italaw16297.pdf

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PUBLIC DOCUMENT

INTERNATIONAL CENTRE FOR THE SETTLEMENT OF INVESTMENT
DISPUTES

In the matter of Arbitration :
between: :

WESTMORELAND MINING HOLDINGS LLC, :

Claimant, :

and : ICSID Case No.
: UNCT/20/3

GOVERNMENT OF CANADA, :

Respondent. :

VIDEOCONFERENCE: HEARING ON JURISDICTION

Wednesday, July 14, 2021

The World Bank Group

The hearing in the above-entitled matter

came on at 9:37 a.m. (EDT) before:

MS. JULIET BLANCH, President

MR. JAMES HOSKING, Co-Arbitrator

PROF. ZACHARY DOUGLAS, Co-Arbitrator

[Page 2]

ALSO PRESENT:

On behalf of ICSID:

MS. ANNELIESE FLECKENSTEIN
Secretary of the Tribunal

Realtime Stenographer:

MS. DAWN K. LARSON
Registered Diplomate Reporter (RDR)
Certified Realtime Reporter (CRR)
B&B Reporters
529 14th Street, S.E.
Washington, D.C. 20003
United States of America
[email protected]

[Page 3]

ALSO PRESENT:

On behalf of the Claimant:

MR. ELLIOT FELDMAN
MR. MICHAEL SNARR
MR. PAUL LEVINE
MS. ANALIA GONZALEZ
MR. JIM EAST
MR. JOHN LEHRER
Baker & Hostetler, LLP
1050 Connecticut Avenue, NW
Suite 1100
Washington, D.C. 20036
United States of America

MR. ALEXANDER OBRECHT
Baker & Hostetler, LLP
1801 California Street
Suite 4400
Denver, Colorado 80202

MR. ANDREW LAYDEN
Baker & Hostetler, LLP
SunTrust Center
200 South Orange Avenue
Suite 2300
Orlando, Florida 32801

Party representative:

MR. MARTIN PURVIS
MR. JEREMY COTTRELL

[Page 4]

APPEARANCES: (Continued)

On behalf of the Respondent:

MR. ADAM DOUGLAS
MS. KRISTA ZEMAN
MS. MEGAN VAN DEN HOF
MS. ALEXANDRA DOSMAN
MR. MARK KLAVER
Trade Law Bureau
Global Affairs Canada
Government of Canada

Party representatives:

MR. KYLE DICKSON-SMITH
MR. PETER CIECHANOWSKI
MS. ANGELA VON HAUFF
MS. SHERI ANDERSON
MS. MARIEKE DUBE
MR. MICHAEL FABIYI
MS. NICOLE SPEARS

MR. DON MCDOUGALL
Deputy Director
Global Affairs Canada

MS. ELENA LAPINA
Trade Policy Officer
Global Affairs Canada

[Page 5]

APPEARANCES: (Continued)

NON-DISPUTING PARTIES:

For the United Mexican States:

MR. DIEGO PACHECO
MR. ARISTEO LOPEZ
Ministry of Economy

For the United States of America:

MS. LISA GROSH
MR. JOHN DALEY
MS. NICOLE THORNTON
MR. JOHN I. BLANCK
Attorney-Advisers
Office of International Claims and
Investment Disputes
Office of the Legal Adviser
U.S. Department of State
Suite 203, South Building
2430 E Street, N.W.
Washington, D.C. 20037-2800
United States of America

MS. CATHERINE GIBSON
Office of the U.S. Trade Representative
600 17th Street, N.W.
Washington, D.C. 20006
United States of America

MS. COURTNEY KIRMAN
MS. CARA YI
U.S. Department of the Treasury
1500 Pennsylvania Avenue, N.W.
Washington, D.C. 20220
United States of America

[Page 6]

C O N T E N T S

PAGE

PRELIMINARY MATTERS.................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................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7

OPENING STATEMENTS

ON BEHALF OF THE RESPONDENT:

By Mr. Douglas.................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................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..9

By Ms. Zeman...................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................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15

By Ms. Van den Hof................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................- 23

By Ms. Dosman..................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................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47

By Mr. Klaver..................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................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88

ON BEHALF OF THE CLAIMANT:

By Mr. Feldman.................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................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101

By Mr. Levine................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................- 141

By Mr. Snarr...................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................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177

QUESTIONS FROM THE TRIBUNAL................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................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158

[Page 7]

P R O C E E D I N G S

PRESIDENT BLANCH: I propose that we start.

So, I wanted to welcome everybody to Day 1

of the Jurisdictional Hearing between Westmoreland

Mining Holdings, LLC, and the Government of Canada in

the ICSID Case Number UNCT/20/3.

A couple of points, firstly, from the

Tribunal. As a very initial point, I can absolutely

guarantee we have read through everything we've been

provided, and we've looked at it carefully.

(Interruption.)

(Stenographer clarification.)

PRESIDENT BLANCH: Good. Thank you.

It was just to reassure the Parties that the

Members of the Tribunal have read everything. We

haven't gone through the slides, the demonstratives,

as they have only just arrived, but we have gone

through everything else.

Secondly, pursuant to Paragraph 30 of PO4, I

confirm the only persons committed to attend this

Hearing are those approved by the Disputing Parties

and the Tribunal, and no unauthorized person shall

[Page 8]

attend in violation of this agreement.

Thirdly, I confirm we've received the

confidentiality undertakings from the Non-Disputing

Parties.

And then, finally, in terms of timetable,

we'll need to take a break at about the two-hour point

for the Transcribers, for the Reporters.

To the extent that the Members of the

Tribunal ask questions during the course of the

presentation, it might mean for the Respondent, and

subsequently for the Claimant, that we have to have a

break before the Opening Presentation is completed.

If that's so, I apologize. I will try to remember to

ask after about an hour and 50 minutes where you are

in terms of progress as to whether--or to ask then for

you to choose a good time to stop.

And I would also ask that each time you move

to a new segment of your presentation, although it

should be, I hope, obvious to us, if you remember, if

you could mention it so that we can just see if we

have any questions that we want to ask on that

particular segment that has just been covered. Aside

[Page 9]

from that, there is nothing else from the Tribunal.

Before we go into the Opening Submissions,

firstly, Claimant, is there any housekeeping?

MR. FELDMAN: Sorry. I have to push all the

buttons. But, no, I don't think so. Thank you very

much, and thank you for making sure we have everyone

here.

PRESIDENT BLANCH: Excellent. Thank you.

And Respondent? Any housekeeping from you?

Mr. Feldman, you're on mute.

MR. DOUGLAS: Nothing from Canada,

President Blanch. Sorry, we're still figuring out our

audio here, but I think we're sorted now.

PRESIDENT BLANCH: Excellent.

Well, in which case, then, I suggest at

2:41 English time--so I think that's 9:41 D.C. time,

Respondent, if you'd like to give us your Opening

Submissions.

OPENING STATEMENT BY COUNSEL FOR RESPONDENT

PRESIDENT BLANCH: And you're still on mute.

MR. DOUGLAS: Are you able to hear us now?

PRESIDENT BLANCH: Perfect.

[Page 10]

MR. DOUGLAS: We keep automatically being

muted for some reason, so just please wave your

hands--well, actually, we can hear you, so let us know

if I'm talking and you're not able to hear me.

Good morning, President Blanch and Members

of the Tribunal. My name is Adam Douglas, and I'm

here on behalf of the Government of Canada. The

substantive obligations under Section A of NAFTA

Chapter Eleven are not owed to a prospective Claimant

until it becomes, A, an investor of a Party. A

Tribunal's jurisdiction ratione temporis is limited to

a claim for an alleged breach and resulting loss or

damage that occur after a Claimant becomes an investor

of a Party.

The Claimant in this case does not contest

that it was constituted under the laws of Delaware on

January 31, 2019, and was not an investor of a Party

prior to this date. Nor does the Claimant contest that

it first invested in Canada on March 15, 2019, when it

acquired Westmoreland Canada Holdings and Prairie

Mines & Royalty, known together as the "Canadian

Enterprises."

[Page 11]

Nonetheless, in its Notice of Arbitration

and Statement of Claim, the Claimant only alleges

breaches of NAFTA Chapter Eleven that occurred on or

before 2016, years before its existence as an investor

of a Party. In fact, the Claimant's Claim is nearly

identical to a NAFTA Claim filed by a previous

investor, Westmoreland Coal Company, also known as

WCC.

The Claimant thus seemingly files a claim on

behalf of WCC and WCC's investments. Even the amount

of claimed damages, $470 million, is identical to the

amount that was claimed by WCC. In its Pleadings, the

Claimant offers various theories to explain why NAFTA

Chapter Eleven should allow it to allege breaches and

claim damages that predate its existence as an

investor. And these arguments are not always clear.

For example, the Claimant argues that it was

substantially the same investor as WCC, and that WCC

merely underwent a bankruptcy restructuring through

which the Claimant emerged on the other side.

However, elsewhere, the Claimant confirms that it was,

in fact, a different investor than WCC and that--but

[Page 12]

has a continuity of interest with WCC that should

allow its NAFTA Claim to proceed on WCC's behalf.

The Claimant also argues, rather boldly,

that NAFTA allows one investor to file a claim on

behalf of another investor, and then alternatively,

that NAFTA in any event allows claims to be

transferred or assigned between investors. None of

the Claimant's various arguments can detract from the

simple, straightforward operation of NAFTA

Chapter Eleven. The obligations under Section A of

Chapter Eleven are owed to investors and their

investments, and if breached, those investors have

standing to bring a claim under Section B.

Article 1116 does not allow a Claimant to

bring a claim alleging breach and loss incurred by

another investor. Article 1117 does not allow a

Claimant to bring a claim alleging breach and loss

incurred by another investor's enterprise. No

Tribunal, under NAFTA or otherwise, has accepted a

request to allow one investor to bring a claim on

behalf of another investor and its investments.

To the contrary, Tribunals, including NAFTA

[Page 13]

Tribunals, have routinely held that a prospective

Claimant must have been an investor of a Party at the

time of the alleged breach. If this Tribunal agrees

with the Claimant in this case, it would be the first

to chart that path.

You will likely hear the Claimant accuse of

Canada today of elevating form over substance.

In its Rejoinder, the Claimant proffered

examples of changes to corporate form, which they

allege would negate jurisdiction under Canada's

interpretation of NAFTA Chapter Eleven, but that is

not Canada's position, and you are not being asked to

address all possible scenarios today, just the case

before you. The case before you is clear. The

Claimant did not undergo a mere change in corporate

form. The Claimant was constituted as a new

enterprise to purchase certain WCC assets--

(Interruption.)

(Stenographer clarification.)

MR. DOUGLAS: Yes. Thank you. Sorry about

that.

The Claimant did not undergo a mere change

[Page 14]

in corporate form. The Claimant was constituted as a

new enterprise to purchase certain WCC assets in an

arm's-length transaction. You will also hear the

Claimant today accuse Canada of using WCC's bankruptcy

proceedings to seek a windfall. That is absolutely

not the case.

It is important to recall that it was WCC's

bankruptcy proceedings. It was not the Claimant's

bankruptcy proceedings. If anything, the Claimant is

trying to use WCC's bankruptcy proceedings as a cover

to hide the fact that it was not an investor and had

no investments at the time of the alleged breach. It

was WCC that was an investor at the time of the

alleged breach, not the Claimant. It was open to WCC

to continue its claim. The Company still exists as an

enterprise constituted under the laws of Delaware.

Canada's Opening Statement today will

proceed as follows: First, we will present our

affirmative case. My colleague Ms. Zeman will explain

the key facts relevant to the Tribunal's jurisdiction

ratione temporis. Ms. Van den Hof will then explain

Canada's position on jurisdiction ratione temporis

[Page 15]

under NAFTA Chapter Eleven. And Ms. Dosman will

explain that the Tribunal does not have jurisdiction

ratione temporis over the Claimant's Damages Claim.

The presentation of Canada's affirmative

case will take about an hour, and depending on where

we are at timing-wise, that may be a good place for a

short break, but we will leave it for the Tribunal to

decide when that is appropriate.

Canada's presentation will then turn to

respond to the alternative arguments presented by the

Claimant. Ms. Zeman will explain that the Claimant

and WCC transacted at arm's length during WCC's

bankruptcy proceedings and are not the same investor

of a Party.

I will then return with a discussion of the

assignment of claims, and my colleague Mr. Klaver will

then explain that the Claimant's continuity of

interest theory has no grounding in fact or in law.

With that, I will turn things over to

Ms. Zeman.

MS. ZEMAN: Members of the Tribunal, a good

part of the day where you are.

[Page 16]

My presentation on background facts will

begin by taking a brief look at how we got here today.

I will then pause to highlight the most fundamental

fact of this phase of the Arbitration when the

Claimant became an investor of a Party.

As the Tribunal considers the relevant

questions of fact in this Jurisdictional Phase, Canada

urges the Tribunal to pay particular attention to the

evidence that has or has not been presented to

establish each proposition. Canada has put forward

evidence on the facts pertaining to how and when the

Claimant became an investor of a Party.

That evidence includes two Expert Reports

from Ms. Coleman on issues pertaining to U.S. law.

Those Expert Reports are largely uncontested. The

Claimant cites frequently to Ms. Coleman's evidence in

support of statements in its own submissions. It has

chosen not to cross-examine her.

Ms. Coleman has presented compelling

evidence on the matters within her ambit. The

Tribunal can comfortably rely on that evidence. By

contrast, the Claimant frequently makes unsupported

[Page 17]

assertions with respect to matters of fact. We will

highlight some of those for you today.

So, to begin, how did we get here? In 2014,

WCC purchased a number of Canadian assets in an

arm's-length sale from a Canadian company called

Sherritt International. These assets included an

Alberta enterprise called Prairie Mines & Royalty ULC.

WCC was a publicly traded Delaware corporation and

held its interest in Prairie in the manner you see on

the screen.

On November 22, 2015, the Government of

Alberta announced its decision to phase out emissions

from coal-fired power plants by 2030; and on

November 24, 2016, Alberta announced that it had

concluded agreements with certain coal-fired power

plant owners to effectuate its decision to allocate

voluntary Transition Payments.

On October 9, 2018, WCC filed for bankruptcy

in the United States under Chapter Eleven of the U.S.

Bankruptcy Code. As the Claimant explained at

Paragraph 57 of its Counter-Memorial, WCC's bankruptcy

process was unrelated to Alberta's 2015 and 2016

[Page 18]

Decisions. Instead, WCC filed for bankruptcy because

it was significantly overleveraged after a series of

acquisitions in the decade prior that nearly tripled

their debt obligations. These are words from WCC's

Chief Restructuring Officer, which the Tribunal can

find at Exhibit R-49. They are also discussed at

Paragraph 50 of Ms. Coleman's First Expert Report and

Paragraphs 16 and 17 of Canada's Memorial.

With input from its lenders, WCC devised a

Plan to address its significant debt obligations in

the bankruptcy process. As required under U.S.

bankruptcy law, WCC filed its Plan with the

U.S. Bankruptcy Court for the Southern District of

Texas.

As WCC described it to the Bankruptcy Court,

its Plan provided for the sale and transfer of

substantially all of its assets and equity interests,

efficient distributions to its creditors, and a

subsequent wind down of its businesses and affairs

upon distribution of the sale proceeds pursuant to the

Plan.

WCC planned to sell its assets in a public

[Page 19]

auction process to maximize the value of its assets

and "provide enhanced stakeholder recoveries."

To protect their interests in their

collateral, WCC's highest priority lenders, the First

Lien Lenders, agreed to provide a bid of last resort,

a stalking horse bid. If no one else wanted to

purchase the assets for sale, the First Lien Lenders

would purchase them through an acquisition vehicle.

As we know, no other bidders came forward.

On November 19, 2018, one month after WCC

began its bankruptcy proceedings and announced that it

planned to dissolve, it filed a claim against Canada

under NAFTA Article 1116 on its own behalf and

Article 1117 on behalf of its Canadian enterprise

Prairie. In its claim, WCC alleged that Canada had

violated NAFTA Articles 1102 and 1105 by virtue of

Alberta's 2015 Decision to phase out emissions from

coal-fired electricity generation by 2030 and its

2016 Decision to allocate Transition Payments to the

owners of the generating units. WCC claimed damages

exceeding $470 million.

On January 31, 2019, the First Lien Lenders

[Page 20]

created the Claimant as a Delaware limited liability

company, or LLC. The Claimant was the acquisition

vehicle that would take title to the purchased assets

on behalf of the First Lien Lenders.

March 15, 2019, was WCC's bankruptcy Plan

effective date. On that date, WCC and the Claimant

executed the transactions contemplated by the Plan.

This was the day the Claimant became the owner of two

Alberta companies, the "Canadian Enterprises."

The transaction also included a listed

purchased asset entitled the "NAFTA Claim."

The Stalking Horse Purchase Agreement

defined this asset in the following terms: "'NAFTA

Claim' means that certain claim filed with the Office

of the Deputy Attorney-General of Canada on

November 19, 2018, by Westmoreland on its behalf and

on behalf of its Canadian subsidiary Prairie Mines &

Royalty ULC against the Government of Canada pursuant

to Chapter Eleven of the North American Free Trade

Agreement (as such claim may be amended)."

The term "Westmoreland" was defined in the

agreement to mean "Westmoreland Coal Company."

[Page 21]

As Ms. Coleman explained at Paragraphs 86 to

88 of her First Expert Report, U.S. bankruptcy law

defines property of the estate of a debtor in

bankruptcy very broadly and includes legal claims.

However, the Bankruptcy Code defers to applicable

non-bankruptcy law, whether state, federal, or, as

here, international law on the issue of

transferability itself and as to the merits of a claim

and who may assert it.

On May 13, 2019, Canada received an attempt

to amend WCC's Notice of Arbitration. The attempted

amendment was submitted on behalf of Westmoreland

Mining Holdings and the Canadian Enterprises. It

sought to substitute Westmoreland Mining Holdings as

the claimant. Canada objected to the attempted

amendment on the basis it was not a permissible

amendment under the 1976 UNCITRAL Rules.

After some exchanges that my colleague

Mr. Douglas will discuss in greater detail later,

Canada and the Claimant agreed that this May 13, 2019,

submission would serve as the Claimant's Notice of

Intent to submit a claim to arbitration under NAFTA

[Page 22]

Article 1119.

On July 23, 2019, WCC'S NAFTA Claim against

Canada was withdrawn, and on August 12, 2019, 90 days

after the submission of its Notice of Intent, the

Claimant initiated these proceedings with Claims under

NAFTA Article 1116 on its own behalf and Article 1117

on behalf of both Prairie and Westmoreland Canada

Holdings Inc.

The Claimant's NOA challenges the same

Alberta Measures as alleged violations of the same

NAFTA obligations and claims the same amount of

damages as WCC claimed in its Claim.

It is this series of events that brings us

here today and to our moment to pause on the most

fundamental fact of this Jurisdictional Phase. It is

undisputed that the Claimant made an investment in

Canada on March 15, 2019. On that date, the Claimant

became the owner of the Canadian Enterprises. It held

these enterprises in the manner you see on the screen.

Prior to March 15, 2019, the Claimant did

not have an investment in Canada. Prior to

January 31, 2019, the Claimant did not exist.

[Page 23]

Pending any questions from the Tribunal on

this aspect of my presentation, I'll pass the floor to

Ms. Van den Hof and then Ms. Dosman, who will address

the consequences of this fact for the Tribunal's

jurisdiction.

PRESIDENT BLANCH: Thank you.

Let me just check whether--Zac, do you have

any questions at this point?

ARBITRATOR DOUGLAS: No.

PRESIDENT BLANCH: And James?

ARBITRATOR HOSKING: No.

PRESIDENT BLANCH: Okay. In which case,

let's pass on. Thank you.

MS. ZEMAN: Thank you.

MS. VAN DEN HOF: Thank you, Members of the

Tribunal. At the core of Canada's objection in this

dispute is the principle that a claimant is only owed

Treaty protection under NAFTA Chapter Eleven after it

becomes an investor of a Party. NAFTA does not

protect investors against historical events, nor does

it free an investor of the need to conduct due

diligence into the enterprise forming the basis of its

[Page 24]

investment.

My colleague Ms. Zeman has already explained

that the Claimant came into existence and made its

investment in 2019. It became an investor of a Party

on that date. We have also explained that the

breaches alleged by the Claimant occurred in 2016,

when Alberta provided Transition Payments to owners of

coal-fired electricity generating units.

The Claimant appears to be alleging that

Alberta should have provided WCC with a payment. But

under the definition of "an investor of a Party," WCC

and the Claimant are distinct investors. They are

separately constituted, one as a corporation, and the

other as a limited liability company. And, as

Ms. Zeman will explain later in our presentation, the

two companies are unrelated, unaffiliated entities and

transacted at arm's length in the bankruptcy process.

With these facts, Canada's objection is uncomplicated.

The Claimant did not exist and was not an

investor of a Party when it alleges it was deprived of

protection, and the Claimant has no standing to bring

a claim on behalf of WCC.

[Page 25]

In my presentation today, before turning to

the legal basis for Canada's jurisdictional objection,

I will recall that the Claimant bears the burden of

proving it has satisfied NAFTA's jurisdictional

requirements. I will then move on to Canada's legal

position in this Arbitration, explaining first that

the Claimant is incorrect that Articles 1116 and 1117

can be interpreted on their own. They must be read

together with Article 1101.

Second, under Article 1101, the challenged

measures must relate to the Claimant and its

investments. There must be an immediate and direct

connection between the Claimant and the challenged

measures.

Third, the protection afforded to the

Claimant's investment under Section A began when the

Claimant took a risk and made its investment. A

domestic enterprise is not protected independently of

its investor.

Four, under Section B, Articles 1116 and

1117 require that a Claimant be a protected investor

at the time of the alleged breach and resulting

[Page 26]

damages.

Finally, I will address previous investment

arbitration cases supporting Canada's position. These

cases are directly on point and contradict the

Claimant's position in this Arbitration. For the

purposes of conserving time, I'll wait until the end

of my presentation to pause and ask for questions.

However, please feel free to stop me between these

sections if you have any questions.

I will now turn to briefly addressing the

Claimant's burden. In our Memorial on Jurisdiction,

we explained that it is the Claimant's burden to

demonstrate the Tribunal has jurisdiction. The

Claimant did not address this issue in their

Counter-Memorial, and we noted the absence of

disagreement in our Reply.

The Claimant then changed course in the

Rejoinder, arguing for the first time on Page 53 that:

"Canada has the burden of proof in its jurisdictional

objection." This is not correct. The Claimant cites

authorities to support its point, explaining that a

party bears the burden of proving its claim or

[Page 27]

defense, but a jurisdictional objection is not a

defense because there is no presumption in favor of

jurisdiction. The Claimant's Authorities and its

Expert agree that the Claimant has the burden of

proving jurisdiction.

For example, the Claimant cites Gallo, but

Gallo found on the same page the Claimant cites that:

"A Claimant bears the burden of proving that he has

standing and the Tribunal has jurisdiction to hear the

Claims submitted. If jurisdiction rests on the

existence of certain facts, these must be proven at

the jurisdictional stage."

And on Page 26 of his First Report,

Professor Paulsson agrees that a NAFTA claimant must

show the claim meets jurisdictional criteria. So, the

Claimant's new argument here cannot be supported, and,

in any case, the Claimant has not materially disputed

the facts upon which Canada's jurisdictional objection

rests and which the Tribunal will evaluate to

determine whether it has jurisdiction.

I will now turn to explaining why the

Claimant has not met NAFTA's jurisdictional

[Page 28]

requirements.

First, the Claimant argues that

Articles 1116 and 1117 stand on their own, and

Article 1101 can be read without the context of the

remainder of the chapter, but Articles 1101, 1116, and

1117 must be read together. This is the only

conclusion consistent with the Vienna Convention's

mandate to read any individual provision in context.

In fact, the NAFTA text directs that they be read

together.

First, Article 1101 defines the scope of the

whole chapter. It circumscribes the scope of every

provision, including Article 1116 and 1117.

Second, Articles 1116 and 1117 refer

expressly to Section A, where Article 1101 is the

first provision, requiring a Claimant to allege that a

party has breached an obligation under Section A.

Finally, the NAFTA Parties agree that these

provisions must be read together.

I'll now turn to Article 1101, which

requires the challenged measures relate to the

Claimant.

[Page 29]

(Interruption.)

(Stenographer clarification.)

MS. VAN DEN HOF: Luckily, that is the last

thing I said.

So, the Claimant argues that Article 1101 is

a general statement which simply requires that the

challenged measures relate to any investor or any

investment. This is incorrect.

In the context of Articles 1116 and 1117,

Article 1101 establishes that there must be a

connection between the measures alleged to have

breached Section A and the investor of a Party

bringing the claim. The NAFTA Parties agree that

Article 1101 requires a direct connection between the

challenged measures and the claimant, and every NAFTA

Chapter Eleven Tribunal evaluating Article 1101 has

come to the same conclusion.

Not a single NAFTA Decision supports the

Claimant's position. For example, the Apotex tribunal

found it necessary to evaluate Article 1101 in the

context of NAFTA's Chapter Eleven and the claimant's

substantive claims. It ultimately found the

[Page 30]

challenged measures must relate to the claimant and

their investment, not any investor or any investment.

NAFTA Tribunals have also elaborated on the

degree of connection required between the challenged

measures and the claimant under Article 1101. For

example, the Apotex tribunal found the relating-to

requirement means the challenged measures must have a

direct and immediate effect on the claimant. And the

Resolute tribunal found, under Article 1101, the

challenged measures must directly address, target,

implicate, or affect the claimant.

As a result, Article 1101 is not simply a

general statement with little substantive importance,

at the Claimant alleges. Instead, it establishes that

there must be a direct and immediate connection

between the particular measure attributable to the

Host State, the claimant, and the particular

investment made by the claimant.

I will now explain why, under Section A, the

protection afforded to the Claimant's investment began

in 2019, when the Claimant acquired the Canadian

enterprises. This is important because the challenged

[Page 31]

measures must relate to the Claimant's investment, not

any U.S. or Mexican investor's investment.

The Claimant has suggested that the

challenged measures relate to it because they affected

the Canadian Enterprises prior to the Claimant's

acquisition of those enterprises. In doing so, the

Claimant ignores that the Canadian Enterprises are

domestic enterprises, Alberta companies. They are

only protected as an investor's investment.

Under NAFTA Chapter Eleven, the protection

afforded to an investment of an investor of another

party begins when a particular investor takes a risk

and makes its investment. First, "investment of

investor of a Party" is a defined term in Article 1139

which requires that the investment be owned or

controlled by the relevant investor.

Second, the equally authentic French version

of NAFTA uses "les investissements effectués par les

investisseurs d'une autre Partie" in the place of

"investment of an investor of another party." The use

of the word "effectuer," or "to make," is clear that

an investment of an investor of another party begins

[Page 32]

when a particular investor makes its investment. The

Spanish text also uses the word "realizar" (speaking

Spanish), meaning "to make."

An investment can only be made once by one

investor. This means the investment made by each

investor is unique. WCC's investment is distinct from

the Claimant's investment.

The Claimant has no response to this point

and simply argues that the English text is also valid,

but Canada's interpretation is the only one consistent

with all three equally authentic versions of the text.

The Tribunal should adopt the interpretation

consistent with the ordinary meaning, that an

investment begins when it is made by a particular

investor.

Third, the scope of the Section A

obligations relevant to this case reinforces Canada's

interpretation. The Claimant argues that respondents

owe obligations to foreign investment enterprises

under Articles 1102 (2) and 1105, but this is not

accurate. Under Articles 1102 and 1105, Canada owes

protection to investments of investors of another

[Page 33]

Party. The underlying domestic enterprise receives no

independent protection.

As a result, the Claimant is incorrect that

it has an investment that was owed protection in 2016.

As my Colleague Ms. Zeman explained earlier,

the investment of WCC in the Canadian Enterprises

occurred in 2014 when WCC acquired its interest in

Prairie Mines & Royalty ULC from Sherritt. By

contrast, the investment of the Claimant in the

Canadian Enterprises occurred in 2019 when it

purchased those enterprises.

The two investments cannot be equated. They

were made at different times by different investors

and under different conditions. Because the Claimant

is different from WCC and its investment is different

from WCC's investment, the challenged measures cannot

relate to the Claimant and its investments.

The Claimant argues the measures breached an

obligation to the Claimant because it and its

investments were treated unfairly and in a

discriminatory manner. But how could Alberta possibly

have treated the Claimant or its investments unfairly

[Page 34]

or in a discriminatory manner in 2016? The Claimant

did not exist or have any investments at that time.

The challenged measures cannot relate to the Claimant

or its investments.

This concludes my submissions on Section A,

and I will now move on to address Section B.

PRESIDENT BLANCH: Just before you do, let

me just check whether there are any questions from

either Zac or from James.

Okay. Please do continue.

MS. VAN DEN HOF: Okay. Thank you.

The Claimant argues that it has standing

under Section B because it is currently an investor of

a Party and has a grievance against Canada's treatment

of the Canadian Enterprises prior to its investment in

them. But the procedures in Section B do not pertain

to any investor of a Party or any investment.

Instead, they pertain to the disputing investor, or

the claimant, with whom Canada consents to arbitrate

and who is, A, alleging the breach of an obligation

under Section A owed with respect to that claimant and

its investment; and, B, alleging it directly or

[Page 35]

indirectly incurred damages arising out of that

breach. This is the only situation where there is a

dispute between a Party and an investor that can be

settled under Section B.

For example, the EnCana tribunal defined a

dispute as "the taking of measures in breach of the

Treaty which caused loss and damage to an investor."

The specific requirements of a disputing investor's

claim are set out in Articles 1116 and 1117.

As our Pleadings explain, NAFTA's object and

purpose requires these provisions to be interpreted in

a way that maintains the effectiveness of the dispute

settlement procedures. Under Article 1116, the

Claimant argues it can bring a claim on behalf of WCC

and WCC's investments. However, Article 1116's title

is clear that a claim under that provision is a claim

by an investor on its own behalf.

In an Article 1116 Claim, there must be, A,

a Measure alleged to have breached an obligation to

the Claimant; and, B, loss or damage to the Claimant

arising out of that breach. All three NAFTA Parties

agree that Article 1116 does not authorize a claimant

[Page 36]

to bring a claim on behalf of another investor who

suffered loss or damage as a result of the alleged

breach.

For example, the United States' Tennant

Article 1128 Submission explains that a Claimant must

be the same investor who sought to make, was making,

or made the investment at the time of the alleged

breach and incurred loss or damage thereby.

There is no provision in Chapter Eleven

which authorizes an investor to bring a claim for an

alleged breach relating to a different investor. My

colleague Ms. Dosman will establish later today that

the Claimant does not even plead any damages that it

could have incurred.

Canada's interpretation is also consistent

with the tribunal's decision in Mesa. That tribunal

found its jurisdiction limited to measures that

occurred after the claimant became an investor holding

an investment.

In response, the Claimant says Mesa finds

that "foreign investment protections apply only where

a foreign investment exists." But the Claimant

[Page 37]

ignores that Mesa was based exclusively on whether the

claimant had sought to make or made each of its

investments at the time of the alleged breach and so

qualified as an investor of a Party with respect to

those investments. It found: "The investor must

establish that it was seeking to make the very

investment in respect of which it makes its claims at

the time of the challenged Measures." The Claimant

would not satisfy the test articulated by the Mesa

tribunal.

The Claimant's theory of Article 1116 leads

to unreasonable outcomes. First, Article 1116 (2)

establishes that a claimant may not bring a claim if

more than three years have elapsed from the date on

which the investor first acquired, or should have

first acquired, knowledge of the alleged breach and

knowledge that the investor has incurred loss or

damage.

An investor cannot acquire knowledge of

breach or loss before it even exists. When a new

investor comes into existence, it could only acquire

knowledge of an alleged breach at that moment. If an

[Page 38]

investor could file a claim under Article 1116

alleging breach and loss that occurred prior to its

existence, the limitation period could, therefore, be

tolled indefinitely, and this would render the

limitation period meaningless.

This shows that Article 1116(2) exclusively

contemplates that a claimant's existence coincides

with the alleged breach and loss or damage. The

Claimant's interpretation of Article 1116 cannot be

correct.

Second, the Claimant's interpretation of

Article 1116 renders Article 1121 (1) meaningless.

Article 1121 requires only the disputing investor to

waive its right to international or domestic

proceedings for damages with respect to the challenged

measure. This provision minimizes the risk of double

recovery and inconsistent outcomes.

If Article 1116 allowed a disputing investor

to file a claim alleging breach and loss incurred by

another investor, as the Claimant contends, nothing

would prevent the original investor from also pursuing

a proceeding for damages with respect to the same

[Page 39]

measure. As the United States explained in its

Tennant Article 1128 Submission, this would

potentially subject the respondents to two proceedings

for the same alleged breach, defeating the purpose of

Article 1121(1)(b).

The Claimant's Rejoinder offered no response

to Canada's arguments on Article 1121. Its only

argument is that the window for NAFTA claims is

"nearly closed anyway." This does not make sense.

The fact that NAFTA has been replaced cannot affect

the interpretation of the Treaty.

For these reasons, the Claimant cannot bring

a claim on behalf WCC. And the Claimant's theory of

Article 1117 is equally flawed. It cannot bring its

claim under Article 1117.

The Claimant argues that the enterprise is

owed obligations under NAFTA independent of the

particular investor that owns it. This cannot be

true. As I explained earlier, an investment begins

when a particular investor acquires its interests in

an enterprise. The domestic enterprise itself is not

owed any Treaty protection. In fact, under customary

[Page 40]

international law, the Claimant would not be entitled

to claim any damages to the enterprise arising out of

any alleged breach of the Treaty.

Article 1117 creates a limited derogation

from customary international law to allow investors to

claim indirect damages incurred by a domestic

enterprise the claimant owns or controls. However, it

does not derogate further from customary international

law to permit a claimant to submit a claim for an

alleged breach of an obligation owed with respect to a

different investor or its investment.

As a result, in an Article 1117 claim, the

claimant must show, A, a Measure alleged to have

breached an obligation owed with respect to the

Claimant, and that it owned or controlled the

enterprise that allegedly incurred a loss arising out

of that breach at the time of the breach and at the

time of the submission of the claim.

Canada's interpretation is consistent with

every NAFTA decision looking at when ownership or

control must exist under Article 1117.

In Gallo, the tribunal found a claimant must

[Page 41]

own or control the enterprise at the time of the

alleged breach. The tribunal observed that previous

investment arbitration tribunals have been unanimous

on this point. The Claimant responds by arguing that

this case dealt with an abuse of process claim. This

is just not true.

It is also just not true that the tribunal

found that Article 1117 is satisfied when the

enterprise was held by any foreign investor at the

time of the alleged breach, as the Claimant alleges.

Instead, the tribunal found that Mr. Gallo had not

satisfied the quid pro quo necessary to access NAFTA

dispute settlement, which requires the claimant

seeking protection to show that it is a "protected

foreign investor who at the relevant time owns or

controls an investment in the host country."

The Claimant has not satisfied the test

articulated by the Gallo tribunal.

The B-Mex tribunal also found that a

claimant must own or control the enterprise at the

time of the alleged breach. The Claimant agrees with

Canada that the B-Mex parties and tribunal agreed that

[Page 42]

the claimant had to own or control the enterprises at

the time of the alleged breaches. The Claimant argues

that this is irrelevant because the tribunal did not

resolve any factual issues on this position. That's

not true.

As you can see on this slide, the tribunal

did find that the claimant owned the enterprises at

all relevant times, including at the time of the

alleged breach, and--rather, they found that they

controlled the enterprise at all relevant times. In

this case, the Claimant did not own or control the

enterprise at all relevant times.

The Claimant's theory of Article 1117 leads

to unreasonable outcomes, demonstrating that it cannot

be correct.

First, the Claimant's argument that

investments are owed obligations and can bring claims

independent of their particular investor is

inconsistent with Article 1117(4), which states that

"an investment may not make a claim." It is also not

consistent with the NAFTA obligations, which

consistently protect only investments of investors of

[Page 43]

another party, not investments by themselves.

Second, by abandoning the requirement that

the challenged measures bear any relationship to the

claimant, the Claimant's theory encourages

claim-shopping. The interpretation makes it possible

for a claimant to purchase an enterprise with a

potential nascent NAFTA claim, making the claim an

asset that can be purchased rather than a right

arising out of the quid pro quo of investment.

The Claimant argues that this may be an

abuse of process without explaining how it might be

abusive. This situation has never arisen before, and

it's not clear the abuse of process doctrine would

apply.

Third, the Claimant's theory could lead to a

multiplicity of proceedings under Article 1116 and

1117 with respect to the same enterprise and arising

out of the same measures. This could lead to the

undesirable prospect of overlapping claims and

divergent outcomes with respect to the same measure.

The simpler explanation, which avoids all of

these issues, is that the claimant's interests in an

[Page 44]

enterprise must exist at the time of the alleged

breach. For these reasons, the Claimant cannot bring

a claim on behalf of the Canadian Enterprises because

it did not own or control them at the time of the

alleged breach.

I'll now move on from the NAFTA text to

previous investment arbitration cases.

As we've shown in our submissions, tribunals

have consistently found they have no temporal

jurisdiction over alleged breaches that occurred

before a claimant became an investor of a Party. The

Claimant accuses us of reading these cases in search

of a rule without a reasoned explanation, but the

cases provide a consistent rationale. A claimant has

no access to dispute settlement where the claimant

couldn't have deprived--sorry, the State, rather,

couldn't have deprived the claimant or its investment

of any protection.

I have already explained that Mesa, Gallo,

and B-Mex are cases where NAFTA tribunals have agreed

that a claimant must have been an investor of a Party

at the time of the alleged breach. Now I will respond

[Page 45]

to the cases where the Claimant focused its attention

in the Rejoinder, STEAG and GEA Group. I am happy to

address questions concerning any other cases if you

have them.

Both STEAG and GEA Group found that a

claimant must be a protected investor at the time of

the alleged breach in a situation where the claimant

and the previous owner of its investment held the same

nationality.

In STEAG, the tribunal found under the

Energy Charter Treaty, in Canada's translation from

Spanish, that "the Tribunal has jurisdiction to

resolve the dispute between the Parties only if said

dispute arises from a claim for violation of the

Treaty that is related to the Claimant's investment in

Spain." The tribunal found the relevant date for

determining its jurisdiction to be the date that the

claimant invested in Spain. It made this finding even

though an investor of same nationality had previously

held the investment at issue.

The Claimant has completely ignored this

portion of the tribunal's decision. Instead, it

[Page 46]

focuses on the fact that the tribunal considered

additional injections of capital from the same

claimant to be the same investment. We didn't refer

to this finding in our submissions. The claimant

cannot meaningfully distinguish this case.

Similarly, the GEA Group tribunal found

that, in order for the tribunal to hear the claimant's

claims, the claimant must have held an interest in the

alleged investment before the alleged Treaty

violations were committed. The Claimant argues that

GEA Group is distinguishable because there was no

evidence of a continuity of interest.

My colleagues will address the Claimant's

misguided continuity of interest theory shortly. For

now, I will just say that the Claimant has not

meaningfully distinguished GEA Group, either.

There is nothing in any of the many cases we

have cited to suggest that, if a claimant can

demonstrate it has an untethered concept of continuity

of interest, a tribunal has jurisdiction. Instead,

each of these cases support that the claimant must be

a protected investor at the time of the alleged

[Page 47]

breach.

For all of these reasons, the Claimant has

not shown that the Tribunal has jurisdiction under

Articles 1101, 1116, and 1117. For the Tribunal to

have jurisdiction, the Claimant would have to show

that it was a protected investor in 2016. It has not

done so.

My colleague Ms. Dosman will explain shortly

that, in fact, the Claimant has not even claimed any

damages it could have incurred.

Thank you for your attention today. I

welcome any questions from the Tribunal on these

issues before turning the microphone over to

Ms. Dosman.

PRESIDENT BLANCH: Thank you.

James?

ARBITRATOR HOSKING: No.

PRESIDENT BLANCH: And Zac?

ARBITRATOR DOUGLAS: No.

PRESIDENT BLANCH: Thank you very much.

Moving on to Ms. Dosman.

MS. DOSMAN: Members of the Tribunal, hello.

[Page 48]

My name is Alexandra Dosman.

Ms. Van den Hof has explained that the NAFTA

does not permit claims by an investor of a Party prior

to its existence and investment in the territory of

another Party.

I will complement her submissions by

addressing the Claimant's failure to plead a

cognizable damages case.

The requirement for a claimant to show

damages prima facie at the jurisdictional stage is

evident from the language of the NAFTA. The Treaty

requires a claimant to plead that it has incurred loss

or damage by reason of, or arising out of, the alleged

breach, either directly, under Article 1116(1), or

indirectly, on behalf of its domestic enterprise under

Article 1117(1).

Where a claimant or its investment could not

have incurred damage arising out of the alleged

breach, the tribunal does not have jurisdiction over

the claim. Tribunals have confirmed this principle.

For example, in UPS v. Canada, the tribunal noted that

a claimant is required to "state a prima facie case of

[Page 49]

damage at the jurisdictional stage."

Similarly, in Saluka v. Czech Republic, the

tribunal found that it lacked jurisdiction in respect

of claims for damage prior to the claimant's

acquisition of the underlying investment.

The other NAFTA Parties agree that the

possibility of establishing damages is a prerequisite

to the submission of a claim to arbitration. México

at Paragraph 4 of its Article 1128 Submission in this

case states that an investor of a Party may only

submit a claim to arbitration if that investor has

incurred a loss. As Ms. Van den Hof noted, the United

States in its Article 1128 Submission in Tennant

agrees at Paragraph 10 that the investor bringing a

claim under Article 1116 must "be the same investor

who suffered loss or damage as a result of the alleged

breach."

Here, the Claimant cannot establish a prima

facie case of damage either to itself or to its

investment because it did not exist at the time the

alleged damages crystallized, and it had no investment

at that time.

[Page 50]

In its Notice of Arbitration, the Claimant's

allegations of loss or damage concern WCC. There is

nothing specific to the Claimant. What is more, the

Notice of Arbitration makes no allegations of indirect

damage specific to the Canadian Enterprises.

In its pleadings on jurisdiction, the

Claimant attempted, belatedly, to establish a link

between itself, its investment, and the alleged loss

or damage. It makes three new arguments, none of

which is grounded in its Notice of Arbitration, and,

in any event, none of these new arguments has merit.

First, the Claimant argues that it can claim

losses on behalf of WCC under Article 1116(1). For

example, at Paragraph 127 of its Rejoinder on

Jurisdiction, the Claimant states that "Prairie's

mine-mouth operations were purchased in 2013-14 by WCC

on the expectation that they would have a 50-year life

span."

It argues that it can claim losses on behalf

of WCC for an alleged violation of WCC's expectations

in 2016. This is not permitted. An investor cannot

make a claim for loss to another investor.

[Page 51]

Second, the Claimant argues that it can

claim losses under Article 1117(1) that were incurred

by Prairie in 2016, years prior to the Claimant's

acquisition of the Canadian Enterprises in 2019. This

is also not permitted. An investor cannot make a

claim on behalf of another investor's enterprise.

Canada does not independently owe obligations to

Prairie, the domestic enterprise.

NAFTA distinguishes between an investor's

direct damages under Article 1116 in its capacity as

owner and indirect damages under Article 1117 in

its--on behalf of that investor's enterprise.

Damage to Prairie is only cognizable as

indirect damage to an investor that has standing to

bring a claim under NAFTA Chapter Eleven.

And, finally, the Claimant appeals to

so-called "pending damages" in an attempt to save its

claim. However, there are no pending damages here.

As you can see on the slide, the Claimant is claiming

losses as a result of Alberta's conclusion of the

Off-Coal Agreements with electricity generators in

November of 2016. These are exactly the same alleged

[Page 52]

$470 million in damages that WCC claimed in 2018. As

you can see on the screen, the Claimant alleges that:

"Payments pursuant to the Off-Coal Agreements

established that Prairie and its investors would be

harmed." It also states that the alleged harm was

certain.

Indeed, the Claimant states that it "had to

file claims within three years of the November 2016

Off-Coal Agreements" in order to fall within the

Limitation Period. That is at Paragraph 102 of its

Counter-Memorial. That is, the Claimant acknowledges

that the alleged damages crystallized prior to its

formation and prior to its investments. There's

nothing new or pending here.

The Claimant then points to the fact that

the Off-Coal Agreements provided for the distribution

of Transition Payments in annual installments. This

is true; it is also unhelpful to the Claimant's case.

Alberta decided how to allocate the

Transition Payments once in 2016. The Transition

Payments contemplated by the OCAs were fully

documented and accounted for in 2016. The OCAs and

[Page 53]

any alleged resulting damage were certain on the

Claimant's case in 2016.

Moreover, the Claimant made its investment

in 2019 with full knowledge of the alleged losses.

The Claimant would have made its own determination of

what the Canadian Enterprises were worth in 2019 and

decided to proceed on that basis.

Canada is not responsible for the valuation

made by WMH when it invested in the Canadian

Enterprises in 2019 with full knowledge of the

regulatory landscape. WMH must make its own claim for

prima facie damage arising out of the breach it

alleges, but it has failed to meet this low bar.

Along with Ms. Van den Hof's submissions,

this concludes Canada's affirmative case.

Following any questions from the Tribunal

and pending any desire for a break, I will turn the

microphone back to Ms. Zeman, Mr. Douglas, and

Mr. Klaver, who, together, will explain why the

Claimant has failed to establish the Tribunal's

jurisdiction on the basis of its alternative theories.

PRESIDENT BLANCH: Thank you very much.

[Page 54]

Let me just check.

Zac, do you have any questions?

And James? No?

A question for the reporter: Are you happy

if we continue, or would you like to have a short

break now?

REALTIME STENOGRAPHER: I'm just fine, Madam

President. Thank you.

PRESIDENT BLANCH: Excellent. Then I

propose we continue.

MS. ZEMAN: Okay. We have heard from both

Ms. Van den Hof and Ms. Dosman that the fact that the

Claimant was not an investor of a Party at the time of

the alleged breach is fatal to its claim. The

remainder of our statement today will address the

Claimant's attempts to avoid that result by positing

rules of international law that do not exist and

failing to establish that it meets those rules as a

matter of fact.

The Claimant's alternative theories of

jurisdiction are largely premised on an alleged

connection with WCC. Over the course of this

[Page 55]

Jurisdictional Phase, the Claimant has characterized

its relationship to WCC as one of "associated

companies", "corporate affiliates", reflecting a

"continuity of beneficial interests" and dropping the

beneficial in its Rejoinder as reflecting a continuity

of nondescript interests.

It asserted at the Bifurcation Hearing that

it is "substantially the same" as WCC, and in its

Rejoinder that WCC merely "changed form" to become

WMH. However, it also indicated in its

Counter-Memorial that it is a "distinct legal entity"

and that it and WCC are separate investors, in the

plural.

The Claimant has asserted that it is a new

owner of a foreign investment and a "new investor

parent" and that it is "not a 'new' investor in

Canada". It has further stated that WCC created the

Claimant as a wholly owned subsidiary and was the

Claimant's parent, but also that it was the Claimant

that had a "continuous interest" in WCC. These

statements cannot be reconciled, either with each

other, the evidence on the record, or with existing

[Page 56]

rules of international law on which this Tribunal's

jurisdiction could be based.

In some places, the Claimant additionally

ties these various factual allegations to the

bankruptcy context that facilitated its purchase of

the Canadian Enterprises. For example, it has alleged

what it calls a "simple proposition" that the entity

emerging from bankruptcy, as the owner of the debtor

company's investment, should be allowed to pursue a

NAFTA Chapter Eleven claim for harm to the investment.

But the Claimant does not tie its theory to the text

of NAFTA.

On its most generous reading, the Claimant's

theory appears to be that any entity emerging from a

bankruptcy process should automatically be viewed as

the same investor of a Party that entered. But as

Canada explained in its Reply, there is no magic in

the bankruptcy context. The characteristics of each

particular transaction and the relationship between

investors purporting to be the same must be assessed

on a case-by-case basis.

In this case, the evidence establishes that

[Page 57]

the Claimant and WCC were at arm's length and that WCC

did not simply become the Claimant. They are not the

same investor of a Party as would be required in order

for the Tribunal to have jurisdiction over the

Claimant's claim.

Today I will take the Tribunal through key

evidence on the record that contradicts the Claimant's

theories of connection to WCC as a factual matter; in

particular, that it is a corporate affiliate of WCC

and that it is the same as WCC. We will revisit four

key facts: First, the Claimant's formation; and,

second, the Bankruptcy Court's arm's length and

no-insider findings. This evidence establishes that

the Claimant's assertion that it was a corporate

affiliate of WCC cannot be supported.

We will then revisit the Bankruptcy Court's

determination that the Claimant would not have

successor liability to WCC and the fact that the

Claimant did not take on all of WCC's assets or

liabilities through the Stalking Horse Purchase

Agreement. All of this evidence establishes that the

Claimant is not, and has not ever been, the same

[Page 58]

investor of a Party as WCC. The two companies are not

the same entity, nor do they share the same legal

personality.

We will begin our highlights with the time

the Claimant was created, three years after the

alleged breach. The Claimant argues that it was a

corporate affiliate of WCC because it was created by

WCC as a wholly owned subsidiary of WCC. But the

evidence shows that it was not WCC who created the

Claimant; it was the First Lien Lenders. And it was

not WCC who owned the Claimant at its creation; it was

a nominee of the First Lien Lenders. It is undisputed

that the First Lien Lenders were adverse in interest

to WCC. The evidence, thus, establishes that there

was no corporate link between the Claimant and WCC

when the Claimant was formed.

Let's take a quick look at the Claimant's

formation document, which is Exhibit R-081. An

excerpt is on the screen in front of you. It defines

Thomas Moers Mayer as the Member, or owner, and

indicates that the Claimant was initially wholly owned

by the Member and that the property, business, and

[Page 59]

affairs of the company shall be conducted by the

Member. Mr. Mayer was a partner at the law firm that

represented the First Lien Lenders in WCC's bankruptcy

process.

In its Rejoinder, the Claimant protested

that Canada did not "explain why the fact WMH was

created by an attorney for the secured creditors

should matter."

Well, it matters for two reasons: First,

the Claimant repeated its incorrect statement about

WCC creating it as a wholly owned subsidiary no less

than five times in its Counter-Memorial. The fact

that the Claimant was not created by WCC thus serves

as an important illustration of the need for caution

when approaching unsubstantiated statements about

matters of fact.

Second, it indicates the absence of a

corporate link from the outset between WCC and the

Claimant. And the Description of Transaction Steps,

which set out the steps that would be taken to execute

the transactions contemplated by WCC's Plan, further

confirms the First Lien Lenders' nominee continued to

[Page 60]

hold the Claimant until the beginning of the

transaction, and the First Lien Lenders held the

Claimant at the end of the transaction. That's at

Exhibit R-043, and that specific confirmation can be

found at Bates Pages R-043.13 and R-043.14.

As Ms. Coleman explained at Paragraph 11 of

her Second Expert Report: "Lenders are inherently

adverse to their borrowers." They have claims to

repayment of their lent money. The First Lien Lenders

and their borrower, WCC, were no exception. The fact

that the First Lien Lenders created and owned the

Claimant confirms that the Claimant was adverse in

interest to, rather than a corporate relation of, WCC.

This is further confirmed by Mr. Mayer's

continued representation of the Claimant in WCC's

bankruptcy process. Canada refers the Tribunal to

Footnote 35 of its Reply for references to the

evidence establishing the parties' legal

representation in the bankruptcy process.

Before I move to the Bankruptcy Court's

findings with respect to the relationship between the

Claimant and WCC, it is worth pausing on the

[Page 61]

Claimant's Rejoinder assertion that it is a mere

change in corporate form from WCC.

If the Claimant were serious about this

allegation, it would have presented evidence on the

rules of Delaware law pertaining to corporate form

changes; it did not. On its face, the Claimant's

formation document does not establish that its

creation amounted to an amendment of WCC's corporate

form. In fact, it indicates the opposite. WCC and

the Claimant have coexisted as independent corporate

entities since the Claimant's creation. To this day,

they both remain separately in existence: WCC as a

corporation, continuing to wind down its affairs; and

the Claimant as an LLC. There is no evidentiary basis

on which to reach the Claimant's conclusion on

corporate form.

The next piece of evidence I'd like to

highlight today are the Bankruptcy Court's legal

findings that the Claimant and WCC were transacting at

arm's length and were not insiders.

On the screen before you is Exhibit R-063,

the Bankruptcy Court's Order confirming the WCC Plan.

[Page 62]

This Order authorized WCC to enter into the

transaction contemplated to effectuate the Plan. In

Paragraph 47, the Court determined that the Claimant

and WCC negotiated, proposed, and entered into the

Stalking Horse Purchase Agreement, which set out the

terms of the Claimant's purchase of the Canadian

Enterprises, from arm's length bargaining positions.

The Claimant never confronts the Bankruptcy Court's

findings in this respect. The term "arm's length" did

not appear once in the Claimant's Counter-Memorial.

It appeared only in a footnote in its Rejoinder

Memorial that responded to a different argument. It,

thus, stands uncontested.

In the same paragraph, the Court goes on to

find that the "purchaser is not an insider of the WLB

debtors as that term is defined in Section 101(31) of

the Bankruptcy Code."

The Claimant is the purchaser, and the WLB

debtors are WCC and certain of its debtor affiliates.

Ms. Coleman explained in her Expert Report that the

Bankruptcy Code defines "insider" to include

"affiliate." The Code also defines "affiliate" as--in

[Page 63]

its translation into slightly plainer English--"an

entity owning or controlling the debtor, that is owned

by the debtor, or that is owned by an entity owning or

controlling the debtor."

The Tribunal can find the references to the

full Bankruptcy Code definitions at the bottom of this

Slide 49.

According to Ms. Coleman, by determining

that the Claimant was not an insider or affiliate of

WCC, the Bankruptcy Court effectively determined that

the Claimant did not own or control WCC, that WCC did

not own or control the Claimant, and that the Claimant

was not owned or controlled by an entity that also

owned or controlled WCC.

The Claimant did not address the Court's

determination, at all, in its Counter-Memorial, and

spent a single paragraph attempting to downplay its

significance in its Rejoinder.

There, the Claimant argued that the

"Bankruptcy Court statement had nothing to do with the

transaction steps." Under those steps, there was a

finite and fleeting moment in time when WCC held

[Page 64]

equity in the Claimant immediately before that equity

was distributed to the First Lien Lenders to satisfy

their claims. The Claimant has indicated that this

step was for the purpose of obtaining favorable tax

treatment for the Claimant. The Claimant argues that

the Court found these steps "integral to [its]

Confirmation of the Bankruptcy Plan." As a result, so

says the Claimant, the Court's determination that the

Claimant was not an affiliate of WCC is irrelevant.

But the Claimant's logic emphasizes just how

striking the Court's no-insider finding is. Despite

knowing all aspects of the transaction, including the

micro step undertaken for tax purposes that the

Claimant focuses on, the Court still determined that

the Claimant was not affiliated with WCC.

As Ms. Coleman explained: "At no point did

WCC have a meaningful role or relationship with

respect to the management or operations of the

Claimant that would lead to a different conclusion

than the one in which the WCC Bankruptcy Court

arrived."

The Claimant has expended significant effort

[Page 65]

in this phase of the Arbitration, accusing Canada of

prioritizing form over substance. Yet, that is

precisely the approach that it takes on this question

of corporate affiliation. It attempts to cast the

transaction as a mere reshuffling of equity between

corporate affiliates because the "formal transfer

outlined in the description of transaction steps is

between WCC, the parent company; and WMH, its wholly

owned subsidiary."

Contrary to the Claimant's suggestion,

Canada is not trying to read out this step from the

transaction. Canada is asking the Tribunal to view

this step in its proper context and draw the

appropriate conclusion, that this was not a mere

reshuffling of equity interest among members of a

corporate family. It was a sale between Parties that

a U.S. Court determined were transacting at arm's

length. The Court reached its conclusion on the basis

of a full evidentiary record.

Consistent with this finding, Ms. Coleman

sums up that the Claimant was an unaffiliated third

party to WCC, formed as a new entity on behalf of the

[Page 66]

First Lien Lenders for the purposes of taking title to

assets that would partially satisfy their claims, and

the transaction both began and ended with the First

Lien Lenders or their nominee owning the Claimant.

As a result, the Claimant's attempts to

connect itself to WCC by claiming an affiliation are

unsupported by the record. The Claimant was not an

affiliate of WCC when the alleged breach occurred,

when WCC entered bankruptcy, when WCC emerged from

bankruptcy, or when the Claimant initiated these NAFTA

proceedings.

That brings us to the third fact to

highlight, which pertains to the Claimant's assertion

that it is the same as WCC. In particular, the

Bankruptcy Court determined that the sale of WCC's

assets was free and clear of preexisting liens and

claims, and the Claimant would not face successor

liability with respect to WCC.

We've pulled up, on Slide 53, an excerpt of

the language from Paragraph 49 of the Bankruptcy

Court's Confirmation Order on Successor Liability. I

won't read the excerpt out, but, as you can see, even

[Page 67]

the excerpt is quite comprehensive.

Ms. Coleman explained, in her First Expert

Report, that this determination means that the

Claimant could not be held liable for the obligations

of WCC solely by virtue of acquiring its assets. This

result would not have been possible had the Claimant

purchased equity interest in WCC.

It's worth noting that WCC viewed obtaining

protection against successor liability as a selling

feature for any potential buyer of its assets in the

bankruptcy process. WCC described its expectations in

this regard in the sales notice that went out to

prospective buyers. In particular, the expectation

was: To the greatest extent possible, the successful

bidder would not be deemed to be a legal or other

successor, to have merged in any way with or into WCC,

or to be an alter ego or mere or substantial

continuation of WCC.

WCC further explained in this sales notice

that the First Lien Lenders would not have entered

into the Stalking Horse Purchase Agreement without

this kind of protection. The bankruptcy Court's "no

[Page 68]

successor liability" finding, thus, confirms the

Claimant and WCC are not the same entity and do not

have the same legal personality.

The fourth fact to highlight is that the

Claimant did not acquire all of WCC's assets or assume

all of its liabilities. The Stalking Horse Purchase

Agreement that Claimant and WCC executed was express.

Only assets and liabilities that were expressly

identified in the agreement were purchased or assumed.

For example, while equipment and coal

inventory were included assets, director and officer

insurance policies, certain specific real property

leases, and certain employee benefit plans were

excluded assets. On the liability side, workers'

compensation liabilities for occupational injuries to

transferred employees arising after the closing were

assumed, but certain statutory liabilities for workers

arising prior to the closing were excluded.

An agreement can be found at Exhibit R-053

and is discussed in Ms. Coleman's First Expert Report

at Paragraphs 65 and 66.

It establishes that the Claimant did not

[Page 69]

inherit all of WCC's characteristics when it purchased

certain assets and assumed certain liabilities in the

asset sale. It establishes that the Claimant is not

the same entity and does not have the same legal

personality as WCC.

As a final note on these issue, Ms. Coleman

explained, at Footnote 98 of her First Expert Report,

that "Orders such as the WCC Plan Confirmation Order

are typically drafted and proposed by the Debtors

before being filed with the Bankruptcy Court."

This means that the findings made by the

Bankruptcy Court's Confirmation Order--including on

arm's-length transacting, no insider relationship,

taking the assets free and clear, and no successor

liability--were specifically sought by WCC and likely

negotiated with the First Lien Lenders. Indeed, the

First Lien Lenders retained the right to terminate the

Restructuring Support Agreement with WCC, and,

correspondingly, their support of WCC's Plan, if WCC

made changes to the draft confirmation order that was

inconsistent with their agreement. This confirms that

the Parties specifically sought these arm's-length,

[Page 70]

no-insider, and no-successor-liability findings for

the Claimant.

The Claimant cannot have it both ways. It

cannot be a non-affiliate and non-successor to WCC to

escape unwanted liabilities but assert that same

affiliation and successor status to pursue a NAFTA

claim.

The evidence establishes that the Claimant

is not the same investor of a Party as WCC.

I'd be happy to take any questions that the

Tribunal may have on the evidence. Otherwise, I'll

pass the floor to my colleague, Mr. Douglas, who will

address the Claimant's arguments with respect to

assignment of claims.

PRESIDENT BLANCH: Thank you. Let me just

check.

Zac? And James? No. Thank you very much.

MS. ZEMAN: Thank you.

MR. DOUGLAS: Good morning again, President

Blanch and Members of the Tribunal.

Just to explain Canada's setup here, you

might see us, from time to time, look up this way.

[Page 71]

That's because there's a big screen over top of here,

which has our slide presentation, as well as you, on

the screen. That is kind of the layout here a little

bit, in case you were wondering. Sometimes we might

look at you up there, even though you are more

directly in front of us.

Today I will be speaking to the assignment

of claims. The Claimant maintains that both an

investment claim and an investment may be assigned

between investors without affecting the jurisdiction

of a tribunal, but only in two circumstances: First,

when the transfer is between investors who are

affiliates; or, second, when the transfer is between

investors that share a close continuity of interest

between them. That's at Paragraph 56 of their

Rejoinder.

My colleague Ms. Zeman has already explained

that the Claimant and WCC were not affiliates but,

instead, transacted at arm's length. My colleague

Mr. Klaver will later explain that the Claimant's

continuity-of-interest theory has no grounding in fact

or in law. I will address the legal aspects of

[Page 72]

assignment of claims more generally.

First, I will explain that the Claimant

cannot establish this Tribunal's jurisdiction ratione

temporis because WCC sold its investment claim under

NAFTA to the Claimant.

Second, I will explain that the Claimant

cannot establish this Tribunal's jurisdiction because

WCC sold the Canadian Enterprises to the Claimant.

Now, before getting started, a quick note on

terminology. As my colleague Ms. Zeman has explained,

the NAFTA claim and the Canadian Enterprises were

unequivocally sold by WCC to the Claimant. However,

in its Pleadings, the Claimant refers to the sale as

an assignment or transfer.

The Claimant's usage of these terms cannot

be used to mask the market-based arm's length nature

of the transaction. Canada will refer to the

transaction as a "sale," which is what, in fact,

transpired through WCC's bankruptcy process.

First, the sale of WCC's investment claim

under NAFTA Chapter Eleven to the Claimant. Canada

provides a full answer to the Claimant's argument at

[Page 73]

Paragraphs 90-95 of its Memorial and

Paragraphs 126-135 of its Reply.

In particular, Canada explained that WCC's

Claim cannot establish this Tribunal's jurisdiction

because it is not the Claim that is before this

Tribunal. It is important to recall the chronology.

WCC entered into bankruptcy in October of 2018. WCC

then filed a NAFTA claim in November of 2018. WCC

then sold its NAFTA claim to the Claimant four months

later, in March of 2019. WCC'S NAFTA claim was then

withdrawn in July of 2019, and the Claimant filed its

own NAFTA claim in August of 2019.

The Claimant does not dispute these facts.

Thus, as a question of fact, whether or not WCC's

NAFTA claim was sold, transferred, or assigned, the

claim no longer exists. It was withdrawn.

Moreover, as a question of law, this

Tribunal only has the competence to adjudicate the

Claim that is before it. That is the Claim that was

filed by the Claimant. This Tribunal has no

competence over WCC's Claim. Nowhere in its Pleadings

does the Claimant explain how WCC's Claim can still be

[Page 74]

factually or legally relevant.

Even if WCC's NAFTA Claim was somehow

relevant, there is no mechanism under NAFTA Chapter

Eleven to allow a disputing investor to sell or

transfer its claim to another investor of a Party. A

state's consent to arbitrate under NAFTA Chapter

Eleven is specific to the investor of a Party that

brings the claim, except in narrow circumstances, like

subrogation, which I will speak to in just a moment.

To establish consent, a NAFTA claim must be

brought by the investor of a Party to whom the measure

relates, who is the subject of an alleged breach of

Section A, and who incurred loss or damage.

Canada alerted the Claimant to these issues

in July of 2019, when the Claimant approached Canada

seeking to substitute itself for WCC in WCC's NAFTA

claim. That is Exhibit R-076. In that letter, Canada

explained that an investment claim cannot be amended

if it would cause the amended claim to fall outside of

the jurisdiction of the tribunal.

Canada provided the Claimant with the

decision of the NAFTA tribunal in Merrill & Ring

[Page 75]

concerning a motion to add a new party. In that case,

Merrill & Ring brought a motion to add a new party,

Georgia Basin, as a claimant. Merrill & Ring and

Georgia Basin were affiliated companies, and

Merrill & Ring claimed that Georgia Basin was also

affected by the measure it was challenging in that

case.

The motion was made pursuant to Article 20

of the 1976 UNCITRAL Rules, the same provision through

which the Claimant in this case sought to substitute

itself for WCC in WCC's after-claim.

Canada opposed the motion in Merrill & Ring

because the challenged measures in that case did not

relate to Georgia Basin under Article 1101. Georgia

Basin was not the subject of an alleged breach of

Section A, and Georgia Basin could not have incurred

any loss or damage.

The tribunal in that case agreed with

Canada's analysis. They wrote: "the Tribunal must

accordingly begin by examining whether the amendment

requested by the Claimant's motion to add a new party

is compatible with the scope of the arbitration

[Page 76]

clause, i.e., do the impugned measures relate to

Georgia Basin and are there credible allegations that

it has been damaged by reason of the alleged breaches

of Section A."

The Merrill & Ring tribunal denied the

motion to add Georgia Basin as a claimant because

doing so would not comport with the terms of the NAFTA

or Article 20 of the 1976 UNCITRAL Rules.

The tribunal's decision in that case

confirms Canada's position in this arbitration.

The challenged measures in this case do not

relate to the Claimant or its investments. The

Claimant and its investments have suffered no breach

of Section A and could not have incurred any loss or

damage.

In its Rejoinder, the Claimant accuses

Canada of acting in bad faith because in our Reply, we

wrote that it was "open to WCC to continue its NAFTA

claim."

There is no bad faith here. The Claimant

approached Canada requesting to substitute itself for

WCC in WCC'S NAFTA claim. It was the Claimant that

[Page 77]

sought to have WCC removed. In fact, what Canada did

not know at the time was that the Claimant had already

purchased WCC's NAFTA claim. Presumably, WCC was thus

already out of the picture well before the Claimant

approached Canada to substitute itself in for WCC.

These were not decisions made by Canada.

These were decisions made by the Claimant, and if the

Claimant wasn't directly aware, it should have been

aware that there is no mechanism under NAFTA Chapter

Eleven that allows a purported claimant to buy a NAFTA

claim from another investor and then pursue it.

For example, there is no case law under

NAFTA or otherwise that has allowed an investment

claim to be sold or transferred from one investor to

another; not one. Moreover, when Treaty partners wish

to establish a mechanism for the transfer of a claim,

they do so expressly such as in the case of

subrogation.

Canada made this point at Paragraph 130 of

its Reply, yet, like with so many other points raised

by Canada, the Claimant provides no response in its

written Pleadings.

[Page 78]

Subrogation allows an investment claim to be

transferred by an investor to its insurer. The Host

State consents to the transfer, typically in the

investment treaty. An example of such a provision can

be found at Article 14.15 of the Canada-United

States-México Free Trade Agreement, which is RLA-066.

Subrogation provides an exception to the

general rule that a claim cannot be transferred. If

claims could be sold or transferred as in due course

or as a matter of course, a provision allowing

subrogation would not be necessary. The Claimant

should have been aware of NAFTA Chapter Eleven's

limitations, in particular with respect to the consent

to arbitrate before it decided to purchase WCC's NAFTA

claim.

But as I mentioned at the outset, the point

is moot in any event because WCC's NAFTA claim was

withdrawn and the Claimant filed its own.

I'd like to now discuss the sale of an

investment from one investor to another after the date

of an alleged breach. As I've mentioned, the Claimant

argues that under NAFTA the right to file a claim

[Page 79]

under Section B transfers with the investment to the

new investor so long as the new investor is an

affiliate or there is a continuity of interest.

And my colleagues Ms. Van den Hof and

Ms. Dosman have already explained the proper

interpretation of Articles 1101, 1116 and 1117, which

leads to the conclusion we set out earlier, namely,

that the alleged breach must relate to the Claimant

and its investments. The Claimant and its investments

must be the subject of an alleged breach of Section A,

and the Claimant or its investments must have incurred

loss or damage.

I will not repeat what my colleagues have

already laid out, but I will address the case law the

Disputing Parties have filed concerning investments

that were sold or transferred after the date of an

alleged breach. And the case law is clear: When an

investor disposes of its investment after an alleged

Treaty breach arises, the transfer does not imbue the

subsequent owner with a right to advance the Treaty

claim.

For example, Daimler v. Argentina, the

[Page 80]

Claimant had transferred its investment after the date

of an alleged breach, and subsequently filed the claim

relating to that investment. Argentina argued that

the right to file a claim transferred with the

investment. And, thus, the tribunal did not have

jurisdiction. The tribunal rejected that argument.

You can see up on the screen, the tribunal

recognizes the severability of a claim from the

underlying investment. The tribunal says that a

strong argument can be made that only an investor with

an investment prior to the dispute has standing to

file the claim. For this reason, the tribunal

rejected Argentina's argument that the right to file a

claim transferred with the investment.

The tribunal held at Paragraph 145 that it

should grant standing to the investor who suffered

damages as a result of the alleged breach.

The tribunal in EnCana v. Ecuador reached

the same result. In that case, the tribunal disagreed

with Ecuador and concluded that the right to advance a

claim remained with the investor that held the

investment at the time the dispute arose.

[Page 81]

You can see on the screen it defined a

dispute at Paragraph 131 as "the taking of measures in

breach of the Treaty which cause loss and damage to an

investor." Canada notes that Professor Paulsson cites

the same paragraph with approval at Page 5 of his

Second Report.

In its Rejoinder, the Claimant argues that

the EnCana tribunal did not address whether the

purchaser of the investment could also assert a claim.

That is not what the Tribunal said. It said that the

investor that held the investment at the time of the

dispute could file a claim. Given that language, it

is hard to imagine how the purchaser of an investment

could also have a dispute.

Moreover, the Claimant's assertion that any

would-be purchaser of an investment should also be

able to file a claim would lead to an absurd result.

What if there are multiple subsequent

purchasers of the investment? Does each subsequent

purchaser get to file a claim?

In Canada's view, that does not make sense,

and is not what the tribunal in EnCana decided.

[Page 82]

There are other examples as well. For

example, in Mondev v. The United States, the question

was whether Mondev had lost standing--sorry, lost

standing to bring a claim because it no longer owned

or controlled the investment. The tribunal found that

Mondev's loss of its investment did not also mean that

it lost its right to pursue a NAFTA claim.

Canada raised this case in its Reply, but

the Claimant did not address it in its Rejoinder. The

same result occurred in Gemplus v. México, where the

tribunal found that the investor that owned or

controlled the investment at the time of the alleged

breach retained the rights to bring the claim, despite

the fact that it had transferred the shares

constituting the investment after the alleged breach.

These cases all support the view that, when

a claimant sells its investment after the alleged

breach, the right to advance the claims remains with

the investor that owned and controlled the investment

at the time of the alleged breach. In contrast to

these cases, the Claimant cites four of its own, which

it argues establishes a rule the right to file a claim

[Page 83]

transfers with an investment when it is sold or

transferred after the date of an alleged breach.

The Claimant is mistaken. Its four cases

are Autopista, Koch Minerals, African Holdings, and

CME. Neither Autopista nor Koch Minerals involve the

transfer of an investment after the date of an alleged

breach. There was, thus, no ratione temporis issue in

those cases. They are not applicable here.

In fact, in Koch Minerals--and Arbitrator

Douglas, I know you're on the tribunal, so you can let

me know if I get this wrong--but in Koch Minerals the

case--which is a case that Claimant relies on

heavily--the issue facing the tribunal was whether two

investments held individually by two investors could

nonetheless be considered as one integrated

investment. The tribunal agreed that it was one

integrated investment because the two investments had

a close nexus.

In the paragraph the Claimant cites, the

tribunal considers whether the investment could have

been integrated had the two investors not been

affiliated companies, but concluded that such an issue

[Page 84]

was not present in the case.

The Claimant, thus, inaccurately cites Koch

Minerals for a proposition that it does not stand for.

The same is true in the next case they cite, which is

African Holdings v. Congo. The tribunal in that case

found that neither Claimant was an investor on the

date of the alleged breach. The tribunal, thus,

denied the claims on grounds of jurisdiction ratione

temporis.

The case, thus, supports Canada's position

in this Arbitration. In obiter dicta, which Professor

Paulsson confirms at Paragraph 60 of its First Report,

the tribunal opined that African Holdings, as assignee

of the Contract debts, could have had the same

interests as SAFRICAS, including with respect to the

investment claim.

However, the tribunal's statement is not

applicable here because, well, it is obiter and,

second, the tribunal made that comment because

SAFRICAS and African Holdings were affiliated

companies continuously owned by the same family.

Thus, even if the tribunal's comments in obiter are

[Page 85]

relevant, the factual circumstances of that case are

different.

That leaves the Claimant with one last case,

which is CME v. Czech Republic. This is the only case

the Claimant cites that involved the transfer of an

investment from one investor to another after an

alleged breach. However, the facts and investment

treaty in that case are unique.

The investment in that case were shares in

an enterprise. The share transfer occurred from a

parent company to its subsidiary. The challenged

measures occurred both before and after the share

transfer. The Czech Republic argued for the first

time at the hearing that the claimant CME could only

challenge measures that occurred after it had acquired

the shares.

The tribunal disagreed on several grounds.

First, the tribunal recognized that the Czech Republic

had prospectively authorized the parent company to

transfer its shares to its subsidiary. It was, thus,

questionable for the Czech Republic to oppose

jurisdiction when it had authorized the share

[Page 86]

transfer.

Second, the definition of "investment" under

the Treaty, which was the Dutch-Czech Republic BIT,

allowed for the rights derived from acquired shares to

qualify as part of the investment. The tribunal,

thus, found that by acquiring the shares, CME had

acquired all of the liabilities, rights, and

obligations of its parent company. There is no

similar definition of an "investment" under NAFTA.

Third, the tribunal concluded that the

investment treaty did not specify whether the

investment had to be owned or controlled by the

claimant at the time of the alleged breach. The

Treaty itself used quite loose language. This is in

contrast to NAFTA, which requires that a challenged

measure relates to the Claimant under Article 1101.

Moreover, the tribunal found that because

the parent company continued to hold the investment

indirectly, it did not matter under the Treaty that

the parent had transferred its shares to its

subsidiary because the parent remained protected

indirectly.

[Page 87]

In other words, the parent company remained

protected as an investor from the moment of the

alleged breach through to the filing of the claim.

Those are not the circumstances here. For these

reasons, factually and legally specific to that case,

the tribunal rejected the Czech Republic's argument.

It is also worth noting that the tribunal's

decision is from nearly 20 years ago and has not been

followed by any tribunal, likely because the decision

was tailored to the unique facts and investment treaty

in that case.

In conclusion, the Claimant advocates for a

law on assignment of claims between two investors that

does not exist.

That is true whether the two investors are

affiliates or have a close continuity of interest.

I will now turn things over to my colleague,

Mr. Klaver, who will discuss the Claimant's continuity

of interest theory, barring any questions from the

Tribunal.

PRESIDENT BLANCH: Zac? And James? Thank

you.

[Page 88]

SECRETARY FLECKENSTEIN: If I may, Madam

President, can I just update on time. I did update in

the chat function, and now Canada has about 13 minutes

left of its two-hour allotment.

MR. DOUGLAS: Okay. I think that is fine.

I think our last presentation is about 15 minutes. I

thought--well, we don't want you to talk fast, Mark.

Our tally is slightly shorter just given some of the

technical issues in the--so, with the grace of the

Tribunal, if we do go over by ICSID's count by a

couple of minutes, would that be okay?

PRESIDENT BLANCH: I'm going to make a

unilateral decision here and say that's fine, if it's

just a few minutes. And obviously, will grant the

same discretion to Claimants.

MR. DOUGLAS: Yes. Thank you very much.

Appreciate that.

MR. KLAVER: President Blanch, Arbitrator

Douglas and Arbitrator Hosking, as my colleague

Mr. Douglas explained, the Claimant contends that an

investment claim may be assigned in one of two

circumstances, first, between affiliates or, second,

[Page 89]

between entities with a continuity of interest. I

will address the Claimant's asserted continuity of

interest. It is worth noting at the outset that the

Claimant's continuity-related arguments have shifted

significantly during this arbitration.

In its Counter-Memorial, the Claimant argued

the Tribunal had jurisdiction because the First Lien

Lenders provided a continuity of beneficial interest.

It did not specify what this meant or how it connected

to the applicable law. For his part, Professor

Paulsson referred to a continuity of beneficial

ownership. The Claimant also alleged the First Lien

Lenders controlled WCC and its assets without

specifying the timeline of this control.

In the Reply, Canada demonstrated that the

First Lien Lenders never beneficially owned WCC or its

assets.

In its Rejoinder, the Claimant did not

attempt a rebuttal to this point. It even withdrew

its reference to a beneficial interest.

Canada also showed that the First Lien

Lenders never controlled WCC or its assets. In its

[Page 90]

Rejoinder, the Claimant next argued that the NAFTA

claim could be assigned due to a close continuity of

interest.

The term "continuity of interest" derives

from U.S. tax law. It relates to a Type G

reorganization, which the Claimant asserts, allows an

entity to restructure tax free. The Claimant never

referenced a continuity of interest in its

Counter-Memorial. It merely mentioned in two

sentences in the last paragraph of its Appendix A that

the transaction was structured to qualify as a Type G

reorganization. The Claimant did not explain how this

point related to its arguments on jurisdiction.

Yet, in its Rejoinder, the Claimant now

places much weight on the alleged continuity of

interest. If the Claimant was serious about this

argument, it would have fully presented it in the

Counter-Memorial.

Canada has had no opportunity to provide

Expert or other evidence on the Claimant's alleged

continuity of interest under U.S. tax law.

In addition, the Claimant again alleged that

[Page 91]

the First Lien Lenders controlled WCC but now appeared

to limit the time of such control to the bankruptcy

process, not during the alleged breach.

Overall, then, the Claimant appears to use

the term "continuity of interest" in two ways: First,

as a term of art relating to its tax treatment and,

second, as a de facto notion of continuing interest

based on the First Lien Lenders' alleged control of

WCC and the bankruptcy process.

I will explain that both formulations of a

continuity of interest are irrelevant to establishing

this Tribunal's jurisdiction and, in any event, the

Claimant has not substantiated these assertions. I

will address the Claimant's assertions on tax

treatment and control separately.

Now, the Claimant does not explain how the

concept of a continuity of interest under U.S. tax law

is part of the applicable law to find jurisdiction

here. U.S. tax law is not the applicable law, which

of course is NAFTA and international law. NAFTA does

not contain a renvoi or a reference to domestic tax

laws for the purposes of establishing jurisdiction on

[Page 92]

an assigned claim.

In fact, NAFTA Chapter Eleven does not use

the term "continuity of interest" at all. Moreover,

despite the Claimant insinuating that international

law applies this concept, not a single investment

decision on the record uses the term "continuity of

interest," not one, including any NAFTA case, nor does

any international law scholarship on the record use

the term "continuity of interest."

The Claimant has made up its own legal test

for the assignment of investment claims based on

concepts selectively chosen from domestic tax laws

that are not the applicable law here. It cannot

establish the Tribunal's jurisdiction on this basis.

Nonetheless, even if the Tribunal considered

that the Claimant's asserted tax treatment was somehow

relevant to the applicable law to find jurisdiction,

the Claimant did not submit reliable evidence to

establish the alleged continuity of interest. The

Claimant relies on its own self-judging and, frankly,

self-serving position that it had a continuity of

interest under U.S. tax law.

[Page 93]

In its Rejoinder, it states the U.S.

Government views WCC and WMH as having a continuity of

interest. This is misleading. As with many areas of

tax, taxpayers make their own judgment calls about

which provisions they may qualify for. Only if they

are audited or a specific decision is sought from a

tax authority or court might there be an actual ruling

on the question.

WCC appears to have had no intention of

seeking a ruling from the Internal Revenue Services,

the IRS, or a Court on its tax treatment.

On the screen is an excerpt of the

disclosure statement that WCC filed with and was

approved by the Bankruptcy Court. This is

Exhibit C-044. The Claimant cites to this document to

support its new argument that the transaction was

designed to qualify for tax-free treatment.

Yet, the document states no opinion of

counsel was obtained on tax issues, there was no

intention to seek a ruling from the IRS, and WCC's

statements about the potential tax treatment were not

binding on the IRS or the courts, which could take a

[Page 94]

different view. This completely undermines the

Claimant's assertion about the U.S. Government finding

a continuity of interest here.

Moreover, the Claimant filed no Expert

Report, judicial Decision, or other independent

evidence to confirm its alleged tax treatment. It

simply asks the Tribunal to take it at its word. Yet,

its unsupported assertions on self-judging tax

treatment do not constitute a reliable evidentiary

basis to find jurisdiction.

In this respect, it is revealing that the

Claimant never once mentions the Internal Revenue Code

by name. Instead, it refers generically to federal

law regarding reorganization in an apparent attempt to

blur the line between U.S. bankruptcy law on which

there is ample evidence before the Tribunal and U.S.

tax law on which there is paltry evidence.

The Claimant's inadequate evidence on its

tax treatment stands in stark contrast to the

legally-binding findings of the Bankruptcy Court on

the unaffiliated relationship between the Claimant and

WCC.

[Page 95]

Accordingly, the Claimant's asserted tax

treatment do not establish this Tribunal's

jurisdiction. It is untethered to NAFTA, and the

Claimant does not offer reliable evidence to support

it.

And moving to the Claimant's de facto notion

of continuity, it argues that the First Lien Lenders

controlled WCC and the bankruptcy process without

explaining why this would be relevant to establishing

jurisdiction under NAFTA.

In fact, its assertions on control are

irrelevant for two reasons: First, the bankruptcy

occurred years after the alleged breach occurred, even

if the First Lien Lenders controlled WCC in the

bankruptcy in 2019, this could not establish that when

the alleged breach occurred in 2016 the Claimant was a

protected investor.

Second, the Claimant cannot establish

jurisdiction based on the First Lien Lenders' alleged

control because they are not the Claimant. The NAFTA

Parties offer their consent to arbitrate with only a

disputing investor. That is the claimant that files a

[Page 96]

claim under Section B. Here, the disputing investor

is WMH, which has separate legal personality from its

owners.

NAFTA offers no mechanism for a tribunal to

derogate from customary international law by piercing

the corporate veil of a claimant to find jurisdiction

based on other parties who might have an interest in

the arbitration, such as a claimant's owners.

Canada and the Claimant both observe that

the definition of "investment of an investor of a

Party" refers to investments held indirectly by an

investor.

As the slide illustrates, the term

"indirectly" means a tribunal can look down the

corporate chain to determine if the claimant, the

relevant investor of a Party, owned or controlled the

investment through intermediaries. This is what the

tribunal did in Waste Management II.

However, this definition does not enable a

tribunal to look up the corporate chain to find

jurisdiction based on a claimant's owners. In this

respect, NAFTA is unlike the Treaty in Perenco between

[Page 97]

France and Ecuador, which expressly authorized that

tribunal to find jurisdiction over a claimant of a

non-party if French shareholders control it.

This Tribunal, by contrast, has no basis

under NAFTA to pierce the Claimant's corporate veil to

find jurisdiction. Nonetheless, even if the Tribunal

sought to rely on the First Lien Lenders to find

jurisdiction, it would be unable to do so for three

main reasons: First, Ms. Coleman explained that on

the facts, the First Lien Lenders did not control WCC

or the bankruptcy process.

And rather than repeating her Expert

analysis here, I would point the Tribunal to

Paragraphs 12-14 and 20-27 of her Second Expert

Report. There, she also discusses how the Bankruptcy

Court confirmed that the First Lien Lenders did not

control WCC through the debt instruments. The

Claimant has not addressed the Court's determination

here.

Instead, it attempts to discredit

Ms. Coleman by misreading her comments on discussion

panels. This is completely ineffective. The Claimant

[Page 98]

took her words out of context and chose not to

cross-examine her, revealing the frailty of its

arguments that the First Lien Lenders controlled WCC

and the bankruptcy.

The second flaw in the Claimant's bid to

establish jurisdiction based on the First Lien

Lenders' alleged control is that it has not identified

who all of the First Lien Lenders are. It merely says

that they included certain entities. We don't know

how many other lenders there may be and what their

interests in the Claimant might be.

Third, under the Claimant's theory of

jurisdiction, continuous U.S. nationality is critical

to upholding this claim. Yet, the Claimant offers no

evidence of the First Lien Lenders' U.S. nationality.

It does not confirm whether any other unidentified

First Lien Lenders have or lack U.S. nationality. Nor

does the Claimant clarify whether the Tribunal might

need to pierce the veil of the First Lien Lenders, to

ensure their beneficial owners have U.S. nationality.

Canada raised these concerns in its Reply at

Paragraph 119, but the Claimant left them unanswered.

[Page 99]

Its case rests on unsupported claims of control by an

unspecified group of entities whose nationality it has

not proven. This is no way to establish jurisdiction

under NAFTA.

Thus, the Claimant's assertions of a

continuity of interest are unavailing because its

claims about tax treatment and control are irrelevant

and unsubstantiated.

To conclude Canada's Opening today, the

Claimant cannot establish this Tribunal's jurisdiction

because it was not an investor of a Party when the

alleged breach occurred, nor can the Claimant overcome

this fundamental flaw in its claim with its shifting

various bits to find a connection with WCC, a separate

enterprise with which it was unaffiliated.

Thank you. I would now welcome any

questions from the Tribunal.

PRESIDENT BLANCH: What I suggest we

do--unless there is any imminent burning

questions--James? And Zac? I suggest we now take our

10-minute break. And then, if the Tribunal have any

questions after the break, we will raise them.

[Page 100]

Otherwise, we'll then go into the Claimant's Opening

Statement. So, it is now quarter to 2:00, so we will

have a 10-minute break until 5 to.

Thank you very much.

MR. KLAVER: Thank you.

(Brief recess.)

PRESIDENT BLANCH: Well, firstly, I just

want to apologize to Mr. Feldman and his team. I hope

I didn't give you too much of a shock when I suggested

we might be only having a 10-minute break before we

went straight into your Opening Submissions. I do

apologize. But hopefully now we've had our break, and

you are ready to start.

And, like we did for the Respondent, if you

need a couple of minutes extra--I think they went two

or three minutes over, and obviously it's the same for

you.

MR. FELDMAN: Thank you. We expect to be

considerably under. We are particularly deferential

in this situation to Mr. Hosking because I'm happy to

say good afternoon, perhaps evening to everybody else,

but for him it is still morning, I think.

[Page 101]

So, with due apologies, would you like me to

begin?

ARBITRATOR HOSKING: Thank you. No problem.

(Interruption.)

(Stenographer clarification.)

MR. FELDMAN: I'll try to stay close to the

microphone.

OPENING STATEMENT BY COUNSEL FOR CLAIMANT

MR. FELDMAN: Thank you very much. I'm

Elliot Feldman, Baker Hostetler, representing

Westmoreland, and, again, good afternoon to everyone

except, unfortunately, for Mr. Hosking.

The NAFTA tribunal in Grand River v. United

States confronted with the dispute over jurisdiction

concluded that: "Investment Tribunals have declined

to adopt a method whereby one of the Parties carries

the burden of proof in matters of jurisdiction. They

have adopted a different approach to deciding whether

jurisdiction exists. Under this method, the

decision-maker looks at the preponderance of authority

for or against jurisdiction."

This is in our exhibits, RLA-030, Page 17,

[Page 102]

Paragraph 37.

The tribunal went on to say that: "A focus

on burden of proof is not the correct approach."

Canada, however, brought the motion to deny

jurisdiction as a defense against Westmoreland's

claim, and, therefore, Canada does have a burden of

proving its defense. As international law prefers not

to deny access to justice, this Tribunal must require

Canada to meet its burden.

Let's assume, as we must for this

jurisdictional proceeding, that Canada did breach

NAFTA, a condition we expect to prove in the merits

phase of this Arbitration. Let's then suppose a

scenario that is not exactly the one here but could

have been. Let's suppose that Canada's breach of

NAFTA caused Westmoreland's bankruptcy. Finally,

let's suppose Canada's version of the bankruptcy, that

the company that emerged, albeit still American, does

not have continuity with the company that entered

bankruptcy.

In this scenario, as Canada would have it,

there would be no compensation possible for Canada's

[Page 103]

breach. Canada would enjoy a complete windfall by

putting the company out of business. The message

would be that, if there were to be a breach, Canada

ought to breach completely, thoroughly, enough to

destroy the company so that it would have no recourse,

the very definition of a denial of access to justice.

We think such a scenario, as

Professor Paulsson also suggested, is perfectly

plausible. This scenario doesn't square with the

facts here. The breach didn't cause Westmoreland's

bankruptcy. We are not arguing the contrary. The

company that emerged from bankruptcy is the product of

a Type G reorganization that deliberately and

specifically assured continuity of interest, and the

most important facts are those required by the Treaty.

The investment was Canadian at the time of

the breach, was unchanged through and after

bankruptcy, always Canadian. The owners at the time

of the breach were American. They remained American

through and after the bankruptcy.

The Claimant, owner of the Canadian

investment, was American at the time of the breach and

[Page 104]

at all subsequent times including when the claim was

made.

This diversity, American owners of a

Canadian investment, the essential requirement of the

Treaty and of its purpose to protect and encourage

foreign investment applied here at all times. No one

shopped the claim. No one manipulated the bankruptcy

in order to obtain a claim they otherwise might not

have had.

Even in a scenario where Canada could have

breached and driven the company out of business,

access to justice would have required acceptance of

jurisdiction. But with the facts here, denial of

access to justice would be extreme and unjustified.

The Vienna Convention requires starting with

the plain language of the Treaty. Although more than

50 times in its Memorial--and I've lost track of how

many times this morning--Canada invokes the phrase "at

the time of the alleged breach." That phrase does not

exist in NAFTA.

Canada wants the Treaty to say that the

Westmoreland, as Claimant, has to be identical to the

[Page 105]

Westmoreland "at the time of the alleged breach," but

NAFTA doesn't say so.

My partner Mike Snarr is going to provide

the detail of what the Treaty does and doesn't say and

explain why Canada's ratione temporis argument has no

place in NAFTA. He will also address the applicable

international jurisprudence to show that Canada finds

no support there for its argument, neither in NAFTA

nor in any other Treaty.

He will explain that the damages here are

falling mostly on the Claimant, the Westmoreland that

has brought the Claim, because the stream of revenue

to pay for land reclamation has been cut off by

Alberta's measures impacting most of all over the next

decade.

And, finally, he will show that there was no

prejudice to Canada in dismissing its defense

questioning jurisdiction over a claim arising from an

American investment in Canada.

My partner Paul Levine will follow Mr. Snarr

to explain the continuity of interest preferred in

international law, as Professor Paulsson has testified

[Page 106]

in two Expert Opinions, and the continuity of interest

reserved in the Type G reorganization under the U.S.

Tax Code in this case.

Canada, generally neglecting the tax

implications of bankruptcy and the applicable rules,

would like this case to be all about a bankruptcy that

forfeited a claim, notwithstanding that a Type G

reorganization expressly preserves lender control.

Canada, denying the continuity of interest inherent in

this type of reorganization, would like to use the

bankruptcy to escape the responsibility thrust upon it

by its rogue province and to deny access to justice by

celebrating form over substance.

Canada this morning argued that the Type G

reorganization is irrelevant because U.S. tax law is

irrelevant. Yet, Canada's jurisdictional objection is

all about U.S. bankruptcy law, the very law even

Ms. Coleman acknowledged is not the applicable law

here.

Canada likes to talk about not having things

both ways. Either domestic law is relevant or it

isn't. Professor Paulsson has explained that

[Page 107]

international law, the applicable law, disfavors form

over substance. But Mr. Levine will add that in this

case, even if form were preferred, we should prevail.

Westmoreland satisfies the Treaty's

requirements for diversity of investor and investment.

The instances where international tribunals have

dismissed for ratione temporis all have been concerned

about Treaty manipulation, shopping for claims,

conditions and circumstances bearing no resemblance to

the case here.

Messrs. Snarr and Levine will both

distinguish those cases. Investment in Canada was

owed protection when Canada breached the Treaty, and

nothing ever happened or changed that should or could

release Canada from those Treaty obligations.

I'm happy now to invite Mr. Snarr to

continue.

MR. SNARR: Good afternoon, Members of the

Tribunal. Can you hear me all right?

Okay. I'm Mike Snarr, Counsel for

Westmoreland Mining Holdings. I will speak for about

30 minutes on the NAFTA Treaty text and the principles

[Page 108]

that emerge from the arbitration decisions that have

been briefed by the Parties.

Next slide, please.

The Tribunal must decide first whether the

terms of the NAFTA Treaty prohibit Westmoreland's

claim, as Canada has argued. If they do not, then the

Tribunal must decide whether there is a prohibition in

customary international law. Assuming such a

prohibition exists, the Tribunal must decide the scope

of that prohibition and its application to the unique

facts of this case.

Westmoreland has explained that the

jurisdictional objection, as strictly and narrowly

articulated by Canada is not found in the language of

the NAFTA Treaty terms. Applying ratione temporis to

the facts of this case, as it has been applied in

other investment arbitration cases, the Tribunal has

jurisdiction, and Westmoreland's claim should go

forward.

There is no dispute that the elements of a

foreign investor having a foreign investment are

essential to trigger a Respondent State's foreign

[Page 109]

investment protection obligations under NAFTA or

bilateral investment treaties. It is required by the

ordinary meaning of the terms of NAFTA and is

recognized by investment arbitration tribunals that

have considered other investment treaties.

This is the diversity of nationality that is

at the heart of foreign investment protections under

international law. The precondition that, in effect,

puts a Host State on notice that treaty obligations

are active and that its conduct towards the foreign

investment and its investor must be guided by the

terms of the Treaty.

What Canada argues in its ratione temporis

jurisdictional objection is not just that a foreign

investment and investor must exist, but that the

corporate form of the investor may never change from

what it was at the time of the breach and, by

extension, that the corporate form of the investment

may never change from what it was at the time of the

breach if the foreign investment and investor hope to

preserve the activated treaty rights to which they are

entitled.

[Page 110]

Canada argues that a foreign investor

company must be the same entity in its same form,

regardless of whether its operations or anything else

about it might be the same.

Canada presents this rule as one that

applies without regard to circumstances, international

law policies, consequences, or prejudice. One might

expect that a strict, absolute rule like this which

limits the rights of an investor and investment

post-breach, would be well-defined in the terms of the

Treaty such that it could just be quoted directly, or

that there might be some official Treaty

interpretation articulated and agreed among the

drafters, saying that the rule is embodied in a

particular passage of the NAFTA text. But there is no

such text in NAFTA, nor any official statement of

interpretation by the NAFTA Free Trade Commission to

that effect.

Next, please.

For all of Canada's references in its

Memorials to the phrase "at the time of the alleged

breach," neither that phrase nor any similar to it is

[Page 111]

found in NAFTA's Chapter Eleven. You will see on the

slide here the text of Articles 1116 and 1117, but

modified as shown in the text highlighted in red.

Article 1116, which speaks to the submission

of claims, does not say that an investor of a Party

may submit to arbitration under this Section A Claim,

provided that the investor is the same national or

enterprise as it existed at the time of the breach.

Those words would have to be added to the

text as shown here. The text of Article 1117

similarly lacks such "at the time of the breach"

language. It does not say that "an investor of a

Party on behalf of an enterprise of another Party may

submit to arbitration under this Section A claim,

provided that the investor is the same national or

enterprise as it existed at the time of the breach and

that the enterprise is the same enterprise as it

existed at the time of the breach."

Moreover, the text of Article 1117 is

configured so that a claimant/investor may make a

claim, not on its own behalf, as in Article 1116, but

on behalf of a foreign enterprise that it owns based

[Page 112]

on a breach and damages that accrue to the foreign

enterprise. Canada contends that investments--let's

go back one slide, please. Thanks.

Canada contends that investments are not

owed obligations and that Article 1117 does not allow

the foreign investor who owns the investment to make

the claim on its behalf. But it should be noted that

the obligations of Articles 1102 and 1105 expressly

apply to investments, and Article 1135 provides that

any award for restitution or compensation under

Article 1117 is to be paid to the investment

enterprise, not the claimant, suggesting that an

investment enterprise is owed obligations, and may be

owed damages, provided it is owned by a foreign

investor who submits the claim.

Now, let's go to the next slide.

The tribunal in Waste Management II chaired

by Professor James Crawford wrote: "Where a treaty

spells out in detail and with precision the

requirements for maintaining a claim, there is no room

for implying into the Treaty additional

requirements..."

[Page 113]

The NAFTA drafters were capable of writing

temporal limitations into the Agreement when they

intended to do so.

Next slide.

Article 1117(2) contains a three-year

statute of limitation for claims made by an investor

on behalf of its investment enterprise, tying that

date to the enterprise's first knowledge of the breach

and damage incurred.

Article 1116(2) similarly contains a

three-year statute of limitations for claims made by

the investor on its own behalf.

Article 1108(4) shows the kind of language

that might have been used in Articles 1116 and 1117

had the NAFTA Parties intended an "at the time of the

breach" limitation as argued by Canada. 1108(4)

states: "No Party may, under any measure covered by

Annex 2, require an investor of another party by

reason of its nationality to sell or otherwise dispose

of an investment existing at the time the measure

becomes effective."

Next slide, please.

[Page 114]

Professor Paulsson wrote in his first Expert

Report that it is indeed a leap, and not a necessary

inference, that the foreign investor submitting the

claim must be the same foreign investor that owned the

foreign investment at the time of the breach. He

added: "Such a significant dispositive rule would

surely have been spelled out. Leaving it open means

that the answer depends on the factual context and its

effect on the policies that underlie the Treaty."

No such dispositive rule is spelled out in

NAFTA. Canada therefore invites the Tribunal to see

Articles 1116 and 1117 through the lens of Canada's

interpretation of Article 1101 in order to read an "at

the time of the breach" requirement into the Treaty.

Next slide.

To do that, the Tribunal has to ignore the

fact that Article 1101 similarly lacks an "at the time

of the breach" clause and to interpret the phrase

"measures adopted or maintained by a Party relating to

investors of another Party" as imposing such a

requirement.

Canada offers no Free Trade Commission

[Page 115]

formal statements of interpretation of Article 1101,

nor any legislative statements contemporaneous to the

NAFTA Parties' adoption of the Treaty, that would

support that view. The ordinary meaning of "measures

adopted or maintained by a Party relating to" is that

the measures must relate to the investor or the

investment. The only way that language of

Article 1101 could be read as a jurisdictional bar is

if there were no circumstances under which the

breaching measures related to Westmoreland and

Prairie.

Canada argues that the Off-Coal Agreements

could not relate to Westmoreland Mining Holdings

because Westmoreland Mining Holdings is a different

entity than the one that existed at the time of the

breach.

We do not agree that measures relating to

Westmoreland Coal Company do not or could not relate

to the Company emerging from the Westmoreland

bankruptcy, given the continuity of interest between

them. Yet, even if one assumed that the relation of

the measures to the Westmoreland Coal Company must be

[Page 116]

disregarded, we have made a prima facie showing that

the measures do relate to both Westmoreland Mining

Holdings and Prairie in the present.

We have explained that the Off-Coal

Agreements ensure that Prairie's mines will close no

later than 2030. The Off-Coal Agreements are measures

that continue to be maintained by Alberta as

compensation to the Albertan utilities to stop using

Prairie's coal. These payments are being provided to

the Albertan utilities in 14 annual installments that

began in 2016. The closure of the coal-fired

electricity units is being accelerated, leading to

earlier closures of Prairie's mines, increased revenue

losses, and increased coalmine reclamation costs.

These losses affect Westmoreland Mining

Holdings' investment in Prairie, stranding its

capital. Westmoreland Mining Holdings is losing and

will continue to lose revenue as a result of the

Off-Coal Agreements compelling the early mine

closures, even assuming that some of the mines hold on

until 2030. These facts as pled should be accepted by

the Tribunal pro tempore in this proceeding. Canada

[Page 117]

may disagree with them, but to the extent there is a

factual dispute about them, that question should be

addressed in the merits phase of the Arbitration.

Article 1101 provides no text to support an

"at the time of the breach" clause, nor does any

interpretation of "relating to" provide a basis for

denying the Tribunal's jurisdiction over this claim.

NAFTA Chapter Eleven does have a number of

express proscriptive requirements: The three-year

statute of limitations, waivers of resolution of

disputes in other fora, diversity of nationality. But

"at the time of the alleged breach" is not one of

them. It is not for the Tribunal to infer additional

proscriptions in the Treaty text, and there is no

support for the view that additional proscriptions

were intended.

Next slide, please.

When Canada says at Paragraph 44 of its

Memorial that Westmoreland Mining Holdings was not a

protected investor when the alleged breaches and

resulting damage occurred because it was not

constituted until January 31, 2019, it presents an

[Page 118]

unrealistic static view of "investment" that, for at

least two reasons, is incongruent with the Treaty's

terms, object, and purpose.

First, damages do not always occur all at

once and all at the time of the breach, which is why

the statute of limitation in Paragraph 2 of

Articles 1116 and 1117 distinguishes between the time

when an investor or investment has knowledge of the

alleged breach and the time when there is knowledge

that damage has been occurred.

Article 1101 also refers to "measures

adopted" and "measures maintained," reflecting the

fact that some measures may infringe Chapter Eleven

protections and cause damage for some time after they

were adopted. In this case, damages are being

incurred after the Westmoreland bankruptcy and will

continue to be incurred by Westmoreland Mining

Holdings.

Second, the cases addressed in Professor

Paulsson's First Expert Witness Statement and by the

Parties in the Memorials demonstrate that is not

uncommon for companies with foreign investments to

[Page 119]

change their corporate structures over time. Canada's

interpretation of the Treaty requires that an investor

could never change its corporate form post-breach and

still maintain a claim to protection under the Treaty

because a different corporate form means a different

person, a different investor, and, logically, the same

would have to apply to an individual who dies and

whose heirs inherit ownership of the investment.

Canada seems to adopt the view, without

exception, that an investor with a different corporate

form or person would have no rights with respect to

events that had occurred previously, regardless of the

connections.

Next slide.

That narrow interpretation of the NAFTA

Chapter Eleven Treaty requirements is not supported by

the Treaty text and makes no practical sense given the

object and purpose of the Treaty. NAFTA was an

historic agreement for economic integration among

three

[Page 161]

1 funding. If you look at corporations and you say,

2 well, there's two types of investments: You have the

3 equity investors, and then you also have the debt

4 investors. And so those debt investors are hoping to

5 get a return from the company through the company

6 doing well. That's the nature of how debt is. And

7 so, those debt investors are looking to get a return

8 on those funds. And so, while there's different

9 interests that go along with the debt versus the

10 equity, the credit holders, they do have a stake in

11 the success of that company. I would hazard to say

12 that the creditors would prefer to be repaid back on

13 their loan schedule as opposed to execute a bankruptcy

14 and move through those things. But that's business.

15 ARBITRATOR DOUGLAS: Okay. But if--

16 PRESIDENT BLANCH: Can I stop you for a

17 second. Can I stop just a second. We lost the

18 Transcript when you were just about to ask your second

19 question, and I just want to make sure that it is

20 being recorded, even if it's not being--actually

21 coming up on the live screen because I don't want to

22 lose any of this.

[Page 162]

1 (Comments off the record.)

2 PRESIDENT BLANCH: Zac, sorry, over to you.

3 Back to your questions.

4 ARBITRATOR DOUGLAS: Okay. Now, where were

5 we? So, we were talking about the difference between

6 equity and debt and investors.

7 Here is, perhaps, another distinction.

8 Whether you can bring counterclaims in investment

9 arbitration is a bit of a fraught question. But

10 assuming you can, just for present purposes, if a

11 counterclaim were brought in relation to events that

12 occurred around about the same time as the alleged

13 breach, wouldn't the Claimant say: "Well, hang on.

14 We are not liable for whatever WCC did during that

15 time because there is no successor liability here"?

16 Wouldn't that be the Claimant's position?

17 MR. LEVINE: I would say if that happened in

18 this scenario--right?--and let's just go back to what

19 a bankruptcy does and just start from the beginning

20 there.

21 In the bankruptcy process, liabilities are

22 discharged. So, when Canada says: "There's no

[Page 163]

1 successor liabilities," well, if there was a

2 debt-for-equity swap and the secured creditors became

3 the equity holders of Westmoreland Coal Company, there

4 would be--there would be no claim there either

5 provided all the claims were released. And usually

6 bankruptcy courts, when they release parties from a

7 bankruptcy, through a Plan of Reorganization, it

8 starts off with we're going to execute with an

9 automatic stay and prohibit further cases from

10 proceeding; and at the end of it, there's a permanent

11 injunction against those preexisting prior

12 liabilities.

13 So, when Canada said says there is no

14 successor liability, well, that is tied to the

15 purchase--that's tied to these assets here and what

16 they go with, but if there was a debt-for-equity swap,

17 we would end up at the same point.

18 ARBITRATOR DOUGLAS: Sorry, you're talking

19 about a debt/equity swap in context of bankruptcy.

20 MR. LEVINE: Correct. Correct.

21 ARBITRATOR DOUGLAS: Yeah. Because in a

22 normal debt/equity swap, you would step into the shoes

[Page 164]

1 of the equity, and you'd be liable; right? I mean,

2 you would bear--

3 (Overlapping speakers.)

4 MR. LEVINE: Go ahead, I apologize.

5 ARBITRATOR DOUGLAS: So you wouldn't be

6 personally liable, but you would have an equity stake

7 in a company that retains its liability?

8 MR. LEVINE: If there was a straight equity

9 swap outside the--like the confines of the bankruptcy,

10 I think that potentially is correct, depending on how

11 you structure that transaction and whether the--all

12 the equity holders want to deal with the results on

13 those claims and how you deal with that contractually.

14 But what I would say is, in this instance,

15 you couldn't have had this credit bidding through this

16 process to waive the successor liability without the

17 bankruptcy either. So, you know, you need a finding

18 from the Bankruptcy Court to insulate you from that, I

19 believe. So, divorcing that hypothetical from the

20 bankruptcy process is very hard to do.

21 ARBITRATOR DOUGLAS: Understood.

22 You said at some point that the Claimant

[Page 165]

1 took control over WCC. Is that strictly correct?

2 Because it took control of assets belonging to WCC.

3 WCC, as far as I understand, still exists. It hasn't

4 been extinguished yet as a corporate entity.

5 So, is that the strictly correct way of

6 explaining this, or...

7 MR. LEVINE: Well, I'll get to that in a

8 second with respect to the restructuring support

9 agreement and, we would say, once you get into the

10 bankruptcy process. And Westmoreland Coal Company

11 says, "We can't pay you back anymore. We need to

12 figure out how to work out our debt"; that, as

13 Ms. Coleman's own writings and speeches say, they sign

14 away everything. It's--they are made an offer they

15 can't refuse because the credit holders can pretty

16 much just take. And so now you are trying to find out

17 what's the best way to make this situation work for

18 everything.

19 So, I think at that point the creditors are

20 taking control of Westmoreland Coal Company, and they

21 are just trying to figure out a way through the

22 bankruptcy process to say, "How do we reorganize this

[Page 166]

1 company so that we can get the maximum value?"

2 And so, I would say they take control at

3 that point. And then that allows the creditors to

4 then say, "Let's take the good parts that we want, and

5 we could have done it through the bankruptcy process,

6 through a debt-for-equity swap, but do this in a very

7 efficient, quick way so we don't have to be saddled

8 with this bankruptcy for a longer period of time."

9 ARBITRATOR DOUGLAS: Thank you very much.

10 That was very, very helpful. Thank you.

11 MR. LEVINE: Any additional questions?

12 PRESIDENT BLANCH: James?

13 ARBITRATOR HOSKING: No. Not for me,

14 thanks.

15 PRESIDENT BLANCH: Please go ahead,

16 Mr. Levine.

17 MR. LEVINE: Okay. So I believe I'm on now

18 what's Slide 44 in my notes. So, Ricky, could we

19 please turn to the next slide.

20 All right. Mr. Snarr talked some about this

21 case, and so I will go through it very briefly. This

22 is CME v. Czech Republic. These are the measures at

[Page 167]

1 issue. As you can see here, the tribunal there was

2 interested in measures that took place in 1996.

3 If we go to the next slide, CME Media

4 Enterprises, who is not the claimant, acquired its

5 investment in 1994 and 1996. In 1997, claimant

6 acquired the investment from the parent company.

7 And if we go to the next slide, the tribunal

8 found this structure was proper. First, CME Media

9 Enterprises, claimant's predecessor, qualified as an

10 investment; and, second, the tribunal found that the

11 right assigned by CME Media Enterprises to its

12 daughter company must also be protected. And I don't

13 need to read the quotes there. They're on the screen

14 for the Tribunal, and we've cited them in our Brief.

15 Next slide.

16 Another case where assignment was

17 permissible was Autopista v. Venezuela. The transfer

18 there was between a Mexican company to a United States

19 company, both of which were owned by a common Mexican

20 parent. That transfer did not defeat jurisdiction,

21 even though México is not a party to the ICSID

22 Convention. Canada states in its Reply Memorial that

[Page 168]

1 the measures took place after the assignment to the

2 United States entity. We've reviewed the

3 Jurisdictional Decision, and we don't see any evidence

4 in there of when the measures actually took place. I

5 think the Tribunal would have to look at the merits

6 decision to find out when the measures took place,

7 which Canada did not cite.

8 Professor Paulsson explains why Autopista

9 should apply here, and he states: "The core

10 similarity relevant for jurisdictional purposes is

11 that, like Venezuela, Canada knew that Prairie was

12 held by a U.S. investment vehicle. The Autopista

13 Tribunal's analysis remains relevant because, in both

14 cases, a legitimate restructuring caused no prejudice

15 to Venezuela and, in this case, to Canada."

16 The next case--and Mr. Snarr also talked

17 about this--was Koch Minerals v. Venezuela. That

18 involved the transfer from Koch Minerals Sárl to Koch

19 Oil Marketing and then on to Koch Nitrogen Sárl. The

20 holding in that case was that the assignment did not

21 affect the transaction. I believe Mr. Snarr actually

22 read this Paragraph 6.70, so it's there on the screen.

[Page 169]

1 I don't want to read it again.

2 But we would say the same rationale applies

3 here too. Although you are talking about different

4 legal personalities, this was a transfer by form

5 between companies in the same chain. There is not

6 some unrelated third parties because the secured

7 creditors had a significant interest in Westmoreland

8 Coal Company.

9 The transaction was not changed. Prairie

10 still has operations in Alberta as it did before. We

11 would say there are no material economic, legal, or

12 commercial differences in substance.

13 Next slide, please.

14 This is what Professor Paulsson says. It

15 talks about in his Expert Report about these cases:

16 "The passages quoted from these cases show that

17 arbitrators applying international law are disinclined

18 to put form over substance when they ascertain whether

19 claims are timely. In the present case, the

20 assignment of rights or its equivalent appears to be

21 inherent, subject to the Tribunal's assessment of

22 the facts in the restructuring affected via the

[Page 170]

1 investor's recourse took protection under the relevant

2 bankruptcy law."

3 I've only read the italicized portion on

4 this slide.

5 Before I move to the next topic, are there

6 any other additional questions?

7 ARBITRATOR DOUGLAS: Just one very small

8 point. I think the Autopista case was a contract

9 case. I'm not sure if that makes any difference to

10 either party's views or not, but that is, perhaps, one

11 important point to come back on; that it is not an

12 investment treaty arbitration. It was an arbitration

13 under a Concession Agreement but submitted to ICSID.

14 I'm not sure if that changes anything from your

15 position or the other party's position.

16 PRESIDENT BLANCH: I think James had a

17 question.

18 ARBITRATOR HOSKING: Yeah, I just have a

19 quick question, if I may.

20 Given that in Claimant's view, we are not in

21 the abuse of process-type cases, what is the relevance

22 of there not being any prejudice? You've mentioned

[Page 171]

1 that a couple of times, including just a moment ago.

2 Is there a particular legal significance to

3 the lack of prejudice, and is there a case that you

4 can point us to where that's been taken into account

5 in the context of the jurisdictional analysis?

6 MR. LEVINE: I don't mean to be squirrely on

7 this answer, but I would defer to Mr. Snarr more on

8 this question. Would it be okay if he answers that

9 question at the conclusion of my presentation? Not to

10 give you an avoidance of an answer, but I think he's

11 dealt more with those issues--

12 ARBITRATOR HOSKING: Okay.

13 MR. LEVINE: --than I have.

14 ARBITRATOR HOSKING: Fine by me if it's fine

15 with the President. Thank you.

16 PRESIDENT BLANCH: Absolutely.

17 MR. LEVINE: I appreciate your indulgence,

18 Mr. Hosking.

19 Any further questions?

20 PRESIDENT BLANCH: I think, please, go ahead

21 with the next topic.

22 MR. LEVINE: Well, the next topic I want to

[Page 172]

1 discuss today is Type G reorganizations. Canada in

2 its Memorials says almost nothing about Type G

3 reorganizations, with Ms. Coleman, who is presented as

4 a bankruptcy Expert, calling this "a distinct inquiry

5 of whether Westmoreland Mining Holdings is an

6 unrelated third-party purchaser of Westmoreland Coal

7 Company's assets." We think she's wrong.

8 Next slide, please.

9 There are three essential points for a

10 Type G reorganization, and they are up on this screen.

11 First, tax attributes ordinarily remain with

12 the original company, but parties can opt out of this

13 ordinary role by selecting intentionally what's known

14 as a Type G reorganization, and to do so, there must

15 be a continuity of interest between the original and

16 new entity. The Type G reorganization roles thus

17 reflect the substance of the transaction, recognizing

18 that the entity starting the bankruptcy and the entity

19 ending the bankruptcy has such a continuity of

20 interest that they should she treated as the same.

21 Next slide.

22 This is a quote from 26 U.S.C. Section

[Page 173]

1 368(a)(1)(G), which is the Internal Revenue Code, that

2 provides for reorganizations involving a transfer by a

3 corporation of all or part of its assets to another

4 corporation in a U.S. Chapter 11 Bankruptcy. And this

5 was clearly the type of reorganization that was

6 selected intentionally in the Plan of Reorganization

7 and the other documents, including an actual

8 transaction document which we've exhibited, the

9 Contribution and Distribution Agreement.

10 Next slide, please.

11 The Treasury regulations describing this

12 type of transaction provide that a Type G

13 reorganization affects only a readjustment of

14 continuing interest in property under modified

15 corporate forms. And this regulation recognizes that

16 the form may be different, but the interest is

17 continual.

18 Next slide, please.

19 The regulations also provide that:

20 "Continuity of interest requires that, in substance, a

21 substantial part of the value of the proprietary

22 interests in the target corporation"--here, which

[Page 174]

1 would be Westmoreland Coal Company--"be preserved in

2 the reorganization."

3 That is, do the interests in the reorganized

4 entity remain the same as the original entity?

5 Next slide.

6 PRESIDENT BLANCH: Mr. Levine, sorry, I'm

7 going to do what I specifically said I wouldn't do.

8 I'm really sorry, but could we go back to the previous

9 slide?

10 MR. LEVINE: Sure.

11 PRESIDENT BLANCH: I just want to make sure

12 I understand.

13 So, is this looking more at the--when it

14 says "the value of the proprietary interests in the

15 target corporation," what exactly does that mean?

16 MR. LEVINE: My understanding of that--and

17 I'm not a tax lawyer, but we have one here who can

18 answer the question, if I do flub this--is that the

19 value of the proprietary interest in the target

20 corporation, meaning: Are you going to retain what's

21 in the original organization and carry it through to

22 the end using some interest that you already had in

[Page 175]

1 that original organization?

2 So, I think it's probably best answered by

3 the next slide, actually, of all things, if we turn to

4 Slide 55.

5 PRESIDENT BLANCH: Please do. I'm sorry for

6 interrupting because I may--

7 (Overlapping speakers.)

8 MR. LEVINE: Yeah. It says: "'Creditor's

9 claim as proprietary interest'... A creditor's claim

10 against a target corporation"--so, that claim being

11 the debt held in the target corporation--"may be a

12 proprietary interest in the target corporation if the

13 target corporation is in a [Chapter 11 of the U.S.

14 Bankruptcy Code] type case. In such cases, if any

15 creditor receives a proprietary interest in the

16 issuing corporation in exchange for its claim, every

17 claim in that class of creditors... is a proprietary

18 interest in the target corporation immediately prior

19 to the potential reorganization..."

20 So, what that is saying is that the

21 creditors' debt holdings in Westmoreland Coal Company

22 is that proprietary interest. That's the interest in

[Page 176]

1 the target corporation.

2 PRESIDENT BLANCH: Thank you.

3 MR. LEHRER: This is John. May I interrupt

4 for one second?

5 MR. LEVINE: Yeah, go ahead. I'm--

6 (Overlapping speakers.)

7 MR. LEHRER: Yeah. Just to be clear, so

8 this test is focused on, essentially, the equity

9 ownership and, you know, continuation there. There is

10 a separate test which also must be met focusing on a

11 continuing asset ownership as well. So, it's the

12 combination of those two things that is going on, the

13 focus being on the equity ownership and what is

14 appropriate for continuing this continuity.

15 PRESIDENT BLANCH: Thank you.

16 MR. LEVINE: If we could turn to the next

17 slide, please.

18 This is from a U.S. Treasury Department

19 Decision, and it states: "The final regulations

20 provide that, in certain circumstances, stock received

21 by creditors may count for continuity of interest

22 purposes both inside and outside of bankruptcy

[Page 177]

1 proceedings... The final regulations treat such senior

2 claims as representing proprietary interests in the

3 target corporation."

4 And so, what these rules do is they give

5 effect to the substance of the transaction, that the

6 secured creditors have a substantial interest in a

7 debtor entity, and that a bankruptcy reorganization

8 should not break the chain of continuity between

9 Westmoreland Coal Company and Westmoreland Mining

10 Holdings.

11 Before I move on to the next topic, are

12 there any further questions?

13 PRESIDENT BLANCH: No, thank you.

14 MR. LEVINE: I wonder if Mr. Snarr is

15 available and if this would be a good time to answer

16 Mr. Hosking's prior question.

17 MR. SNARR: Yes, I think I can do that. Is

18 the mic working now? Okay. Good.

19 So, we are trying to find rules of

20 international law here--excuse me--that apply to,

21 really, a unique set of facts. We don't have anything

22 in the text of NAFTA that speaks expressly to this.

[Page 178]

1 In fact, as I discussed, there is text in NAFTA that

2 suggests that there is not the strict rule intended

3 that Canada has argued. So, we look to the text of

4 NAFTA to see what we can find. If there were a strict

5 express statement in NAFTA, then you might have a

6 different perspective on how that rule should be

7 applied because, with the language being expressly

8 contained in NAFTA, the Parties on each side, the

9 Respondent and the Claimant, are on notice about the

10 application of a strict rule.

11 Let's take the diversity of nationality

12 rule. I think that is certainly clearer in the NAFTA

13 text that that applies, and it is clear in

14 investor-State treaties. So, that rule and the

15 principle of retroactivity of treaties is usually a

16 pretty hard line.

17 Now, you can imagine, perhaps, an extreme

18 circumstance where a respondent State decides to

19 confer nationality on the claimant and therefore

20 disrupt the diversity of nationality. And maybe in

21 that situation, you would say, given that strict rule,

22 we won't apply it as strictly as it's contained in the

[Page 179]

1 text.

2 Well, we are dealing here with the absence

3 of a provision that we are trying to find the source

4 of law that is the root of this question, and Canada

5 has cited NAFTA, and we've looked at the text, and it

6 is not contained in the text.

7 So, we are trying to divine from the cases,

8 the investor-State awards, what are the international

9 law principles that apply here? And in looking at the

10 international law principles, looking at the cases

11 where an abuse of the Treaty has not been allowed or

12 there's been forum-shopping, we have to take from

13 that: Why were those cases decided the way that they

14 were?

15 And so, we have to get at the rationale of

16 it. And the rationale seems to be that there is a

17 principle of good faith and fairness that comes into

18 play with respect to restructuring and the timing of

19 claims. And so, when we talk about, is there any

20 prejudice here on the part of Canada, we raised it

21 twice in our Briefs and I haven't seen anything yet

22 from the Government of Canada to suggest that they are

[Page 180]

1 prejudiced by whether it would be Westmoreland Coal

2 Company versus Westmoreland Mining Holdings.

3 We are getting to the issue of fairness and

4 good-faith principles with respect to the operation of

5 the dispute-resolution provisions in the Treaty, and

6 the connection of those procedures to what is an

7 investment, an undisputed investment in Canada of a

8 company, an enterprise owning and operating those

9 mines. So, I think that prejudice ties to the

10 international principles that we're culling from these

11 cases, and we are trying to find out what the contours

12 are of them in deciding this question.

13 And as Professor Paulsson states in his

14 Expert Report, that this is a case that may be a case

15 of first impression, and unless there are strict

16 provisions contained in the terms of the Treaty as you

17 do the international law analysis, then that opens the

18 situation up for consideration on a case-by-case

19 basis. And the equities of this case, we believe,

20 strongly favor us and jurisdiction being found for the

21 claim.

22 ARBITRATOR HOSKING: Okay. I appreciate

[Page 181]

1 your answer. Thank you very much.

2 Sorry, Mr. Levine. I hope I didn't throw

3 you off.

4 PRESIDENT BLANCH: I'm not sure we can hear

5 you, Mr. Levine.

6 MR. LEVINE: There we go. There's two mute

7 buttons I have to press to make this thing work.

8 After 18 months, you would think I would have figured

9 out how to use Zoom, but apparently not.

10 So, if we could turn to the final topic.

11 And the next slide is that the "Bankruptcy Preserved a

12 Continuity of Interests."

13 Next slide, Ricky.

14 The secured creditors had loaned over

15 $700 million to Westmoreland Coal Company with the

16 expectation of being repaid, somehow. And when

17 Westmoreland Coal Company defaulted on those

18 obligations, the secured remedy--creditors' remedy was

19 the collateral they had, and they could have exercised

20 on that collateral once there was a default. But,

21 instead, they executed additional documents: The

22 bridge loan, the restructuring support agreement, and

[Page 182]

1 the debtor-in-possession financing agreement.

2 If we could turn to the next slide.

3 We've laid these out in our Memorials, but

4 these agreements gave a number of indicia of control

5 over to the secured creditors. There's approved

6 budgets, there's financial metrics, there's weekly

7 reporting obligations, approval rights over

8 revenue-generating contracts longer than six months.

9 A number of these are detailed in our Appendix page to

10 the initial Memorial.

11 If we could go to the next slide, please.

12 But among the important ones here is the

13 control given by the restructuring support agreement

14 of the bankruptcy process to the secured creditors. A

15 restructuring support agreement is an agreement that

16 ensures the debtor entity cedes the control of the

17 bankruptcy to the secured creditors. And in this

18 case, that agreement had two principal effects.

19 First, the secured creditors had approval

20 rights over all the key bankruptcy documents: The

21 Plan; the Plan Supplement where the transaction was

22 formally structured; the sale agreement; and numerous

[Page 183]

1 other documents. And, normally, these are documents

2 that the debtor could put together on their own, and,

3 in this case, that reverse the ordinary course of

4 events.

5 Second, the bankruptcy process was to be

6 completed quickly. The secured creditors obviously

7 valued efficiency and did not want to be tied up in

8 bankruptcy for a long time. They've already had their

9 debt defaulted on.

10 Next slide.

11 Now, as we've mentioned earlier, the secured

12 creditors could have done a debt-for-equity swap

13 through the bankruptcy process, but, instead, they

14 used the reorganization process, that is, as

15 Ms. Coleman explains in her own writings, the way

16 bankruptcy gets conducted. As she says: "A typical

17 Section 363 sale involves participation by existing

18 lenders who are undersecured and often have

19 'everything,' a debtor in possession, by or with the

20 consent of existing lenders and the debtor's

21 management. These parties have substantial control

22 over the terms of the price and sale,

[Page 184]

1 especially...where...the obtainable price is well

2 below the amount of the secured debt."

3 And that is exactly what happened here. The

4 secured creditors exchanged their debt for the same

5 assets they could have had acquired through the

6 debt-for-equity swap.

7 Next slide, please.

8 Now, before I move on to this, I just want

9 to say: Canada implies that we do not dispute what

10 Ms. Coleman opines about because we chose not to

11 cross-examine her. And that, of course, is not the

12 standard in the Procedural Order. If that were the

13 standard, Canada's choice not to cross-examine

14 Professor Paulsson would lead to the same way of earn.

15 We don't, of course, contend that's actually the case.

16 What we do dispute is Ms. Coleman's

17 conclusions. The remainder of her Opinion repeats a

18 lot of what's in the factual exhibits and what's in

19 documents that we feel, as U.S. attorneys, we can

20 address without the need for a further expert.

21 Now, what Ms. Coleman did say, in a taped

22 interview, which we transcribed at C-046--and we

[Page 185]

1 provided the interview video in our filings--is that

2 this--how this bankruptcy got conducted is how

3 bankruptcies get done these days. In this excerpt,

4 conducted with MandA.TV, she stated there's a real

5 shift of power and a real shift of control in the

6 bankruptcy case to secured creditors who extend that

7 credit.

8 What she's saying is, you get into

9 bankruptcy and you don't have ability to fund your

10 operations, you essentially accept more funding in

11 exchange for turning over your rights to those

12 creditors.

13 If we go to the next slide.

14 She's also written about this shift of power

15 and shift of control and the effect it has on

16 preparing the bankruptcy documents.

17 And she said: "Without first getting

18 debtor-in-possession lender consent, the debtor cannot

19 do anything outside the ordinary course of business.

20 For example, the debtor is no longer free to seek to

21 assume or reject contracts. It cannot propose an

22 incentive plan to retain critical management players.

[Page 186]

1 It cannot sell or decline to sell its assets. But

2 most important, it cannot propose its own plan without

3 lender approval, and it cannot obtain approval of the

4 plan over the opposition of the debtor-in-possession

5 lender--or that of any other creditor to whom the

6 debtor-in-possession lender extends its protection..."

7 And, basically, the secured creditors

8 control the material aspects of the Company.

9 If we could go to the next slide.

10 We have highlighted these two cases in our

11 Rejoinder Memorial, and we've put some quotes up here

12 from them. And I don't want to belabor these points

13 because they are in the filings, but we think these

14 cases are illustrative of what happened here, that

15 there may be a change in form, but that change in form

16 does not serve to defeat jurisdiction.

17 And if we could to the next slide, please.

18 Which brings me back to where we started.

19 If Westmoreland Coal Company could have changed its

20 corporate form from a corporate entity to a limited

21 liability company, that would not have defeated

22 jurisdiction. And if the secured creditors took

[Page 187]

1 equity in Westmoreland Coal Company as a result of the

2 bankruptcy, that would not have defeated jurisdiction.

3 So, using their control of the bankruptcy

4 and using the outstanding debt they were owed, the

5 secured creditors used the new corporate entity to do

6 the same thing. They did flow through a transaction

7 that made Westmoreland Coal Company the parent of

8 Westmoreland Mining Holdings. And they did so in a

9 way that United States federal law finds would

10 preserve a continuity of interest.

11 So, if we could go to the final slide.

12 This is what Professor Paulsson said in his

13 Second Report: "What matters is the ultimate economic

14 reality; does the recovery pursued ultimately and

15 legitimately seek reparation of the harm done to

16 protected investors who put their capital at risk?

17 Canada does not address the rationale for this

18 proposition, but simply repeats that a claimant who

19 was not an investor when the dispute arose has no

20 standing."

21 In conclusion, Claimants have demonstrated

22 that jurisdiction exists here, and Canada's objection

[Page 188]

1 fails to demonstrate that jurisdiction does not exist.

2 We thank you for your time, and we are

3 prepared to answer any further questions the Tribunal

4 may have.

5 PRESIDENT BLANCH: What I'd like to propose

6 is that we take something just like a 5- to 10-minute

7 break so that the Tribunal Members can just work out

8 if we have questions to raise, any questions to raise

9 now, which may be for Claimants, or it may be points

10 that we suggest that the Parties might want to address

11 tomorrow. We will let you know as soon as we're ready

12 to come back into the main Hearing. So, please, I

13 would ask that nobody runs away very far.

14 Anneliese, could you get the three of us and

15 yourself back into the Tribunal breakout room?

16 SECRETARY FLECKENSTEIN: Yes. One second.

17 (Brief recess.)

18 PRESIDENT BLANCH: The Tribunal thanks the

19 Parties. Those Opening Submissions were really

20 helpful, very clear, so thank you so much. And the

21 PowerPoints are really helpful too.

22 You've been so clear that actually we have

[Page 189]

1 no further questions for you, and we don't actually

2 have any specific questions for you to consider for

3 the Rebuttals tomorrow. We have every confidence that

4 the Parties will pick out anything they want to cover

5 in the Rebuttals.

6 So, on that, I propose to close the

7 Proceedings for today, unless there is any

8 housekeeping.

9 Firstly, Mr. Feldman, is there anything

10 further on Claimant's side for tonight?

11 Mr. Feldman, I'm afraid we can't hear you.

12 MR. FELDMAN: Can you hear me now?

13 PRESIDENT BLANCH: Yes, we can.

14 MR. FELDMAN: Sorry. I used to teach and

15 always worry at the end of a class when a class had no

16 questions, and if I was really that clear, that you

17 really think so. So my teaching instinct is coming

18 out from this, but okay. We will try to anticipate

19 what you are thinking about and try to answer it

20 tomorrow.

21 PRESIDENT BLANCH: I suspect, as a teacher,

22 you should feel slightly more comforted because I'm

[Page 190]

1 not sure that we asked many, if any, questions to

2 Canada; whereas, I think Claimant got a few. So, I

3 can absolutely assure you, we really do feel very,

4 very well briefed.

5 MR. FELDMAN: Thank you.

6 PRESIDENT BLANCH: Mr. Douglas, is there

7 anything further housekeeping from Canada?

8 MR. DOUGLAS: No, there is nothing further

9 from Canada. Thank you, President Blanch.

10 PRESIDENT BLANCH: Well, I hope everyone

11 gets at least a bit of break before we meet again

12 tomorrow, and I look forward to that.

13 Thank you.

14 MR. FELDMAN: Thank you very much.

15 MR. DOUGLAS: Thank you very much.

16 (Whereupon, at 2:41 p.m. (EDT), the Hearing

17 was adjourned until 9:30 a.m. (EDT) the following

18 day.)

[Page 191]

CERTIFICATE OF REPORTER

I, Dawn K. Larson, RDR-CRR, Court Reporter,

do hereby certify that the foregoing proceedings

were stenographically recorded by me and thereafter

reduced to typewritten form by computer-assisted

transcription under my direction and supervision;

and that the foregoing transcript is a true and

accurate record of the proceedings.

I further certify that I am neither counsel

for, related to, nor employed by any of the parties

to this action in this proceeding, nor financially

or otherwise interested in the outcome of this

litigation.

Signature

Dawn K. Larson