## Facts

- S.D. Myers, Inc. (SDMI), a U.S. company, transported and processed polychlorinated biphenyl (PCB) waste at a facility in Ohio and sought to treat PCB waste sourced in Canada through a related Canadian entity.
- Canada had regulated PCB waste exports and, in late 1995, issued an interim order and follow-on measures that effectively prohibited exporting PCB waste from Canada to the United States.
- The prohibition followed a U.S. regulatory shift allowing limited PCB waste imports, including an authorization benefiting SDMI.
- SDMI alleged the Canadian export ban was adopted primarily to shield Canadian PCB processors from competition, causing SDMI lost contracts and business opportunities in Canada.
- SDMI initiated arbitration under NAFTA Chapter 11 (UNCITRAL Rules), asserting breaches of national treatment (Art. 1102), minimum standard of treatment (Art. 1105), performance requirements (Art. 1106), and expropriation (Art. 1110).
- The tribunal issued a merits award finding breaches of Arts. 1102 and 1105, rejecting Arts. 1106 and 1110 claims, and later awarded roughly CAD 6 million plus interest and some costs.

## Issues

1. Whether SDMI qualified as an NAFTA “investor” with an “investment” in Canada despite operating in Canada through related corporate arrangements.
2. Whether Canada’s PCB export ban afforded SDMI less favorable treatment than Canadian investors in like circumstances, in breach of NAFTA Article 1102.
3. Whether Canada failed to provide treatment consistent with customary international law, including fair and equitable treatment and transparency, in breach of NAFTA Article 1105.
4. Whether the export ban imposed a prohibited performance requirement under NAFTA Article 1106.
5. Whether the export ban constituted an expropriation or measure tantamount to expropriation under NAFTA Article 1110.

## Decision

- The tribunal exercised jurisdiction, treating SDMI as an investor with a protected investment based on control and economic reality rather than formal ownership alone.
- Canada breached NAFTA Article 1102 because SDMI and Canadian PCB processors were in like circumstances and the measure operated to favor domestic processors.
- Canada breached NAFTA Article 1105 because the decision-making process and implementation fell below the customary international law minimum standard, including expectations of transparency and non-discriminatory administration.
- Canada did not breach NAFTA Article 1106 because the export ban did not fit the treaty’s enumerated categories of prohibited performance requirements.
- Canada did not breach NAFTA Article 1110 because the temporary export restriction was regulatory in character and did not amount to compensable expropriation.
- The tribunal later awarded SDMI approximately CAD 6 million in damages (plus interest) and allocated some costs.

## Legal Principles

- Investor and investment status under NAFTA Chapter 11 may be assessed functionally, considering control, coordinated operations, and economic reality, not only formal share ownership.
- Article 1102 “like circumstances” analysis focuses on competitive comparability; formally general measures can still violate national treatment when their effects and purpose favor domestic actors.
- Article 1105 incorporates the customary international law minimum standard of treatment; deficiencies in transparency, predictability, and non-arbitrary administration can constitute a breach.
- Article 1106 is applied to the treaty’s specified categories of performance requirements; a measure that indirectly encourages domestic processing is not necessarily a prohibited requirement absent a covered condition.
- Discriminatory or harmful regulation does not, by itself, establish expropriation under Article 1110; a higher threshold of serious and durable deprivation is required.

## Conclusion

The tribunal held Canada internationally responsible under NAFTA for adopting and administering a temporary PCB export ban that, in purpose and effect, advantaged Canadian PCB processors over a U.S. competitor, violating national treatment and the customary international law minimum standard, while rejecting claims framed as performance requirements and expropriation and awarding reduced damages tied to demonstrated loss during the ban period.


S.D. Myers, Inc. v. Gov’t of Can., 40 I.L.M. 1408 (NAFTA Ch. 11 Arb. 2001)