Canadian Lawyer InHouse

35 CANADIANLAWYERMAG.COM/INHOUSE NOVEMBER/DECEMBER 2018 I n d u s t r y S p o t l i g h t SHORTLY AFTER the Conservative government was elected in Ontario, it quickly carried out one of its main campaign promises and introduced legislation to scrap the former Liberal government's cap and trade scheme. Known as Bill 4, the Cap and Trade Cancellation Act, 2018 repeals Ontario's ballyhooed Climate Change Mitigation and Low-carbon Economy Act, 2016 and elim - inates cap and trade instruments. However, the bill goes much further than that. It includes provisions that will limit compensation to a small percentage of com- panies that have purchased cap and trade instruments. Parties registered to participate under the previous legislation that won't be compen- sated include electricity importers, natural gas distributors and companies that operate equipment related to the transmission, stor- age and transportation of natural gas, supply petroleum products for consumption in On- tario or operate certain transmission systems. To add insult to injury, the government included a Crown immunity clause that prevents companies from pursuing litiga - tion for the shift in policy despite the mil- lions of dollars they may have invested into Ontario's green energy initiatives. At the same time, Ontario scrapped the White Pines Wind Project, a planned nine- turbine wind facility already under construc- tion in central Ontario. The moves caught the attention of infra- structure lawyers. Patrick Duffy, co-head of the project development & finance group at Stikeman Elliott LLP in Toronto, says it's a sign that sovereign or political risk is playing a bigger role in projects and needs to be on the radar screen of in-house legal teams operating in the infrastructure space. Rob Seidel, Canada managing partner for DLA Piper who works on infrastructure fi - nancing deals, agrees that "political risk is on the rise in Canada relative to other jurisdic- tions." When it comes to infrastructure, Seidel says, companies "have to be very sensitive to the impact of political risk real or per- ceived." Duffy notes that since the 1990s Canada has been viewed as a stable infrastructure market since the 1990s. However, with a flurry of elections in the past couple of years that has seen the end of long-standing gov - ernments in Ontario and Alberta and shifts in policy, combined with the federal gov- ernment's inability to move forward on any major energy infrastructure projects, Duffy says, "the risk does seem to be rising." Take B.C. for example. The NDP gov- ernment scrapped plans to build a new bridge to replace the Massey Tunnel and ease Metro Vancouver traffic congestion — a pet project of the previous provincial Liberal government. However, it's not just Canada. There's a general unease in the political sphere globally as governments topple or teeter in many western democracies, which is ex - cepted to impact infrastructure. Everything from Brexit to U.S-initiated trade and treaty wars and a tightening of foreign investment regimes around the globe will impact com- panies involved in building infrastructure. Maxine Ethier, global head of the infra- structure group at Baker McKenzie LLP, says sovereign risk in the infrastructure space is "definitely" on the rise globally. "You can see all of the countries are starting to look at their foreign investment rules," with a view to tightening them, she says. Sovereign risk rising for infrastructure deals With a flurry of elections that has seen the end of long-standing governments in Ontario and Alberta and shifts in policy, combined with the federal government's inability to move forward on any major energy infrastructure projects, the risk is real. BY JIM MIDDLEMISS ILLUSTRATION: HUAN TRAN

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