You're correct. Canada may rightfully claim the region as territorial waters, but the international treaties and conventions guarantee the right of free passage. The issue is the ability to extract mineral resources.....
No, Canada may not rightfully claim the region as territorial waters. Generally accepted principals of international law do not allow them to claim any farther off of their north coast, then we claim off our east and west coasts. They are claiming a "special historical exception."
It won't fly because the world's other maritime nations aren't buying it.