The Lawyers Weekly
Vol. 27, No. 2
May 11, 2007
FOCUS ON CROSS-BORDER LAW

Can a Canadian company use the Canada-U.S. border to shield itself from liability for transboundary environmental damage? Can the U.S. enforce a unilateral order granted in a private citizen's suit against a foreign entity operating in a foreign country in compliance with that country's laws? Should transboundary environmental disputes be resolved diplomatically through bilateral agreement or through domestic litigation which disregards state sovereignty and international comity? These are some of the important questions the U.S. Supreme Court will be asked to consider as a result of the recent decision of the U.S. Court of Appeals in Pakootas v. Teck Cominco Metals, Ltd.

The facts of Pakootas are fairly straightforward. Teck operates a lead-zinc smelter in Trail, British Columbia, 10 miles north of the U.S. border. For almost a century, until 1995, it discharged "slag" , a by-product of the smelting process, into the Columbia River. That slag travelled downstream and accumulated in Lake Roosevelt in the State of Washington causing widespread contamination. After negotiations between the Environmental Protection Agency (the "EPA" ) and Teck failed, the EPA, pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA" ), issued an order directing Teck to conduct a remedial investigation and feasibility study at an estimated cost of at least US$20 million. Teck did not comply with the order, nor did the EPA seek to enforce it. However, pursuant to the citizen suit provisions of CERCLA, two members of the Coville Confederated Tribes, whose reservation borders the Columbia River, brought an action seeking enforcement of the order and penalties for non-compliance. Teck sought to dismiss the action on the ground, inter alia, that it was not a "responsible party" under CERCLA. The motion was denied by the U.S. District Court (and the U.S. Court of Appeals affirmed).

The main focus of Teck's argument on appeal was that to apply CERCLA to Teck's activities in Canada would be an impermissible extraterritorial application of U.S. law. In particular, Teck relied on the presumption against extraterritorial application of U.S. law. In a creative bit of statutory interpretation, the Court of Appeals found that because the operative event creating liability under CERCLA is the release of a hazardous substance, and that the actual or threatened release took place in the U.S., it did not matter for CERCLA's purposes that the "responsible party" was located in Canada and did not carry on business in the U.S. The Court of Appeals reasoned that the order only involved a domestic application of CERCLA since the predicate acts ("releases" to the "environment" from a "facility" ) had all taken place in the U.S.

The implications of this decision are far-reaching. It appears to violate the principles of comity that underlie international law. This is of particular significance in this case, where Canada and the U.S. have a longstanding history of bilateralism in the resolution of environmental disputes. Examples include the U.S.-Canada Boundary Waters Treaty of 1909 and its International Joint Commission, as well as NAFTA's "Side Agreement" on Environmental Cooperation. By imposing liability under CERCLA, the U.S. courts have, in departing from past practice, set a new precedent that favours resort to lawsuits in domestic courts over bilateral negotiation. This in turn may cause countries such as Canada to adopt retaliatory legislation aimed at U.S. corporations that, while carrying on business in the U.S., produce pollution that migrates to Canada.

One of the interesting ancillary issues arising out of this decision is whether the EPA's order is enforceable in Canada. It is unclear how the order might be enforced against Teck in the U.S. given that Teck does not carry on business there. Certainly an order (if subsequently obtained in the U.S.) requiring Teck to pay remediation costs incurred in the U.S. pursuant to the CERCLA order may be enforceable in Canada (as it was in U.S. v. Ivey 1986, 30 O.R. 3d 370). However, it is uncertain whether our courts will enforce a foreign non-monetary order (such as the current CERCLA order) given the Supreme Court of Canada's reluctance to enforce such orders in Pro Swing Inc. v. Elta Golf Inc., 2006 SCC 52, due to public policy reasons. Supporters of the decision in Pakootas argue that enforcement of the CERCLA order is not against Canadian public policy since the order is consistent with Canadian environmental laws, particularly those in B.C., which have expanded the "polluter pays" principle and provide for absolute, joint and several, and retroactive liability for environmental damage.

Teck has petitioned the U.S. Supreme Court for a writ of certiorari. The result will be a telling indication of the future of transboundary environmental dispute resolution between Canada and the U.S.

Richard Attisha is the co-chair of Harper Grey LLP's Environmental Law Practice Group and the firm contact for TAGLaw, a global legal network which provides advice on cross-border issues. Cameron Elder is an associate at Harper Grey LLP practising in environmental and construction law litigation.