THE HAGUE, Netherlands (CN) – A week of hearings opened before an international arbitration tribunal on Monday, with a California energy company arguing the Canadian government owes it more than $90 million for violating the now-defunct North American Free Trade Agreement.
According to Tennant Energy, the Canadian province of Ontario illegally blocked the company from participating in a government program offering above-market prices to encourage green energy development. It brought complaints before the Permanent Court of Arbitration, an intergovernmental organization based in The Hague, Netherlands, where countries have been settling disputes since 1899.
In 2009, the Ontario Power Authority developed a so-called Feed-In Tariff program, which offered long-term contracts to energy producers for up to 40 times the market rate of electricity prices as an incentive to develop solar and wind projects. Tennant Energy, using a subsidiary company called Skyway 127, applied to the FIT program to develop a wind energy project in Bruce County, Ontario, but it was denied. The Napa Valley-based company claims the government of Ontario gave an unfair advantage to a group of Korean investors to develop the same project.
This week’s hearings focus on whether the PCA has jurisdiction to hear the dispute. Lawyers for the Canadian government argue Tennant Energy has no standing because it wasn’t a protected investor as defined by NAFTA, the 1994 agreement that established a free trade zone for Mexico, Canada and the United States. That deal was replaced last year by the United States–Mexico–Canada Agreement.
“The legal and factual claims are so weak, to pursue them on the merits is futile,” Heather Squires, senior counsel at Canada’s Trade Law Bureau, told the arbitration panel. The hearings are being held in an entirely virtual fashion, with parties based in the United States, Canada and the Netherlands.
Canada also argues that the PCA has no jurisdiction to hear the dispute because the California company failed to file its complaint on time. NAFTA sets a three-year time limit on complaints – the FIT rejection came in 2011 but Tennant Energy didn’t bring the issue to the PCA until 2017. The company argues it was unaware there was a breach of NAFTA until it met with its lawyers in 2015.
The Canadian government relied heavily on a previous decision by the PCA, which rejected a very similar claim by Mesa Power Group, which had also been rejected for a FIT program contract. The Texas-based power company, founded by the late oil and gas tycoon T. Boone Pickens, wanted the Canadian government to pay it $658 million for allegedly giving preference to other investors. However, the PCA found there was no evidence Ontario had favored any group over another and rejected the claim.
The FIT program ended in 2013 and is mostly seen as a failure. Then-Ontario Energy Minister Glenn Thibeault said the program decreased competition in the energy market and encouraged market manipulation.
“How we implemented those policies led to a number of suboptimal outcomes,” he said. In 2012, the World Trade Organization conclude the program violated international trade regulations.
Hearings will continue on Tuesday.