International Trade Committee on March 8th, 2011

[Don Stephenson]

I'll let John answer that part, but, yes, NAFTA was to protect foreign investors in Canada and Canadian investors in the other two countries.

In the case of AbitibiBowater, they were legally established in another NAFTA country and therefore had access to the dispute settlement under NAFTA, including chapter 11. I'm uncertain about the history of the ownership of the company, and maybe John can provide more detail, but a Canadian and an American firm merged into AbitibiBowater, Abitibi being the original Canadian company and Bowater being the American.

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

But the headquarters is in Montreal?

[John O'Neill]

The company headquarters are in Montreal. AbitibiBowater is a merger of Abitibi Consolidated, which was primarily a Canadian company but did have some operations in the U.S., and Bowater Incorporated, a U.S. company that also had some operations in Canada. Under the merger agreement, the new company, AbitibiBowater, was incorporated in Delaware and its head office is in Montreal.

It carries on substantial business operations both in the United States and in Canada. So for the purposes of NAFTA chapter 11, it was a foreign investor that did have substantial business operations in its home country, the United States.

[The Chair, Conservative, Lee Richardson]

I'm afraid we'll have to get to the next round, but it's a great line of questioning and very useful. Thank you. I'm sure many Canadians would be interested.

Mr. Keddy.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Thank you, Mr. Chairman.

I welcome our witnesses.

I was a bit disturbed by the line of questions, actually, but maybe that's just my inherent bias coming out.

Mr. Chairman, when I look at this whole situation, I think--and with respect for my colleague from Newfoundland--this was a protracted issue between the Province of Newfoundland and AbitibiBowater that, unfortunately for the workers in Newfoundland, was not able to be resolved. There were two opportunities there, as I understand it, and I'll ask for some clarification.

Without chapter 11 ever existing, you could have gone through the courts in Canada. Or you could have gone through chapter 11 and, I expect, found hopefully a more streamlined and faster process and a ruling made with respect to Newfoundland and the Government of Canada that quite frankly I think would have ended up benefiting the Province of Newfoundland. However, those jobs are still lost, and that's the real shame here.

Had that not happened--and I realize you don't have legal advisers here--had we not had chapter 11, I would expect that this would still be in court. Do you have an opinion on that?

[John O'Neill]

It's hard to say.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Not really...?

[Don Stephenson]

No. My guess is that it would have been challenged somehow in the courts, but as I said, the Province of Newfoundland passed legislation closing access to the normal procedure for pursuing these rights in the provincial courts.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Fair enough; and you had mentioned that before.

The other question that came up involved the pension buyout and the environmental remediation that came to be settled between the company and the province. I don't see anything unusual with that, and I don't know why the federal government would be involved in that, although some of the questions from my colleagues seem to be headed in that direction.

If we have chapter 11 in place for a reason...and let's be fair and up front here: that reason is to have a dispute mechanism settlement for two entities with different opinions that have no other avenue left but to go to the courts. Hopefully those courts are unbiased and take into consideration all existing laws that are on the books. We ended up, in this case, paying out from the Government of Canada $130 million.

I just don't see what other venue, what other avenue, is available to go through that.

I'm not sure my colleagues aren't suggesting that perhaps this should have been the Province of Newfoundland. I'm a little surprised to hear that, especially from the NDP.

I don't think we have a choice but to respect federal law in Canada and to follow it. Unfortunately, in this case we ended up to be found in contradiction of the rules of international trade, and paid.

Am I oversimplifying this?

[Martha Hall Findlay, Liberal, Willowdale, ON]

It's a big “we”.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Well, it's a big we, but at the same time, that's what we're left with here.

[Don Stephenson]

I guess some parts are simple and some parts are not so simple in respect of the matter. The simplest part is that a company was expropriated, and that compensation was due--

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Absolutely.

[Don Stephenson]

--in some way, shape, or form.

There were several complications in respect of this particular matter.

Just as I go past it, John was reminding me that you may wish to check whether or not the province made a claim for the money that was paid in severance under the bankruptcy proceeding in Canada, the CCAA proceeding. We're not aware of whether or not that claim was made. It would have been, it seems to me--I'm not a lawyer--a legitimate claim by the province in a bankruptcy proceeding. So just that fact should be checked.

In the simplest terms, under the law and under international arbitration procedures, companies can take disputes against other companies to international arbitration all the time. The London Court of International Arbitration is there for companies to pursue their disputes, their commercial disputes, with other companies.

What the NAFTA did--as we do in all of our investment protection agreements, and as most countries do in respect of their bilateral investment protection agreements--was to allow investors to access those same international arbitration procedures in respect of the decisions taken by governments. That's the novel part. The rest does seem somewhat straightforward.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Yes.

Just to be clear, I think all of us have spent a fair amount of time looking at chapter 11 and trying to understand all the intricacies within it. But--and again, maybe it's an oversimplification--you have to have a dispute settlement mechanism. This one is not there solely for foreign entities. It's there to protect Canadian investment abroad as well, and Canadian investment in Canada.

So I don't see the great resistance to chapter 11, which is a dispute settlement mechanism that actually works to benefit Canadian investors and to treat foreign investors fairly. We may not be happy with the outcome of every settlement, but there has to be a rules-based process to settle these very thorny and often difficult international disagreements, or disagreements that take place domestically here in Canada, because of rules, regulations, or laws that governments have passed or companies refuse to obey.

You have to have a system. Maybe there's a better system there, but I'm not aware of it.

[Don Stephenson]

I agree with the question.

[The Chair, Conservative, Lee Richardson]

We're going to round two. These will be five-minute rounds. We're hoping to keep the questions and answers in each case to five minutes.

We're going to start with Ms. Hall Findlay.

[Martha Hall Findlay, Liberal, Willowdale, ON]

Thank you, Mr. Chair.

I hope to be very quick, because I want to turn it over to my colleague Mr. Simms.

The issue, for my colleague Mr. Keddy, is not that we disagree with chapter 11 and the rules. We fully understand that you need to have them. The key is that with any legal action there is always opportunity to engage in negotiations beforehand.

So where was the federal government, in discussions with the provincial government and AbitibiBowater, in recognizing that there were opportunities to deal with the liabilities of Abitibi with regard to remediation, for example? Perhaps there was an opportunity. So instead of just cutting a cheque for $130 million after the fact, that federal money could have been used to address Abitibi's liabilities for remediation, and thus help the remediation process, not just the company.

My point was not a dispute with the issue of chapter 11 or the existence of the rules. I understand that completely. But if we can't do anything about this now, maybe we've learned that we need to be much more involved beforehand.

I think my colleague Mr. Julian has raised an interesting question about the applicability of chapter 11 and the nationality of different companies. I think that's worth looking at.

Mr. Simms.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Yes. I couldn't have said it better myself.

Normally I like to get down to the meat of the situation, but we kind of got waylaid by some of the comments here.

I understand what you're saying, Mr. Keddy, but when it comes down to it, for the average citizen involved in living around this land, this expropriated land, that is to the benefit of society in general, I would rather have seen--and I think it was possible--$130 million paid to have much cleaner soil, even that alone, as opposed to $130 million to get someone off your back.

I mean, you can always talk about jurisdictions, but we found jurisdiction in Nova Scotia to clean up the Sydney tar ponds. We found it, and I think in this case we could have found much the same, but it does open up a broader discussion about industrial remediation and the lack of involvement. Because right now we're still in the courts over environmental remediation, and its price tag could take it somewhere in excess of $500 million. So someone still has to pay that, and we're still out $130 million.

I'm happy for the investors of AbitibiBower, but at the same time it's hard if you're an average citizen living amongst the waterways and so on and so forth. And there was the justification that, okay, in the beginning, the origins of the company were such that they were given free access to anything for the sake of jobs. Now, we're talking 100 years ago, I appreciate that, but at the same time, some of that has to be factored in.

That was my point of discussion from the beginning, and the question was, was there any open discussion about getting involved? Because all I'm looking at is a value for money, which is.... Yes, the Newfoundland government paid severances. They also paid a certain percentage of money that was owed to people who were local creditors.

But in the meantime, I want to launch into a quick question about what was said, and I think the discussion is about who exactly is where. I agree in protecting our investors overseas. As Mr. Keddy would know, I'm a free trader myself, but I do believe in the protections that are in the institutions.

But I think he brings up a good point, which is that I don't know who is what anymore. That mill was always a Canadian mill, owned by Canadian people, right up until the time it was closed--always. And now we find ourselves in some sort of situation where there was $130 million going to a foreign company and there is nothing coming back to us in return.

Anyway, I don't know if there's any comment on that. It's just my own little comment. Perhaps you can understand my frustrations. I don't know.

[Don Stephenson]

First of all, I understand that this was just a turn of phrase, but to say that $130 million was paid to get somebody off your back I think is the wrong characterization or understanding of the issues involved. It was a payment--

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Well, certainly you can see it from our perspective--

[Don Stephenson]

Agreed, but this was a payment for someone's assets that were expropriated by a government and that seems perfectly normal. The issue of the environmental remediation is a legally separate question--legally separate--from the question of the compensation for those assets. This wasn't Let's Make A Deal. This was a straight question--

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

But it should have been Let's Make A Deal. That's what I'm saying to you.

[Don Stephenson]

Okay--

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

I mean, you can lecture me on the jurisdictions all you want.