Danny Chavez vs. NAFTA

I have generally been underwhelmed by media coverage of AbitibiBowater’s prospective NAFTA challenge of Newfoundland and Labrador’s decision to reclaim natural resources that the company previously used to operate paper mills in the province.

I watched a panel discussion on Mike Duffy Live (before his Senate appointment) that focussed entirely on NAFTA’s nondiscrimination provisions. But there is no suggestion that the provincial government discriminated against Abitibi because it is an “American” company (headquartered in Montreal, but incorporated in Delaware) or that it treated Canadian companies in similar circumstances differently.

Subsequent reporting and commentary has more accurately emphasized NAFTA’s expropriation provisions. But if the timber and water rights ultimately belong to the Crown anyway, it is not clear why the Newfoundland and Labrador government would be expected to pay compensation for them. Its legislation does appropriately envision compensation for expropriating hydroelectric facilities that Abitibi’s predecessor built.

As far as I know, the provincial government has made no decision about the amount of such compensation and the company is not saying how much it wants. Recourse to NAFTA seems very premature. Abitibi is clearly using the treaty to put pressure on Newfoundland and Labrador, rather than as a last resort to resolve an irreconcilable dispute.

Anyway, in contrast to my general disappointment with coverage of this episode, I was particularly happy to read Gus Van Harten’s fantastic op-ed in today’s Financial Post. He makes several excellent points about the Abitibi situation in particular and NAFTA’s Chapter 11 in general.

One comment

  • some facts for clarification so you need not find yourself in the embarrassing position of being on the wrong side of a losing argument.
    1. Abitibi Bowater expropriation of assets.
    The NL gov’t didn’t unilaterally end the business relationship. AB did with their actions to close the Grand Falls Windsor Paper Mill.
    As to the legality of taking back ownership of the Hydro assets, AB broke one of the covenants contained in the agreement itself with the mill’s closure, they have no rights in NL to provincial resources whatsoever.
    They do however have an expectation to be compensated for infrastructure they built. That is fair and will be taken care of by NL is due course.
    I’d suggest reading the following links:

    The Star Lake Power Plant cost Abitibi about 50 million to build in 1998.

    Timber rights were given to them to produce paper…No paper, therefore no timber rights.

    I guess the 250 million must be a good will payment!!

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