Ottawa Pays AbitibiBowater $130-million for Expropriation

Riyaz Dattu

Aug 24, 2010

By Bertrand Marotte, Report on Business

The federal government is taking a $130-million hit to compensate forestry giant AbitibiBowater Inc. for Newfoundland and Labrador’s expropriation of its assets in the province.

The settlement is believed to be one of the largest of its kind under the terms of the North American free-trade agreement’s Chapter 11.

“It’s extremely significant,” Riyaz Dattu, a partner at Osler, Hoskin & Harcourt LLP in Toronto, said Tuesday.

“This was an action of the government of Newfoundland and Labrador and it’s the federal government that had to step up and pay the damages,” he said.

NAFTA’s Chapter 11 allows foreign companies to file compensation claims in countries where they have investments and feel a government action – such as legislation or expropriation – is unfair and discriminatory. Even if the allegedly unfair actions were initiated by a province, it is the federal government that is on the hook if arbitration determines that compensation must be made.