What is NAFTA Chapter 11?

NAFTA Chapter 11 is the portion of the North American Free Trade Agreement that allows investors from one NAFTA country to sue the government of another NAFTA country for actions which hurt them or their investments. Its protections include: a promise to pay full, fair and effective compensation when governments expropriate investments made in their territories; as well as a promise by NAFTA governments to provide investors from the other countries "treatment no less favourable" than that which they have given to their own investors in the North American Free Trade Area.

 

What are the available remedies?

The available remedy is compensation. NAFTA Tribunals are not entitled to order a government to change its rules. What they can do is award money damages to individuals who bring valid complaints for losses incurred because of those rules. The standard of compensation is restitution of the position the claimant would have been in, had the measure never been imposed.

 

What is the case about?

If the claim proceeds, the measure is the Canadian Government's decision to tax Canadian Energy Trusts under its so-called Tax Fairness Plan. The objective of the tax changes is to eliminate the income trust model as a means of investing in Canada starting in January 2011.

Under the protection of tax treaties that promised no more than a 15% withholding tax, U.S. and other foreign investors have been using the income trust model to invest in Canada's energy sector. The income trust model allowed foreign investors to directly share in the ownership of Canadian oil and gas businesses, and to receive different and better returns on their investments than if they had simply acquired corporate shares.

The tax changes will deprive U.S. and other foreign investors from this investment tool, and those who owned units in Canadian energy trusts on October 31, 2006, suffered severe and permanent losses in equity as a result.

 

Who is eligible to bring a claim?

U.S. citizens and permanent residents, as well as the nationals of Mexico and certain other countries, are eligible to bring a NAFTA claim against Canada. U.S. business entities, such as corporations, trusts and non-profit organizations, are also entitled to bring a NAFTA claim.

Canadian citizens are not eligible to bring a NAFTA claim against the Government of Canada, unless they also possess the nationality of either the United States or Mexico.

 

What is happening right now?

A first group of potential claimants has provided the Government of Canada with a document called a "Notice of Intent to Submit a Claim to Arbitration". Submitting this document did not launch the case, but it has provided the Government of Canada with notice that a case could be filed as soon as the 90-day notice period expires (at the beginning of February 2008).

 

What do I need to do to learn more about the case?

If you are eligible to bring a NAFTA Claim, and you held units in a Canadian energy trust on October 31, 2006, you may click on the page entitled "Enter Your Information" at the top of this page to provide us with some basic information so that we can contact you if a decision is made to proceed with the case.

 

Does it matter if I sold my investments in Canadian energy trusts after October 31, 2006?

The most important question is whether you held units in Canadian energy trusts on October 31, 2006. If you are not sure, you should ask your financial advisor or mutual fund director. Regardless of whether your units were sold after that date or not, you may still be eligible to bring a NAFTA claim to recover the losses you suffered because of Canada's surprise tax changes.

 

I held units in different kinds of Canadian income trusts. Can I still join the case?

This web site is only for people who invested in Canadian energy trusts. If you held a mix of trust investments in Canada as of October 31, 2006, be sure when you complete the information request form (on the "Enter Your Information" page) that you only describe your investment in Canadian energy trusts.