Subject IndexFriday, February 6, 2009

You are in:

 Bureaus/Offices Reporting Directly to the Secretary > Office of the Legal Adviser > International Claims and Investment Disputes (L/CID) > NAFTA Investor-State Arbitrations > Cases Filed Against the United States of America > ADF Group Inc. v. United States of America
05. ADF Reply on Place of Arbitration

INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES
ICSID CASE No. ARB(AF)/00/1
BETWEEN:
ADF GROUP INC.
INVESTOR
AND
THE GOVERNMENT OF THE UNITED STATES OF AMERICA
PARTY
 

INVESTOR'S REPLY TO THE RESPONSE OF THE UNITED STATES
on the issue of the
PLACE OF ARBITRATION
(Chapter 11 - Section B - Article 1130 of the NAFTA; Schedule C - Chapter IV - Article 20 and Article 21 of the ICSID Arbitration (Additional Facility) Rules

I. Brief History of The Submissions to Date

  1. On February 26th, 2001, the Claimant (or "Investor") submitted its written submissions on the place of arbitration (The Claimants " Main Submissions");

  2. On March 19th, 2001, the United States of America (the "Party" or the "United States") submitted its written submissions in response (the "Response") to the Claimant's Main Submissions;

  3. The following is the Claimant's reply ("Reply") to the Party's Response, in compliance with Item 12 of the Minutes of the First Session of the Tribunal held on February 3rd, 2001;

    II. Seat of Arbitration and Place of Arbitration

  4. In its Main Submissions to the Tribunal on the place of arbitration, the Claimant proceeded on the assumption that the Tribunal was to choose a place of arbitration under Article 21 of the ICSID-AFR but the Tribunal would be free to hold hearings in other venues as it saw fit;

  5. In its reply to the Claimant's Main Submissions, the United States takes the position that this Tribunal "is to determine a place of arbitration that is both the legal seat and the presumptive location of physical hearings". Additionally, the United States takes the position that "Article 21 [of the ICSID-AFR] only grants the Tribunal authority to meet elsewhere for the limited purpose of inspecting goods, other property or documents".

  6. In the remainder of this reply, the Claimant will assume, for the sake of argument, that the United States is correct and that the issue to be addressed by the Tribunal is the appropriate place of arbitration under Article 21 of the ICSID-AFR and that in making that determination the Tribunal may presume that the location of all hearings will be in the place of arbitration chosen.

  7. However, the Claimant invites the Tribunal to seek the views of the United States on the impact of the position it takes in respect of Article 21 of the ICSID-AFR on the fact that the Tribunal's initial preliminary hearing was held by video conference with the Panel Members participating from Montreal, Geneva and Washington. In particular, we invite the Tribunal to inquire whether the United States considers that the failure to determine a place of arbitration prior to the initial preliminary conference and to hold the initial preliminary conference at that place of arbitration has vitiated these arbitral proceedings;

  8. Accepting the contention of the U.S., for the purpose of argument and no more, and assuming that the present debate is to determine both the place of arbitration for the purposes of the legal seat and the location of the physical hearings, we submit that the clear weight of argument favours Montreal as the place of arbitration;

  9. We reach that conclusion on the following grounds:

    1. Contrary to the pretensions of the United States, Quebec is the only jurisdiction which provides for judicial review of Chapter Eleven awards that is unclouded by the uncertainty resulting from the debate as to whether Chapter Eleven arbitrations are international commercial arbitrations;

    2. Contrary to the claim put forward by the United States, the "location of the subject matter in dispute" is an inappropriate test for choosing a place of arbitration and, even if it were an appropriate consideration, it does not favor Washington;

    3. Contrary to the claim of the United States, application of any "convenience to the Parties" claim does not favor Washington;

    4. Contrary to the claim of the United States, Montreal is a far less costly venue than Washington;

    5. While there is no bar to the Tribunal choosing Washington as the place of arbitration, the consideration of neutrality favors Montreal;

III. Suitability of the Law on Arbitral Procedure of the Place of Arbitration.

  1. The Claimant wants, and is entitled to, a legal seat for the arbitration where the grounds for review of the arbitral award are clear, predictable and limited. The NAFTA Parties chose international arbitration as the appropriate vehicle for resolving investor-State disputes under Chapter Eleven and effect must be given to that choice. That necessarily implies choosing a place of arbitration where an award may be reviewed in a known, predictable legal environment rather than one where, as a result of the Party's own failure to act, the legal regime governing review is unclear and untested;

  2. Quebec law governing actions to review and set aside an international arbitral award is based on the UNCITRAL Model Law and applies without restriction to all international arbitral awards, not simply international arbitration awards arising out of a commercial relationship;

  3. The United States law governing international arbitral awards is contained in Chapter 2 of the U.S. Federal Arbitration Act (the "FAA") which only applies to actions to recognize and enforce international commercial arbitration awards. The FAA does not apply to international arbitration awards that do not arise out of a commercial relationship;

  4. If Washington is chosen as the place of arbitration, the appropriate legal mechanism for seeking review of a Chapter Eleven award (but not for seeking recognition or enforcement of such an award) is unclear, and that lack of clarity undermines the authority of the Tribunal and its eventual award and promises to multiply post award litigation;

  5. In those circumstances, Quebec offers a more suitable environment for this arbitration;

  6. Both Canada and the United States have ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) (the "New York Convention") but both countries also limited its application to legal relations which are considered as commercial under national law. The Province of Quebec was exempted from Canada's reservation "where the law does not provide for such limitation";

  7. NAFTA Article 1136(7) provides that a "claim that is submitted to arbitration under this section shall be considered to arise out of a commercial relationship or transaction for purposes of Article 1 of the New York Convention […]".

  8. Canada recognized that the deeming provision of Article 1136(7) might not reach actions to review and set aside Chapter Eleven awards in situations where domestic review remedies were limited to awards in commercial arbitrations. It amended its Federal Commercial Arbitration Act to deem awards arising out of Chapter Eleven Arbitrations to be commercial for the purposes of actions to review the award. The United States made no similar amendment.

  9. The precise scope of the deeming provision set out in Article 1136(7) has already given rise to controversy in an action brought by Mexico to review and set aside the Chapter Eleven award in Metalclad v. The United Mexican States.. In an application for judicial review of the Chapter Eleven award, Mexico, supported by Canada as an Intervenor, argued that a Chapter Eleven arbitration is not a commercial arbitration. Mexico supported its argument with references to statements made by the United States in another Chapter Eleven arbitration. All three NAFTA Parties claim that NAFTA Article 1136(7) deems Chapter Eleven arbitrations to be commercial strictly for the purposes of recognition and enforcement of awards and not for any other purpose and specifically not for the purposes of review of awards;

  10. In a series of paragraphs designed to obfuscate rather than enlighten, the United States argues that Chapter 2 of the FAA implements the New York Convention and that "[i]t is thus not debatable that a Chapter Eleven award must be considered "commercial" for purposes of the New York Convention";

  11. That is both correct and beside the point. The New York Convention and Chapter 2 of the FAA apply only to the recognition and enforcement of international commercial arbitration awards. As a result of NAFTA Article 1136(7), for the purposes of Article 1 of the New York Convention a Chapter Eleven arbitral award is deemed to arise out of a commercial relationship. The U.S. submission states simply that Chapter 2 of the FAA is available for actions to recognise or enforce Chapter Eleven awards. It does not reach the crux of the problem, whether for purposes other than recognition and enforcement, Chapter 2 of the FAA (or any other provision of the FAA) is available for actions to review and set aside Chapter Eleven awards and, if so, on what grounds;

  12. The answer to that question depends on whether Chapter Eleven awards are "commercial" for the purposes of actions to set aside such awards and the U.S. submission never addresses that issues. If such awards are "commercial" for the purposes of review, then U.S. law might be considered suitable. If they are not, there is no clearly applicable U.S. law. The determination of whether such Chapter Eleven awards are commercial or not for the purposes of review is a question of domestic law and beyond the jurisdiction of this Tribunal. This Tribunal cannot resolve the dispute, it can only recognise the impact of the dispute on suitability of the United States as a place of arbitration in this case.

  13. It should be stressed that all NAFTA partners have already raised one issue in legal proceedings;

  14. The fact that one can argue that Chapter Eleven awards are not commercial for the purpose of review - and all NAFA Parties have made that argument - illustrates the unsuitability of the United States law governing judicial review of Chapter Eleven awards;

  15. In its outline of argument to the British Columbia Supreme Court, the Attorney General of Canada stated that "the authorities concerning private commercial arbitrations (whether international or domestic) are not helpful because NAFTA Chapter Eleven arbitration is "Public" rather than "Private Commercial" in nature". The effect of that position was to strip Chapter Eleven awards of the protection normally afforded all arbitration decisions, allowing the Attorney General of Canada to argue that "in interpreting NAFTA Chapter Eleven, Tribunals should not attract extensive judicial deference and should not be protected by high standard of judicial review";

  16. In the same case, Mexico argued that British Columbia's International Commercial Arbitration Act was inapplicable to control judicial review of NAFTA Chapter Eleven awards because it only applied to international commercial arbitrations. Arguing that the scope of NAFTA Article 1136(7) was limited to actions to recognize and enforce awards, Mexico took the position that "NAFTA does not state therefore that an arbitration conducted pursuant to Chapter Eleven shall be deemed to be a commercial arbitration for purposes of an application to set aside an award (as opposed to enforcement which is quite different).";

  17. Mexico found support for its position in arguments filed by the United States in the Methanex case;

  18. The particular U.S. arguments referred to by Mexico were made in Methanex Corporation v. United States of America as follows:

    "Section 2 Subsection 2 of the Ontario International Commercial Arbitration Act applies the Model Law only "to international commercial arbitration agreements and award.

    Chapter Eleven of the NAFTA, however, is not a commercial arbitration agreement, and given the nature of this dispute - a challenge under international law to measures to protect public health and the environment - an award would not easily lend itself to being characterized as being commercial";

    …

    "It is unclear that this provision can be construed to deem Chapter Eleven claims as commercial in contexts other than the two conventions specifically identified, and it far from clear that the claims here could be considered "commercial" for other purposes".

    [emphasis supplied]

  19. In pages 9 to 10 of its Main Submission, the United States concedes that Chapter 2 of the FAA, which implements the New York Convention, does not grant any authority to a U.S. Court to review any arbitral award, whether commercial or otherwise. The authority to review and set aside an arbitral award is found in Chapter 1, the residual Chapter;

  20. However, the residual application of Chapter 1 of the FAA is triggered by Section 208 of the FAA which reads as follows:

    "Section 208 Chapter 1: residual application

    Chapter 1 applies to actions and proceedings brought under this chapter to the extent that chapter is not in conflict with this Chapter or the Convention as ratified by the United States".

  21. There is a serious question whether an application to set aside a Chapter Eleven award can be considered "an application or proceeding brought under [Chapter 2]", if - as all three NAFTA Parties argue - such an award is not commercial for any purpose other than recognition and enforcement. In addition, neither Chapter 2 of the FAA nor the New York Convention provide for actions to review and set aside awards. How can an action to review and set aside an award be said to be an "application or proceeding brought under [Chapter 2]" so as to trigger any residual application of Chapter 1 of the FAA?

  22. The Toys "R" Us case cited by the United States in support of its claim for the residual application of Chapter 1 of the FAA is of no help on this issue. Firstly, the Court found that "[n]either party seriously disputes the applicability of the Convention" and it was "clear" to the Court that "it did apply". Secondly, the residual application of Chapter 1 of the FAA, through Section 208 was assured because the investor had brought an application to enforce its award under Chapter 2. The Court was therefore faced with "an application or proceeding brought under [Chapter 2]", as required by Section 208;

  23. It is impossible to predict how a United States Court would react to an action to set aside a Chapter Eleven award brought under Chapter 2 of the FAA - which does not provide for such actions - in order to trigger the residual application of Chapter 1, when it is also argued that the New York Convention does not apply. The only result capable of prediction is legal mayhem;

  24. In what appears to be an argument of last resort, the United States argues in footnote 13 of its Main Submission that, even if the FAA does not apply, the District of Columbia Uniform Arbitration Act would govern;

  25. We note that on its face the District of Columbia law provides for a fairly wide judicial review of arbitration awards which have the effect of making such awards subject to an effective appeal, contrary to most arbitration friendly jurisdictions;

  26. In addition, the fact that the District of Columbia law is offered as a review mechanism in the event that the residual application of Chapter 1 of the FAA is refused and Chapter 2 of the FAA is of no assistance, points to the reality of the Claimant's concerns. Suggesting multiple possibilities of review does not lead to the conclusion that the question of review is settled. Rather, it underlines the uncertainty of U.S. law in this area;

  27. The United States argues that it is a popular destination for international commercial arbitration. That is not the issue here. The issue is whether the jurisdiction is a more suitable legal seat than Quebec. Given the positions taken by the governments of the three NAFTA countries on the limited scope of the deeming provisions found at NAFTA Article 1136(7), choosing Washington as the place of arbitration will be to embroil the Parties in extensive litigation simply to determine what law, if any, and what legal standards apply;

  28. In support of its position that Washington is as suitable a venue for the legal seat as Montreal, the United States makes reference to decisions in Methanex and Ethyl. Both of these decisions were rendered without the benefit of a review of Mexico's application for judicial review filed in the Supreme Court of British Columbia. Consequently, they were made without benefit of the knowledge of how the controversy over the scope of NAFTA Article 1136(7) might play out in an application for judicial review. In addition, neither award heard argument on or considered the legal environment in Quebec. Consequently, their conclusions cannot be considered relevant to the dispute before this Tribunal;

  29. The United States has cited a number of cases in support of its position that the U.S. is an arbitration friendly environment and that the FAA would be applicable to review of a Chapter Eleven decision. The cases all involve international commercial disputes and thus are not on point. There has been no United States case seeking review of a Chapter Eleven award. Some of the cases cited by the United States deserve additional comment;

  30. The Mitsubishi Motors case, a decision of the Supreme Court, concerns the arbitrability of a dispute. It is true that the majority notes that U.S. courts should favour international commercial arbitration. However, the dissenting opinion of Mr. Justice Stevens, supported by Mr. Justice Brennan and, in relevant part by Mr. Justice Marshall demonstrates that the debate as to the amount of deference United States courts should give to arbitration decisions, even those involving private commercial arbitrations, is never far from the judicial mind. Mr. Justice Stevens states:

    "Like any other mechanism for resolving controversies, international arbitration will only succeed if it is realistically limited to tasks it is capable of performing well - the prompt and inexpensive resolution of essentially contractual disputes between commercial partners. As for matters involving the political passions and the fundamental interests of nations, even the multilateral convention adopted under the auspices of the United Nations recognises that private international arbitration is incapable of obtaining satisfactory results" (footnotes omitted)

  31. In Chromalloy Aeroservices, v. Arab Republic of Egypt, a 1996 case involving an application under the New York Convention, an award made against Egypt in an international commercial arbitration. The Egyptian Court of Appeal had nullified that award. The U.S. District Court for the District of Columbia stated:

    "Under the Convention, "Recognition and enforcement of the award may be refused" if Egypt furnishes to this Court "proof that … [t]he award has … been set aside … by a competent authority of the country in which or under the law of which, that award was made". [Footnotes omitted] In the present case, the award was made in Egypt, under the laws of Egypt, and has been nullified by the court designated by Egypt to review arbitral awards. Thus, the court may, at its discretion decline to enforce the award".

  32. The court, in fact, chose to recognize and enforce the award, despite the decision of the Egyptian Court of Appeal quashing the award. In reaching its decision, the Court examined many factors, including "international comity". Its opening observation in the section of the judgement dealing with international comity was to cite the following phrase from Laker Airways Limited v. Sabina, Belgium World Airways:

    "No nation is under an unremitting obligation to enforce foreign interests which are fundamentally prejudicial to those of the domestic forum".

  33. Despite reaching the conclusion that the decision of the Court of Appeal at Cairo "is proper under applicable Egyptian law". The Court nevertheless ignored the Court of Appeal's decision to quash the award and concluded that "the award of the Arbitral panel is valid as a matter of U.S. law".;

  34. In Scherk v. Alberto - Culver Company, the U.S. Supreme Court considered a motion to stay proceedings brought in the U.S. courts while parties arbitrated an international commercial dispute before the International Chamber of Commerce. While the majority of the Supreme Court upheld the stay, Mr. Justice Douglas dissented, supported by Justices Brennan, White and Marshall. The minority would have refused to stay proceedings and would have permitted recourse to the U.S. courts despite the written arbitration agreement stating:

    "When a defendant, as alleged here, has through prescribed acts within our territory, brought itself within the ken of federal securities regulation, a fact not disputed here, those laws - including the controlling principles of Wilko - apply whether the defendant is foreign or American, and whether or not there are trans-national elements in the dealings.

    …

    The virtue of certainty in international agreements may be important, but Congress has dictated that when there are sufficient contacts for our securities laws to apply, the policies expressed in those laws take precedence".

  35. The underlying thread of the foregoing statements indicate a resilient judicial attitude which cannot be described as arbitration friendly even in arbitrations involving private citizens. Given the strength of the dissents in the United States Supreme Court, it can be surmised that any application to review a Chapter Eleven award will severely test judicial deference to international arbitration awards

  36. It also cannot be argued that the NAFTA Parties intended Chapter Eleven awards to be subject to any special review regime other than one which is arbitration friendly. Recall that Canada amended its legislation to ensure that Chapter Eleven awards were treated in exactly the same way as international commercial arbitration awards. The United States is arguing (we think incorrectly) that its judicial system provides an arbitration friendly environment for review of Chapter Eleven awards. It is not arguing that Chapter Eleven awards ought to be subject to a more penetrating review;

  37. In stark contrast to the uncertainty prevailing in the United States the legal environment for reviewing and setting aside arbitral awards in Quebec provides a jurisdiction where the judicial review of Chapter Eleven awards is clearly provided for and the grounds of review are clearly set out;

  38. Quebec's arbitration law is based on the Model Law and does not make a distinction between commercial and non-commercial arbitration. In addition, in the case of non-domestic awards, it incorporates the UNCITRAL Model Law, alone with the Commentaries and the Report. For the purposes of the recognition and enforcement of all awards rendered outside Quebec, Quebec law incorporates and applies the New York Convention.

    IV. Location of the Subject Matter in Dispute

  39. The United States asserts that the "location of the subject matter in dispute and proximity of the evidence" clearly point to the United States and Washington D.C. as the place of arbitration;

  40. While this is one of the items listed in the UNCITRAL Notes, at paragraph 22, it is submitted that it is of virtually no relevance in the present case.

  41. The "location of the subject matter in dispute" is a private law concept that is used as a factor that points to an appropriate jurisdiction (forum conviens). The rationale that supports its application in the private law context does not support its application in an investor state dispute such as the present one;

  42. The location of the subject matter in dispute in private law is an exercise which points to the appropriate jurisdiction because generally in private law, the subject matter will be governed by the local law;

  43. The location of the subject matter in dispute in the present case will have no effect on the substantive law applicable to the dispute. NAFTA Article 1131 states that a Tribunal established under Section B of Chapter Eleven "shall decide the issues in dispute in accordance with NAFTA and applicable rules of international law";

  44. When the concept is used in international arbitration, the location of the subject matter in dispute will be a factor that leads to choosing a jurisdiction other than the one where the subject matter in dispute is found in order to ensure a neutral location;

  45. If one were to accept the contention of the United States that the rule on "location of the subject matter in dispute and proximity of the evidence" ought to be applied in Chapter Eleven cases, then every Chapter Eleven arbitration would be located in the host state;

  46. That is so because in all Chapter Eleven arbitrations, the investor challenges measures adopted or maintained by a Party and, in all cases, the measures constitute at least in part, the subject matter of the dispute. Had the NAFTA Parties intended to enact a presumption that all Chapter Eleven arbitrations conducted in the country of the host state, then they would have drafted such a presumption into Part B of Chapter Eleven;

  47. At best, in a Chapter Eleven arbitration, the rule respecting the location of the subject matter of the dispute might be considered to enter into the determination of the convenience of the parties but ought not to otherwise influence the Tribunal's considerations;

  48. The Claimant also takes issue with the assertion of the United States that the subject matter in dispute and bulk of the evidence is located within a short distance of Washington, D.C.;

  49. One of the factual questions which this Tribunal will examine is the nature of fabrication of U.S.-origin steel that was proposed to occur in Canada. It may well be that a visit to the ADF facilities in Terrebonne, Quebec would be necessary to properly understand the nature of the activities proposed to be carried out in Terrebonne, Quebec. Evidence in respect of that issue is clearly not located in the United States;

  50. Similarly, the contract proposals prepared by the various members of the ADF Group were prepared in both Canada and the United States;

  51. The bulk of the evidence referred to by the United States as being located in Washington, consists entirely of documentary evidence, much of which is publicly available and eminently transportable. The physical location of that documentary evidence should not be a deciding factor in the determination of the place of arbitration;

  52. In the Methanex decision on the Place of Arbitration the Tribunal considered that the issue of the location of the subject matter of the dispute "bears only slight importance";

  53. The Ethyl case clearly recognised that the relationship between the subject matter of the dispute and the legal seat of the arbitration was a municipal law concept of questionable applicability in a Chapter Eleven arbitration. The Tribunal stated:

    "Canada makes two threshold arguments that must be addressed at the outset. It urges (at page 5 of its Memorandum of October 2, 1997) that Article 16(1) of the UNCITRAL Rules 'permits the Tribunal to take into account certain general, universally applied considerations which usually are found in the doctrine of forum conveniens', which "provide that the forum in which to try a matter should be the jurisdiction that has the closest connection with the action and the parties

    …

    Leaving aside the issue as to whether that municipal law doctrine has a place in international arbitration, the Tribunal is constrained to say that in its view its decision regarding the place of arbitration in this case must be made, as Article 16(1) prescribes, 'having regard to the circumstances of the arbitration', meaning all such circumstances …".

    [emphasis in the original]

    V. The Convenience of the Parties.

  54. In considering the convenience of the Parties, the Tribunal is more properly called upon to consider the relative inconvenience of any particular location on the Parties;

  55. For the Tribunal members, whether Washington or Montreal is chosen, two of the members will have to travel and one will be in his or her home city;

  56. In terms of convenience of witnesses, the United States claims without support that it will bear a heavier burden bringing witnesses to Montreal than ADF Group Inc. would bear bringing witnesses to Washington. With respect, we consider that at best, that factor is neutral. Witnesses from one Party or the other will have to travel and, absent any knowledge of how many witnesses will be presented by either Party, it is impossible to measure which group of witnesses will be more inconvenienced;

  57. The facilities available to Parties are also important to consider. Neither ADF nor its counsel maintain any office facilities in Washington, D.C. Consequently, if Washington is chosen as the place of arbitration, counsel for ADF would be forced to work out of hotel rooms or rented accommodations and to physically install the computer equipment to support litigation;

  58. By contrast, the United States has an extensive and fully staffed Consulate General in Montreal. We assume that the Consulate General of the United States in Montreal has boardrooms, meeting rooms, computer facilities and staff, all of which are already under the jurisdiction of the Department of State and no doubt could be used to assist the Department of State lawyers in their representation of the United States;

  59. The computer facilities at the U.S. Consulate General in Montreal would, with little effort, permit the United States to conduct much of its legal research on line, whether or not the Consulate General has a law library. In addition, Montreal is well served with three laws schools of world renown, all of which have their own law libraries, access to which could be arranged for the U.S. visitors;

  60. Thus, in terms of facilities available to the Parties, the Claimant will be at a much greater disadvantage in Washington than would the United States in Montreal;

  61. The United States claims that its litigation team needs to consult with the various agencies of the U.S. government and, consequently, the balance of convenience weighs in favour of Washington. Once again, with respect, we disagree. This factor is at best, neutral;

  62. ADF's litigation team will also need to consult with various officials within the ADF group;

  63. We might also note that the United States government is accustomed to litigating far from home. As one of the major users of the WTO dispute settlement mechanism, it must be assumed to have developed an expertise in litigating abroad that is second to none;

    VI. Relative Expense.

  64. The United States claims that Montreal and Washington are more or less equal when one considers the expense of locating the litigation in either city. The U.S. position is based in large part on its claim that in Washington, the Parties will have access to ICSID arbitration facilities at a lower cost than comparable facilities in Montreal and, to a lesser extent, on a claim that Canada imposes a sales tax which (presumably) Washington does not;

  65. The United States claim that its "experience in other cases suggests that siting this arbitration in Quebec could subject the fees of at least one of the arbitrators to these [sales] taxes and, therefore, increase the cost of this arbitration".

  66. In fact, the Goods and Services Tax (GST) is a cascading sales tax which only impacts the final non-commercial consumer. Any business or professional which is obliged to pay GST in the course of a commercial operation generates a tax credit equal to the amount of tax paid. That credit can be offset against tax amounts payable or taken as a refund. Thus, there is no net impact of GST on arbitration fees - every dollar paid generates a credit;

  67. The effect of the rate of exchange between U.S. and Canadian dollar has a huge impact on the overall expense of the hearing. Hotels, meals, transportation and all other services are generally less expensive in Montreal than they are in Canada. When costs are translated into a common currency the cost advantage is significant. The rate of exchange between U.S. and Canadian dollars for March 30, 2001 are as follows: $1.00US = $1.57 Cdn and $1.00Cdn = $0.63 US;

  68. While we believe that we would be able to obtain first rate facilities in Montreal at little or no cost, we are unable to confirm that fact immediately. Various government agencies regularly permit the use of their facilities by private litigants at little cost. If the cost of facilities is a major factor for the United States, the Tribunal could always order ADF to pay facility costs in excess of what would have been incurred at the ICSID facility. We do not believe there will be much difference;

    VII. Neutrality.

  69. Given the Party's decision not to consider Mexico as the place of arbitration, the Claimant admits that strict neutrality, in the sense of a venue outside of the territory of the United States or Canada, is impossible. However, considerations of relative neutrality would favour Montreal over Washington;

  70. ADF Group Inc. does not have offices in Montreal. Its head offices and production facilities are located in Terrebonne, a city north of Montreal and in Lachine, a city in the Montreal suburbs. Thus, Montreal is not the home city of ADF, as opposed to Washington, which is the home city of the U.S. Government;

  71. In terms of the Parties' relationship with the judicial system of the place of arbitration, ADF Group Inc. ranks as a private litigant in both Quebec and Washington. By contrast the Government of the United States of America enjoys privileges in the United States as a result of its status;

  72. For example, the Government of the United States will have appointed all of the Federal judicial officers who might be called upon to review, recognise or enforce the award in question if Washington is the place is of arbitration, while ADF Group Inc. would remain a simple private litigant in either venue;

    VIII. CONCLUSION

  73. In light of all of the above, it is submitted that Quebec is indisputably the more appropriate forum for the place of arbitration in the present case;

Signed at Montreal, this 2nd day of April, 2001

                                                             

Peter E. Kirby

René Cadieux

FASKEN MARTINEAU DuMOULIN LLP

Stock Exchange Tower

Suite 3400

800 Place-Victoria

Montreal (Québec)

Canada

H4Z 1E9

Counsel for: ADF Group Inc.

ADF International Inc.

Served to:

BY TELECOPIER: 202-522-2615

Mr. Alejandro A. Escobar

Secretary of the Tribunal

International Centre for Settlement of Investment Disputes

1818 H. Streeet N.W.

Washington, D.C., USA

20433

BY TELECOPIER: 202-776-8388

United States of America

c/o Mr. Barton Legum

United States Department of State

Office of the Legal Advisor

2430 E Street N.W., Suite 203, South Building

Washington, D. C., USA

20037-2800

THE TRIBUNAL

Judge Florentino P. Feliciano - President

Professor Armand de Mestral

Ms. Carolyn B. Lamm.

The Office of Electronic Information, Bureau of Public Affairs, manages this site as a portal for information from the U.S. State Department. External links to other Internet sites should not be construed as an endorsement of the views or privacy policies contained therein.