AbitibiBowater uses NAFTA to challenge expropriation
As widely expected when Newfoundland and Labrador suddenly stole expropriated almost all of AbitibiBowater’s assets in the province, the natural resource multinational has launched a challenge under the North American Free Trade Agreement.
Premier Danny Williams expropriated AbitibiBowater’s (TSX:ABH) resource rights and assets in central Newfoundland as a punitive measure for the company’s decision to close a paper mill, the newsprint giant alleged in a free trade challenge Thursday.
The Montreal-based company filed a notice of intent under the North American Free Trade Agreement accusing the Newfoundland and Labrador government of taking a “blatantly discriminatory” action when it passed legislation to expropriate its hydroelectric assets, and water and timber rights in Grand Falls-Windsor.
“The act simply singled out one such company for retaliatory expropriation, and dressed up its punitive actions with populist rhetoric designed to loosely suggest (but not really reflect) rational public policy goals,” the 40-page notice says.
“The real motivation, and the real consequence of the act, was simple. It was to kick a single foreign investor out of the province because that investor had angered premier Williams and some of his constituents.”
AbitibiBowater is seeking over $300 million in compensation for its expropriated assets and rights, an amount that Newfoundland and Labrador rejects as excessive.
Because NAFTA is an international agreement, the federal government is now dragged into a legal action because of a decision made unilaterally by a provincial government. That the feds almost certainly disagree with the expropriation only compounds the irony. (As far as I know, the federal government has not officially expressed an opinion.)
What if Ottawa were to pay off AbitibiBowater and then dock Newfoundland and Labrador an equivalent amount in equalisation payments or other federal transfers? Premier Danny Williams would no doubt take the opportunity to hit the roof yet again.