NAFTA defeat 'disappoints' federal government

The federal government is responding albeit briefly to a recent North American Free Trade Agreement tribunal decision finding Canada liable for damages for wrongly rejecting a U.S. company's bid to open a quarry in Digby County.

"Canada is disappointed in the tribunal's ruling and we are considering all available options moving forward," John Babcock, spokesperson for Foreign Affairs, Trade, and Development said in an emailed statement to CBC News.

Foreign Affairs would not answer questions aboutthe case, including whether Ottawa intends to ask Nova Scotia to share the cost of whatever compensatory damages are awarded in future.

In 2008, New Jersey concrete company Bilcon appealed the rejection of its proposal to open a 50-year quarry at Whites Point on Digby Neck.

Last week a majority of the three-member NAFTA tribunal found the process broke international law.

Bilcon is seeking $300-million in damages.

The companyargued it had been unfairly blindsided by a Joint Review Panel created by Nova Scotia and Ottawa to examine the project.

The Joint Review Panel rejected the quarry on the grounds it compromised "community core values," a vague criteria never actually raised at the hearing.

"Bilcon had been denied a fair opportunity to know the case it had to meet and to address it," the two-member majority of the tribunal wrote in its decision.

The tribunal said the Joint Review Panel did not properly assess the environmental effects of the proposed quarry and,wrongly,completely ignored mitigation measures.

"The rigorous and comprehensive evaluation was not in fact carried out ...There was in fact a fundamental departure from the methodology required by Canadian and Nova Scotian law."

A hearing to award compensatory damages to Bilcon will be scheduled.

A dissenting member of the tribunal, Donald McRae of the University of Ottawa,discounted the significance of the "community core values" issue saying it was another way of describing elements that were included for consideration in the Joint Review Panel terms of reference.

McRae calls the tribunal ruling "troubling" and "intrusive," warning it will create a chill on future environmental reviews since the result puts scientific and technical feasibility over human environment concerns.

"Failure to comply with Canadian law by a review panel now becomes the basis for a NAFTA claim allowing a claimant to bypass the domestic remedy provided for such a departure from Canadian law," McRae wrote in his dissent.

"This is a significant intrusion into domestic jurisdiction and will create a chill on the operation of environmental review panels," McRae said.

In its statement to CBC News, Foreign Affairs stands by the tribunal process.

"Investor-state dispute provisions protect Canadian investors abroad and create a welcoming environment for foreign investors at home, creating jobs and prosperity for Canadians," the statement says.