Alleging that Canada has violated the North American Free Trade Agreement with unlawful restrictions, Exxon Mobil Corp. (XOM) has announced its intention to sue Canada in early November for more than $40 million. Arkansas-based Murphy Oil Corp. (MUR) has also warned Canada of its intent to sue for more than $10 million.

In their August filings, both companies argued that, under NAFTA, Canada agreed not put any "local content" requirements into effect.  Local content consists of rules or regulations that require companies to source a percentage of goods and services from local vendors.

However, Exxon and Murphy Oil both allege that the Canada-Newfoundland Offshore Petroleum Board established several "guidelines and/or obligations" that violate those terms of the agreement.  The regulations require the petroleum companies operating in the region to spend a fixed percentage of revenues in Canada, and to set up a fund for unspent money to be used for research and development in Newfoundland and Labrador.

Exxon and Murphy have filed for redress under Chapter 11 of the NAFTA treaty, which affords companies the right to demand compensation from signatories in violation of the agreement.

News and Related Story Links:

• CNNMoney:
  Exxon Mobil Expected to File $40 million NAFTA Suit Against Canada in November.

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• Wikipedia:
  North American Free Trade Agreement (NAFTA).