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[Page 192]

PUBLIC DOCUMENT

INTERNATIONAL CENTRE FOR THE SETTLEMENT OF INVESTMENT

DISPUTES

VIDEOCONFERENCE: HEARING ON JURISDICTION

Thursday, July 15, 2021

The World Bank Group

The hearing in the above-entitled matter

came on at 9:32 a.m. (EDT) before:

MS. JULIET BLANCH, President

MR. JAMES HOSKING, Co-Arbitrator

PROF. ZACHARY DOUGLAS, Co-Arbitrator

[Page 193]

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 194]

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 195]

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 196]

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 197]

[Page 198]

P R O C E E D I N G S

1 PRESIDENT BLANCH: Welcome, everybody, to

2 Day 2 of the Jurisdictional Hearing between

3 Westmoreland Mining Holdings, LLC, and the Government

4 of Canada, an ICSID Case UNCT/20/3.

5 I'm going to give the same reminder as I

6 gave yesterday pursuant to Paragraph 30 of PO4, in

7 which I confirm the only persons permitted to attend

8 this Hearing are those approved by the Disputing

9 Parties and the Tribunal, and no unauthorized persons

10 shall attend in violation of this agreement.

11 Is there any housekeeping before we

12 continue?

13 Firstly, Claimants. Mr. Feldman?

14 MR. FELDMAN: I have to click a lot of

15 things to answer you.

16 But I'm not aware of any housekeeping,

17 unless there is anyone else on our team who has

18 thought of something, but I think we're fine. Thank

19 you.

20 PRESIDENT BLANCH: Excellent.

21 Mr. Douglas?

[Page 199]

1 MR. DOUGLAS: Nothing from the side of

2 Canada, President Blanch.

3 PRESIDENT BLANCH: Perfect. Well, then, in

4 which case, we'll start, Mr. Douglas, with the

5 Respondent's Rebuttal. We have 45 minutes, and, as

6 yesterday, the Tribunal will do its best to refrain

7 from asking any questions during the course of your

8 rebuttal, keeping them until after both Parties'

9 Rebuttals. But if we do have any questions, we will

10 interrupt.

11 MR. DOUGLAS: Great. That sounds great.

12 Thank you very much, President Blanch.

13 REBUTTAL ARGUMENT BY COUNSEL FOR RESPONDENT

14 MR. DOUGLAS: Good morning and good morning

15 to the Members of the Tribunal. It is nice to see you

16 again.

17 Canada's Rebuttal will not take the full

18 45 minutes. I will first address a couple of

19 high-level points concerning the Claimant's legal test

20 on the assignment of claims and the Claimant's

21 contention that Canada is seeking a windfall in this

22 case.

[Page 200]

1 Ms. Van den Hof will then address a few

2 points raised by the Claimant concerning the

3 Tribunal's jurisdiction ratione temporis under NAFTA

4 Chapter Eleven. Mr. Klaver will then discuss flaws in

5 the Claimant's case concerning continuity of interest,

6 and Ms. Zeman will conclude Canada's rebuttal with a

7 few remarks.

8 The Claimant confirmed yesterday that NAFTA

9 contains no provision on the assignment of claims from

10 one investor to another, and that the Claimant is,

11 thus, required to look elsewhere in international law

12 for a rule. The Claimant stated at Page 177 of the

13 Transcript: "We are trying to find rules of

14 international law."

15 But it is not permissible to find a rule of

16 international law and then apply it to NAFTA when such

17 a rule does not comport with the text of NAFTA itself.

18 As Canada explained yesterday and in its Pleadings,

19 there is no mechanism under NAFTA Chapter Eleven that

20 allows an investor of a Party to buy a claim from a

21 disputing investor and then pursue it. It is

22 well-established that the scope of the arbitration

[Page 201]

1 clause under NAFTA Chapter Eleven includes

2 Articles 1101, 1116, and 1117. This was determined by

3 the tribunal in Methanex, which is at Paragraph 120 of

4 RLA-026.

5 To satisfy the arbitration clause, a

6 disputing investor must satisfy those provisions

7 which, as we explained yesterday, the Claimant in this

8 case has not. Section B of NAFTA Chapter Eleven is an

9 extraordinary remedy and cannot be expanded beyond its

10 terms. The Claimant tries to read language into the

11 NAFTA when it argues that claims can be assigned, so

12 long as two investors have a continuity of interest.

13 President Blanch, you asked the Claimant

14 whether the third bullet on Slide 17 of the Claimant's

15 presentation was the rule the Claimant proposes. The

16 Claimant confirmed at Page 139 of the Transcript that

17 that is, indeed, its position.

18 There is nothing in the text of NAFTA

19 allowing for this rule. The Claimant's rule is

20 untethered to the applicable law. The Claimant's rule

21 is something of its own creation. It is not a rule of

22 international law. The Claimant argued at Page 133 of

[Page 202]

1 the Transcript that there is ample evidence of

2 customary international law for its proposed

3 continuity test. If there is, the Claimant certainly

4 hasn't provided any State practice or opinio juris to

5 show that there is, and Canada contests the point.

6 Alternatively, at Page 179 of the

7 Transcript, the Claimant states that it "divined the

8 rule from investment law awards." However, none of

9 the cases cited by the Claimant in this Arbitration

10 discuss a concept of a continuity of interest. The

11 Claimant pointed the Tribunal yesterday to S.D. Myers

12 and CME. S.D. Myers did not involve the assignment of

13 a claim after the date of an alleged breach, nor did

14 it address the continuity-of-interest theory.

15 CME also did not address the concept of a

16 continuity of interest, and, in any event, I explained

17 yesterday why that case is not applicable here.

18 The Claimant did not raise Autopista on this

19 point, but I can address it now. As I explained

20 yesterday, the transfer of the investment in that case

21 happened after the date of the alleged breach and,

22 thus, there is no ratione temporis issue in this case.

[Page 203]

1 The share transfer happened in August 1998, and the

2 alleged breach happened in March of 2000. References

3 to these facts can be found at Paragraphs 26 and 33 of

4 the Award, which is CLA-020. Moreover, as Arbitrator

5 Douglas pointed out yesterday, the case was a contract

6 case, not an investment case. It, thus, has limited

7 applicability to the Claimant's claim.

8 The Claimant's proposed international law

9 rule, thus, has no grounding in international law at

10 all. If the Tribunal agrees with the rule presented

11 by the Claimant, it would be the first tribunal to do

12 so. Moreover, relying on the Claimant's concept to

13 create a new test for the assignment of claims would

14 be highly problematic because, in this case, it would

15 allow lenders, such as major financial institutions

16 who make loans but otherwise have no foreign

17 investments in the Host State at the time of an

18 alleged breach, to, nonetheless, have standing in ISDS

19 proceedings. That would significantly expand the

20 scope of international investment law.

21 The better view, in Canada's view, is that

22 investors are not in a position to transfer claims or

[Page 204]

1 jurisdictional offers under NAFTA Chapter Eleven.

2 That view comports with the text of the Treaty.

3 The next point I would like to discuss are

4 the equities of the case. The Claimant yesterday

5 accused Canada of using WCC's bankruptcy proceedings

6 to seek a windfall. If we want to discuss the

7 equities of this case, we can look to the beneficial

8 owners of WCC and the Claimant. Now, let me be clear:

9 Canada in no way views beneficial ownership as

10 relevant to the Claimant's attempt to have standing in

11 this case. However, we can recognize that the

12 beneficial owners of WCC and the Claimant are not the

13 same, and that the beneficial owners of WCC are no

14 longer here.

15 The individuals who stand to benefit from an

16 award in this Arbitration are the beneficial owners of

17 the Claimant, that is, the First Lien Lenders. The

18 Claimant confirmed this at Page 137 of the Transcript.

19 The debt that WCC owed to those lenders was fully

20 satisfied through WCC's bankruptcy process.

21 Ms. Coleman explains this at Footnote 72 of her First

22 Expert Report, and the Claimant does not contest this

[Page 205]

1 point.

2 At Paragraphs 28-30 of Appendix A of its

3 Counter-Memorial, it cites to Ms. Coleman's

4 Footnote 72, confirming its accuracy. The debt that

5 WCC owed to the First Lien Lenders was satisfied, and,

6 yet, the First Lien Lenders would, through the

7 Claimant, stand to benefit from an additional

8 $470 million NAFTA Award in this Arbitration. That is

9 a windfall.

10 Unless the Tribunal has any questions, I

11 will turn things over to Ms. Van den Hof.

12 PRESIDENT BLANCH: (Audio interference.)

13 (Interruption.)

14 (Stenographer clarification.)

15 PRESIDENT BLANCH: I was just checking if

16 James or Zac had any questions, but they both

17 confirmed they don't, and I don't.

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

19 Tribunal.

20 Yesterday, the Claimant addressed Canada's

21 position that, under Articles 1101, 1116, and 1117, an

22 investor of a Party bringing a claim must establish

[Page 206]

1 that the challenged measures alleged to breach an

2 obligation under Section A relate to the claimant and

3 its investments and that the claimant directly or

4 indirectly incurred loss or damage arising out of that

5 breach.

6 The Claimant has not satisfied these

7 jurisdictional requirements. Today I will respond to

8 three of Claimant's arguments concerning this

9 interpretation.

10 First, Mr. Snarr argued, at Pages 114 and

11 117 of the Transcript, that it is not required for the

12 foreign investor submitting the claim to be the same

13 foreign investor that owned the foreign investment at

14 the time of the breach. And Article 1101 provides no

15 text to support an at-the-time-of-the-breach clause.

16 This argument ignores that Article 1101

17 needs to be read in the context of the Claimant's

18 substantive claims in this Arbitration. In this

19 context, the measures referenced in Article 1101 are

20 those alleged to have breached NAFTA Chapter Eleven,

21 and the relevant investor of another Party is the

22 investor bringing a claim under Articles 1116 and

[Page 207]

1 1117. Accordingly, under Article 1101, the Claimant

2 must allege that the challenged measures relate to it

3 as an investor of a Party.

4 As I explained yesterday, every NAFTA

5 tribunal evaluating Article 1101 has come to this

6 conclusion, along with all of the NAFTA Parties.

7 Because the Claimant did not exist or have any

8 investments at the time of the challenged measure,

9 this requirement is not satisfied. The challenged

10 measure, Alberta's 2016 conclusion of the Off-Coal

11 Agreements, does not relate to the Claimant or its

12 2019 investment.

13 Not only is the Claimant's reading of

14 Article 1101 inconsistent with the ordinary meaning of

15 that provision, but it would open up NAFTA dispute

16 settlement to an indeterminate class of claimants.

17 This is because it removes the requirement for the

18 challenged measure to relate to the investor bringing

19 the claim and, instead, provides an investor standing

20 when the challenged measure relates to any U.S. or

21 Mexican investor.

22 Second, Mr. Snarr suggested yesterday that,

[Page 208]

1 given the continuity of interest between WCC and the

2 Claimant, the challenged measures could relate to the

3 Claimant. That was at Page 115 of the Transcript.

4 This argument suggests that the Claimant could create

5 a nexus to the challenged measures through its arm's

6 length purchase. That cannot be right.

7 As the tribunal in Apotex held, there must

8 be an immediate and direct connection between the

9 particular measure attributable to the State, alleged

10 to be a breach of NAFTA Chapter Eleven, and the

11 investor bringing the claim. A prospective claimant

12 cannot create that connection through its own actions

13 after the fact.

14 Third, Mr. Snarr asserted yesterday, at

15 Page 137 of the Transcript, that Prairie was owed

16 independent obligations under NAFTA Chapter Eleven,

17 arguing that: "Canada owed obligations to Prairie

18 under Articles 1102 and 1105, and it continues to owe

19 them, as Prairie is owned by Westmoreland Mining

20 Holdings."

21 I explained in detail yesterday that

22 investments are not owed obligations independent of

[Page 209]

1 their investors. And I explained why an investment of

2 an investor of another Party begins when a particular

3 investor takes a risk and makes an investment in

4 Canada. WCC's investment in Canada is not the same as

5 the Claimant's investment in Canada.

6 Prairie is a domestic enterprise. It is not

7 independently owed obligations under NAFTA Chapter

8 Eleven. Article 1117(4) also establishes Prairie may

9 not bring a claim in its capacity as an investment.

10 There is only one investor mentioned in Article 1117,

11 and that investor is the claimant. Article 1117

12 addresses the narrow situation where a measure

13 breaches an obligation owed with respect to the

14 claimant but the loss is incurred indirectly through

15 an enterprise. This indirect loss would be left

16 unaddressed under customary international law.

17 The fact that the Claimant is permitted to

18 claim indirect losses incurred by its enterprise does

19 not mean that a claimant is permitted to allege

20 breaches that occurred in relation to a different

21 investor.

22 Mr. Snarr contested this yesterday, saying,

[Page 210]

1 at Page 112 of the Transcript, that "Article 1135

2 suggests that an investment enterprise is owed

3 obligations and may be owed damages provided it is

4 owned by a foreign investor who submits the claim."

5 Article 1135 suggests no such thing. It

6 simply provides that damages payable to the enterprise

7 under Article 1117 are, in fact, paid to the

8 enterprise. It says nothing about the scope of

9 obligations owed.

10 For these and all of the reasons Canada has

11 explained throughout this Jurisdictional Phase, the

12 Claimant's arguments do not disturb the conclusion

13 that it has failed to meet the jurisdictional

14 requirements imposed by Articles 1101, 1116, and 1117.

15 Are there any questions from the Tribunal?

16 PRESIDENT BLANCH: No, not at this stage.

17 Thank you.

18 MS. VAN DEN HOF: Great. Thanks.

19 MR. KLAVER: Members of the Tribunal, as my

20 colleague Mr. Douglas explained, the Claimant's case

21 now turns on its alleged continuity of interest. The

22 Claimant continues to blur its dual use of this

[Page 211]

1 concept regarding its tax treatment and the First Lien

2 Lenders' alleged control of WCC and the bankruptcy

3 process. On tax treatment, yesterday the Claimant

4 argued that U.S. federal law recognizes a continuity

5 of interest between WCC and the Claimant. This is

6 misleading.

7 The Claimant's asserted continuity of

8 interest is its own self-judging opinion. The

9 Claimant has decided for itself that it had this tax

10 treatment. In an attempt to substantiate its opinion,

11 the Claimant advances argumentation by Counsel. Yet,

12 while the Claimant said it considered that its

13 attorneys can address factual matters, argumentation

14 from Counsel is not fact evidence.

15 If it were serious about the alleged

16 continuity-of-interest argument, it would not rely

17 solely on argumentation from its Counsel. Yet the

18 Claimant has filed no evidence to confirm its alleged

19 tax treatment under U.S. law.

20 To be clear, the record contains no tax

21 assessment from the IRS. No audit is on the record.

22 No court decision confirming a continuity of interest

[Page 212]

1 is on the record.

2 Despite the Claimant's suggestions, the

3 Bankruptcy Court does not make conclusive

4 determinations on questions of tax law.

5 Ms. Coleman explained at Paragraph 33 of her

6 Second Expert Report that, under U.S. law, the

7 determination of whether WMH may qualify for certain

8 tax benefits is a distinct inquiry from whether it was

9 an unaffiliated buyer of WCC's assets.

10 This makes sense; tax law is--frequently

11 features idiosyncratic rules that apply for its

12 purposes only, but may be absurd in other contexts.

13 For example, tax law can deem a corporate entity to be

14 liquidated for tax purposes, even though it remains in

15 existence for all other purposes.

16 Outside the limited purposes of tax law in

17 this NAFTA proceeding, the Claimant's asserted tax

18 treatment is irrelevant, and the Claimant has not

19 explained otherwise. In fact, the Bankruptcy Court

20 made a legally-binding finding in the context of this

21 specific transaction on the unaffiliated relationship

22 between WCC and the Claimant.

[Page 213]

1 Thus, the record does not contain reliable

2 evidence to support the Claimant's alleged tax

3 treatment but does contain reliable evidence that

4 contradicts the Claimant's alleged association with

5 WCC.

6 Moving to the First Lien Lenders' alleged

7 control of WCC, yesterday, despite choosing not to

8 cross-examine her, the Claimant again raised

9 Ms. Coleman's comments on discussion panels. The

10 Claimant mistakenly states that Ms. Coleman's prior

11 statements about negotiating power and relative

12 leverage are inconsistent with her statements on the

13 specific facts of this case, and the legal concepts of

14 control under the Bankruptcy Code.

15 In particular, the Claimant suggests that a

16 Restructuring Support Agreement, an RSA, ensures the

17 debtor and the--cedes control of the bankruptcy to the

18 secured creditors. This is not correct.

19 Ms. Coleman explained in her Second Report

20 at Paragraph 27, that the Parties to an RSA, other

21 than the debtor, do not control the bankruptcy

22 process.

[Page 214]

1 The debtor here, WCC, had a fiduciary duty

2 to maximize the value of its estate for the benefit of

3 all stakeholders, not just the First Lien Lenders.

4 Consistent with this fiduciary duty, the RSA

5 contained a "fiduciary out" provision that allowed WCC

6 to terminate the Agreement in favor of a better

7 alternative. This contradicts the Claimant's

8 assertion that the First Lien Lenders controlled the

9 bankruptcy process.

10 Finally, despite Canada again asking who all

11 the First Lien Lenders are, the Claimant continues to

12 avoid this issue. It even stated yesterday at

13 Paragraph 137 of the Transcript that the First Lien

14 Lenders would be the appropriate beneficiaries of any

15 Award.

16 Canada maintains that the First Lien Lenders

17 cannot create this Tribunal's jurisdiction, that they

18 are not the Claimant. Nevertheless, the Claimant's

19 reliance on the lenders, despite its failure to

20 identify them or prove their U.S. nationality, reveals

21 a major flaw in its attempt to create jurisdiction

22 here.

[Page 215]

1 Consequently, the Claimant's arguments on a

2 continuity of interest based on its tax treatment and

3 control are irrelevant to the applicable law in these

4 proceedings and they are unsubstantiated.

5 Thank you. Unless the Tribunal has any

6 further questions, I will pass the floor to Ms. Zeman.

7 PRESIDENT BLANCH: I have one question,

8 which I think you answered in your very final

9 sentence.

10 MR. KLAVER: Yes.

11 PRESIDENT BLANCH: You've explained that

12 Canada's position is the Claimants haven't proved a

13 continuity of interest. It's a self-judging, it

14 hasn't been approved by the Courts or by the tax

15 authorities. But am I correct that Canada's position

16 is even had they proved to Canada's satisfaction this

17 continuity of interest, that is not sufficient in

18 Canada's view to give jurisdiction.

19 MR. KLAVER: That is absolutely correct.

20 The continuity-of-interest concept is not part of the

21 applicable law, and so it simply is irrelevant for

22 finding jurisdiction here.

[Page 216]

1 PRESIDENT BLANCH: Thank you.

2 Zac and James, do either of you have any

3 questions? No. Thank you.

4 MR. KLAVER: Thank you.

5 MS. ZEMAN: Hello, again. The final point

6 we'll make today pertains to the Claimant's several

7 references yesterday to debt-for-equity swaps.

8 Through those references, the Claimants seem to

9 suggest that what the First Lien Lenders did was the

10 functional equivalent of that type of transaction.

11 For example, at Page 184 of yesterday's Transcript,

12 Mr. Levine asserted that: "The secured creditors

13 exchanged their debt for the same assets they could

14 have acquired through the debt-for-equity swap."

15 But purchasing assets from the debtor and

16 carrying out a debt-for-equity swap are not the same

17 thing. A debt-for-equity swap involves acquiring

18 equity in the debtor entity itself. That's not what

19 happened here.

20 Importantly, the Claimant's focus on other

21 possible ways for WCC to have settled its debts

22 through the bankruptcy process, for example, by

[Page 217]

1 offering its equity to the First Lien Lenders, is

2 consistent with Ms. Coleman's explanations that the

3 debtor has a great deal of latitude to decide how to

4 settle its debts in a Chapter Eleven bankruptcy case.

5 That can be found at Paragraph 33 of her

6 First Expert Report. It also underlines that the

7 First Lien Lenders had options. As the Claimant

8 stated yesterday, they could have acquired assets

9 through the debt-for-equity swap, but they did not

10 choose that option. They chose that option where they

11 purchased assets from WCC in an arm's-length

12 transaction through an acquisition vehicle that they

13 owned or controlled at all material times, for tax

14 purposes. This was their choice, not Canada's.

15 The fact that that choice has consequences

16 for this Tribunal's jurisdiction is not a windfall to

17 Canada. Instead, it supports Canada's position that

18 there is no magic in the bankruptcy process itself and

19 that each transaction must be assessed on a

20 case-by-case basis.

21 And in this case, as Canada has explained

22 throughout this Jurisdictional Phase, the consequence

[Page 218]

1 of those choices is that the Tribunal does not have

2 jurisdiction over the Claimant's claim.

3 That concludes Canada's rebuttal for today.

4 We thank the Tribunal for your time and attention over

5 these last couple of days and remain happy to answer

6 any additional questions you may have.

7 PRESIDENT BLANCH: Zac, do you have any

8 questions at this stage? James?

9 I just have one. This is a question I have

10 actually for the Claimants, as well.

11 QUESTIONS FROM THE TRIBUNAL

12 PRESIDENT BLANCH: That there is a--clearly,

13 there is two extremes that we could be looking at. We

14 have one extreme where you have a contrived claim, and

15 I think it is accepted by Canada that this is--we are

16 not in the situation of a contrived claim. It may be

17 that you want to answer this question later, but I put

18 it out now so you have a chance to think about it.

19 On the other extreme, you have a situation

20 where, even if, for example, a company keeps its

21 identity but goes from public to private, or you have

22 an individual claimant who dies and the claim would be

[Page 219]

1 pursued by that person's--a person who inherits--

2 (Interruption.)

3 (Stenographer clarification.)

4 PRESIDENT BLANCH: I don't think the

5 background noise is me, but I apologize if it is.

6 If you have an individual claimant who dies

7 and the claim would be continued by that person's

8 executors under the will, I'm trying to work out where

9 on each Party's perspective there would be the right

10 to continue the claim and where it crosses over to

11 being--there being no jurisdiction.

12 And as I say, it may be that you would like

13 to think about this on the break and then answer it

14 after the Claimant's rebuttal, but I would be

15 interested for both Parties to explain to me where

16 along that line it becomes from being permissible to

17 being impermissible. Where does the jurisdiction go?

18 MS. ZEMAN: Yes, thank you. Yes. We would

19 like to answer that question later. I beg your

20 indulgence on that.

21 PRESIDENT BLANCH: Yeah. No, that is

22 actually fine.

[Page 220]

1 (Overlapping speakers.)

2 MS. ZEMAN: Perfect. Thank you.

3 PRESIDENT BLANCH: In which case, I thank

4 Canada for their rebuttal.

5 We now have a 15-minute break before we move

6 to the Claimant's Rebuttal. So, that would be, I

7 think, 10:18, so let's say 10:20 to start with the

8 Claimant's.

9 Anneliese, can you get the Tribunal back

10 into the Tribunal breakout room?

11 SECRETARY FLECKENSTEIN: Yes. Yes.

12 PRESIDENT BLANCH: Perfect. Thank you.

13 (Brief recess.)

14 PRESIDENT BLANCH: So, Mr. Feldman, do you

15 have everybody that you need from your team now on the

16 line?

17 I can't hear you, if you're speaking.

18 MR. FELDMAN: Can you hear me now?

19 PRESIDENT BLANCH: I can perfectly.

20 MR. FELDMAN: Okay. Apparently, I have two

21 buttons for speaking, and they seem to be mutually

22 incompatible.

[Page 221]

1 So, with apologies, would you like us to

2 begin?

3 PRESIDENT BLANCH: Let me just check with

4 Mr. Douglas that all his team is ready.

5 Mr. Douglas, are you okay for us to start?

6 MR. DOUGLAS: Mr. Feldman, if it makes you

7 feel any better, I also cannot figure out the buttons.

8 Yes. Everybody from Canada is present.

9 Thank you, President Blanch.

10 PRESIDENT BLANCH: Perfect. Well, I can

11 almost guarantee that just about the time we finally

12 master this and make no more mistakes will be when the

13 world gets back to normal and we can travel again.

14 But until that time, we are still trying.

15 Mr. Feldman, over to the Claimant for your

16 rebuttal.

17 REBUTTAL ARGUMENT BY COUNSEL FOR CLAIMANT

18 MR. FELDMAN: Thank you very much. Thank

19 the Tribunal again.

20 Canada's Expert Witness testified that

21 bankruptcy law does not go in this Arbitration. We

22 agree, which is why we've had no reason to call her

[Page 222]

1 for cross-examination. This case is governed by the

2 terms and plain language of NAFTA and customary

3 international law.

4 The question presented by Canada to the

5 Tribunal is whether the misfortune of bankruptcy can

6 protect Canada against the claim arising from a breach

7 of treaty obligations to protect the foreign

8 investment. Canada doesn't contest that in dispute is

9 the investment in Canada owned at all times by

10 American investors.

11 In this case, the Government of Alberta

12 changed the law, took significant value from an

13 American investor, compensated similarly situated

14 Canadian companies for their losses arising from the

15 change in the law, but compensated the American

16 investor not at all.

17 After Alberta began distributing money to

18 the Canadian companies and confirmed that the American

19 company Westmoreland would not receive any,

20 Westmoreland went bankrupt.

21 Canada contends that the bankruptcy

22 necessarily produced a new company, Alberta

[Page 223]

1 discriminated against the old company, and the new

2 company that emerged from bankruptcy forfeited the

3 claim of the original company because of the

4 bankruptcy. Canada argues that the buyers of the

5 bankrupt company should have deducted the value of the

6 claim from the purchase price of the bankrupt company

7 because the buyers knew there was a damaging and

8 costly treaty breach, and should have known that they

9 couldn't collect on the claim. It is Canada's way to

10 evade responsibility, and it is precisely the windfall

11 to Canada that Professor Paulsson warned against in

12 his Expert Opinion composed for this Tribunal.

13 It was not for the new company to abandon

14 the claim to Canada's benefit. The secured creditors

15 saw value in the claim, deliberately and

16 mathematically preserved it through the bankruptcy and

17 now are pursuing it. There are at least three

18 applicable principles of international law here:

19 First, international law favors access to justice;

20 second, international law focuses on the plain

21 language of treaties; third, international law favors

22 continuity of interest.

[Page 224]

1 Denial of jurisdiction would deny access to

2 justice. The plain language of NAFTA doesn't contain

3 the words "Canada needs or imagines," as it doesn't

4 require an investor of an investment at the time of an

5 alleged breach to be identical with the investor who

6 brings a claim within the statute of limitations. And

7 the Claimant here is substantially the same as the

8 investor at the time of the breach.

9 Canada's defense against jurisdiction is

10 Westmoreland's bankruptcy. Therefore, in rebuttal, we

11 will spend some time on the bankruptcy showing again

12 that there is a substantial continuity of interest

13 between the Claimant and the investor owning the

14 investment at the time of the breach.

15 Were NAFTA to require that the investor from

16 the moment of breach couldn't change in form and

17 preserve its claim, it would impose a rule directly

18 contrary to the Treaty's purpose as it would

19 discourage investors who may want to merge or acquire

20 and who may in unfortunate circumstances, go through a

21 restructuring or bankruptcy or with the example that

22 was offered by the President of the Tribunal a short

[Page 225]

1 while ago, someone dies and are the heirs not entitled

2 to the claim?

3 Nonetheless--because here we have, in

4 effect, a death of the company. Nonetheless, we do

5 see limitations on transfers or assignments or sales

6 of claims. The Tribunal seems to be looking for a

7 line to draw, and we're happy to try to help draw that

8 line. In addition to avoiding shams and shopping, a

9 claim may be preserved only when it remains

10 substantially within the ownership of common interest,

11 whether a family or a family of businesses, such as

12 the case here.

13 My partner John Lehrer will explain how

14 Westmoreland's Type G reorganization preserved the

15 continuity of interest. I would like to remind the

16 Tribunal of Professor Paulsson's final comment on this

17 subject in his Second Expert Report at Paragraph 18.

18 Ricky, if you could bring that up. That is

19 CER.035.

20 Professor Paulsson does use more than one

21 term--beneficial interest, beneficial ownership,

22 continuity--but explains that the terms or expression

[Page 226]

1 are not "self-defining and cannot achieve any effect

2 by simple assertion. What matters," he says, "is the

3 ultimate economic reality. Does the recovery pursue

4 ultimately and legitimately seek reparation of the

5 harm done to protected investors who put their capital

6 at risk." Those italics are Professor Paulsson's.

7 "Canada does not address the rationale for

8 this proposition but simply repeats that a Claimant

9 who was not an investor when the dispute arose has no

10 standing."

11 Indeed, that is what Canada did, again,

12 yesterday and again this morning. Mr. Snarr will

13 explain how the definition of "continuity of interest"

14 in the U.S. Tax Code is useful in articulating the

15 principle for continuity of interest or any of the

16 terms Professor Paulsson suggested for this same--with

17 the same intention in international law.

18 Mr. Snarr will also correct Canada's

19 interpretations of a number of international

20 arbitrations. My partner Andrew Layden will correct

21 some of Canada's errors pertaining to bankruptcy in

22 general and in this particular case. The essential

[Page 227]

1 discrepancy in view is that Ms. Coleman's theoretical

2 exegesis is divorced from the reality of bankruptcy,

3 as she herself has acknowledged in her public

4 speaking. Mr. Layden will rebut Canada's theory about

5 the control of company through bankruptcy.

6 Finally, Mr. Levine will correct some

7 apparent misunderstandings pertaining to some specific

8 international arbitrations upon which Canada seeks to

9 rely when arguing that a change in corporate form

10 means the forfeiture of a Chapter Eleven claim.

11 Canada interprets the cases rather liberally.

12 There is only one arbitration that appears

13 truly on point with the case here, CME v. The Czech

14 Republic. Canada recognizes the problem it has with

15 this case. In its presentation yesterday and again

16 today, Canada tries to make it go away. Mr. Levine

17 will explain why, and I will close with a short

18 comment. And we will try hard to stay within our time

19 limitations.

20 So, I'm passing the baton.

21 Thank you very much.

22 MR. LEHRER: Thank you, Mr. Feldman.

[Page 228]

1 I would like to thank the Members of the

2 Tribunal for their time today. My name is John

3 Lehrer. I would like to further address the

4 continuity of interest principle discussed yesterday

5 and related facts present in this case. It is

6 important to bear in mind that U.S. federal tax laws

7 do provide a definition of continuity of interest

8 emanating from long-standing legal principles.

9 Mr. Snarr will show why that definition is

10 helpful in the context of international law as applied

11 to the bankruptcy.

12 Before we turn to the slides I would like to

13 cover, I want to address one item raised by Canada in

14 its earlier rebuttal: the use of the Type G

15 reorganization was the chosen transaction form to

16 obtain a particular tax result. To be clear, the same

17 tax result could be obtained with a debt-for-equity

18 swap, or continuity also would be present.

19 My first slide, please, Ricky.

20 As indicated on this slide, the confirmed

21 bankruptcy plan specifically provides that, if the

22 stalking horse purchaser--here, WMH--is the Successful

[Page 229]

1 Bidder, the Sale Transaction may be structured either

2 as a taxable transaction or a reorganization under

3 Section 368 (a) (1) (G) of the Internal Revenue Code; in

4 other words, a Type G reorganization, as set forth in

5 the description of the transaction steps.

6 Next slide, please.

7 There were no bidders other than WMH,

8 resulting in WMH becoming the Successful Bidder. As

9 indicated on this slide, the Contribution and

10 Distribution Agreement specifically provides that the

11 transaction steps collectively were structured to be

12 treated as a single tax-free Type G reorganization.

13 In other words, the transaction steps involving WCC

14 and WMH were designed to qualify as a Type G

15 reorganization. To qualify as a Type G

16 reorganization, a number of requirements must be met,

17 including, most important for purposes of this

18 Jurisdictional Hearing, the continuity-of-interest

19 requirement.

20 Next slide, please.

21 The continuity-of-interest requirement is

22 present in reorganizations because the term

[Page 230]

1 "reorganization" presupposes a continuance of interest

2 on the part of the transferor in the properties

3 transferred. In other words, U.S. law requires that

4 the equity holders of a transferor receive and own an

5 equity interest in an acquiring entity, in connection

6 with the transaction.

7 This continuity-of-interest requirement is

8 modified in the context of bankruptcy proceedings or

9 bankruptcy-related restructuring transactions, to

10 include creditors of a bankrupt corporation in the

11 group of relevant stakeholders for purposes of

12 determining whether this continuity requirement has

13 been met, essentially treating creditors as

14 proprietors.

15 As indicated on this slide, the Coleman

16 Reply Report specifically provides that on

17 December 16, 2014, WCC obtained approximately

18 $700 million of debt financing from the First Lien

19 Lenders. The Coleman Report provides that the First

20 Lien Lenders' Stalking Horse Bid, through WMH, was a

21 credit bid made using a portion of their $669 million

22 secured claim.

[Page 231]

1 As previously indicated, this bid was

2 successful, and the effect or result of this

3 successful bid is clearly provided in the Coleman

4 Reply Report. The effect of the multi-step

5 transaction was to transfer WCC's assets to WMH, the

6 First Lien Lenders' designee, in partial satisfaction

7 of WCC's debt to the First Lien Lenders.

8 The continuity-of-interest requirement was

9 met because the First Lien Lenders, creditors of WCC,

10 end up as equity owners of WMH under the undisputed

11 facts in connection with the transaction steps.

12 If the Tribunal has no questions for me, I

13 will turn the floor to Mr. Snarr.

14 PRESIDENT BLANCH: Sorry. I have just two

15 questions.

16 QUESTIONS FROM THE TRIBUNAL

17 PRESIDENT BLANCH: Can I firstly take you

18 back to Slide 3?

19 I don't think this is relevant; I just want

20 to make sure I understand it.

21 Is it possible to pull Slide 3 up?

22 MR. LEHRER: So, this is numbered Slide 3.

[Page 232]

1 Is it--

2 PRESIDENT BLANCH: It was basically talking

3 about either some sort of transaction or a G--

4 MR. LEHRER: Ricky, go back to Slide 3.

5 Is it the language three lines down? Is

6 that what you were looking for, President Blanch?

7 PRESIDENT BLANCH: Yeah. Sorry, I've got

8 it. What I just wanted to say: Is a taxable

9 transaction different from a reorganization under

10 368(a)(1)(G)?

11 MR. LEHRER: Yes. To be clear: So, a

12 reorganization has a number of requirements that must

13 be met, one of them being the continuity-of-interest

14 requirement. Just because a transaction--let's say

15 somebody wanted to structure a transaction as a G

16 reorganization. Let's say it met the

17 continuity-of-interest requirement. It may not meet

18 another requirement which would then make it a taxable

19 transaction, but just because a taxable transaction

20 occurs or doesn't occur does not necessarily mean that

21 the continuity-of-interest requirement still would not

22 be met.

[Page 233]

1 PRESIDENT BLANCH: And that takes me very

2 neatly to my second question.

3 It is put against you by Canada that the

4 Claimants have effectively self-satisfied themselves

5 that there was continuity of interest, but that hasn't

6 been confirmed by whichever U.S. authority, whether

7 it's the tax authority or whether it's the Bankruptcy

8 Courts or whoever would confirm it.

9 On your analysis, is that correct, or is it

10 for the company to determine whether there is

11 continuity of interest?

12 MR. LEHRER: It is for the company to

13 determine in filing tax returns, in taking positions,

14 etcetera. It is up to the company, it is up to the

15 Parties, to determine under our system. And it

16 certainly is possible that somebody could disagree

17 with that determination in the future, but it doesn't

18 mean that, in order to solidify that position, you

19 need a court order or you need approval of our taxing

20 authorities to get to that position, as it is the case

21 may be in some other countries.

22 But, to be clear, the last slide--if we go

[Page 234]

1 to that, Ricky.

2 The issue with continuity of interest is

3 really: Do we have a group of stakeholders that were

4 present in WCC that now end up being the Owners of

5 WMH? And as the third bullet indicates, that group of

6 stakeholders at WCC were the First Lien Lenders. It

7 is undisputed that those First Lien Lenders became the

8 Owners of WMH as a result of this transaction. That's

9 in the record.

10 So, that's why continuity of interest in

11 this case has been met under the facts.

12 PRESIDENT BLANCH: Thank you.

13 I don't have any other questions at this

14 stage.

15 Zac or James? No.

16 So, please, let's move to your next speaker.

17 MR. LEHRER: Mr. Snarr.

18 MR. SNARR: Thank you.

19 Canada claims to have the higher ground for

20 the simple, straightforward operation of NAFTA Chapter

21 Eleven at Page 12 of the Transcript and then, in its

22 presentation of 71 slides, seems not to have displayed

[Page 235]

1 or quoted the actual text of Articles 1116 or 1117,

2 which determine who may submit a claim to arbitration.

3 Canada's presentation favors cases over the text of

4 the Treaty, but that's not where treaty interpretation

5 begins.

6 Where Canada did reference the Treaty text,

7 its own biases often crept into the descriptions of

8 what the text says. For example, Canada referenced

9 Article 1139, but did not display it for the Tribunal.

10 Let's look at what Canada said about Article 1139's

11 definition of "investments of an investor" and what

12 the text of Article 1139 actually says.

13 Ricky, can you bring up the next slide?

14 Canada said: "Under NAFTA Chapter Eleven,

15 the protection afforded to an investment of an

16 investor of another Party begins when a particular

17 investor takes a risk and makes its investment.

18 First, 'investment of investor of a Party' is a

19 defined term in Article 1139 which requires that the

20 investment be owned or controlled by the relevant

21 investor." Page 31 of the Transcript.

22 "The relevant investor"; that's what Canada

[Page 236]

1 says. Now, let's read what Article 1139 says.

2 "'Investment of an investor of a Party' means an

3 investment owned or controlled, directly or

4 indirectly, by an investor of such Party." Contrary

5 to Canada, the Treaty makes no reference to "the

6 relevant investor." In fact, not only is it not in

7 1139, it is not anywhere else in Chapter Eleven.

8 Canada puts significant stock in the French

9 translation of Article 1101 to explain how that

10 Article changes Articles 1116 and 1117, making them

11 require that the claimant/investor be the same

12 investor in person as the investor that existed at the

13 time of the alleged breach.

14 Next slide, please.

15 The English and French texts of 1101's

16 references to "investments" are displayed here on the

17 slide. Canada said that the use of the word

18 "effectuer," or "to make," is clear that an investment

19 of an investor of another Party begins when "a

20 particular investor" makes its investment.

21 But "particular investor" is not found even

22 in the text of the French translation, let alone the

[Page 237]

1 equally authentic English text. If it were there, the

2 French text would read differently, as shown in the

3 language at the bottom of the slide.

4 Next slide, please.

5 Canada argues that the import of the French

6 word "effectués" in Article 1101 is that: "An

7 investment can only be made once by one investor.

8 This means the investment made by each investor is

9 unique. WCC's investment is distinct from the

10 Claimant's investment." Page 32 of the Transcript.

11 That is a lot of weight to put on a word

12 that the English translation apparently deemed

13 superfluous in the phrase "investment of an investor

14 of another Party." Nevertheless, let's go to the

15 Treaty text to see how Canada's interpretation

16 measures up to the definition of "investment" in

17 Article 1139.

18 Article 1139 does not say that: "An

19 investment of an investor of a Party must be made by

20 an investor or that it can be made only once." It

21 says that: "An 'investment' means an investment owned

22 or controlled by an investor."

[Page 238]

1 Now, we cannot imagine that Canada is

2 suggesting that investments must be made only once and

3 could not be sold to another investor. That would

4 defeat the whole purpose of foreign investment

5 treaties. Article 1139 requires only ownership or

6 control, which could come by sale or acquisition.

7 Article 1102 expressly applies national

8 treatment obligations to not only the establishment of

9 an investment or making of an investment, but also its

10 acquisition, expansion, management, conduct,

11 operation, and sale or other disposition of

12 investments. Canada's claim that an investment must

13 be made, can only be made once, and that each

14 investment is unique does not fit with the Treaty

15 terms, saying that an investment, by definition, only

16 needs to be owned or controlled by an investor of

17 another Party and that the obligations under Section A

18 of Chapter Eleven expressly assure treatment with

19 respect to the expansion, sale, and disposition of

20 investments.

21 Next slide, please.

22 There is no Free Trade Commission

[Page 239]

1 interpretation of Article 1101 to support Canada's

2 view. We submitted pages and pages of legislative

3 text by both Canada and the United States at the time

4 that NAFTA was implemented, each of which summarizes

5 the intent and purpose of the NAFTA Chapter Eleven

6 Articles. We refer the Tribunal to CLA-061 and

7 CLA-062. Nothing in those official interpretive

8 documents supports Canada's views, and Canada has not

9 claimed otherwise.

10 We had not answered Canada's Article 1121

11 arguments previously because the answer is not

12 complicated. Multiple investors can have interests in

13 the same investment. If one investor's claim

14 overlapped with another investor's claim for the same

15 damages, any Tribunal hearing the claim would not make

16 an award until it was satisfied that the award would

17 not lead to a double recovery. There is no risk of

18 double recovery in this case, in any event.

19 As to the fear of multiple cases involving

20 common facts, NAFTA Article 1126 provides for

21 consolidation of multiple NAFTA claims where there are

22 questions of law or fact in common.

[Page 240]

1 Consolidation tribunals have been formed

2 several times in the past to streamline the cases and

3 minimize potential conflicts. The risks that Canada

4 has raised about double recoveries and multiple claims

5 are not grounded in reality, and not present here.

6 Canada also raises the specter of banks

7 having many potential investment claims for loans.

8 I'm not sure that it's particularly relevant here, but

9 when we go to the text of Article 1139, again, for the

10 definition of "investment," we see that loans with a

11 maturity of more than three years are expressly

12 identified as "investments." So, if banks owned such

13 loans, they would be investments under the Treaty.

14 Canada said in its Rejoinder the Claimant

15 proffered examples of changes to corporate form, which

16 they allege would negate jurisdiction under Canada's

17 interpretation of NAFTA Chapter Eleven, but that is

18 not Canada's position. Page 13 of the Transcript.

19 What, then, is Canada's position? Is it

20 Canada's position that any change of corporate form

21 for any reason post-breach relieves Canada of a claim?

22 It is Canada's position that the death of an investor

[Page 241]

1 terminates the investor's claim? I take it we will

2 soon find out.

3 The rule at issue here is not a

4 continuity-of-interest rule. It is the rule Canada

5 has proffered to say no jurisdiction should apply

6 here. We have demonstrated that Canada's rule is not

7 found in the NAFTA text. NAFTA does have express

8 limitations and requirements for making claims,

9 showing that the drafters could have written them in

10 and did write them in when they intended them. Even

11 if Canada's "at the time of the breach" rule did exist

12 in the NAFTA Treaty terms, the application of Canada's

13 "form over substance" rule without exception would

14 lead to extreme and absurd results.

15 Canada also has argued that there is no

16 provision in NAFTA for the assignment of claims, yet

17 Canada has cited no provision in NAFTA forbidding the

18 assignment of claims. Again, the NAFTA drafters knew

19 how to write limitations on claims in the Treaty text

20 when they so intended.

21 Without a grounding in the text of NAFTA,

22 the Tribunal is left to do a case law analysis of the

[Page 242]

1 arbitration decisions and, based on the facts of the

2 cases and the rationales provided, determine whether a

3 proscriptive legal norm to some degree similar to what

4 Canada is arguing exists in customary international

5 law and, if so, to determine how it is shaped by

6 customary international law principles.

7 When the facts of Gallo and Mesa Power are

8 considered closely, it becomes apparent that the rule

9 being applied there is that no investor protections,

10 substantive or procedural, apply before there is a

11 foreign investor and a foreign investment triggering

12 Treaty obligations. The rule drawn from those cases

13 does not address who the foreign investor might be or

14 transfers between investors because those cases did

15 not have more than one possible foreign investor.

16 The cases we have cited that show support

17 for the continuation of a claim through restructuring

18 have a common thread that there has been a bona fide

19 investment, that corporate restructuring or transfers

20 are taken for ordinary business purposes, and there is

21 some common connection among the investor and

22 investments: Corporate affiliation, perhaps a family

[Page 243]

1 relationship, beneficial ownership of shares. We have

2 called this common thread a continuity of interest.

3 It could be described in some other way, but

4 "continuity of interest" also happens to be the same

5 term used in the U.S. Tax Code when applied to a

6 bankruptcy reorganization where the emerging company

7 retains the tax attributes of the former company

8 because of the fact that it has common interests, as

9 shown by the stakeholders that are common between the

10 two companies.

11 This common thread in cases that supports

12 the continuation of a claim presents a narrow,

13 reasonable distinction from those cases invoking broad

14 dicta about the identity of a particular claimant at

15 the time of a breach.

16 Consistent with the Rules of Article 31 of

17 the Vienna Convention, it represents a good-faith

18 interpretation of the Treaty, because it is in harmony

19 with the Treaty's object and purposes, and because it

20 works no prejudice to the Respondent State. It avoids

21 a capricious Treaty interpretation that would allow a

22 Respondent State to blow hot and cold, with respect to

[Page 244]

1 the investment protection obligations depending on

2 corporate changes necessitated by the misfortune of a

3 bankruptcy or life changes resulting from the

4 misfortune of an investor's untimely passing, which

5 are immaterial to whether there is a bona fide foreign

6 investment worthy of nondiscriminatory equitable

7 treatment in the host country.

8 That concludes my remarks, and unless there

9 are questions, I'll pass it to Mr. Layden.

10 PRESIDENT BLANCH: Zac or James? No.

11 ARBITRATOR HOSKING: Can I ask a quick

12 question?

13 PRESIDENT BLANCH: Of course.

14 ARBITRATOR HOSKING: Mr. Snarr, with respect

15 to the possibility of more than one investor meeting

16 the jurisdiction requirements in 1116 and 1117, what

17 is your answer to the point made by the Respondent

18 that--the question, I guess, raised by the Respondent,

19 that which of those investors has to be harmed? How

20 do you measure where the harm comes from? And then a

21 related question: How do you measure the statute of

22 limitations?

[Page 245]

1 MR. SNARR: Well, any investor making a

2 claim has to demonstrate harm and damages, and if

3 there were competing overlapping claims, the tribunal

4 that would hear those claims, probably a consolidation

5 tribunal under Article 1126, would have to sort out

6 the extent to which there are different damages being

7 claimed by the investors or whether the damages are

8 overlapping in the same. It's a well-understood

9 principle of international law that there can't be a

10 double recovery of damages. And so, that's--I think

11 that's the principal reason why Article 1126

12 consolidation tribunals were formed.

13 ARBITRATOR HOSKING: Quite apart from double

14 recovery, you're saying that both--if you had two

15 investors, you--both investors would have to suffer

16 some harm in order to rely on those two investors to

17 meet the requirements of those Articles of the Treaty?

18 MR. SNARR: Well, each investor making a

19 claim has to demonstrate harm. Now, it may be that

20 you could imagine a situation where you have different

21 investors and they are both making claims, and maybe

22 one has the better claim to the harm and a better

[Page 246]

1 claim to the damages. If both those claims were made,

2 I imagine the consolidation tribunal could be formed

3 and hear that case, and then ensure that the harm and

4 the damages were attributed appropriately to the right

5 claimant. Even if there wasn't a consolidation

6 tribunal, and you had two separate cases going on at

7 the same time against the same State, I'm certain that

8 the State would raise the argument that, in a

9 particular case, that the claimant didn't have an

10 entitlement to its damages claim because those damages

11 were, to the extent they existed, belonged to somebody

12 else. That would be an issue of proof in the merits

13 on damages for the tribunal.

14 ARBITRATOR HOSKING: Okay. With respect to

15 the statute of limitations, when does that start

16 running?

17 MR. SNARR: Well, just as 1116 and 1117 say,

18 it depends on the nature of the claim. The claimant

19 who brings the claim under 1116 has to satisfy the

20 three-year statute of limitations. It has to make the

21 claim within three years of knowledge of the breach

22 and damages. When it's a 1117 claim, then the statute

[Page 247]

1 of limitations runs from the enterprise's knowledge of

2 the breach or knowledge of the damages.

3 ARBITRATOR HOSKING: Okay. Thank you.

4 MR. LAYDEN: Thank you for the opportunity

5 to speak today. My name is Andrew Layden, and I will

6 try and limit my comments to the bankruptcy-related

7 issues.

8 We believe we have made a convincing case

9 that there was a continuity of interest between

10 Westmoreland Coal and Westmoreland Mining where

11 Westmoreland Coal's secured creditors exercised

12 substantial control over the debtors during the

13 bankruptcy cases, and that's detailed in our

14 Appendix that was filed, as well as in our arguments

15 yesterday. That is further supported by Ms. Coleman's

16 statements, in other contexts, about the substantial

17 control that a debtor-in-possession lender exercises

18 over a debtor.

19 Additionally, the situation is such that

20 Westmoreland Coal's senior secured lenders took title

21 to substantially all of Westmoreland's coal's assets,

22 via a Bankruptcy Court-approved credit bid with no new

[Page 248]

1 money changing hands.

2 The transfer was effectuated by making

3 Westmoreland Mining a wholly owned subsidiary of

4 Westmoreland Coal and having those assets transferred

5 via an intercompany transfer. And the transfer

6 qualified for a Type G Reorganization under U.S. tax

7 law because it had a continuity of interest.

8 Yesterday Canada made four main bankruptcy

9 arguments in opposition to the Claimant's position

10 that there was a continuity of interest, and I'll

11 briefly address each of those.

12 Canada's first argument was that the

13 formation document for the Claimant was important

14 because the Claimant was technically formed by the

15 lawyer representing the Secured Creditor group. This

16 is just not important. It is very common for lawyers,

17 even staff members like paralegals or secretaries, to

18 create entities that will later be used in a

19 transaction.

20 So, what is more significant here is the

21 structure of the transaction itself, and that is that

22 Westmoreland Mining was formed and then became a

[Page 249]

1 wholly owned subsidiary, received the transfer of

2 assets, and then the ownership of WMH was transferred

3 to the lenders via the credit bid, again, with no new

4 money changing hands, solely the conversion of the

5 debt into the equity of Westmoreland Mining. So, we

6 believe the focus on the initial formation document

7 and who filled out the forms is immaterial here.

8 The second argument that Canada raised was

9 that the Confirmation Order made a standard finding

10 that Westmoreland Mining and Westmoreland Coal

11 operated at arm's length and that Westmoreland Mining

12 was not an insider of Westmoreland Coal.

13 We believe those findings have to be

14 considered together with the other findings in the

15 Confirmation Order. Specifically, the Bankruptcy

16 Court approved the transaction steps as integral to

17 the Plan, and it is undisputed that the transaction

18 steps contemplated Westmoreland Mining becoming a

19 wholly owned subsidiary of Westmoreland Coal.

20 The Bankruptcy Court Confirmation Order also

21 specifically provided that the transfer of assets,

22 which were defined to include causes of action, "shall

[Page 250]

1 be preserved and shall vest in Westmoreland Mining,

2 free and clear of liens, claims, charges and other

3 encumbrances."

4 The confirmation order also provided

5 specifically: "For the avoidance of doubt, and

6 notwithstanding anything to the contrary in this Plan

7 or the Confirmation Order, the NAFTA claim...is not

8 being released...."

9 We think it is significant that the Parties

10 and the Bankruptcy Court recognized the NAFTA claim

11 was a potential asset of the bankruptcy estate and

12 attempted to preserve it for the benefit of the

13 Creditors, here, the senior Secured Creditors, which

14 had, essentially, a blanket lien on all assets of

15 Westmoreland Coal.

16 Canada's position is that the Bankruptcy

17 Court's Order is not effective in this regard. But it

18 is important to note that the Parties in the

19 Bankruptcy Court made a conscious effort to preserve

20 this claim in the bankruptcy case, and it's Canada, in

21 this instance, arguing that the Bankruptcy Court's

22 Confirmation Order is not effective.

[Page 251]

1 The third argument raised by Canada was that

2 the Bankruptcy Court's "no successor liability"

3 language demonstrates that Westmoreland Coal and

4 Westmoreland Mining are different for purposes of the

5 NAFTA claim, but we believe Canada vastly overstates

6 the significance of this language.

7 As an initial matter, virtually every

8 transfer from a Debtor in bankruptcy includes similar

9 and standard language, that the recipient of the

10 assets is not liable for the Debtor's debts. This is

11 because most Debtors in bankruptcy have significant

12 liabilities, and no one would take title if the

13 liabilities tagged along with the assets.

14 Canada suggests that this liability shield

15 is only possible in a sale transaction, but that isn't

16 so. Upon confirmation of a Reorganization Chapter

17 Eleven Plan, a Debtor would receive a Discharge, which

18 functions very similarly. The Discharge broadly

19 eliminates the Debtors' debts, and that is often the

20 goal of a Debtor filing bankruptcy in the first place.

21 This is also noted in Ms. Coleman's First Report at

22 Paragraph 18.

[Page 252]

1 So, the ability to leave debts behind the

2 reorganization or a transfer of assets is a

3 fundamental feature of the U.S. Bankruptcy Code, and

4 the language that Canada points out is very standard

5 language effectuating that.

6 The fourth argument that Canada raised is

7 that the Claimant only took most, but not all, of

8 Westmoreland Coal's assets in the credit bid and,

9 therefore, Westmoreland Coal and Westmoreland Mining

10 are not exactly identical in their assets and

11 liabilities.

12 First, Ms. Coleman recognized, herself, in

13 Paragraph 89 of her First Expert Report, that the

14 transfer involved substantially all of the assets.

15 Canada yesterday pointed to some ancillary assets,

16 like directors' and officers' insurance, and none of

17 those have anything to do with the investment at issue

18 here in Prairie.

19 What Westmoreland Mining did acquire is

20 cited in Paragraph 100 of our Rejoinder. It was the

21 U.S. properties; the mining lease; the equipment and

22 fixed assets; the accounts receivable; the coal

[Page 253]

1 inventories; the contracts; the cash; the permits; the

2 books and records; the cause of action; the

3 headquarters; the intercompany receivables; the tax

4 assets; collateral securing any bonds; and the equity

5 in the Canadian business, including, additionally,

6 intellectual property, including trade dress,

7 trademarks, and goodwill, and Westmoreland Coal's

8 goodwill.

9 We must recall that the senior Secured

10 Lenders here acquired these assets with no new money.

11 It was a conversion of debt into equity in the new

12 co., Westmoreland Mining. In doing so, Westmoreland

13 Mining was served as a wholly owned subsidiary of

14 Westmoreland Coal to accept the assets in an

15 intercompany transfer.

16 We believe that demonstrates a continuity of

17 interest here.

18 Thank you for the opportunity to address

19 these, and I'm happy to answer any questions the

20 Tribunal may have.

21 PRESIDENT BLANCH: James or Zac?

22 Thank you, Mr. Layden.

[Page 254]

1 MR. LAYDEN: Thank you.

2 MR. LEVINE: Good day to everyone, and thank

3 you for the opportunity to present again.

4 As Mr. Feldman mentioned, I will be

5 discussing some of the authorities presented by Canada

6 in its presentation yesterday and the rebuttal of

7 those materials.

8 Canada's presentation yesterday relied on

9 GEA v. Ukraine, found at RLA-023 and STEAG v. Spain,

10 found at RLA-056 and CLA-037, for the proposition that

11 this Tribunal should uphold the jurisdiction ratione

12 temporis objection here. Both cases are

13 distinguishable. Both involve transfers of an

14 investment where the transferor and the transferee had

15 no prior relationship. Canada attempts to distinguish

16 Koch, Autopista, and African Holdings as well.

17 As Canada stated at Page 83 of the

18 Transcript: "Koch permitted the transfer because there

19 was a close nexus." African Holdings stands for the

20 same proposition. Again, Canada concedes on Pages 84

21 and 85 of the Transcript that the African Holdings

22 tribunal stated the two companies at issue were

[Page 255]

1 affiliated companies continuously owned by the same

2 family.

3 Autopista also involves transfers between

4 companies within the same family. Mr. Douglas today

5 says that the date of the breaching measures in that

6 case can be found at Paragraph 33 of CLA-020. But

7 that paragraph provides only the date when

8 conciliation proceedings began. I would, therefore,

9 urge the Tribunal to study Canada's interpretation of

10 authority closely. You would have to look at the

11 merits decision to determine when the breaching

12 measures occurred in Autopista.

13 That includes what Canada says about

14 CME v. Czech Republic. Canada offers a number of

15 reasons to distinguish this case, including

16 superficial reasons concerning the age of the case and

17 whether other disputes cite CME. Substantively,

18 Canada's reasons are not supported by the decision,

19 and Canada did not bother to demonstrate where CME

20 provides supports for its propositions yesterday.

21 Canada, for example, states that the Czech

22 Republic prospectively approved of the share

[Page 256]

1 transfers, but the Award provides at Paragraph 423

2 that the Memorandum of Association was silent as to

3 the change of control that took place in 1997, not

4 that future share transfers were prospectively

5 authorized.

6 Canada also argues that the Czech-Dutch

7 Bilateral Investment Treaty did not specify whether

8 the investment had to be owned or controlled by the

9 claimant at the time of alleged breach, where NAFTA

10 requires this under Article 1101(1). That argument

11 presupposes this Tribunal agreeing with Canada's

12 position, and Mr. Snarr has explained yesterday why

13 the Tribunal should not.

14 Canada further argued that the Czech-Dutch

15 Treaty purportedly allowed for the rights derived from

16 required shares to qualify as part of the investment,

17 which, according to Canada, captured the prior rights

18 of the parent entity. But the CME decision at

19 Paragraph 147 states specifically what the investment

20 constituted, and Canada's derived rights argument is

21 not listed as an investment.

22 Regardless, NAFTA offers similarly broad

[Page 257]

1 protection in the definition of an "investment" which

2 includes enterprises and equity and provides

3 protection for both direct and indirect investment,

4 which are found in Articles 1139 and for enterprises

5 also in Article 1117.

6 Canada's final attempt to distinguish CME is

7 that the claimant's parent company was also

8 treaty-protected, and it could have brought the claim.

9 However, that parent was not the claimant in the case

10 and the tribunal ruled specifically in Paragraph 424

11 that this assignment of the investment by the parent

12 to the claimant was entirely permissible. But CME

13 demonstrates that more than one claimant could seek

14 relief for the same breaches.

15 We believe that the facts here fit the

16 paradigm of these cases. The secured creditors had

17 made their investment prior to the date of the

18 breaching measures. They understood the business,

19 well, but as a result of the bankruptcy, they have

20 limited options for a recovery on their debt. Indeed,

21 literally no one else wanted these assets. There were

22 no other bidders for the assets during the bidding

[Page 258]

1 process.

2 With no options to obtain a recovery for

3 their debt after the default, the secured creditors

4 used a portion of their previously contributed debt to

5 obtain the assets at issue through Westmoreland Mining

6 Holdings. Canada now seeks to reap a windfall from

7 this misfortune, extinguishing its liability for its

8 breaches through dint of a bankruptcy reorganization.

9 Canada also argues that Westmoreland Coal

10 Company could have carried on with its claim,

11 notwithstanding that Canada insisted Westmoreland Coal

12 Company's had to be withdrawn as a condition for

13 Canada to accept an amended Notice of Arbitration for

14 Westmoreland Mining Holdings.

15 Canada's position is at odds with Loewen.

16 The Loewen tribunal did not find that jurisdiction was

17 lacking because the claimant changed its corporate

18 form through a bankruptcy restructuring, nor did the

19 Loewen tribunal object to the fact that the NAFTA

20 claim was transferred. The tribunal there had two

21 problems with jurisdiction. First, the Company that

22 emerged from bankruptcy as the parent company of the

[Page 259]

1 investment had become a U.S. company, breaking the

2 diversity of nationality.

3 Second, the tribunal refused to accept that

4 the Canadian company to which the claim was

5 transferred could proceed with the claim because it

6 was a naked shell company referenced as Nafcanco with

7 no ownership of any assets of the investment. Here,

8 Westmoreland Coal Company is an American company, but

9 it is a naked shell company with no ownership of the

10 investment, something that the Loewen tribunal did not

11 tolerate.

12 Westmoreland Coal Company is not the company

13 that will face increased reclamation costs because of

14 the Measures. Westmoreland Mining Holdings is.

15 Westmoreland Coal Company is slated to be dissolved

16 and would have been closed by now but for a delay in

17 the bankruptcy process and transfers of mining

18 permits.

19 Canada's argument that the claim could not

20 be pursued by the Westmoreland Coal Company turns the

21 Westmoreland bankruptcy completely upside down because

22 the goal of the bankruptcy is to preserve assets and

[Page 260]

1 value for the secured creditors. Any award that might

2 have accrued to Westmoreland Coal Company should inure

3 to the benefit of its primary stakeholders, the

4 Shareholders of Westmoreland Mining Holdings, the same

5 secured creditors who had the stake in Westmoreland

6 Coal Company.

7 Two additional non-NAFTA Decisions discussed

8 by Canada require a response.

9 Canada cites EnCana v. Ecuador, found at

10 RLA-053 for the proposition that the claimant at the

11 time of the breach can advance its claim, even though

12 the investment was later sold, but the tribunal there

13 did not even address whether an additional claimant

14 could assert a claim. Nor could it. The investment

15 was transferred to entities that did not qualify for

16 Treaty protection, based upon nationality.

17 This point is made clear by

18 Daimler v. Argentina, found at RLA-054. The issue in

19 Daimler was whether the claimant transferred the right

20 to assert the claim to its parent company because the

21 claimant had standing at the time of the breach and

22 had not transferred its rights over the claim under

[Page 261]

1 domestic law. Because the claimant had standing at

2 the time of the breach and had not transferred its

3 right over the claim under domestic law, it still had

4 standing to proceed with the arbitration.

5 However, the tribunal later explained that

6 the claimant's parent, who had an indirect investment

7 at the time of the allegedly offending government

8 measures, may also enjoy an independent right to bring

9 its own claim for the same damages. That can be found

10 at Paragraph 155 of the Award.

11 What would not be allowed, of course, was a

12 double recovery. The same principle was found to be

13 true in Gemplus v. México, which would have allowed a

14 transfer from Gemplus to SLP but for a contractual

15 agreement to the contrary. This case, found at

16 CLA-029 is discussed in Paragraph 115 of our

17 Rejoinder.

18 Moreover, Canada's citation of Mondev and

19 other cases for the position that an investor should

20 continue its claim after losing its investment is

21 inconsistent with its own reading of NAFTA

22 Article 1101.

[Page 262]

1 Canada has argued that Chapter Eleven must

2 relate to investors of another Party and investments

3 of investments of another Party, and that it cannot

4 relate to Westmoreland Mining Holdings because, even

5 though it may be an investor now that it owns Prairie,

6 it did not own Prairie at the time of the breach.

7 There is nothing about this interpretation

8 that logically would have had--would have permitted

9 Westmoreland Coal Company to continue its claim.

10 Without Prairie as an investment, the same

11 Article 1101 language Canada cites, applied in the

12 same way, would mean Westmoreland Coal Company is not

13 an investor and the measures do not relate to it.

14 If the cases were reversed, Canada certainly

15 would be here arguing that the measures are not

16 causing damages to Westmoreland Coal Company as it

17 does not own the Mines and it will be unaffected by

18 the future increases in mine reclamation costs that

19 will be suffered by Prairie and its parent,

20 Westmoreland Mining Holdings.

21 Absent any questions, Mr. Feldman will

22 conclude.

[Page 263]

1 PRESIDENT BLANCH: Thank you.

2 James and Zac? No.

3 Mr. Feldman, back to you.

4 MR. FELDMAN: I think I managed all the

5 buttons.

6 You can hear me? Thank you.

7 So, we thank the Tribunal, again, in this

8 Closing moment. We observe that we seem to turn to

9 French yesterday probably in celebration of Bastille

10 Day because otherwise the French doesn't have much

11 meaning for this proceeding. And we've had a debate

12 now about language, the critical part of our language

13 is what the Treaty says and not what it doesn't say.

14 So, in today's argument, Mr. Douglas would

15 like us to believe that because it doesn't say

16 something, then that something is proscribed. But the

17 language of the Treaty must be interpreted in terms of

18 the terms that are in the Treaty.

19 What we have been offered is a static view

20 of investment in an environment that is trying to

21 encourage foreign investment. When a foreign investor

22 makes their investment, they need the flexibility to

[Page 264]

1 merge, acquire, and act in other ways and to change

2 their form if they so choose.

3 The theory that is advanced by Canada is

4 that at the moment that there's a breach of a treaty,

5 such that there are damages that befall the Company,

6 the Company is frozen. If it wants to protect the

7 claim, it can't change because any changes will change

8 the Company and therefore it won't be, in Canada's

9 theory, the same.

10 I was thinking about Mr. Hosking's question.

11 Obviously, more than one investment can be impacted by

12 the same State action, and then there would be more

13 than one claim arising from that State action. And

14 those claims, as Mr. Snarr explained, would be

15 consolidated if they arose. And the statute of

16 limitations would apply in the same way that is

17 written in the Treaty, under the same terms.

18 So, it seems to us, obvious and inevitable

19 that there could be more than one claim, and there

20 could be more than one claimant arising from the same

21 circumstances and rules, and in those circumstances

22 the Treaty does provide a solution.

[Page 265]

1 So, we have thought about this now as

2 something like a death in the family, and we have

3 suggested that the line you would like to draw, and

4 that we suggest you do draw, is consistent with

5 the--President Blanch's inquiry this morning. There

6 are cases that plainly don't qualify for jurisdiction

7 where there has been shopping of the claim or there

8 has been a manipulation, and then there are others

9 where there is inheritance or someone dies.

10 In this case, a Company died. But the

11 people who ran the Company, who controlled it and

12 effectively owned it, they survived, and they still

13 should own the Claim.

14 With that, we invite questions from the

15 Tribunal that--and express our gratitude for the time

16 and attention the Tribunal has given to this Hearing.

17 Thank you.

18 PRESIDENT BLANCH: Thank you, Mr. Feldman.

19 What I suggest--we have 15 minutes' break

20 now. And Mr. Feldman, this is not to suggest we don't

21 have questions arising out of your final part of your

22 Closing, but I think probably the best thing is for

[Page 266]

1 the Tribunal Members to get together now just to see

2 what questions that we may have for both of the

3 Parties, and then we can regroup in 15 minutes for us

4 to raise any questions we have to both Parties.

5 So, on that, I suggest we get back together

6 at 31 minutes past the hours, wherever you are, and I

7 would ask that the Members of the Tribunal are taken

8 into the breakout room, please.

9 SECRETARY FLECKENSTEIN: Elizabeth, please.

10 Thank you.

11 (Brief recess.)

12 PRESIDENT BLANCH: So, Mr. Feldman, do we

13 have everybody of your team here?

14 And you're on mute.

15 MR. FELDMAN: It's the second button.

16 Sorry.

17 We're all in different places, but, yes, I

18 think we're all assembled. Thank you.

19 PRESIDENT BLANCH: Excellent.

20 Mr. Douglas?

21 MR. DOUGLAS: Yes, we have everyone. Thank

22 you.

[Page 267]

1 PRESIDENT BLANCH: So, as a preliminary

2 comment, we wanted to thank both Parties. You have

3 really given us pretty much everything that we could

4 ask for. Your submissions have been really clear, and

5 we are incredibly grateful for all the hard work that

6 you both have done.

7 So, we have very few questions, and that

8 should not be taken in any way other than a compliment

9 to the work that everybody has done today.

10 QUESTIONS FROM THE TRIBUNAL

11 PRESIDENT BLANCH: How we propose is that,

12 firstly, I would be grateful to get an answer from

13 both Parties--I'll start with the Respondent and then

14 Claimant--to the question I raised whilst Respondent,

15 Canada, was making their Rebuttal submissions. Then

16 Mr. Hosking has just a very few questions. It may be

17 that Mr. Zac Douglas and I might have some points that

18 we comment on, but I don't think that we will have

19 that many questions for you.

20 So I just emphasize again, that is not in

21 any way--in fact, it is a reflection on the caliber of

22 your submissions, but it's a very positive reflection,

[Page 268]

1 so I just want to make that very clear. We are very

2 grateful.

3 So, therefore, moving on to the questions,

4 if I could start, Mr. Douglas, with you and your team

5 for an answer to the question that I rather

6 ineloquently posed early on.

7 MR. DOUGLAS: Yes, absolutely,

8 President Blanch.

9 Before we get to that question, with your

10 indulgence, Canada had a brief comment about issues

11 concerning evidence in this case, which I'm happy to

12 address later. It will take but a minute. Or I can

13 do that now, and then we can move on to answer your

14 question or the question from the Tribunal.

15 PRESIDENT BLANCH: Please do that now. It

16 may be that Mr. Feldman would like to make a

17 responsive comment before.

18 FURTHER REBUTTAL BY COUNSEL FOR RESPONDENT

19 MR. DOUGLAS: Okay. That is absolutely

20 fair.

21 Canada's comment is as follows: On June 18

22 of this year, Canada wrote a letter to the Tribunal

[Page 269]

1 noting that the Claimant had added a tax lawyer and a

2 bankruptcy lawyer to its Counsel of record, and we

3 also noted that argument from Counsel is not evidence.

4 In its Rebuttal, we heard from the tax lawyer and

5 bankruptcy lawyer.

6 In Canada's view, it is not proper for the

7 Claimant to testify from the Bar, if I can call it

8 that, let alone in rebuttal. The Claimant had the

9 opportunity to submit expert evidence on bankruptcy.

10 It chose not to. Instead, it agreed that the

11 bankruptcy issues in this case are not materially in

12 dispute, and it elected not to cross-examine

13 Ms. Coleman to testify.

14 The Claimant also had an opportunity to call

15 a tax expert. It didn't. In fact, the Claimant did

16 not raise its tax arguments until its Rejoinder,

17 effectively preventing Canada from presenting any

18 evidence on these issues.

19 We're not concerned by these issues. We

20 don't see the Claimant's continuity of interest theory

21 as having any relevance, but Canada does urge the

22 Tribunal to pay particular attention to the evidence

[Page 270]

1 that has been submitted to establish each of

2 Claimant's propositions.

3 In Canada's view, argumentation from Counsel

4 is not evidence on which this Tribunal can find

5 jurisdiction.

6 I'm happy to answer any questions on that

7 before we move on to the question that was posed by

8 the Tribunal.

9 PRESIDENT BLANCH: Can I just open it to

10 Mr. Feldman in case he wants to make any comment in

11 reply?

12 MR. FELDMAN: Thank you, Madam President. I

13 like the sound of "Madam President."

14 This is both exceptional and a bit

15 objectionable. If there was an objection to a letter

16 on June 18, he could have posed an objection on

17 June 18. We did not think this case was about

18 bankruptcy. We did not think it was about tax. We

19 didn't need Experts. We have lawyers, and because

20 Canada made such a case about this, we rebutted and

21 replied, making the best use of lawyers. We don't see

22 anything exceptional or objectionable about that.

[Page 271]

1 We are a little surprised that we are now

2 getting new argument at the end of this Hearing and

3 that the Respondent is using this occasion to advance

4 another argument. We have seen this before in letters

5 to the Tribunal in which new argument was introduced

6 about how the Tribunal should call Canada's Expert

7 because we weren't interested in cross-examination.

8 So we don't think we have done anything

9 extraordinary here. We use the best legal talent we

10 have. There is no need for Expert testimony. Their

11 Expert acknowledged that this was not about

12 bankruptcy. We spent a lot of time on bankruptcy

13 today only because it's rebuttal, and what we are

14 rebutting, it seems, is the case about bankruptcy.

15 And that seems to be the defense.

16 More than that we really don't--I don't have

17 more to say. I can't say "we" because I haven't had

18 an opportunity to confer with anybody about this new

19 argument that's suddenly been introduced.

20 PRESIDENT BLANCH: Thank you, Mr. Feldman.

21 QUESTIONS FROM THE TRIBUNAL

22 PRESIDENT BLANCH: Mr. Douglas, would you

[Page 272]

1 like to proceed now to the response to my question?

2 MR. DOUGLAS: Yes. Absolutely. I will pass

3 things over to Ms. Zeman to provide an answer. Thank

4 you.

5 MS. ZEMAN: Thank you.

6 All right. To answer your question from

7 earlier, President Blanch, in Canada's view, what

8 matters is the legal personality of the investor.

9 Canada has explained that its consent to arbitrate

10 under NAFTA Chapter Eleven is limited to particular

11 investors of a Party. "Investor of a Party," as we

12 know, is a defined term in NAFTA, which includes a

13 reference to "an enterprise of such Party that seeks

14 to make, is making, or has made an investment."

15 An "enterprise" under NAFTA Article 201

16 means "any entity constituted or organized under

17 applicable law," and then it goes on to cite some

18 examples. Accordingly, there may be scenarios where

19 an investor maintains the same legal personality

20 following a corporate reorganization pursuant to the

21 applicable domestic law. Whether or not that

22 transpires requires a case-specific and fact-based

[Page 273]

1 inquiry.

2 Canada notes that the U.S. also explained in

3 its NAFTA Article 1128 submission in Tennant, that the

4 analysis of whether an investor remains the same

5 investor following a corporate reorganization requires

6 a case-specific and fact-based inquiry. That's at

7 Footnote 15 of RLA-076.

8 If, under the applicable domestic law, a new

9 entity is considered to have the same legal

10 personality as a previous enterprise in a corporate

11 reorganization, then the investor remains the same

12 investor for the purposes of NAFTA Chapter Eleven. An

13 example might be an amendment to an entity's corporate

14 form, which domestic law finds maintains the same

15 legal personality.

16 This is why Canada explained yesterday that,

17 if the Claimant were looking to establish that it was

18 a mere change in corporate form from WCC, then it

19 should have put forward evidence about the applicable

20 rules of domestic law on corporate form changes.

21 Now, you've also asked about heirs and

22 natural persons. We're not experts on domestic will

[Page 274]

1 and estate laws, but the same case-by-case analysis

2 would be required. If the relevant domestic law

3 contained a legal fiction whereby the deceased's

4 estate is a continuation of the deceased's legal

5 personality, that could be sufficient to grant

6 jurisdiction, subject, of course, to the particular

7 facts of the case.

8 In this case, you've heard the statement the

9 Claimants state again today that it was substantially

10 the same as WCC, that the Westmoreland that entered

11 bankruptcy was substantially the same as the

12 Westmoreland that emerged. That is a question that

13 must be assessed by reference to domestic law. And,

14 to be clear, that is a question of fact that requires

15 evidence to establish.

16 Here, the U.S. Bankruptcy Court has turned

17 its mind to the relationship between WCC and WMH as a

18 matter of U.S. law and has determined on the basis of

19 a complete evidentiary record that the two are at

20 arm's length and were not insiders. It also

21 determined that Claimant would not have successor

22 liability to WCC. In short, it found that the

[Page 275]

1 Claimant and WCC were not the same entity under U.S.

2 law.

3 Those findings are binding on the Claimant,

4 and they are determinative of the question of whether

5 the Claimant and WCC are the same investor of a Party

6 under NAFTA for the purposes of this claim. They are

7 not, and the Tribunal does not have jurisdiction on

8 the facts of this case.

9 I'd be happy to field any follow-ups the

10 Tribunal may have. Otherwise, we're in your hands.

11 PRESIDENT BLANCH: I suggest that, first of

12 all, Mr. Feldman and his team give their answer, and

13 then we'll see if we have any follow-up questions from

14 the Tribunal.

15 MR. FELDMAN: Thank you, Madam President. I

16 will just say a word, and then I think Mr. Snarr would

17 be best appointed to complete an answer.

18 We have here a question about where there's

19 a line, and the line seems to be, from Canada,

20 all-encompassing. A company can't move; it can't

21 change; it can't do anything once there's a breach and

22 it has a claim. That's contrary to the object and

[Page 276]

1 purpose of an investment treaty. And it would do

2 nothing but discourage foreign investors because, if

3 subject to an act of State that is damaging, from that

4 point forward, they are not permitted to change in any

5 way, to become some different legal personality.

6 But Mr. Snarr would, I think, provide a more

7 complete answer.

8 But you're on mute. You're not the only

9 one--

10 MR. SNARR: It was on double-mute.

11 Thank you.

12 I think that we--I think that most of what

13 we would want to say on this we just said in our

14 Rebuttal. I will note that I think what I'm hearing

15 from the Government of Canada now, for the first time,

16 is that there may be an exception to the rule; perhaps

17 a small exception, but an exception.

18 And if there's an exception, then it becomes

19 a factual question, and it depends on what kind of

20 change there is in the corporate form to determine

21 whether it's really enough of a change to mean that

22 Canada's strict rule should apply.

[Page 277]

1 If there is an exception, then, one, I don't

2 think that Canada has explained how, under its reading

3 of the Treaty, there is an exception to this rule that

4 it claims is in the Treaty. I don't know what the

5 Treaty justification is for their rule, that until now

6 has been a strict rule to which there have been no

7 exceptions.

8 If there are factual issues, then factual

9 issues are the kinds of issues that should be held

10 over to the merits. If there are factual issues about

11 whether the change in the corporate form affects the

12 nature of the measures relating to the new entity,

13 whether it relates differently to the damages than the

14 prior entity or whether the breach relates differently

15 to the entity, those are factual questions that should

16 be held over for the Merits.

17 Otherwise, I think that we've answered this

18 question in our prior submissions, and we will leave

19 it at that unless there are further specific questions

20 on this point from the Tribunal.

21 PRESIDENT BLANCH: Thank you, Mr. Snarr.

22 James, let's start with you. Are there any

[Page 278]

1 follow-up questions that you want to ask from that?

2 ARBITRATOR HOSKING: No. No, thank you.

3 PRESIDENT BLANCH: Zac?

4 ARBITRATOR DOUGLAS: No. No, that was very

5 complete.

6 PRESIDENT BLANCH: Thank you. In which

7 case, can I turn over--James, do you have any other

8 questions that you wanted to raise?

9 ARBITRATOR HOSKING: I do have a couple of

10 hopefully quick questions, and I think the first one

11 probably goes to the Respondent, and then perhaps the

12 Claimant may want to comment on it afterwards. And

13 the question really goes to what the position of WCC

14 is now in Canada's submission.

15 We understand that WCC still exists; does it

16 have any residual rights to bring a treaty claim? And

17 the question really arises out of Canada's position

18 that the attempt to transfer the Claim as part of the

19 bankruptcy plan fails as a matter of public

20 international law. That is Canada's submission. And

21 then the related issue was: What is the consequence

22 of the change in ownership of the Canadian assets as a

[Page 279]

1 consequence of the bankruptcy reorganization? So,

2 what is WCC's position today?

3 MS. ZEMAN: Thank you for that. I think the

4 most appropriate person to answer that will be my

5 colleague, Mr. Douglas, who is right here

6 standing--lying in wait.

7 ARBITRATOR HOSKING: Nicely done.

8 MR. DOUGLAS: Canada has a bit of musical

9 chairs happening.

10 So, I think, if I understand your

11 question--and you can let me know if I haven't--it is:

12 What would be WCC's position today? And I think if

13 they no longer own or control the investment, that is

14 true, the enterprise, but that still would not

15 preclude a claim under 1116 on their own behalf.

16 Canada's view is that you have to own and control the

17 enterprise at the date that you submit a claim, as

18 well as the date of the alleged breach. But under

19 Article 1116, you file a claim on your own behalf.

20 So, like in Daimler and EnCana, all of those

21 cases where the investor no longer held the

22 investment, the tribunals determined nonetheless that

[Page 280]

1 the investment in this case retained jurisdiction,

2 even though it no longer held the investment. So, WCC

3 could still be in a position to bring a claim on its

4 own behalf. As we've mentioned, it is still an entity

5 constituted under the laws of Delaware.

6 ARBITRATOR HOSKING: I think that answers

7 the question, unless my colleagues have any questions

8 on that. I think it would be helpful to hear from the

9 Claimant if they have any response.

10 MR. FELDMAN: I think we probably do have a

11 response. After all, Westmoreland Coal Company can't

12 do much with the damages and they are not the ones now

13 suffering from the damages. That's the secured

14 creditors, especially because the damages are

15 continuing--

16 (Interruption.)

17 (Stenographer clarification.)

18 MR. FELDMAN: It's the secured creditors who

19 are suffering the damages, particularly because of the

20 continuing damages related to the reclamation

21 schedule, but Mr. Snarr may have something more to say

22 about this.

[Page 281]

1 MR. SNARR: Thank you. Yes, I would,

2 perhaps, slightly amend that it is Westmoreland Mining

3 Holdings held by the Secured Creditors as Shareholders

4 that is incurring the damages.

5 I think we will not repeat our earlier

6 submissions about what's happening with respect to

7 Westmoreland Mining Holdings and Prairie now, but I am

8 struck a little bit by the comment from Canada that

9 Westmoreland Coal Company could bring a claim now, in

10 part, because Canada had insisted that withdrawal of

11 the Westmoreland Coal Company claim was a condition

12 for recognition of the Notice of Arbitration for

13 Westmoreland Mining Holdings, number one. And, two,

14 if Westmoreland Coal Company could bring a claim now,

15 so that, really, all of this argument has been an

16 academic debate about the name of which company is

17 proceeding as the Claimant for the appropriate claim

18 here, then we've invested a lot of time and energy on

19 something that might be interesting but might be

20 proven to be rather pointless, if all we need to do is

21 have Westmoreland Coal Company proceed as the Claimant

22 now with that claim.

[Page 282]

1 So, in any event, Westmoreland Mining

2 Holdings has Prairie, and it is the one that is

3 ultimately responsible for the reclamation costs of

4 the mines that are hanging out there. And that's been

5 a concern of our client for some time.

6 ARBITRATOR HOSKING: I think that was clear.

7 Unless there is anything that my colleagues have to

8 follow up on that, I just have one other short

9 question, but--

10 MR. DOUGLAS: Would it be possible for

11 Canada just to provide a short reply to the statement

12 made by the Claimant?

13 PRESIDENT BLANCH: Yeah. I was going to

14 ask, actually, if you had anything that you wanted to

15 say in reply. And it may be that the Claimant might

16 want to make a further comment once they have heard

17 you.

18 But, please, Mr. Douglas, go ahead.

19 MR. DOUGLAS: Yes. Just, I think, first, on

20 the question about whether Canada had conditioned the

21 withdrawal, we will leave the Tribunal to review the

22 correspondence between Canada and the Claimant on that

[Page 283]

1 issue.

2 As I explained yesterday, it was the

3 Claimant that approached Canada seeking to substitute

4 itself for WCC in WCC's claim. It was the Claimant

5 that wanted WCC removed from the picture. That was

6 not Canada's decision. That was the Claimant's

7 decision.

8 In terms of who is suffering damages,

9 Mr. Snarr is correct, it's not the Secured Creditors;

10 it would have to be Westmoreland Mining Holdings. But

11 as Canada has already explained, Westmoreland Mining

12 is not capable of suffering any damages. And the

13 reclamation costs to which Mr. Snarr refers, they

14 would have been fully aware of those costs at the time

15 that they acquired the investment on March 15, 2019.

16 PRESIDENT BLANCH: Mr. Feldman or Mr. Snarr,

17 is there anything you want to add before we go to

18 Mr. Hosking's next question?

19 MR. FELDMAN: If I may, this is, perhaps, a

20 silly debate, and there is a record, but Canada

21 demanded a withdrawal of the Westmoreland Coal Company

22 claim, and we responded to that demand in order to

[Page 284]

1 move the case forward, and so we withdrew the claim.

2 We didn't go to Canada and say "Let us withdraw this

3 claim." That's not what happened.

4 What we did do is try to facilitate the

5 process in recognizing that Westmoreland Mining

6 Holdings had a different name for Westmoreland Coal

7 Company and that we, therefore, tried to amend our

8 request. Our request to amend was denied. We filed a

9 new claim. Much was made yesterday about the claim

10 being the same. Of course, it was the same. That was

11 the intent of the amendment. All we wanted to do was

12 change the name.

13 And so, we had to go through a further

14 procedure, but not entirely, because there was

15 recognition of continuity of interest on the part of

16 Canada such that we chose you folks, for example, as a

17 Tribunal, as a continuation of the process we were

18 already in. So, we didn't completely streamline, but

19 we did preserve a process, and we didn't start over

20 again when we made the change. But the last step in

21 the process was about withdrawal of the claim, and

22 that was demanded by Canada.

[Page 285]

1 PRESIDENT BLANCH: I can confirm that the

2 Tribunal will be able to read the communications

3 between the Parties and we'll be able to work out what

4 actually happened.

5 I propose, Mr. Hosking, that you ask your

6 next question.

7 ARBITRATOR HOSKING: Sure. And this is a

8 relatively straightforward question. I just wanted to

9 understand what the Tribunal is being asked to decide,

10 and it goes to the Respondent's claim that there is no

11 jurisdiction ratione temporis over the Claimant's

12 damages claims, the part of the item dealt with by

13 Ms. Dosman yesterday. And as I understand the

14 argument, is it is that damages pled by the Claimant

15 WMH mirror the claim that was made by WCC.

16 My question is: Purely for jurisdictional

17 purposes, is it correct that all the Tribunal has to

18 do is find that the Claimant has made out some prima

19 facie basis for WMH having some harm at the

20 jurisdictional stage? And then the question of

21 whether WMH--should we decide that there is

22 jurisdiction, the question of whether WMH can make out

[Page 286]

1 that claim is really a question for the Merits?

2 MR. DOUGLAS: Yes. Thank you for the

3 question. And with Ms. Dosman's leave, she has

4 allowed me to answer.

5 You are correct, Canada's position is that

6 it is a prima facie basis. A more fulsome damages

7 analysis would have to be saved for the Merits. But

8 Canada's position is that a prima facie damages case

9 cannot be made out in this case.

10 Primarily--I mean, many reasons why, but the

11 $470 million claim was filed by WCC in November of

12 2018, before the Claimant even existed, and the

13 Claimant alleges the exact same damages. So, I think

14 there's some clear indication there that the damages

15 the Claimant is alleging in this case happened before

16 it even existed as an investor of a Party.

17 Claimant keeps coming back to this notion

18 that there are still damages that are pending for it.

19 When you acquired the investment, when the Claimant

20 acquired the investment in March of 2019, it would

21 have been fully aware of the regulatory landscape in

22 Alberta. So, whether or not there are any damages

[Page 287]

1 that are ongoing for it, those are not attributable to

2 Canada.

3 The Claimant would have conducted its own

4 valuation of the investment when it acquired. Some of

5 those figures are at Paragraph 28 of Appendix A to the

6 Claimant's Counter-Memorial. When you decide how to

7 value and what you are going to pay, there's a break

8 in the attribution at that point in time. So, none of

9 the damages claimed by the Claimant in this case can

10 either be attributable to Canada--but as Ms. Dosman

11 explained, they all crystallized well before the

12 Claimant became an investor of a Party. They

13 crystallized in 2016 when the OCAs were signed by the

14 Government of Alberta.

15 ARBITRATOR HOSKING: So, then, if I can just

16 encapsulate that, is it the Respondent's position,

17 then, that the damages--that there is no harm, as of

18 March 2019, for which WMH could claim?

19 MR. DOUGLAS: I think our position is that

20 the damages they have claimed--so, if you look at

21 their NOA, the damages they have claimed are all in

22 the past.

[Page 288]

1 ARBITRATOR HOSKING: Okay.

2 MR. DOUGLAS: So, the Claimant, in later

3 Pleadings, may have tried to draw out or explain or

4 extrapolate damages that might be happening after

5 2019, but that is clearly not what their claim says.

6 And, in any event, we don't see their arguments as

7 having much credibility for the reasons I just stated,

8 which is that they were a new investor acquiring a new

9 investment at that time, and everything they are

10 claiming in terms of damages is something that

11 happened in the past.

12 And, on that basis, you cannot make out a

13 prima facie case for damages. And the provisions of

14 Article 1116 and 1117 which require you to state a

15 prima facie case of damages are not made out.

16 ARBITRATOR HOSKING: Okay. I think I'm

17 clear on that. With the President's approval, shall

18 we ask the Claimant to respond briefly?

19 PRESIDENT BLANCH: Absolutely.

20 MR. FELDMAN: There's a tragic element to

21 this, and I can't help but observe. We are all

22 absorbed in the problems of climate change. This is a

[Page 289]

1 coal mine. The Company is trying to clean it up. It

2 has been put on a different calendar to do that by

3 virtue of the actions of State. It doesn't have a

4 revenue stream to pay for it anymore. It is asking

5 for someone to be responsible.

6 It is trying not to walk away from its prior

7 obligation, but if everything has been wiped out,

8 maybe it doesn't have that obligation to clean it up.

9 Maybe it is now left to the good citizens of Alberta

10 to have to clean up after these mines.

11 That's potentially an implication here,

12 which I can't help but observe as a kind of a tragic

13 element of the Canadian argument. But one of my

14 colleagues might want to add something more legal or

15 technical to the proposition.

16 MR. SNARR: I would just add that I don't

17 know how Canada can determine when damages were

18 crystallized, as we've not had a hearing or Pleadings

19 on damages beyond the initial Pleadings.

20 The other point that I would make is when

21 Mr. Douglas talks about the acquirer looking at the

22 value of the Company and looking at the regulatory

[Page 290]

1 environment and deciding whether to get into that

2 environment, that may be the case if you had a

3 different situation where there was not a continuity

4 of interest and you had a completely unrelated

5 investor, somebody not in the coal business looking to

6 decide to get in. And they are the ones who were

7 bidding in the bankruptcy opportunity.

8 There weren't any other parties like that

9 bidding. It was only the secured creditors, and they

10 were already in the regulatory environment because

11 they had already committed capital through

12 Westmoreland Coal Company.

13 And so, in the process of making a bid, they

14 were trying to maximize the value of the assets of the

15 Company as they were coming out of bankruptcy, so that

16 they could free from the liabilities left behind as a

17 result of the bankruptcy, try to move forward and make

18 the most of the Company as they could.

19 I think that's a materially different

20 situation, and it has bearing on the question of how

21 the Tribunal draws the contours around the rule that

22 is being asked to be applied here.

[Page 291]

1 ARBITRATOR HOSKING: Thank you. Those are

2 the only questions I had. Thank you for your time.

3 PRESIDENT BLANCH: Thanks, James.

4 Zac, did you have any further or follow-up

5 questions?

6 ARBITRATOR DOUGLAS: Perhaps just a very

7 brief follow-up question to what was just being said.

8 It is not being suggested by the Claimant, is it, that

9 the first secured creditors are bringing a claim for a

10 distinct loss caused to them as a first secured

11 creditor?

12 MR. SNARR: No. The Claim is by

13 Westmoreland Mining Holdings.

14 ARBITRATOR DOUGLAS: Yeah. So, when you

15 were talking about how damages would be valuated when

16 you decided to go through the reorganization, you are

17 not talking about historic damage to the first secured

18 creditors. You're talking about historic damage, if

19 any, to WCC which was then on your case

20 transferred--the Claim in respect to that damage was

21 transferred to the Claimant?

22 MR. SNARR: It's the--I think we can break

[Page 292]

1 it up in separate ways. There is damage to the

2 investment, Prairie. Canada has said that Prairie is

3 a different investment when it was owned by

4 Westmoreland Coal Company than it is when it's owned

5 by Westmoreland Mining Holdings. I think that's a

6 legal fiction, and I understand how legal fictions

7 sometimes have their purpose.

8 But let's be clear, that Prairie is the same

9 Company, the same Owner of the Mines, and the

10 investment that is being damaged, it's been our

11 position that when it was owned by Westmoreland Coal

12 Company, that the Treaty obligations were activated

13 and that there was a breach and that there was harm to

14 Prairie.

15 Now, Prairie was transferred to Westmoreland

16 Mining Holdings, and we are talking also about a

17 breach that has effects that extend over time because

18 we are talking about the life of coal mines and the

19 time horizon for that and the planning that goes into

20 the reclamation of the mine that takes place over a

21 period of years.

22 So, the damages that we're talking about are

[Page 293]

1 damages to Prairie and damages associated with the

2 transfer of the claim to Westmoreland Mining Holdings

3 from Westmoreland Coal Company.

4 ARBITRATOR DOUGLAS: That's clear. Thank

5 you very much.

6 PRESIDENT BLANCH: So, Zac, you've asked all

7 your questions. James, you've asked all yours.

8 I have no further questions. So, on that, I

9 think we turn to any final administrative matters.

10 POST-HEARING MATTERS

11 PRESIDENT BLANCH: Mr. Feldman, do you have

12 any final housekeeping at this point?

13 MR. FELDMAN: I just wanted to add that we

14 look forward to an in-person hearing, so we can

15 actually meet all of you, but I don't think that is

16 necessarily housekeeping.

17 PRESIDENT BLANCH: Well, certainly it would

18 be lovely if we were all able to be together rather

19 than having to cope with double-mute buttons and

20 everything else we are trying to deal with.

21 Mr. Douglas, do you have any housekeeping or

22 further comments?

[Page 294]

1 MR. DOUGLAS: No. I agree it would be nice

2 to meet everybody in person, but, given the

3 circumstances, it is what it is. There is no further

4 housekeeping issues from Canada.

5 PRESIDENT BLANCH: Excellent.

6 Well, in which case, it just falls to me to

7 thank Dawn and the other Reporters--to the extent

8 there were any others--thank you for a fantastic job.

9 As always, I'm in awe of the work that you do.

10 I'd also like to thank everybody at ICSID

11 for their help in putting this all together. I'd like

12 to thank both sets of Parties for all your hard work

13 and very clear submissions.

14 The Tribunal will now go into its

15 deliberations and we will provide a Decision once we

16 finish deliberating and it's drafted. But in the

17 meantime, I hope everybody is able to have a bit of a

18 rest and a lovely weekend.

19 Could I ask that the Tribunal is moved back

20 into the breakout room.

21 Thank you, everybody.

22 (Whereupon, at 12:10 p.m. (EDT), the Hearing

[Page 295]

1 was concluded.)

[Page 296]

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