AbitibiBowater settles NAFTA suit with Ottawa

August 25, 2010   by PLANT STAFF

MONTREAL: The Newfoundland Labrador government’s expropriation of AbitibiBowater assets and natural resource rights in 2008 will cost Canadian taxpayers $130 million.

The Montreal-based pulp and paper giant currently under bankruptcy protection has settled a $500-million complaint with the federal government under Chapter 11 provisions of the North American Free Trade Agreement (NAFTA) so both sides could avoid a protracted and expensive legal battle.

Chapter 11 allows an aggrieved party to sue NAFTA governments directly for regulatory expropriation or moves that negatively affect the commercial value of a property.

The company said it will now withdraw its NAFTA notice of arbitration.


Newfoundland Labrador moved to expropriate all of AbitibiBowater’s resource rights and hydro electricity rights from a generating station at Star Lake following the company’s announcement in December 2008 it would close the Grand Falls-Windsor pulp and paper mill in March last year.

The province’s Conservative government said the hydro rights were tied to the operation of the mill. Its legislation said all AbitibiBowater’s assets, including dams and power stations (but excluding the pulp and paper mill) would be owned by Nalcor, a provincial Crown corporation.

AbitibiBowater said the settlement agreement is conditional upon the approval of its terms by the Superior Court of Quebec and by the US court, which are overseeing its bankruptcy case. Court approvals in the US and Canada will also be needed for the company’s restructuring plans. Once free of bankruptcy, the settlement will be paid to the new Canadian entity.

Newfoundland and Labrador premier Danny Williams said the province would not reimburse the $130 million to the federal government the, noting Ottawa is responsible for the cost of the NAFTA settlement under terms of the international agreement.

Meanwhile, AbitibiBowater continues its restructuring, which is to be concluded by the fall, with the closure of two idled Quebec paper mills in Dolbeau and Gatineau that had employed 570 workers.

Both mills produced more than 600,000 tonnes of commercial paper and newsprint annually.
PLANT, files from The Canadian Press

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