Law360, New York (January 4, 2016, 7:47 PM ET) — American paper company Resolute Forest Products Inc. is seeking CAD$70 million ($50.2 million USD) in damages from the Canadian government under the North American Free Trade Agreement for losses allegedly caused by the government-aided revival of a competitor's paper mill in Nova Scotia.
The Montreal-based company said in a Dec. 30 statement that it has filed a notice of arbitration under NAFTA over measures taken by the provincial government in Nova Scotia to reopen a paper mill owned by Port Hawkesbury Paper LP. By aiding Port Hawkesbury, the government unfairly discriminated against Resolute and caused the closure of Resolute's paper mill in Quebec, according to the statement.
The closure of its Laurentide mill in October 2014 deprived Resolute of its investment, violating its rights under NAFTA, the company claims.
"The company is seeking damages for direct losses of approximately $70 million, consequential damages, and additional costs and relief deemed just and appropriate by an arbitral tribunal," according to the statement.
Resolute, which manufactures products ranging from newsprint, specialty papers, tissue, and market pulp and wood products, noted in its statement that Canada is responsible for Nova Scotia's actions under NAFTA and international trade law.
Canadian officials did not immediately respond to a request for comment on Monday. A Resolute spokesman declined to provide additional comment.
When Resolute announced it was permanently closing its Laurentide paper mill in Shawinigan, Quebec, in September 2014, the company blamed the closure on the restart of the Port Hawkesbury mill at the end of 2012, the high cost of fiber, and higher transportation and fuel costs that affected the mill's competitiveness.
The Laurentide mill was in operation for more than 126 years and produced 191,000 metric tons of commercial printing papers annually, according to the company.
Port Hawkesbury Paper, meanwhile, claims that the reopening of its mill was a part of a normal statutory, court-supervised, insolvency proceeding in the Canadian courts, in which all stakeholders, including those in the U.S., were provided with an equal opportunity to participate. The company said the reopening was fully consistent with international trade rules.
Resolute’s claim under NAFTA comes in the midst of an ongoing international trade dispute that stemmed from a complaint made by American paper companies to the U.S. International Trade Commission in early 2015 that Canadian shipments of glossy paper used in magazines and catalogs were being illegally subsidized.
The ITC ruled in favor of the American paper companies over the next several months after concluding that the Canadian companies had received government subsidies and that the imports were harming domestic manufacturers. Port Hawkesbury and Resolute's Canadian counterpart were ultimately slapped with tariffs of 20.18 percent and 17.87 percent, respectively, which went into effect in December. Other Canadian paper companies were assigned a rate of 18.85 percent.
The Canadian government challenged the findings under NAFTA shortly after the countervailing duties were finalized, claiming that the U.S. Department of Commerce hadn't accurately calculated the subsidy rates.