AbitibiBowater seeks $500-million compensation through NAFTA for expropriation of assets in Newfoundland
March 1, 2010 By Pulp & Paper Canada
AbitibiBowater has filed a Notice of Arbitration under the North American Free Trade Agreement with regards to…
AbitibiBowater has filed a Notice of Arbitration under the North American Free Trade Agreement with regards to the expropriation of its assets and rights in Newfoundland and Labrador. The company contends that the provincial government’s enactment in December 2008 of Bill 75, which expropriates an array of the company’s rights and assets, was arbitrary, discriminatory, and illegal under international law.
The claim seeks direct compensation for damages of approximately $500 million.
In early December 2008, AbitibiBowater announced capacity-reduction measures in Canada and the United States, including the permanent closure of its mill in Grand Falls-Windsor, Newfoundland, due to the economic downturn and decline in product demand. The province quickly passed Bill 75, expropriating the mill, an attached hydroelectric facility and AbitibiBowater’s water and timber rights in Newfoundland and Labrador. The company has asserted in the Notice of Arbitration that the province’s Bill 75 breaches Canada’s NAFTA obligations on a number of grounds, including unlawful expropriation, fair compensation, and discrimination.
“After operating in Newfoundland and Labrador for more than a century and contributing significantly to the region’s economic, social and sustainable development, the nationalization of AbitibiBowater’s assets was unexpected and unnecessary,” stated David J. Paterson, president and CEO of AbitibiBowater.
AbitibiBowater has been engaged in discussions with the Government of Canada and the provincial government in an effort to achieve a settlement and avoid a protracted NAFTA case. “We are disappointed that a settlement acceptable to all parties has not yet been reached and we still hope that this issue can be resolved by a negotiated settlement with the Government of Canada,” concluded Paterson.
Since the company is incorporated in the state of Delaware and carries out business activities in the United States, the expropriation of rights and assets represents a breach of
Canada’s obligations to a U.S. investor under Chapter Eleven of NAFTA.
Only a few weeks prior to the filing, AbitibiBowater vacated the buildings and property at the Grand Falls-Windsor mill, and the government of Newfoundland assumed custody and management of the former pulp and paper mill. AbitibiBowater had been taking care of security and environmental monitoring of the properties.
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