When free trade is not free: the abitibi case.

• Author: Bowal, Peter

We will not give away our valuable timber and water resources to a company that does not honour its historic commitments... [w]e will, therefore, today introduce a bill to ensure these valuable natural resources are returned to their rightful owners--the people of Newfoundland and Labrador.

--Newfoundland and Labrador Premier Danny Williams, December 16, 2008

The legislation, which is without precedent in Canada, and is reminiscent of decrees emanating from jurisdictions with less democratic traditions, shocks common sensibility.

--David J. Paterson, CEO of Abitibi to Premier Williams, December 19, 2008

Introduction

The North American Free Trade Agreement (NAFTA) came into effect on January 1, 1994 between Canada, Mexico, and the United States. It purports to "promote conditions of fair competition in the free trade area", "increase... investment opportunities in the territories of the parties", and "facilitate the cross--border movement of goods and services between the territories of the parties" [Article 102 (1)(a)-(f)].

Not only do trade barriers among these three countries remain, NAFTA also regulates government contracts, intellectual property and investments. One of the most serious rules is that no government may expropriate assets of a company from another member country. Article 1110 of NAFTA is labeled "Expropriation and Compensation". It says "no Party may directly or indirectly nationalize or expropriate an investment of an investor of another Party in its territory or take a measure tantamount to nationalization or expropriation of such an investment" unless it is on a non-discriminatory basis for a public purpose in accordance with due process of law and is accompanied by payment of fair compensation.

This article describes the recent Abitibi case in Newfoundland.

Expropriation Legislation

AbitibiBowater Inc. (Abitibi), a U.S.-based global forest giant incorporated in Delaware, had operated several mills throughout Newfoundland and Labrador (Newfoundland) from the early 1900s. In 2005, Abitibi closed its Stephenville mill. Three years later, it announced plans to end 800 jobs and shutter the Grand Falls-Windsor mill, its last in the province. For Abitibi to cease operations which began more than a century earlier was the final straw for Newfoundland Premier Danny Williams.

Less than two weeks later, on a cool, gray day before Christmas 2008, Premier Williams stood in the legislature to speak in support of Bill 75, the...