AbitibiBowater challenges Newfoundland hydro seizure

Newsprint manufacturer AbitibiBowater Inc. said it will challenge the government of Newfoundland and Labrador’s seizure of its hydropower projects on the Exploits River.

AbitibiBowater filed notice April 23 of its intent to submit a claim to arbitration under the North American Free Trade Agreement in connection with expropriation of its assets and rights. (HNN 4/3/09)

The company filed the notice as part of a dispute resolution mechanism available under NAFTA. It said it would subject the claim to arbitration in three months, should the matter not be resolved by that date.

AbitibiBowater seeks more than C$300 million (US$246 million) in direct compensation for what it sees as the fair market value of the expropriated assets and rights. It also wants compensation for additional costs and further relief as deemed appropriate by the arbitration tribunal.

Although AbitibiBowater is headquartered in Montreal, it is incorporated in Delaware and carries out business activities in the United States. Therefore, the company said, the expropriation of rights and assets in Newfoundland and Labrador represents a breach of Canada’s obligations to a U.S. investor under Chapter 11 of NAFTA.

The company’s position is that Newfoundland’s passage of Bill 75, which expropriated its assets and contractual rights to natural resources in Newfoundland and Labrador, was arbitrary, discriminatory, and illegal.

AbitibiBowater asserts the bill breaches Canada’s NAFTA obligation on a number of grounds. It claims: Criteria for expropriation detailed by NAFTA are not met in the bill; the bill does not ensure payment for fair market value of the expropriated assets and rights; and the bill purports to strip the company of any rights to access of the courts, a violation of NAFTA. AbitibiBowater also alleges the bill is retaliatory and discriminates against the company.

Newfoundland and Labrador Premier Danny Williams announced in December 2008 the province would expropriate the company’s timber rights and hydro assets when the paper maker closed its last newsprint mill in the province.

AbitibiBowater hydro developments in Newfoundland and Labrador included 30-MW Beeton, 45-MW Grand Falls-Windsor, and the 20-MW Bishop’s Falls project, all on the Exploits River. It also was an owner of 18-MW Star Lake.

Newfoundland and Labrador’s government reported it assumed ownership and management of the assets on March 29 through province-owned Nalcor Energy.

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