TC Energy Corporation and TransCanada Pipelines Limited v. United States of America

At a glance

Parties

TC Energy Corporation and TransCanada Pipelines Limited (Canada) v. United States of America

Case no.

ICSID Case No. ARB/21/63

Forum and rules

ICSID Convention; ICSID Arbitration Rules 2006, as modified by NAFTA Chapter 11, Section B; place of proceeding Washington, D.C.

Treaty

USMCA Annex 14-C (legacy investment claims), invoking NAFTA Chapter 11, Section A

Tribunal

Alexis Mourre (President), Henri C. Alvarez, John R. Crook

Sector

Oil pipelines (Keystone XL)

Outcome

Jurisdiction declined by majority (12 July 2024). Henri C. Alvarez dissented.

Amount

According to the claimants' press release, the claim was for more than USD 15 billion. Nothing was awarded. The claimants were ordered to pay the respondent USD 300,594.41 for its share of the arbitration costs and USD 1,181,524.88 for its legal fees, costs and expenses.

The dispute

The claimants held legacy investments in the Keystone XL (KXL) Pipeline. The pipeline was to carry Canadian crude oil from Hardisty, Alberta to Oklahoma and Texas. The United States twice denied a Presidential permit for its cross-border segment, in 2012 and 2015. The claimants then brought a 2016 NAFTA claim, which they released under a Termination Agreement of 23 March 2017. Permits were issued in 2017 and again in 2019. On 20 January 2021, after the USMCA had replaced NAFTA on 1 July 2020, President Biden revoked the 2019 Permit. The claimants relied on Annex 14-C of the USMCA. They argued that it allowed holders of legacy investments to bring claims for breaches of NAFTA Chapter 11, Section A for three years after NAFTA ended, including breaches by measures taken in that period. As alternatives, they relied on a choice-of-law theory, the unclean hands doctrine and a principle of consistency. The United States, supported by Mexico as a non-disputing party, objected that Annex 14-C only extended consent to arbitrate breaches that occurred while NAFTA was in force.

Key holdings

1. Read in its ordinary meaning, Annex 14-C extends only the offer to arbitrate under Section B. The USMCA parties did not agree to extend the substantive obligations of Section A of NAFTA Chapter 11 beyond 30 June 2020. Award ¶¶ 145–146, 151–156
2. Paragraph 3 of Annex 14-C has a purpose of its own: it puts a definite end to consent that would otherwise remain open under NAFTA's limitation periods. The words "for greater certainty" in footnote 20 confirm existing law and add no new obligations. Footnote 21 can be explained without assuming that Section A survived. Award ¶¶ 158–170
3. Under Article 70 VCLT and Article 13 of the ILC Articles on State Responsibility, termination released the parties from their NAFTA obligations. The revocation of the 2019 Permit therefore cannot be a "breach of an obligation" within Annex 14-C. Consent to arbitrate ran until 30 June 2023, but only for facts capable of breaching NAFTA while it was in force. Award ¶¶ 175–177
4. The supplementary means of interpretation do not change this result. Internal U.S. documents that were not shared with the other USMCA parties, and documents written after the treaty was signed, have little or no value as evidence of the parties' common intention. Terms such as "grandfathering" and "transition" in the negotiating record are imprecise. Award ¶¶ 182–188, 198
5. The choice-of-law theory fails. An agreement formed by accepting a treaty offer to arbitrate cannot be wider than the offer itself. The claimants' reliance on CSOB was misplaced, and the case is not conceptually different from Feldman. The unclean hands and consistency arguments also fail, because the claimants cannot bring a NAFTA claim simply because the revocation came after NAFTA ended. Award ¶¶ 201–210
6. Costs follow the event. The claimants must pay the respondent USD 300,594.41 for its share of the arbitration costs and USD 1,181,524.88 for its fees, costs and expenses. Award ¶¶ 217–219
7. Dissent (Henri C. Alvarez): Annex 14-C gives consent to arbitrate all legacy investment claims alleging a breach of Section A that are brought within three years, including claims over measures taken during the transition period. In his view the negotiating documents confirm this reading, and the Tribunal had jurisdiction. Dissenting Opinion ¶¶ 3–9, 33

Procedural history

1. 22 November 2021Request for Arbitration filed. ICSID registered it on 22 December 2021.
2. 21 September 2022Tribunal constituted. The ICSID Secretary-General appointed the President after a ballot procedure failed.
3. 12 December 2022Procedural Order No. 1 on procedural rules.
4. 13 April 2023Procedural Order No. 2 grants the United States' request to bifurcate and hear its jurisdictional objection first.
5. 11 September 2023Mexico files a submission as a non-disputing party under NAFTA Article 1128.
6. 6 November 2023Procedural Order No. 3 orders the production of USMCA negotiating documents. On 4 December 2023 the Tribunal declined Mexico's request to reconsider it.
7. 11 December 2023Procedural Order No. 4 rejects the claim of deliberative process privilege and refers the attorney-client privilege claims to a Privilege Master. Jennifer Kirby was later appointed to that role.
8. 3–5 April 2024Hearing on jurisdiction in Washington, D.C.
9. 12 July 2024Award: the majority declines jurisdiction. Henri C. Alvarez issues a dissenting opinion.

Tribunal, counsel and experts

Decided by

• Alexis Mourre President — appointed by the institution
• Henri C. Alvarez Co-arbitrator — appointed by the claimant (dissented)
• John R. Crook Co-arbitrator — appointed by the respondent

For the claimant

Sidley Austin LLP · JPW Energy Law PLLC

For the respondent

U.S. Department of State, Office of International Claims and Investment Disputes · Office of the U.S. Trade Representative

Experts

Christoph Schreuer (claimant) · Richard K. Gardiner (respondent) · Hervé Ascensio (respondent)

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Keywords

• Keystone XL
• pipeline
• Presidential permit revocation
• USMCA Annex 14-C
• legacy investment
• NAFTA Chapter 11
• NAFTA termination
• sunset clause
• ratione temporis
• consent to arbitration
• VCLT Article 31
• VCLT Article 32
• travaux préparatoires
• footnote 20
• footnote 21
• unclean hands
• bifurcation
• deliberative process privilege

Summary generated with AI from the published documents — refer to the award for the authoritative text.