February 25, 2010 / 4:25 PM / 8 years ago

UPDATE 1-AbitibiBowater files C$500 mln claim under NAFTA

* Claim relates to expropriation of its assets and rights

* Says talks with federal/provincial governments failed

TORONTO, Feb 25 (Reuters) - AbitibiBowater said on Thursday filed a C$500 million ($467 million) claim under the North American Free Trade Agreement, seeking compensation from a Canadian province for assets expropriated after the bankrupt forestry company closed a mill there.

The company, headquartered in Montreal but incorporated in the United States, filed for bankruptcy protection in April 2009 after crumpling under a heavy debt load.

Five months before the filing, the provincial government of Newfoundland and Labrador passed a bill allowing it to take over lands, timber and water-use rights in the Atlantic province -- a move that AbitibiBowater claims violated international law.

The bill came on the heels of AbitibiBowater’s announcement that it would close its newsprint mill in Grand Falls-Windsor, cutting about 800 jobs. The closure was part of a plan to cut production capacity in the face of weakening demand in Canada and the United States.

AbitibiBowater claims the provincial government hastily passed legislation without consulting the company or holding public hearings.

AbitibiBowater is seeking damages of about C$500 million, plus additional costs and relief. It claims the province has violated the investment protection provisions of NAFTA, a deal signed by Canada, the United States and Mexico in 1994.

The company said Canada’s federal government is responsible for the provincial government’s actions because Ottawa signed NAFTA.

It said it had attempted to resolve the claim without initiating what could prove a protracted NAFTA case.

“Unfortunately, despite those extensive discussions, we are unable to resolve the matter at this time and the company has no choice but to file a formal claim under NAFTA,” Chief Executive David Paterson said in a statement.

Representives of the province and the federal government would not comment immediately on the matter. (Reporting by Euan Rocha; Editing by Frank McGurty) ($=$1.07 Canadian)

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