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AbitibiBowater seeks NAFTA arbitration over expropriation of rights and assets in Newfoundland

AbitibiBowater has filed a Notice of Intent to Submit a Claim to Arbitration under the North American Free Trade Ag…

AbitibiBowater has filed a Notice of Intent to Submit a Claim to Arbitration under the North American Free Trade Agreement (NAFTA) with regards to the expropriation of its assets and rights in Newfoundland and Labrador. It is the company’s position that the passing of Bill 75 by the provincial government, which expropriates AbitibiBowater’s provincial assets and contractual rights to natural resources, was arbitrary, discriminatory and illegal.

AbitibiBowater is seeking in excess of $300 million in direct compensation for the fair market value of the expropriated rights and assets, plus additional costs and further relief as the Arbitral Tribunal may deem appropriate.

“It is our obligation to defend the interests of our shareholders and ensure we receive compensation for the fair market value of the expropriated assets, plus additional damages. With this notice, we have taken the first step in pursuing legal actions,” says David J. Paterson, president and CEO.

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. The company has filed this notice as part of the dispute resolution mechanism available under NAFTA and will submit the claim to arbitration in three months, pursuant to the relevant NAFTA provisions, should this matter not be resolved by that date.

In early December 2008, AbitibiBowater announced various capacity-reduction measures, including the permanent closure of its Grand Falls, Nfld., mill, as a result of the economic downturn and decline in product demand. According to AbitibiBowater, the province quickly passed Bill 75, without any attempt to consult with the company and without holding any public hearings.

The company has asserted in the Notice of Intent that Bill 75 unquestionably breaches Canada’s NAFTA obligations on a number of grounds, including, among others, the basis of expropriation. According to AbitibiBowater, NAFTA explicitly details the grounds under which government expropriation can occur, and these criteria for expropriation are not met in Bill 75.

The company also states that under NAFTA, AbitibiBowater is entitled to immediate, full and fair compensation, and that. Bill 75 does not ensure payment for the fair market value of the expropriated rights and assets.

AbitibiBowater claims that Bill 75 purports to strip the company of any rights to access the courts, which is independently a violation of NAFTA.

“AbitibiBowater has been operating in Newfoundland and Labrador for more than a century, contributing significantly to the region’s economic, social and sustainable development,” says Paterson. “The nationalization of our assets was unexpected and an unnecessary course of action. It came despite our proactive outreach to form a joint working group to address and resolve all issues related to our rights and assets in the province. The Company remains open to seeking a collaborative resolution with the federal and provincial governments.”