by Brian Lee Crowley

March 10, 2011 – Ottawa – The Macdonald-Laurier Institute (MLI) today released a Commentary, AbitibiBowater, Democracy and the Public Interest, based on MLI Managing Director Brian Lee Crowley's testimony before the House of Commons Standing Committee on International Trade.

In December 2008, Premier Danny Williams' Progressive Conservative government in Newfoundland and Labrador announced the seizure of the assets of the paper, pulp and lumber firm AbitibiBowater. The province paid no compensation for this nationalization. The company brought an action under the investor protection provisions ("Chapter 11") of NAFTA and won a settlement of $130 million. But while the province nationalized the assets, the settlement had to be paid by the Government of Canada as the sole government in Canada that was a signatory to NAFTA.

The Standing Committee is charged with studying the impact of the AbitibiBowater settlement on "future democratic decisions taken in the public interest by Canadian governments at all levels."

In his brief to the Committee, Crowley argued that this mandate failed to focus on the real issues raised by the AbitibiBowater decision: the dangers created by a legal and constitutional situation where provinces may behave badly, damage Canada's reputation as a safe place for foreign investors, and then pass the bill for the harm they do to the federal taxpayer.  Crowley's brief raised four key points:

  1. The Chapter 11 provisions of NAFTA provide no bar whatsoever to Canadian governments acting in the public interest through law and regulation, but they properly require that the government pay the legitimate costs associated with their decisions, including compensating parties whose property is confiscated or nationalized.
  2. Paying compensation for expropriation is a matter of basic fairness and is a fundamental principle in Canadian law, not just NAFTA.
  3. As a country with huge investments in other jurisdictions, we benefit enormously from such investor protections in other countries, and failure to apply such protections domestically would damage our credibility and harm Canadian investors.
  4. The AbitibiBowater case points up a damaging inconsistency in Canada's constitutional and legal framework whereby Canada has the treaty-making power and, therefore, is responsible to ensure that we meet our treaty obligations; but provinces are not bound to respect the NAFTA provisions.

Crowley writes, "If there is any kind of a democratic deficit in the AbitibiBowater decision, it is that the Government of Newfoundland and Labrador was able to force the federal government and federal taxpayers to pick up the tab for its bad behaviour."