Chemtura Corporation v. Canadian Government

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Final judgment

Economic stakeholders
Chemtura Corporation
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Arbitration court
Lindane, , Organochlorine
Claiming compensation of $78,593,520 for breach of Articles 1105, 1103 and 1110 of NAFTA.
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August 2, 2010
No violation of Articles 1103, 1105 and 1110 of NAFTA, Chemtura Corporation is ordered to pay costs in the amount of $3,296,233.8.

In an award dated August 2 2010, an arbitral tribunal dismissed all claims made by the american company Chemtura Corporation for $78 million in compensation following the Canadian government's ban on lindane-based crop protection products.

Lindane, an insecticide introduced to the Canadian market in 1938, was used in particular on canola plantations. 4 companies, including Chemtura, were authorized by the Canadian government to sell lindane-based pesticides in Canada. Following the ban on the use of lindane in the U.S., the Canadian Canola Growers Association (CCGA) and the Canola Council of Canada (CCC), concerned that the ban might affect the export of their lindane-treated canola to the U.S. market, asked the 4 companies to voluntarily withdraw canola from registered uses of lindane.

On December 17, 1998, Chemtura Corporation confirmed that it would voluntarily accept such a withdrawal, on condition that all other lindane producers did the same, and that the Canadian Pest Management Regulatory Agency (PMRA) approved other lindane substitutes manufactured by the company. On October 28, 1999, Chemtura Corporation and the Canadian government reached an agreement to withdraw canola from authorized uses of lindane.

At the same time, between 1999 and 2001, the PMRA carried out a risk assessment of lindane exposure for the environment and human health, concluding that the registrations of all products should be terminated or suspended due to the harmful effects of the substance. As a result, Chemtura's approvals were revoked in 2001. A review commission set up at the company's request reached the same conclusions in 2005.

Chemtura Corporation then decided to bring the matter before an arbitration tribunal on the basis of articles 1103, 1105 and 1110 of the North American Free Trade Agreement (NAFTA), by which the United States and Canada are bound. The company alleges that Canada conducted an imperfect review of its licenses to sell products containing lindane, and that despite the assurances it gave in the 1999 withdrawal agreement, the Canadian government refused to register Chemtura's lindane replacement products. Such behavior by the authorities would violate conventionally guaranteed standards of protection against expropriation, the minimum standard of treatment, and the most-favored-nation clause.

On the other hand, the Canadian government argues that the ban on lindane-based products is a legitimate and non-compensable act, taken in good faith and in a regular manner with the aim of protecting human health and the environment pursuant to the doctrine of police powers.

In its award, the arbitral tribunal rejected all of Chemtura’s allegations. It asserts that Chemtura has not produced sufficient evidence to show that the process of assessing the effects of lindane was undertaken in bad faith or in violation of procedural rules. The non-discriminatory ban was a legitimate manifestation of Canada’s police powers to protect human health and the environment.