TC Energy Corporation and TransCanada Pipelines Limited v United States of America ICSID Case No. ARB/21/63 - Respondent's Reply to Claimant's Observations on Respondent's Request for Bifurcation - 2 March 2023
TABLE OF CONTENTS
II. The Parties Agree on the Standard for Bifurcation
III. Bifurcation Is Appropriate in This Arbitration
A. The U.S. Objection to the Tribunal's Jurisdiction Is Substantial
1) The Starting Point for Interpreting the Legacy Investment Claims Annex Is the Termination of the NAFTA
2) Claimants Have Not and Cannot Identify Any Provision of the USMCA Memorializing an Agreement to Extend the Application of the NAFTA's Substantive Investment Obligations
3) The Parties' Prior Treaty Practice Further Undermines Claimants' Argument
4) Claimants' Arguments Concerning Context and the USMCA's Object and Purpose Fail
B. The United States' Objection Will Eliminate Claimants' Claims in Their Entirety and Bifurcation Would Promote Efficiency
C. The United States' Objection Is Distinct From its Merits Arguments and Bifurcation Is Fair to Both Parties
1. In accordance with the Tribunal's Procedural Order No. 1 of December 12, 2022, the United States hereby submits its Reply to Claimants' Observations on its Request for Bifurcation of these proceedings.
2. As the United States showed in its Request for Bifurcation and will demonstrate further in this Reply, the three factors of the applicable test for bifurcation all weigh in favor of briefing the U.S. objection to jurisdiction separately from the merits of the case. Claimants, in their Observations on the U.S. Request for Bifurcation, devote most of their attention to the first factor, arguing that the U.S. objection to jurisdiction is not substantial. But, if anything, the more than 18 pages that Claimants devote to their attempted rebuttal of the U.S. objection shows the substantiality of the objection and how seriously they must take it.
3. Claimants do not dispute, nor could they, that the Tribunal lacks jurisdiction over their claims unless Claimants can show that the United States, Canada, and Mexico agreed in the USMCA that the NAFTA's obligations would continue to bind them after the NAFTA's termination on July 1, 2020. Claimants cannot, however, point to any text in the USMCA embodying such an agreement. Instead, they ask that the Tribunal infer an agreement from a combination of the USMCA Protocol and references to the NAFTA in the Legacy Investment Claims Annex. Claimants' reading of the USMCA is untenable, as the United States discusses briefly below and will elaborate in more detail when it comes time to brief its objection to jurisdiction. For purposes of the U.S. Request for Bifurcation, however, it is enough that Claimants' arguments are insufficient to show that the U.S. objection is less than substantial.
4. The other relevant factors weigh heavily in favor of bifurcation as well. With respect to the second factor, Claimants do not contest - nor could they - that a finding in favor of the United States on its jurisdictional objection would bring an end to this case. As for the third factor, the resolution of the U.S. objection requires only an exercise in treaty interpretation and does not implicate any of the merits of Claimants' claims.
5. All three factors, as well as considerations of fairness and efficiency, therefore weigh in favor of bifurcation and the U.S. request should be granted.
49. For the foregoing reasons, and the reasons stated in its Request for Bifurcation, the United States respectfully requests that the Tribunal bifurcate the proceedings, suspend the proceedings on the merits, and decide the United States' jurisdictional objection as a preliminary matter.