From an article published in The
Independent Jan 13th, 2016
Abitibi Bowater is at it again.
In 2010 the company squeezed $130 million out of
Canadian taxpayers after the Government of Newfoundland and Labrador
expropriated Abitibi’s hydroelectric assets in Grand Falls-Windsor
and took back water and timber rights.
The company threatened to sue Canada under
Chapter 11 of the North American Free Trade Agreement (NAFTA), prompting the
Harper administration to settle out of court.
This all went down after Abitibi chose to pull
out of the province and used the excuse of imminent bankruptcy to give minimum
compensation to workers and pensioners, while paying nothing toward cleaning up
the environmental damage it had caused.
The company never did go out of business; after
emerging from bankruptcy proceedings under a new name, Resolute Forest
Products, it was business as usual on the mainland.
This time the company closed down a mill in
Shawinigan, Que., and is again suing under NAFTA because, it claims,
a competing mill in Port Hawkesbury, N.S. was given an unfair trade advantage
when it was subsidized by the Government of Nova Scotia.
The Port Hawkesbury mill closed in 2011 but was
purchased by Pacific West Commercial for $33 million and reopened one year
later with the guarantee of provincial government aid of approximately $12
million a year over a 10-year period. Today more than 1,000 people in Cape
Breton are employed by Port Hawkesbury Paper.
In addition to claiming direct losses of around
$70 million, Resolute Forest Products is
seeking unspecified consequential damages that could ultimately mean much
higher compensation.
What’s wrong with this
lawsuit?
At first glance, this lawsuit might appear
reasonable to some. That is, until one considers two important points.
First, the original argument for including
an investor-state dispute settlement mechanism in NAFTA was to prevent
governments from discriminating against foreign corporations in favour of local
businesses. There is a loophole in NAFTA, however, which allows Canadian
corporations to register in the United States and then claim they are
American for the purpose of suing Canada. This can be done as a mail box company in the state
of Delaware, for instance.
Resolute Forest Products’ head office is
in Montreal and, according to the company’s website, the “vast majority” of the
forests where it harvests trees are in Canada. Doesn’t this suggest that
Resolute—like Calgary-based Lone Pine Resources, which is currently suing Canada for $118.9 million
USD as a result of Quebec’s decision to ban fracking in the interest of
protecting the natural environment—is really a Canadian company in
American disguise?
Secondly, the Resolute Forest Products lawsuit could
be a ‘back door’ challenge to the whole idea of subsidies. This is a new,
and very significant, twist because trade agreements generally don’t attempt to
eliminate government’s right to use subsidies to stimulate local economies.
Even wildly pro-free trade governments haven’t argued for that.
For example, the Comprehensive Economic and Trade
Agreement (CETA) did not in any way address the huge subsidies European
countries give to their fishing industries. This is why Newfoundland and
Labrador’s acquiescence to the elimination of the its minimum
processing requirements (MPRs) that former governments had designed to protect
local communities and local workers was very shortsighted, even with the $280
million MPR federal compensation fund.
What the Resolute Forest Products lawsuit
suggests is that we now have very limited options when it comes to leveling the
very uneven playing field that exists in the international fisheries. We can
apparently forget the concept of provincial subsidies or bailouts to help local
producers and local jobs, as they can be challenged by industry players in
other provinces who happen to have European affiliates or have registered in
the United States.
The Resolute Forest Product lawsuit shows how
trade agreements can generate far-reaching consequences that governments never
anticipated. Canada, in particular, has not been very smart in its pursuit of
trade agreements. Just our NAFTA lawsuits alone have gained us the dubious
distinction of being the most sued developed country in the world. The United
States, by contrast, has yet to lose a NAFTA lawsuit.
You can find information about the other two lawsuits at
