Court clears way for Canada suit against U.S. Steel
A Canadian court has cleared the way for Ottawa to seek penalties of up to $10,000 a day against U.S. Steel for allegedly breaking job-protection promises made when it bought Hamilton, Ontario-based Stelco.
The Federal Court of Appeal struck down U.S. Steel's efforts to overturn Canadian investment law—the second such court decision to go against the company—after almost two years of procedural and legal challenges by the Pittsburgh-based company.
The Canadian government sued the company in 2009, claiming U.S. Steel's decision to temporarily shut down two former Stelco plants violated promises it made about maintaining employment levels.
U.S. Steel bought Stelco in 2007 for $1.1 billion US, and the decision to idle the Ontario facilities affected about 1,500 jobs. The company blamed weak demand for the shutdowns and denies it broke any promises.
All deals over $300 million Cdn involving a foreign buyer are required to pass an Industry Canada review to ensure that the takeover provides a "net benefit" to Canada.
While the government does not detail what "net benefit" means, it considers employment, technology development, productivity, competition and the effect a takeover will have on national policies.
In approving the Stelco takeover, the federal government cited job protection as one of the benefits.
The Investment Canada Act gives the government the authority to ask the courts to fine U.S. Steel up to $10,000 a day until its commitments on job protection are honored.
"The courts have now made it clear—twice—that the penalties set out in the act are legitimate, as is their purpose to protect Canada's economy and enforce promises made by foreign investors," said Ken Neumann of the United Steelworkers union of the ruling, which was issued on May 25.
U.S. Steel declined to comment on the development.
The Investment Canada Act gained notoriety last year, when the federal government rejected a $39 billion takeover bid by Anglo-Australian miner BHP Billiton for Saskatchewan-based Potash Corp, saying the deal was not of "net benefit" to Canada.
A $3 billion bid by the London Stock Exchange to buy TMX Group, operator of the Toronto Stock Exchange, will also face a "net benefit" review.