(Reuters) - Bankrupt Canadian newsprint producer AbitibiBowater Inc said the government of Canada will pay it C$130 million to settle a claim seeking compensation from a province for assets expropriated after the company closed a mill there.
On February 25, the forestry company filed a C$500 million claim under the North American Free Trade Agreement (NAFTA), seeking compensation.
The provincial government of Newfoundland and Labrador had passed a bill allowing it to take over lands, timber and water-use rights in the Atlantic province -- a move that AbitibiBowater claimed violated international law.
The bill came on the heels of AbitibiBowater’s announcement that it would close its newsprint mill in Grand Falls-Windsor.
On Tuesday, AbitibiBowater said it will waive its legal actions and claims against the government under the NAFTA, as a part of the settlement.
“We are now able to move forward and focus on finalizing our restructuring process and plans to emerge from creditor protection in the fall 2010,” Chief Executive David Paterson said in a statement.
The company said the settlement payment will be made to the new Canadian entity after it exits bankruptcy.
“In reaching this agreement, the government of Canada is avoiding potentially long and costly legal proceedings,” the Foreign Affairs and International Trade Canada said in a statement.
Reporting by Aftab Ahmed in Bangalore