International Trade Committee on March 8th, 2011

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

We are obviously not talking about a lot that is expropriated by a municipality or some level of government, we are rather discussing businesses that invest in Canada or in Quebec.

[Don Stephenson]

Precisely.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

So hundreds of such events could have taken place without the Department of International Trade being informed about them. Also, when there is a dispute, it is because a company has gone to court.

[Don Stephenson]

That is right.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

Likewise, you are not always aware when something like that happens.

[Don Stephenson]

No. We are aware when a business challenges under the NAFTA, but we are not necessarily aware if the suit is brought before a provincial court.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

In all of the NAFTA provisions, is there a mechanism that allows for renegotiation when problems occur? As with chapter 11, do the NAFTA countries agree that they could better define the concepts of expropriation, of an investor or of investment? Is this a subject that has to be renegotiated?

[Don Stephenson]

Yes. A few years ago, the three NAFTA signatories agreed on the clarification of certain clauses or procedures within the NAFTA. They were interpretations.

What was the phrase that was used, John? Were they clarifications or interpretations?

[John O'Neill]

The term was “a note of interpretation”.

[Don Stephenson]

It was a note of interpretation.

This is to say that the three parties agreed on the interpretation of a clause and produced a note of interpretation that courts must follow.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

According to our analysis, the definition of expropriation is quite vague. This could even be to the benefit of investors who might want to challenge almost any social or environmental law of a government or one of the contracting parties. We feel that, in a sense, this limits the possibilities of provincial governments and the Government of Canada to pass legislation.

I am well aware that you are neither the signatories nor the negotiators, but I wanted to express my view nevertheless.

Perhaps Claude could finish.

[Don Stephenson]

Could I answer or make a comment?

[The Chair, Conservative, Lee Richardson]

I think that will have to be in the next round.

Thank you. C'est tout.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

He has a comment.

[Don Stephenson]

May I respond?

[The Chair, Conservative, Lee Richardson]

Sure.

[Don Stephenson]

The NAFTA has not changed the definition of expropriation in Canadian law. Canadian law already contained the concept of direct expropriation, as in this case, or of indirect expropriation, which involves other kinds of measures that result in you losing your investment. That has not changed with the NAFTA.

Also, people may, for indirect reasons such as an environmental regulation or some other regulation, challenge government measures either under the NAFTA or before the country's courts. However, if they do so under the NAFTA, they will not be successful. I have not seen any situation where government regulations intended to protect the safety of individuals or of the environment have been restricted.

[The Chair, Conservative, Lee Richardson]

Merci.

Mr. Julian.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Merci, monsieur le président.

My thanks to our witnesses for coming here today.

This is a pretty disturbing case from a number of different standpoints. There's a series of questions I'd like to ask.

Could you confirm that the Newfoundland and Labrador government had to pay or did pay about $30 million in severance pay that AbitibiBowater should have paid and how that entered into the evaluation of giving $130 million to a company that projects profits over the next four years of $1.5 billion? It seems a poor use of taxpayers' funds, when you when you have projected profits in that scope and the Newfoundland and Labrador government picking up severance pay, to have Canadian taxpayers foot the bill for this situation.

The other question I'd like to ask is about compensable rights. Water rights, under Canadian law, are not subject to compensation, and I'm wondering again to what extent the evaluation took place.

You have the Newfoundland and Labrador government picking up severance pay. You have rights that are not compensable. How did the department evaluate this? I'm assuming they recommended payment. How did the department evaluate the payment of $130 million on that basis?

[Don Stephenson]

Well, to the first part, with respect to the $30 million paid by the province to cover severance, this was a decision made by the provincial government, not the federal government. We were not directly involved in that discussion or decision. It was a matter that was legally separate from the question of expropriation of assets. That was the issue under the NAFTA and we did not take it into consideration in respect of settling the expropriation.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Just so I understand: Canadian taxpayers, through Newfoundland and Labrador, picked up moneys that AbitibiBowater owed to its workers, and that didn't in any way enter into the equation for the $130 million paid out to AbitibiBowater.

[Don Stephenson]

It did not enter into the equation of the Government of Canada's decision to provide $130 million in compensation for the expropriation. It may—and I underline the “may”, because you'll have to ask someone who represents the Government of Newfoundland and Labrador this question—have entered into their discussions and considerations when they decided not to pay or participate in compensation to the firm.

With respect to the second--

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Were there other payments made by Newfoundland and Labrador?

[Don Stephenson]

No. One of the considerations that was clearly involved in their decision whether or not to pay compensation--and this was stated publicly by the premier--was the liability for environmental remediation costs down the road.

As to the second part of the question with respect to the assessment that was made, we conducted an assessment of the fair value of the assets. As there are continuing settlement discussions going on today between the province and other investors in the same facilities, I wouldn't want to get into a detailed discussion of the evaluations we made of those assets. Moreover, they were part of a confidential settlement negotiation and would involve commercially confidential information.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

So we're now up to $170 million and counting that the Canadian taxpayers picked up for AbitibiBowater. This is very relevant to our committee report, of course, and I think we'll need to have a discussion as a committee to see to what extent we can get that evaluation, that information.

The second disturbing aspect of this, I think as you'll understand, is that the AbitibiBowater headquarters is in Canada. So now we have another situation where a Canadian company is using investor-state provisions to flip its ownership.

Could you confirm that NAFTA chapter 11 provisions were originally designed to protect foreign companies? Whether or not it was wise to put those in place I guess is open to question, but now we have a situation where Canadian companies can access chapter 11 provisions if, for tax reasons or whatever else, they have filed incorporation papers outside Canada.

That of course is very disturbing when you think of the Canada-Europe trade agreement and basically allowing companies anywhere in the world to access chapter 11 as long as they file their incorporation papers in the appropriate place. This is another aspect that's disturbing to many Canadians.

Can you confirm that the AbitibiBowater headquarters is in Canada and that chapter 11 wasn't designed to have Canadian companies use it against the Canadian government?