Vattenfall, a Swedish energy firm, launched a $1.9 billion investor-state claim against Germany in 2009 under the Energy Charter Treaty over permits delays for a coal-fired power plant in Hamburg. According to Vattenfall, delays of required government permits started when the state’s environmental ministry established “very clear requirements” for the plant, due to “the reports of the Intergovernmental Panel on Climate Change having alerted the public to the impending climate change.” Public opposition to the proposed plant focused on prospective carbon emissions and water pollution. Further delays, according to Vattenfall, occurred when the Green Party – which opposed the plant on environmental grounds – formed a coalition with the Christian Democrats after state elections in 2008. After Vattenfall litigated in domestic courts, the coalition government issued the permits to Vattenfall, but with additional requirements to protect the Elbe River.

 

Rather than comply with these requirements, Vattenfall launched its investor-state claim against Germany, arguing that Hamburg’s environmental rules amounted to an expropriation and a violation of Germany’s obligation to afford foreign investors “fair and equitable treatment.” In response, Michael Müller, then Germany’s deputy environment minister, stated, “It’s really unprecedented how we are being pilloried just for implementing German and European Union (EU) laws.” To avoid the uncertainty of a prospective investor-state tribunal ruling ordering payment of a massive amount of compensation, the German government reached a settlement with Vattenfall in 2010. The settlement obliged the Hamburg government to drop its additional environmental requirements and issue the contested permits required for the plant to proceed. The settlement also waived Vattenfall’s earlier commitments to mitigate the coal plant’s impact on the Elbe River. Any monetary payment extracted from German taxpayers in the settlement has not been disclosed. Vattenfall’s coal plant in Hamburg began operating in February 2014.

 

Investor-State Attacks: Climate Change

 

Vattenfall v. Germany I
Coal-fired electric plant/climate change
Case settled (environmental protections rolled back)

 

Lone Pine v. Canada
Fracking
Case pending

 

In September 2013, Lone Pine Resources, a U.S.-based oil and gas exploration and production company, launched a $241 million challenge against Canada under NAFTA to challenge Quebec’s suspension of oil and gas exploration permits for deposits under the St. Lawrence River as part of a wider moratorium on the controversial practice of hydraulic fracturing, or fracking. The provincial government had declared a moratorium in 2011 so as to conduct an environmental impact assessment of the extraction method widely known for leaching chemicals and gases into groundwater and the air.

 

Lone Pine had plans and permits to engage in fracking on over 30,000 acres of land directly beneath the St. Lawrence Seaway – the province’s largest waterway. According to Lone Pine, the moratorium contravened NAFTA’s protection against expropriation and guarantee of a “minimum standard of treatment.” The case is pending.

 

TransCanada v. United States
Keystone XL crude oil pipeline
Case dismissed

 

In June 2016, the TransCanada Corporation launched an ISDS case under NAFTA demanding $15 billion in compensation because the corporation’s bid to build a pipeline was rejected by the U.S. government.  The $15 billion claim was five times more than the $3.1 billion that TransCanada said it already had invested in the pipeline project because the compensation demand included the future expected profits that TransCanada claims it would have earned had the pipeline been allowed. 

 

The proposed 875-mile pipeline – called the Keystone XL – would transport to the U.S. Gulf Coast up to 830,000 barrels per day of highly-corrosive crude oil extracted from tar sands in Alberta, Canada. The pipeline would transport one of the dirtiest fossil fuels on the planet across more than a thousand rivers, streams, lakes and wetlands as it traverses six U.S. states.

Indigenous leaders, farmers, and ranchers in the path of the project stressed that a spill from the pipeline would threaten their lands and livelihoods. Their concerns were bolstered by environmental and health experts who provided evidence during the course of various federal and state reviews of the project about how tar sands oil development in Alberta, Canada already has devastated the land and water of Canadian First Nations communities, released toxic chemicals that poisoned and sickened these communities and threatened local species of fish and wildlife

 

The pipeline also raises significant concerns with respect to its climate impacts. If the pipeline were completed, it would create new demand for intensified carbon-intensive tar sands extraction and processing as the purpose of the pipeline was to transport the tar-sands oil to U.S. Gulf Coast refineries for processing so finished product could be exported into the global market.

 

The November 2015 decision by the U.S. government not to approve the pipeline project came after tens of thousands of citizens in the states that would be affected and by environmental activists nationwide had worked for six years to demonstrate that the pipeline was not in the national interest and would pose serious health and environmental risks.

 

In January 2016, just two months after the U.S. government’s decision to reject the pipeline, TransCanada filed notice of intent to start an ISDS case under NAFTA. It simultaneously filed a case in U.S. federal court, claiming that the decision to reject the pipeline was unconstitutional because only Congress, not the president, has authority to make such a decision.

 

In its ISDS notice of arbitration, TransCanada claimed the United States had violated four different investor rights provided by NAFTA. First, it claimed that the U.S. government violated the “minimum standard of treatment” standard, arguing that the U.S. government led TransCanada to develop “reasonable expectations” that the Obama administration would approve the pipeline, only to ultimately reject it. The company noted that, while in 2010 the U.S. State Department was “inclined” to approve the project, subsequently “politicians and environmental activists ... continued to assert that the pipeline would have dire environmental consequences,” which ultimately led the Obama administration to reject it for “symbolic reasons, not because of the merits.” 

 

TransCanada also alleged that disapproval of the project violated the NAFTA investor protection against “indirect expropriation,” arguing that the pipeline “substantially deprived” the company of its investment in the project.” TransCanada also claimed violations of NAFTA’s “national treatment” standard, claiming that the United States treated the Canadian firm worse than it treated U.S. firms, and of NAFTA’s “most-favored nation” standard, claiming that the United States treated the Canadian firm worse than other international pipeline companies. These latter claims were lodged despite the fact that no other company would be permitted to build the pipeline.

 

In his first week as president in January 2017, Donald Trump signed an executive order inviting TransCanada to submit a new application for approval of the pipeline’s construction. ISDS rules would have permitted TransCanada to continue to pursue compensation via ISDS for lost revenue it claims was caused by the project’s delay even after receiving a permit. However, on February 28, 2017, the company suspended its case for 30 days, which coincided precisely with the time period by which the U.S. State Department was to make a final decision on the new permit application. 

 

During that 30 day period, on March 4, 2017, the White House clarified that a previous Trump executive order calling for pipelines to be constructed with American-made steel and pipe would not apply to the Keystone XL. Shortly thereafter, the State Department issued the permit. TransCanada then announced that it would discontinue its NAFTA ISDS case.  Various news outlets reported that close observers suspected that the quick permit approval and the Buy American steel/pipe waiver that blessed TransCanada’s use of foreign steel and piping were likely the “settlement” price extracted from the Trump administration by TransCanada for dropping its NAFTA claim.