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The NAFTA big chill suit against Danny Williams and the public interest

AbitibiBowater, our largest forest company,  is using Chapter 11 of NAFTA to sue Canada over the actions of the province of Newfoundland. If the company succeeds in this case, it will be the great chill that corporations everywhere dream of to prevent governments from defending the public interest by taking back public resources that have been licensed to private companies for economic development.

We should be offended on democratic grounds that once again a corporation will sue a sovereign government not in a court – but before a NAFTA tribunal.  The rights of Canadian citizens and governments will end up being adjudicated by a panel of bureaucrats in a boardroom inside World Bank headquarters in Washington DC.

But we should also be angry over what this high stakes game is really about.  This is nothing more than a bargaining move by a company that desperately needs money and wants hundreds of millions of dollars from the Newfoundland treasury.

A year ago, AbitibiBowater closed the Grand Falls paper mill in Newfoundland and over 500 workers lost their jobs.  At the time, the company said that the closure was forced by workers who refused to accept concessions.  However by April, the company as a whole filed for bankruptcy protection and several other mills were also closed.  The perverse result for Grand Falls was that workers who were owed thousands of dollars each in severance pay got nothing.

Danny Williams and the Newfoundland government were furious with the company and they proceeded to take back the company’s timber and water rights and expropriate their hydro-electric dam and power station.  After all, the hydro operation depended entirely on a water license issued by the province to provide power for the mill.

A negotiation then ensued over the appropriate compensation for the investments that the company had made in the hydro operation.  But just what is the value of a hydro station that is based on a license to provide power for a mill that the company has now closed? 

Danny Williams was nicknamed “Hugo” over the expropriation of the assets.  Even though the government’s actions did not save their jobs, the mill workers have nothing but admiration for Williams.  A lesser known part of this story is that the Premier and the government then stepped in and paid over $30 million in severance pay that was owed to the people who lost their jobs at Grand Falls.  To my knowledge, this is unprecedented by any government in Canada.

Needless to say, any deal between the province and AbitibiBowater would have to take into account the millions of dollars of company obligations to workers already paid by Newfoundland.  The larger question is whether AbitibiBowater was using public resources to run a paper mill or to be a private power producer.  Put another way, are the licenses to use resources for economic development just another kind of private property that can be used or not used or sold regardless of the public benefit? 

In any event, the NAFTA challenge was from day one a bargaining chip in these negotiations, and the NAFTA proceedings will now be just another bargaining table where the company thinks it will have a stronger hand.

The NAFTA suit also offends on another level.  AbitibiBowater is presumably still a Canadian company (although 51% of its shares are held by the former Bowater shareholders).  Its headquarters is a landmark in downtown Montreal and the majority of its mills are in Canada.  The company has a $100 million loan guarantee from the province of Quebec and it is negotiating with the federal government for further assistance to restructure and emerge from CCAA protection.   

As it turns out, whether the company is Canadian or not doesn’t matter.  As long as there are US investors or shareholders, a Chapter 11 case can be brought.  In other words, this NAFTA provision is much less about trade between countries, and much more about the privileges of capital to trump the rights of citizens and governments.

So Newfoundland is in effect being dragged to the World Bank building and forced to defend the actions of its legislature before an unelected and non-judicial, unconstitutional NAFTA star chamber.  Of course, all that can be avoided by giving the company everything it wants.    

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