$20 billion LNG lawsuit exposes NAFTA’s toxic legacy: report

December 14, 2023

OTTAWA—Ruby River Capital’s $20 billion USD NAFTA challenge to Quebec’s decision to deny the firm’s controversial liquefied natural gas (LNG) project exposes the dire threat that investor-state dispute settlement (ISDS) poses to climate action, says a new report from the Canadian Centre for Policy Alternatives. 

“The Quebec government’s decision to reject the U.S. investor’s LNG project, based on a rigorous and transparent environmental impact assessment, was a remarkable, public-spirited victory for climate policy that should be celebrated and emulated, not penalized,” says Scott Sinclair, founding director of the CCPA's Trade and Investment Research Project (TIRP) and author of the report, Toxic Legacy: Énergie Saguenay, Climate Action, and Investment Arbitration. 

“Tragically, however, a tribunal made up of trade lawyers, deliberating in private, has been empowered to second-guess that decision, underlining the massive financial risks posed by ISDS to climate action in Canada and abroad.” 

Among the report’s findings: 

  • At $20 billion USD, the damages sought are the highest of all known NAFTA claims and among the most expensive ISDS claims internationally. The risk of incurring huge costs for turning down fossil fuel projects casts a pall over bold climate initiatives by “chilling” government action.
  • The Ruby River case exposes the “revolving door” in the insular and highly lucrative arbitration industry, since the investor is represented by a former Canadian public servant now working at a prominent international law firm.
  • Ruby River’s reliance on third-party funding to bring its claim drops the veil on the speculation inherent in the ISDS system, where private investors, such as hedge funds, can bet on and trade in future ISDS awards, encouraging more and riskier claims.
  • Canada could have, but didn’t, raise jurisdictional challenges to Ruby River’s case, as the Biden administration did in TC Energy’s NAFTA “legacy” case involving the Keystone XL pipeline. Canadian lawyers could and should have tried to mitigate the risk of a multibillion settlement in both the TC Energy and Ruby River cases but instead chose to do nothing. 

“Given this mishandling of Canada’s legal defence, it would be reasonable for the Quebec government to insist that Ottawa assume full financial responsibility for any eventual payout if Ruby River wins its case,” says Sinclair. “In the longer term, Ruby River’s audacious lawsuit should provide a catalyst for Canada to finally erase ISDS from all its treaty commitments and to support international efforts to exit and dismantle the investor-state system.”

Toxic Legacy: Énergie Saguenay, Climate Action and Investment Arbitration is available at: https://policyalternatives.ca/publications/reports/toxic-legacy

For more information and interviews please contact Amanda Klang, CCPA Senior Communications Specialist (Media & PR) at [email protected] or cell: 514 996 3515.

Offices: