British Columbia lumber producers avoided a $300-million penalty Wednesday after an international business court rejected claims by United States rivals that B.C. cheated on terms of a Canada-U.S. trade pact.
The U.S. alleged in 2011 that B.C. producers and the province had used the devastation caused to Interior forests by the mountain pine beetle to justify low stumpage rates – and that export volumes of lumber appeared to exceed the production expected from the harvest of beetle-damaged wood.
The U.S. claimed B.C.’s actions were in violation of the portion of the 2006 Canada-U.S. Softwood lumber agreement (SLA) that covers B.C. timber pricing policies.
However the London Court of International Arbitration, a 129-year-old institution for resolving commercial disputes that charges up to $710 per hour of court time, voted unanimously in favour of B.C. producers. All three members of the tribunal that heard the case are European. One was selected by Canada, one by the U.S., and the third selected by the other two.
“Today’s ruling by the London Court of International Arbitration proves that British Columbia’s market-based timber pricing policies are fully consistent with the SLA, and that B.C. has always honoured its commitments under the agreement,” the province stated in a news release.
“The arbitration panel dismissed the U.S.’s complaint in its entirety.”
Neither B.C. nor the U.S. Lumber Coalition could provide a copy of the reasons for the decision – those will become publicly available in about two weeks.
Jobs Minister Pat Bell, at a media scrum in Vancouver, described the arbitration court’s ruling as “total victory” that “completely vindicated British Columbia.”
“This means long-term stability for British Columbia families, the people that work hard every day in our forests – [they] can look forward to a long and prosperous future,” Bell said.
This was the third Canadian softwood dispute to go before the arbitration court and the first in which B.C. scored a clear victory, Bell said.
“It has demonstrated that the softwood lumber agreement works. The softwood lumber agreement that was created back in 2006 has really worked in favour of British Columbia and has demonstrated that our industry is working within the rules that were laid out in that agreement.
“The thing that makes this ruling particularly unique is the fact that there is no right of appeal. There is no opportunity for the Americans to take this back to the department of commerce or any other legal body within the United States. So this is a full and final ruling. B.C. will continue to be able to ship into the United States in an unfettered way.”
Bell said the court’s decision was timely.
“We are starting to see some recovery in the United States. Softwood lumber shipments into the United States are up about nine per cent year to date. That is particularly good news and we are starting to see prices over $300 [per thousand board feet] on the composite index on a weekly basis. So our companies are profitable, they’ve got a long-term future to look forward to.”
John Allan, president and CEO of B.C.’s Council of Forest Industries, was “very pleased with the outcome.”
“The American claim started out as $499 million approximately and was amended subsequently to just under $400 million. That would have been a significant penalty, should that kind of claim have been awarded against us, but it’s an absolute outright victory for us.”
The U.S. Lumber Coalition said it believed it had presented a “compelling demonstration” that B.C. classified more export lumber as low grade than the harvest of beetle-damaged wood could have sustained.
“The [London court] did not take issue with this conclusion as a factual matter, but concluded it could not rule against Canada on this basis alone. Rather, the [court] found that the United States also had to demonstrate that a particular amount of misgrading could be attributed to each specific BC government action.
“Because there were multiple B.C. actions that had the effect of misgrading timber, together with the legitimate damage caused by the mountain pine beetle, the specific effect of any one B.C. action on the grading of logs that no longer exist could not be determined,” the coalition said.
Steve Swanson, chairman of the U.S. coalition, said that “while the coalition vehemently disagrees with the [London] panel conclusion, we respect and appreciate the efforts of this panel and the U.S. government to grapple with the complex issues involved in this case.”
- Canada declares win in softwood lumber case vs United States (business.financialpost.com)