Canadian court rules to allow case against US Steel move forward

Tuesday, 15 June 2010 02:45:48 (GMT+2)

On January 12, 2010 US Steel Corp. urged a Canadian judge to throw out a government lawsuit alleging the steelmaker failed to live up to commitments it made when it acquired Stelco Inc.

However, Canada's Federal Court Monday moved to uphold the Investment Canada Act, which governs foreign investment in Canada.

In January, Michael Barrack, council for US Steel argued that the Investment Canada Act is unconstitutional because it's too vague and doesn't give companies a proper right to defend themselves, Investors can justify why they didn't comply with commitments made under the law, but aren't told how, he said.

"An investor is left to guess what ‘justifies non- compliance' means," Barrack said. The government is seeking as much as C$14 million (US$13.5 million) in fines, or an order forcing US Steel to sell the Canadian operations, for failing to meet commitments that include maintaining employment levels and steel production at the plants in Hamilton, Ontario, Barrack said.

Industry Minister Tony Clement had said the government can force US Steel to live up to obligations made when it took over Stelco, Canada's last domestically owned steel mill. Clement said Canada can even unwind the deal, claiming the company broke its commitments under a law covering foreign takeovers.

At the current time, US Steel recognizes it failed to uphold two promises made at the time Stelco was acquired because, according to a June 14 article printed in the Winnipeg Free Press, "sudden international economic crisis" left US Steel with no other alternative.   The article further indicates that as of May 2009, US Steel Canadian operations had "shrunk to only 23 percent of the more than 3,000 workers it promised to employ" at the time of the acquisition.

The Canadian Federal Court will hear arguments on the matter in the future.  A firm date has not yet been set. 

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