[In The Matter Of]{.smallcaps}:

**THE LOEWEN GROUP, INC. and**

**RAYMOND L. LOEWEN,**

Claimants/Investors,

v\.

**THE UNITED STATES OF AMERICA,**

Respondent/Party.

ICSID Case No. ARB(AF)/98/3

**SUBMISSION OF THE**

**GOVERNMENT OF CANADA**

**PURSUANT TO NAFTA**

**ARTICLE 1128**

**Department of Foreign Affairs**

**and International Trade**

Trade Law Bureau/ JLT

Lester B. Pearson Building

125 Sussex Drive

Ottawa, Ontario, Canada

######  K1A 0G2

Tel: (613) 992-3201

> Fax: (613) 944-3213

# Introduction

1.  NAFTA Article 1128 entitles a Party to the NAFTA to make submissions
    on a question of interpretation of the NAFTA. On August 1, 2001,
    Canada notified the Tribunal and the disputing parties that it
    intended to make submissions to the Tribunal on certain issues
    raised by the disputing parties in this phase of the arbitration.

2.  This submission is not intended to address all interpretative issues
    that may arise in this proceeding. To the extent that it does not
    address certain issues, Canada's silence should not be taken to
    constitute concurrence or disagreement with the positions advanced
    by the disputing parties.

3.  Canada takes no position on any particular issues of fact or on how
    the interpretations it submits below apply to the facts of this
    case.

# Article 1102 (National Treatment)

4.  The relevant provisions of NAFTA Article 1102 state:

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(1) Each Party shall accord to investors of another Party treatment no
    less favourable than that it accords, in like circumstances, to its
    own investors with respect to the establishment, acquisition,
    expansion, management, conduct, operation, and sale or other
    disposition of investments.

(2) Each Party shall accord to investments of investors of another Party
    treatment no less favourable than that it accords, in like
    circumstances, to investments of its own investors with respect to
    the establishment, acquisition, expansion, management, conduct,
    operation, and sale or other disposition of investments.

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5.  The objective of the national treatment obligation in NAFTA Article
    1102 is to prevent a NAFTA Party from discriminating
    between investors of another Party in respect of their investments
    or investments of investors of another Party and its own investors
    or their investments that are in like circumstances.

6.  This is a relative standard. To establish a breach under Article
    1102, a claimant is required to show that a Party has accorded it
    treatment with respect to investment that is less favourable than
    the treatment accorded in like circumstances to its own investors or
    their investments.

7.  For there to be denial of national treatment, de *jure* or *de
    facto* discrimination (i.e., the according of less favourable
    treatment) by a Party against a foreign investment or against a
    foreign investor in respect of its investment must be proven. Proof
    of mere intention to discriminate does not establish a breach of
    Article 1102.[^1] The Tribunal must determine whether the treatment
    accorded resulted in actual discrimination.

# 

# Article 1105 (Notes of Interpretation)

8.  In its September 10, 2001 letter ("Submission"), the Investor makes
    the following assertions in support of its position that the Notes
    of Interpretation of Certain Chapter 11 Provisions, issued by the
    Free Trade Commission on July 31, 2001 ("Commission's
    Interpretation"), has no material impact on this proceeding:

    a.  the Commission's Interpretation has no effect on Article 1105
        and the "fair and equitable treatment and full protection and
        security protections" as it is an amendment to the NAFTA, which
        can only be effectuated through the formal amendment process set
        out in Article 2202;[^2]

    b.  the Commission's Interpretation is an acknowledgement that the
        broad investment protections of "fair and equitable treatment"
        and "full protection and security" are now part of customary
        international law;[^3]

    c.  even if the Commission's interpretation were effective, Article
        1103 would still require the United States to accord investments
        the same independent protections of "fair and equitable
        treatment" and "full protection and security," because those
        protections appear in bilateral investment treaties to which the
        United States is a party.[^4]

9.  Based on those assertions, the Investor in essence submits that the
    Commission's Interpretation has no effect on the interpretation and
    application of Article 1105 and that the Tribunal should disregard
    it.

10. Canada disagrees with such a characterization of the nature, content
    and effect of the Commission's Interpretation.

# The Commission's Interpretation Is Not An Amendment To The NAFTA

11. The Commission's Interpretation is not an amendment to the
    provisions of the NAFTA.

12. By its own terms, the Commission's Interpretation consists of
    "interpretations of Chapter Eleven in order to clarify and reaffirm
    the meaning of certain of its provisions." It states not what the
    provisions of the NAFTA are to mean in the future, but what they
    always have meant. It identifies the legal standard that the NAFTA
    Parties intended to apply when agreeing to certain provisions of the
    NAFTA. It is the legal standard that has been applicable under
    Article 1105 since the NAFTA entered into force on 1 January 1994.
    There thus has been no removal of rights as suggested by the
    Investor.[^5]

13. As a treaty, the NAFTA is the creature of the States that are party
    to it. The Parties have assumed obligations *vis-à-vis* one another
    that protect investors and investments and have established the
    process that applies to this proceeding. In this instance, the
    Parties, acting as the Commission, have simply carried out a
    function that they expressly reserved for their Ministers acting
    collectively: to ensure the correct understanding of the governing
    law through issuance of authoritative interpretations.

14. The Commission, which is established under NAFTA Article 2001,
    comprises cabinet-level representatives of each Party, specifically,
    the Ministers of the three Parties responsible for international
    trade, including investment issues arising under Chapter Eleven. The
    Commission is the Parties to the NAFTA acting collectively under
    that treaty. It is the highest level policy-making organ and
    administrator for the Treaty as a whole. In acting through the
    Commission, the Parties act through a single body vested with
    decision-making power under the NAFTA.

15. The Commission is vested with the prime and final authority as the
    interpreter of the NAFTA. Article 1131(2) makes that clear: "\[a\]n
    interpretation by the Commission of a provision of this Agreement
    shall be binding on a Tribunal established under this Section
    \[i.e., Section B of Chapter Eleven\]." Article 1131(2) forms part
    of the governing law that a tribunal established under Section B of
    Chapter Eleven, such as this one, is required to apply.

16. The Commission's authority as the prime and final interpreter of the
    NAFTA reflects the NAFTA Parties' long-term institutional interest
    in the proper functioning of the Treaty. An interpretation by the
    Commission is the full expression of what the NAFTA Parties
    intended, and its effect is clear: it is binding.

17. In this respect, the Investor's statements -- that "if the FTC's
    'interpretation' is understood as an attempt to change the scope of
    Article 1105 *retroactively*, serious questions would arise as to
    whether the NAFTA Parties have interpreted Article 1105 'in good
    faith' by changing its meaning in the midst of litigation" (emphasis
    in text);[^6] that "\[i\]t would be wrong to discuss these
    three-Party 'interpretation' of what have become key words of this
    arbitration, without protesting the impropriety of the three
    governments making such an intervention well into the process of
    arbitration" (quoting Sir Robert Jennings);[^7] and that "private
    parties not represented in the discussions of the three executives
    \[...\] \[were\] unable to exercise democratic input \[...\]"[^8] --
    demonstrate a misunderstanding of the nature of the NAFTA as a
    treaty, of its provisions and of the Commission's structure and
    functions.

18. The role of the NAFTA Parties as disputing parties, capital
    exporters, recipients of investments of other Parties and as
    sovereign states with a clear interest in the proper operation of
    the NAFTA transcends the merits of specific cases. In acting in
    their plenary capacity as the Commission, the Parties act as the
    guardians of the Treaty. They have the legal right to clarify the
    meaning of the obligations that they agreed to undertake and have
    specified in the NAFTA a mechanism for doing so. This right was not
    only negotiated in the NAFTA; it was also approved by the
    legislatures of each Party when the NAFTA was ratified and
    implemented.

## The Applicable Legal Standard Is That Set Out In The Commission's Interpretation

19. In its Submission, the Investor states that "\[i\]n sum, the FTC's
    July 31, 2001 interpretation must be understood as an
    acknowledgement that the broad investment protections of 'fair and
    equitable treatment' and 'full protection and security' are **now**
    part of customary international law"[^9] (emphasis added). Later, it
    concludes that "\[t\]herefore, this Tribunal -- now, as before --
    must determine \[...\] whether the United States and Mississippi
    accorded Claimants' investments fair and equitable treatment and
    full protection and security, giving those terms their ordinary
    meaning."[^10] The Commission's interpretation does not create any
    new concept or standard within customary international law.

20. The appropriate legal standard under Article 1105 is that set out in
    the Commission's Interpretation. In particular, the latter provides
    that "\[t\]he concepts of 'fair and equitable treatment' and 'full
    protection and security' do not require treatment in addition to or
    beyond that which is required by the customary international law
    minimum standard of treatment of aliens." This is the standard that
    must be applied.

21. Any attempt to apply a different legal standard under Article 1105
    must fail, as it would be contrary to the governing law of this
    proceeding as set out in Article 1131. The task of the Tribunal is
    to apply Article 1105 in accordance with the Commission's
    Interpretation.

Article 1103

22. In its Submission, the Investor argues that were the Commission's
    Interpretation to be effective, it "would still be entitled to the
    free-standing protections of 'fair and equitable treatment' and
    'full protection and security' through the application of NAFTA's
    most-favoured-nation provision, Article 1103."[^11] This would be so
    because, in the view of the Investor, certain bilateral investment
    agreements to which the United States is a party contain those
    "free-standing protections."[^12]

23. The Commission's Interpretation has clarified the legal standard of
    Article 1105 and that this standard cannot be changed or modified
    through reference to other provisions of the NAFTA or provisions of
    other agreements. The Commission's Interpretation makes clear that a
    breach of another provision of the NAFTA or of another international
    agreement is irrelevant with respect to the application of Article
    1105 of the NAFTA: "\[a\] determination that there has been a breach
    of another provision of the NAFTA, or of a separate international
    agreement, does not establish that there has been a breach of
    Article 1105(1)."

> All of which is respectfully submitted,

####### 

####### 

####### 

####### Sheila M. Mann

> Of Counsel for the Government of Canada
>
> 13 November 2023

[^1]: *In the Matter of Cross-border Trucking Services,* Secretariat
    file No. USA-MEX-98-2008-01, Final Report of the Panel, February 6,
    2001: The Panel, relying on settled WTO practice, declined to
    examine the motivation or intent of the challenged measure and
    confined its inquiry to whether the measure was inconsistent with
    the NAFTA.

[^2]:
    > First and second arguments identified in the Investor's
    > Submission.

[^3]:
    > Third argument identified in the Investor's Submission.

[^4]:
    > Fourth argument identified in the Investor's Submission.

[^5]:
    > Investor's Submission, at 6.

[^6]: *Ibid*. at 7.

[^7]: *Ibid*.

[^8]: *Ibid*. at 6.

[^9]:
    > *Ibid.* at 16.

[^10]:
    > *Ibid.* at 18.

[^11]:
    > *Ibid*. at 16.

[^12]:
    > *Ibid*. at 16-18.