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Procedural Order No. 8 (Request for Bifurcation)

I. RELEVANT PROCEDURAL HISTORY

1.

By Notice of Arbitration dated 1 June 2017, the Claimant commenced this arbitration against the Respondent pursuant to Articles 1116 and 1120 of Chapter 11 of the North American Free Trade Agreement ("NAFTA"), and the Arbitration Rules of the United Nations Commission on International Trade Law, 1976 ("UNCITRAL Rules").

2.

On 24 June 2019, the Tribunal issued Procedural Order No. 1 ("PO 1") establishing the procedural calendar for an initial phase up to the Tribunal's decision on bifurcation and preliminary motions, and two alternative timetables for a subsequent phase applicable (i) should the proceedings not be bifurcated; and (ii) should the proceedings be bifurcated.

3.

On 2 July 2019, the Respondent filed its Statement of Defence.

4.

On 23 September 2019, the Respondent submitted its Request for Bifurcation, requesting that the Tribunal address in a preliminary procedure the Respondent's NAFTA Article 1116(2) time-bar jurisdictional objection.

5.

On 23 October 2019, the Claimant submitted its Response to the Request for Bifurcation.

6.
From 14 to 15 January 2020, a hearing on the issues of bifurcation and preliminary motions took place in Washington, D.C.
7.

On 27 February 2020, the Tribunal issued Procedural Order No. 4 ("PO 4"), in which it dismissed the Respondent's request for bifurcation on the ground that it was premature. The Tribunal held, in relevant part:

87. In the exercise of its discretion to bifurcate, the Tribunal is guided by three relevant considerations. These considerations are (i) whether the jurisdictional objection is frivolous; (ii) whether the objection, if successful, would materially reduce the time and costs of the proceeding; and (iii) whether the objection concerns issues intertwined with the merits of the arbitration.

88. Having considered the Parties' submissions on this issue, the Tribunal has decided to dismiss the Respondent's request for bifurcation on the ground that it is premature.

89. The Tribunal has been directed to paragraph 91 of the Claimant's Notice of Arbitration dated 1 June 2017 ("NOA").102 Paragraph 91 of the NOA refers to "four categories of wrongful actions" purportedly committed by the Respondent, namely (i) the unfair manipulation of the award of access to the electricity transmission grid; (ii) the unfair manipulation of the dissemination of the FIT Program information; (iii) the unfair manipulation of the awarding of the FIT Program Contracts; and (iv) the improper destruction of necessary and material evidence by senior officials in the Government of Ontario. However, the NOA simply does not contain sufficient particulars of each category of wrongdoing which would allow the Tribunal to take a view, one way or another, on whether the Tribunal can determine the Respondent's jurisdictional objection without entering into the merits.

90. The Respondent has requested that the Tribunal bifurcate the proceedings to consider the Respondent's jurisdictional objection that the Claimant allegedly failed to meet the conditions precedent for submitting a claim to arbitration pursuant to Article 1116(2) of the NAFTA. According to the Respondent, the NOA was filed more than three years after the Claimant first acquired, or should have acquired, knowledge of the alleged breach and knowledge that it incurred loss or damage as a result of that breach and as such, the claim is time-barred.

91. Before the Tribunal can make an assessment of whether to bifurcate the proceedings, the Tribunal will need to know what evidence it will likely have to consider in determining the Respondent's jurisdictional objection and whether the Tribunal will be substantially engaging in the facts of the dispute when considering that evidence. However, until the Tribunal is informed of the specific breach in question which the Respondent now contends is time-barred, the Tribunal does not know what evidence will likely be adduced or the evidence it will likely have to consider in assessing when the Claimant acquired, or should have acquired, knowledge of that breach. Consequently, the Tribunal is unable to decide at this stage whether an inquiry into the Respondent's jurisdictional objection will be best conducted with the merits phase when the Tribunal will have the benefit of the entire record or whether the jurisdictional objection should be heard as a preliminary issue. The Tribunal needs to see the Claimant's claims in more detail before it can decide whether the proceedings can be bifurcated. The Tribunal cannot decide whether to bifurcate the proceedings or not if there is no specificity to the claims. For these reasons, the Respondent's request for bifurcation is premature.1

8.
The Tribunal further determined that the proceedings would continue in accordance with the procedural timetable set out in PO 1 for the non-bifurcated scenario, with certain modifications adopted in order to allow the Respondent to pursue the bifurcation of the proceedings after having had sight of the Claimant's Memorial.2 In the event that the Respondent decided to renew its request for bifurcation, the Tribunal held that:

(d) After receiving the [Parties'] submissions, the Tribunal will decide on the papers without a hearing on whether the proceedings should be bifurcated. In this regard, the Tribunal notes that it has had the benefit of extensive arguments by Parties on the issue of bifurcation and the oral arguments made at the Hearing in particular have been of assistance to the Tribunal. In the interests of expediency and to save time and costs for all Parties, the Tribunal is confident that it can address a second bifurcation request without a further hearing.

(e) The Tribunal will issue the relevant procedural directions after it has come to a decision on the Respondent's second bifurcation request, including any adjustments to the procedural timetable where necessary.3

9.
On 26 June 2020, the Parties advised the Tribunal that they agreed to extend certain deadlines set out in PO 4. On 4 July 2020, the Tribunal confirmed the Parties' agreement to amend the procedural schedule.
10.
On 7 August 2020, the Claimant submitted its Memorial on Jurisdiction, Merits and Quantum (the "Memorial"), along with the witness statement of Mr. John C. Pennie4 and the expert report on valuation by Richard Taylor and Larry Andrade of Deloitte.5
11.

On 21 September 2020, the Respondent submitted its Memorial on Jurisdiction (the "Memorial on Jurisdiction") and, in a separate filing, its renewed request for bifurcation (the "Renewed Request for Bifurcation"), along with the witness statement of Mr. Lucas McCall.6

12.
On 13 October 2020, the Claimant filed its response to the Respondent's request for bifurcation ("Response to Renewed Bifurcation Request").
13.

On 28 October 2020, the Respondent sought leave (i) to submit into the record as a new legal authority the Westmoreland Mining Holdings LLC v. Government of Canada, ICSID Case No. UNCT/20/3, Procedural Order No. 3, Decision on Bifurcation, dated 20 October 2020 (the "Westmoreland Decision"); and (ii) for both disputing Parties to file submissions on the relevance of the Westmoreland Decision to the Renewed Request for Bifurcation.

14.
On 30 October 2020, at the Tribunal's invitation, the Claimant provided its response, stating that it "opposes [the Respondent's request] based on practicality, delay, and cost." Further, should the Tribunal decide to admit the Westmoreland Decision into the record, the Claimant argued that a specific procedure should then follow, according to which both the disputing and non-disputing Parties would be given the opportunity to file submissions, and the disputing Parties would then be given the opportunity to respond to the non-disputing Parties' submissions.
15.
On 10 November 2020, the Tribunal informed the Parties that, prior to receipt of the Respondent's request, it had already decided on the course to be followed in connection with the Respondent's Renewed Request for Bifurcation. As such, it saw no need to depart from that decision for purposes of receiving further submissions from the Parties on the Westmoreland Decision. Taking account of the fact that the Westmoreland Decision is already in the public domain, the Tribunal nevertheless granted the Respondent permission to submit it into the record, without comment from the Parties.

II. SUMMARY OF THE PARTIES' POSITIONS

A. The Respondent's Position

B. The Claimant's Position

III. THE TRIBUNAL'S ANALYSIS

37.
The Respondent has submitted two objections to the Tribunal's jurisdiction ratione temporis for decision on a preliminary basis, namely: (i) the Claimant was not a protected "investor of a Party" when the alleged breach occurred, and therefore the Claimant has not met the requirements of Article 1116(1) of the NAFTA ("First Objection"); and (ii) the claim was not filed prior to the expiry of the 3-year limitation period articulated in Article 1116(2) of the NAFTA ("Second Objection").67
38.
As stated in PO4, the Tribunal is guided by three relevant considerations in the exercise of its discretion to bifurcate. These considerations are (i) whether the jurisdictional objection is frivolous; (ii) whether the objection, if successful, would materially reduce the time and costs of the proceeding; and (iii) whether the objection concerns issues intertwined with the merits of the arbitration.68
39.
Having carefully considered the submissions of the Parties, the Tribunal concludes that these considerations favour a bifurcation of the proceedings, with the scope of the bifurcated jurisdictional hearing to be determined after the Claimant's filing of its Counter-Memorial on Jurisdiction.
40.
First, in the Tribunal's view, neither the Respondent's First Objection nor the Second Objection could be said to be frivolous. Without deciding the merits of the Respondent's two jurisdictional objections, it appears to the Tribunal that both Parties were able to cite authority for their respective positions, and the objections are not ones that could be dismissed out of hand.
41.
Secondly, either of the Respondent's two objections, if successful, could potentially dispose of the totality, and if not, essential parts of the Claimant's claim. There is a fair chance that bifurcation will allow for less evidence and more focused legal arguments at the next stage of the proceedings.
42.
Thirdly, the Tribunal considers that the Respondent's First Objection can be examined without delving into the merits of the Claimant's claim. The Respondent's First Objection is discrete and focuses on: (i) when the alleged breach occurred; and (ii) when did the Claimant become an "investor of a Party" with an investment in Skyway 127. This is separate from the question of whether there is merit to the Claimant's allegations of breach. This is also separate from the question of whether the Claimant knew or should have known about the alleged breach, and/or the loss or damage arising from the breach.
43.
With regard to the Respondent's Second Objection however, it is not yet clear to the Tribunal whether it would be able to determine this objection without delving into the merits of the Claimant's claim. At the heart of this objection is the question of whether the Claimant knew or should have known about the alleged breaches, as well as the loss or damage arising out of those breaches, more than three years prior to the filing of its Notice of Arbitration. On one hand, this could well be a relatively straightforward issue for decision on a preliminary basis. The Respondent's case is simply that the Claimant's allegations should have been known to the Claimant based on information that was publicly available prior to 1 June 2014, including the numerous public documents used in the Mesa Power arbitration and the Mesa Power submissions. On the other hand, depending on the evidence which the Claimant intends to adduce, the Tribunal may be required to substantially engage in the facts of the dispute, and to establish certain facts and connections between these facts. This may also involve significant testimony from, and cross-examination of, witnesses. In that case, the inquiry would be best conducted together with the merits phase when the Tribunal has the benefit of the entire record.
44.
In the premises, the Tribunal grants the Respondent's Renewed Request for Bifurcation, at least with respect to the First Objection. However, with respect to the Second Objection, the Tribunal finds that it would be able to better assess whether this objection should similarly be decided on a preliminary basis after it has had sight of the Claimant's Counter-Memorial on Jurisdiction. The Tribunal shall therefore determine the scope of the bifurcated jurisdictional hearing after the Claimant's Counter-Memorial on Jurisdiction is filed.
45.
Having allowed the Respondent's bifurcation application, and having taken into account the fact that the time for the Claimant to prepare its Counter-Memorial on Jurisdiction overlaps with the Christmas and New Year periods, the Tribunal directs that the Claimant files its Counter-Memorial on Jurisdiction 60 days from the date of this procedural order. Thereafter, the Tribunal will issue the relevant procedural directions after it has come to a decision on the scope of the bifurcated jurisdictional hearing.

IV. THE TRIBUNAL'S DECISION

46.
For the foregoing reasons, the Tribunal determines and orders as follows:

a. The Respondent's Renewed Request for Bifurcation is granted;

b. The scope of the bifurcated jurisdictional hearing shall be determined after the Claimant's Counter-Memorial on Jurisdiction is filed; and

c. The issue of the costs of the Respondent's Renewed Request for Bifurcation is reserved to a further order, decision or award.

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