Newfoundland vs. AbitibiBowater?

Dec.21.08 | About: Resolute Forest (RFP)

Hugo Chavez ain't got nothin' on Newfoundland and Labrador premier, Danny Williams. Ol' Hugh at least pays compensation for expropriating private assets owned by corporations, unlike Williams, who is just taking the assets of forestry company AbitibiBowater (ABH).

AbitibiBowater is threatening legal action under the North American Free Trade Agreement over Newfoundland and Labrador's move to expropriate its resource rights and hydro assets in Grand Falls-Windsor...

“The legislation is an entirely unfounded and unscrupulous attack by the province of Newfoundland and Labrador,” it says.

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

The province hastily passed Bill 75 on Tuesday to expropriate the company's hydroelectric assets, water and timber rights in the Grand Falls-Windsor area.

The move came after Montreal-based AbitibiBowater announced it was shutting down a century-old mill in the central Newfoundland region, with the loss of nearly 800 jobs.

The company says its legal advice is that the expropriation is “clearly and unequivocally” illegal under NAFTA and international legal principles.

“While the government of Newfoundland and Labrador appears to wish to punish AbitibiBowater Inc. for the announced closure of the Grand Falls mill, it is the people of Newfoundland and Labrador that stand to suffer from the clear signal being sent by the government that private property rights and the rule of law in the province are expendable,” says the letter, which is copied to the Justice Department in Ottawa.

The law passed by the legislature says all of AbitibiBowater's assets except for its pulp and paper mill will be owned by Nalcor, a recently established provincial Crown corporation. Those assets include dams and power stations. ...

Mr. Williams has said AbitibiBowater broke a century-old “covenant” with the province when it decided to shut down the mill next March, a move that would devastate the Grand Falls-Windsor economy. He pointed to a 1905 agreement that gives AbitibiBowater access to wood and hydroelectricity as long as it runs a milling and logging operation.

Mr. Williams said the government will not compensate AbitibiBowater for the loss of water and timber rights.

Scratch Newfoundland off the list of places to invest.