November 25, 1999
(Justice)

Minister responds to Opposition criticisms of Bill 31

Justice Minister Paul Dicks refuted recent claims by the Opposition that sections of Bill 31, An Act to Provide for the Conservation, Protection, Wise Use and Management of the Water Resources of the Province, could jeopardize the province's interests unless they are altered.

"The provincial government has sought the advice of well-respected trade lawyers with regard to issues raised by the Opposition concerning amendments to the government's bill on bulk water removal," said Mr. Dicks. "The advice government has received from its legal advisors has not swayed us from our original position."

Minister Dicks added: "International trade is a matter of federal jurisdiction. If a trade claim is filed because of our legislation, it must be filed against the federal government because that government is a party to NAFTA; the province is not. Also, it should be noted that the federal government is not planning to enact legislation banning the removal of water from provincial basins. It has asked the provinces to ban the removal of water from provincially-controlled water basins."

Minister Dicks also stated: "In consultation with our legal advisors, we have carefully reviewed the proposed amendment to section 7 and government believes that it is not in the best interest of the province. Furthermore, the bill in its present form, without amendment, will have no adverse legal consequences under NAFTA. There is no reason for the province to wait for a federal government initiative on water. There is no risk to the province of passing Bill 31 in its present form."

Government's legal advisor, Geoffrey Kubrick, of the law firm Flavell, Kubrick & Lalonde of Ottawa, has appeared often as a counsel before Binational Dispute Resolution Panels established under NAFTA and the earlier Canada-United States Free Trade Agreement. He has also been involved in a number of leading trade cases in litigation before the Federal Court of Canada and the Supreme Court of Canada.

Mr. Kubrick stated: "I have reviewed the release from the provincial Opposition relating to proposed amendments to Bill 31, in particular the amendment to Section 7, and I do not believe that the views expressed by Mr. Byrne accurately reflect Canada's NAFTA obligations. As the minister has pointed out, international trade is a matter of federal jurisdiction. In the event that there are any trade claims filed because of this proposed legislation, they must be brought against the federal government not against the province."

"Bill 31 is an environmental measure intended to conserve and protect provincial water resources," he said. "The recommendation offered by the leader of the Opposition, which stressed limitations on `water exported in bulk' is counter productive. It would create an express export restraint, contrary to Canada's WTO and NAFTA obligations."

In his opinion to government, Mr. Kubrick also stated that government would not be liable for any compensation claims as set out by the Opposition. "The provisions of NAFTA, Chapter 11 are for dealings between a disputing investor and a party. For purposes of NAFTA `party' means Canada, the United States or Mexico. Article 1135 of NAFTA makes it clear that an award under Chapter 11 may only be made `against a party.' Newfoundland is not, and cannot be, a party in such proceedings."

Mr. Kubrick said he is dubious about a risk of "billions of dollars" being successfully claimed for water export compensation claims. "NAFTA does not create a new law of expropriation. It does not change domestic law with respect to issues of liability and damages. Any claim of wrongful expropriation of an existing right would have to meet the requirements of Canadian (and Newfoundland) law. This would include the requirement that a disputing investor must establish damages through evidence. The mere possibility or opportunity for an investment alone would not give rise to anything more than nominal damages. Again, if there were such a claim, it must be brought against the federal government, and an award of damages can only be made against the federal government, not the province."

Also speaking on this issue is Professor Don McRae, the Hyman Soloway Professor of Business and Trade Law and former Dean in the Common Law Section of the Faculty of Law at the University of Ottawa. He specializes in international trade law. His experience with NAFTA is vast.

Professor McRae confirmed that no claims can be brought against the province under NAFTA Chapter 11.

"The Government of Canada is a party to NAFTA, the provinces of Canada are not parties to NAFTA," noted Professor McRae. "Further, even if a claim arising out of Bill 31 was brought against the Government of Canada, then whether Section 7 was brought into effect before or after water export legislation by the federal government is simply irrelevant."

Professor McRae went on to say that, as for the suggestion that NAFTA, Chapter 11 will give rise to NAFTA parties having to pay billions of dollars in compensation, this is no more than wild speculation. Experience with NAFTA so far just does not bear out such speculation.

Media contact: David Wells, (709) 729-6830.

1999 11 25 12:35 p.m.