Court clears way for Canada suit vs U.S. Steel

Fri May 27, 2011 4:41pm EDT
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

TORONTO (Reuters) - A court has cleared the way for Ottawa to seek penalties of up to C$10,000 a day against U.S. Steel for allegedly breaking job-protection promises made when it bought Canadian steelmaker Stelco.

The Federal Court of Appeal struck down U.S. Steel's efforts to overturn Canadian investment law -- the second such court decision to go against the company -- after almost two years of procedural and legal challenges by the Pittsburgh-based steelmaker.

The Canadian government sued the company in 2009, claiming U.S. Steel's decision to shut down two former Stelco plants violated promises it made about maintaining employment levels.

U.S. Steel bought Hamilton-based Stelco in 2007 for $1.1 billion, and the decision to idle the facilities affected about 1,500 jobs. The company blamed weak demand for the shutdowns and denies it broke any promises.

The official agreement between U.S. Steel and the Canadian government that allowed the acquisition of Stelco to go ahead has not been publicly disclosed.

All deals over C$300 million ($306 million) involving a foreign buyer are required to pass a government review to ensure that the takeover provides a "net benefit" to Canada.

While the government does not detail what "net benefit" means, it considers employment, technology development, productivity, competition and the effect a takeover will have on national policies.

In approving the Stelco takeover, the federal government cited job protection as one of the benefits.

But when demand dropped for its products in the aftermath of the global financial crisis, U.S. Steel decided to shutter most of its Canadian operations.   Continued...