Court Upholds Canadian Law, Dismisses U.S. Steel Case on Unconstitutionality
06/15/2010 - A Canadian Federal Court ruling confirms the federal government's ability and obligation to ensure foreign takeovers of Canadian companies provide real benefits to the country, and dismissing a legal challenge by U.S. Steel, which had argued the Investment Canada Act's enforcement mechanisms were unconstitutional.
A Canadian Federal Court ruling has confirmed the federal government's ability and obligation to ensure foreign takeovers of Canadian companies provide real benefits to the country. The ruling dismisses a legal challenge by U.S. Steel, which had argued the Investment Canada Act's enforcement mechanisms were unconstitutional.
"This ruling is a victory for our members and all Canadians," said Ken Neumann, USW National Director for Canada. "The court has confirmed the Investment Canada Act is constitutional and it is now up to our government to enforce this legislation with all foreign takeovers, to the fullest extent," added Neumann.
U.S. Steel launched its legal challenge last year, after the Canadian government took the company to court on the grounds it broke commitments it made about maintaining jobs and production levels at the former Stelco operations in Canada.
Prior to its purchase of Stelco, U.S. Steel had made numerous commitments to the Canadian government to ensure that its purchase would provide a "net benefit" to Canada, as required by the Investment Canada Act. After the sale, however, U.S. Steel shut down former Stelco operations and laid off hundreds of workers. The federal government later took legal action against U.S. Steel, alleging the company broke its commitments.
According to the USW, the case against U.S. Steel marks the first time the Canadian federal government has taken such action, despite the damaging impacts of other foreign takeovers such as Brazil-based Vale's purchase of Inco Ltd. and Swiss-Anglo miner Xstrata PLC buying the former Falconbridge Ltd. Both cases have resulted in job loss and economic injury to Canadian communities.
In her ruling, Madam Justice Dolores M. Hansen declared that the undertakings made by foreign corporations in such takeovers "are binding commitments" made to the Canadian government.
