An arbitration tribunal under the North American Free Trade Agreement has thrown out a precedent setting application by Canadian cattle producers that U.S. bans on Canadian livestock violated the agreement.
In a decision last week the tribunal ruled that the Canadian cattle producers may have had a legitimate complaint against the American government when the U.S. banned all Canadian ruminant livestock from entering the country after Canada’s first case of BSE was discovered in 2003 in Alberta.
However, because Canadian producers didn’t have a personal investment in American companies or property, they were not eligible to seek a $235 million trade remedy under Chapter 11 of NAFTA, which requires equal treatment of foreign and domestic investors.
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Canadian Cattlemen for Fair Trade (CCFT), consisting of 109 farm families and livestock businesses, launched the trade action against the U.S. government in 2004.
Ottawa attorney Mike Woods argued on behalf of the group that the growth and expansion of the Canadian cattle industry was an intended result of the NAFTA agreement.
They asked the tribunal to rule that the investments they had made in the live cattle market had been undermined by the American government’s decision to close their borders to Canadian cattle on May 20, 2003 and the continued closure to feeder heifers, breeding stock, cattle older than 30 months and meat from cattle over 30 months.
The trade panel’s decision ruled that despite this, the cross-border trade interests were not enough to trigger a Chapter 11 claim.
The American government successfully argued that NAFTA’s Chapter 11 provisions do not apply to investments made in Canada, only those directly made in the United States.
In its 124 page ruling, the tribunal ruled out further actions based on Chapter 11 of NAFTA, as was agreed at the outset of the hearings by both parties.
“Unfortunately for them, they lost their argument. However it doesn’t rule out a class action suit,” said Cameron Pallett, a Toronto attorney that has brought a lawsuit against the Canadian federal government and an American based livestock feed company.
He will be in a Toronto court again this spring to argue that federal government was responsible for livestock producers’ losses in the wake of BSE discovery in Canada.
Woods said two things speak in support of the CCFT’s actions and have value in the outcome.
In its decision the tribunal said each side should pay for half of the tribunal’s cost and each be responsible for its own legal costs.
And the ruling did provide some hope for producers seeking a NAFTA remedy.
The tribunal ruled that under Chapter 20 of the agreement the Government of Canada could sue for a NAFTA remedy.
The ruling states, “Nothing in this holding precludes the Canadian government from doing so. Indeed, taking the Claimant’s factual submissions at face value, Claimants would be wholly justified in pressing their government to seek recourse against the U.S. Government for the measures at issue.”
Woods said the CCFT has asked the Canadian government to file a NAFTA Chapter 20 claim, but it refused.
