Canadian Industry Minister Tony Clement announced that the Canadian government has begun legal proceedings against U.S. Steel over production cutbacks at its Stelco subsidiary.
Clement said in a statement Friday that an application has been filed with the federal court of Canada asking the court to address the promises to Canada that U.S. Steel has broken by halting most of its Canadian operations earlier this year. This is the first time the Canadian government has taken to court a foreign company to meet its promises under the 1985 Investment Canada Act.
Clement says U.S. Steel broke its compliance agreement by halting operations at its Stelco subsidiary's Hamilton and Nanticoke plants in Ontario last March, a move which resulted in about 1,500 layoffs of Canadian members of the United Steelworkers.
Back in 2007, U.S. Steel acquired Canada's last domestically owned steel mill, Stelco, and signed a contract under which it made commitments on production, research and development and investment, in exchange for being allowed to acquire the company.
U.S. Steel said it was forced to close production at the Canadian plants -- alongside several mill shutdowns in the US -- to respond to crumbling demand in the auto, construction and oil drilling sectors. U.S. Steel General Counsel James Garraux said on Friday, "We are disappointed that the minister has apparently decided to pursue the matter in the courts while ignoring our numerous requests to meet with him on these issues and while disregarding the ministry's own guidelines with respect to foreign investment... We will vigorously defend our record at U.S. Steel Canada in the appropriate forum."