October 28, 2002

Canada to pay $8.23 million for unfair actions in SD Myers case

An international arbitration tribunal last week ruled against Canada in the SD Myers NAFTA investor-state claim and awarded the U.S. company damages of $8.231 million as compensation for discrimination while it was operating in Canada between 1994 and 1997.

This award follows the November 2000 liability award which found that Canada violated two NAFTA investment chapter obligations when it wrongfully closed the border to the export of polychlorinated biphenyl wastes (PCB) from Canada to the United States in 1995 in order to protect the market share of Canadian competitors from U.S.-based competition. The NAFTA Tribunal found that Canada had discriminated against SD Myers, in addition to ruling that the Canadian actions were unfair and fell below minimum standards of treatment under international law.

Since Canada changed its own PCB export policy in 1997, the NAFTA award will not result in any change to Canadian laws. In its November 2000 award, the Tribunal concluded that Canada's PCB ban was not consistent with the government's own international environmental law obligations, but noted that no change was necessary given Canada's voluntary withdrawal of the export ban in 1997 before this NAFTA claim was heard.

SD Myers, based in Tallmadge, Ohio, recycles PCB waste. Before the ban, the company had negotiated purchase orders worth over $50 million (Cdn) to treat PCB waste from hundreds of Canadian facilities storing these wastes, including schools, universities, hospitals and municipal utilities. Canada's export ban nullified the company's Canadian orders and left Canadian clients the sole option of sending their PCB wastes out to the Swan Hills destruction facility in Alberta.

"We are very pleased with the decision of the NAFTA Tribunal," said SD Myers president Dana Myers. "We entered the Canadian market to help Canadians deal with an important environmental issue. We played by the rules...Our Canadian customers supported us but we were penalized by the Canadian government, solely on the grounds that we were American.

"We are happy to have this chapter finally behind us," he continued. "The NAFTA Tribunal recognized the effort that our company put into the Canadian market and that was totally lost due to the unfair treatment caused by the policies of the former Canadian Minister of the Environment..."

Barry Appleton, managing partner of Appleton and Associates International Lawyers, which represented the company, said the award "proves that the NAFTA works for small companies as well as large ones.

"The NAFTA investor-state process ensures that transparency and fair treatment prevail over the policies of local self-interest. Governments must treat all companies fairly, and it makes no difference whether they are foreign or domestic. Under NAFTA, companies that have been unfairly treated must be compensated to where they would have been if this discriminatory behavior did not occur," he explained.

The SD Myers claim has also continued a trend of decisions by NAFTA tribunals against Canadian governmental actions. The U.S. and Mexican governments have been much more successful in claims under the NAFTA: the U.S. has won every NAFTA claim brought against it and Mexico has succeeded in the majority of claims against it. By contrast, NAFTA tribunals have ruled against Canadian governmental actions in every decided NAFTA claim to date.

The NAFTA panel's damages award is not subject to appeal. A final consideration of costs is now under way before the tribunal. The full text of the NAFTA awards, along with background information, may be viewed on-line at www.appletonlaw.com. More information is also available from Barry Appleton, Appleton & Associates International Lawyers, 416/966-8800, E-mail bappleton@appletonlaw.com; or Dana Myers at SD Myers, 330/630-7000.

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