Canadian court has 'no jurisdiction' to overturn NAFTA ruling in Digby quarry case, lawyers argue

An American concrete company told the Federal Court of CanadaTuesday it "has no jurisdiction" to set aside a Nova Scotia-linkedNAFTAaward that could end up costing Canada more than $500 million.

Federal lawyerswere in an Ottawa courtroom this week in a bid tothrow outa 2015 international arbitration tribunal decision in favour ofBilcon, a Delaware-based company denied permission to open aquarry onDigbyNeck, N.S.

DigbyNeckwas chosen byBilconas the future site of a 50-year stone quarry in 2002, only to have its proposal rejected by ajoint federal-provincial review panel in 2008 due to environmental concerns.

Bilconsuccessfully sued Canada usinga controversial investor protections clause inChapter 11 of the North American Free Trade Agreement, which allows foreign companies to sue governments over unfair treatment.

Bilconis now seeking more than$500 million in damages.

The case is seen by some as a test of sovereignty onwhether Canada has the right to enforceits own environmental rules on foreign investors.

'Noobligation'

The company's lawyerJohn Judgetold the court Tuesday that Canada consented to the arbitration and is now effectively trying to re-argue a case itlost.

"This court has no jurisdiction to set aside this award," he said."This court cannot review the merits of the award."

Canada is pushing for thetribunal's awarding of liability to be quashed, arguing it was based largely on a finding that Canadian environmental assessment rules were not followed in rejectingBilcon'squarry proposal.

Federal lawyers have arguedthat the ruling was outside the scope of theNAFTApanel and the company'scomplaint about its treatment should have gone to a Canadian court.

"There is no obligation [under NAFTA] to exhaust local remedies," Judge told court.

The company's lawyers also arguedthe NAFTA tribunal's finding that Canadian rules were not followed was merely part of its fact-finding duty, and that Canadian courts "accept" the doctrine of judicial deference.

"An international tribunal is an appropriate forum to consider non-compliance of domestic law in determining whether an international standard has been breached," Judge said.

Question of costs

Bilcon'slawyersalso urged the Federal Court justice to ignore the value of the huge award potentially hanging over theproceedings.

"These cases can involve huge amounts of money," Judge said. "That should not affect how this court deals with these issues."

But the size of the potential award is one reason why thecase is so important, saidGretchen Fitzgerald, withthe Sierra Club of Canada, an intervener in the case.

"Our leaders and public servants will look at his award and factor in the $500-million payout, the scope, the price we could pay for saying no to damaging projects," said Fitzgerald, speakingoutsidecourt Tuesday.

She also pointed out that if Nova Scotia were on the hook a portion of any damages awarded toBilcon, it could be detrimental to the province and its finances.

"If you're looking at a province like Nova Scotia, if we are asked to contribute, it could have significant impacts on our bottom line,"she said.

Officials with the Nova Scotia government have said there is no written agreement obligating the province topay the NAFTAdamages.

Global Affairs Canada, meanwhile, did not directly respondto a question from CBC onwhether Nova Scotia would be liable for any damages but instead provided this statement:

"Under Canada's Commercial Arbitration Act, decisions of arbitral tribunals can be subjected to statutory judicial review on limited grounds, including excess of jurisdiction," a spokesperson wrote.

Federal Court Justice AnneMactavishreserved her decision after thetwo-day hearing.

It is unlikely shewill issue her decision beforeBilcongoes back before the arbitration tribunal on Feb. 19 for the second phase of the NAFTA complaint:determininghow much Canada must pay.