ASTALDI CANADA INC. Applicant And: Muskrat Falls Corporation Respondent, 2018 NLSC 229

court crest IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR GENERAL DIVISION Citation : Astaldi Canada Inc. v. Muskrat Falls Corporation , 2018 NLSC 229 Date : November 21, 2018 Docket : 201801G7001 Between: ASTALDI CANADA INC. Applicant And: Muskrat Falls Corporation Respondent Before: Justice Carl R. Thompson Edited Transcript of Oral Reasons for Judgment Place of Hearing: St. John’s, Newfoundland and Labrador Date of Hearing: November 14 & 19, 2018 Date of Oral Judgment: November 19, 2018

Summary: The Arbitration Tribunal scheduled to hear matters in dispute after Respondent terminated its contract with Applicant, determined earlier by this Court to be the forum to consider those matters including that Tribunal’s jurisdiction to do so, was confirmed to be the forum to consider the right of the Respondent to call letters of credit. An order prohibiting or suspending that call was issued until dealt with by the Tribunal, the call having taken place after the Court’s earlier decision to defer to the Tribunal but before the Tribunal convened.

Appearances: R. Paul Burgess, Q.C. Appearing on behalf of the Applicant Geoffrey L. Spencer and Douglas B. Skinner Appearing on behalf of the Respondent Philip J. Buckingham Appearing on behalf of National Bank of Canada Authorities Cited: CASES CONSIDERED: Muskrat Falls Corporation v. Astaldi Canada Inc. , 2018 NLSC 210 .

REASONS FOR JUDGMENT Thompson, J. : INTRODUCTION [ 1 ] This is an Application by Astaldi Canada Inc. (“Astaldi”) for the continuation of an ex parte Order of this Court issued November 14, 2018 prohibiting and/or suspending Muskrat Falls Corporation (“MFC”) from calling two letters of credit issued by National Bank of Canada (“National Bank”).

BACKGROUND [ 2 ] Following the decision of Justice Adams of this Court dated October 23, 2018 requiring the parties to submit the question of the jurisdiction to an Arbitration Tribunal arising from MFC’s termination of contract with Astaldi for the construction of an hydroelectric project in Labrador (See Muskrat Falls Corporation v. Astaldi Canada Inc. , 2018 NLSC 210 ), MFC on November 6, 2018 called upon two irrevocable standby letters of credit originally issued by National Bank on December 6, 2013. [ 3 ] MFC effected this call pursuant to and in reliance upon Exhibit 16 to the Agreement which was amended by

Section 31 of their Incentive Funding Contract of September 6, 2018 (“IFC”) as follows: Exhibit 16 to the Agreement including, but not limited to, the Dispute Review Board Provisions: a. do not apply to any issue regarding reimbursement of advances made by Company to Contractor; b. shall not apply to or impede Company’s exercise of the remedies under the Agreements upon termination for Default; and c. are only available to Contractor for claims for damages upon termination for Default. [ 4 ] Notably, Justice Adams in his decision determined that

Article 31 and Exhibit 16 would survive even if prior termination of the contract had been effected based upon the principle of separability (See Muskrat Falls Corporation , paragraphs 17-20 ). [ 5 ] Astaldi’s Notice of Arbitration delivered September 27, 2018, seeks inter alia interim relief from MFC drawing upon all performance bonds and letters of credit. ANALYSIS [ 6 ] It appears that Exhibit 16(

b) and (

c) of the contract are effective upon termination for default. Termination for default is in issue between the parties. As a result of the decision of Justice Adams, the Arbitration Tribunal must first determine whether it will assume jurisdiction for this and such other matters as may be placed in dispute arising from that contract. [ 7 ] Consequently, it would appear that should the Arbitration Tribunal assume jurisdiction over this specific issue, it would have to determine inter alia whether the right to call the letters of credit is conditional upon a finding of proper “termination for default” under

Article 16 as amended by

section 31 of the IFC. The letters of credit issued by National Bank appear on their face to be without recourse. [ 8 ] The Board of Arbitration has set November 27, 2018 to hear an interim motion by Astaldi.

[ 9 ] Accordingly, MFC’s right to make the call is in issue before the Board of Arbitration. At the time of the filing of the decision of Justice Adams, the Notice of Default was in place, but not the call on the letters of credit.

The Order of Justice Adams then left any issue arising in the hands of the Arbitration Tribunal yet to be constituted. conclusion [ 10 ] I do not have jurisdiction to deal with the issue of the rights of the parties on the issue of this call on the letters of credit given the decision of Justice Adams. [ 11 ] The clear direction of Justice Adams would leave to the parties the presentation of this issue initially to the Arbitration Tribunal. [ 12 ] The call on the letters of credit took place after this determination of jurisdiction took place. The Arbitration Tribunal will not convene until November 27, 2018.

The facts giving rise to this specific issue and the relief claimed by Astaldi crystallized after the decision of Justice Adams and before the convening of the Arbitration Tribunal. [ 13 ] Until the issue is engaged by the Arbitration Tribunal, the parties should not be without recourse as to matters arising in this interim period.

Accordingly, the ex parte Order should continue to preserve the integrity of the decision of Justice Adams and the process thereby engaged. [ 14 ] Accordingly, it is ordered that MFC is prohibited and/or suspended from calling Irrevocable Standby Letter of Credit / Advance Payment Number 504-12-0013280 dated December 6, 2013 issued by National Bank to MFC and Irrevocable Standby Letter of Credit - Performance Number 504-12-0013271 dated December 6, 2013 issued by National Bank to MFC until such time as the Arbitration Tribunal either declines jurisdiction or issues an order with respect to Astaldi’s Notice of Application/Motion dated November 8, 2018, seeking emergency relief; and National Bank consenting, is enjoined to give effect to this Order and not to make any payments to MFC pursuant to National Bank’s obligation pursuant to the aforementioned letters of credit so as to give effect to the terms of this Order. _____________________________ Carl R.

Thompson Justice