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AbitibiBowater Files Arbitration Notice Against Canadian Government

Montreal, Quebec, Canada, 25 February 2010 -- (Canada NewsWire) -- AbitibiBowater today filed a Notice of Arbitration under the North American Free Trade Agreement (NAFTA) with regards to the expropriation of its assets and rights in Newfoundland and Labrador, Canada. The company contends that the provincial government's enactment in December 2008 of Bill 75, which expropriates an extensive array of the company's rights and assets, was arbitrary, discriminatory, and illegal under international law.

The claim seeks direct compensation for damages of approximately CAD 500 million, plus additional costs and relief deemed just and appropriate by the Arbitral Tribunal. This is one of the largest claims ever filed against Canada under NAFTA. Under international law, the Canadian federal government is responsible for the actions of Newfoundland and Labrador in violation of the investment protection provisions of NAFTA.

In early December 2008, AbitibiBowater announced capacity-reduction measures in Canada and the United States, including the permanent closure of its Grand Falls-Windsor, Newfoundland and Labrador mill, due to the economic downturn and decline in product demand. In retaliation, the province hastily passed Bill 75, without any attempt to consult with the company and without holding any public hearings.

The company has asserted in the Notice of Arbitration that the province's Bill 75 unquestionably breaches Canada's NAFTA obligations on a number of grounds, including among others:

  • Unlawful expropriation: NAFTA explicitly details the grounds under which government expropriation can lawfully occur. The criteria for lawful expropriation were not met by the Government of Newfoundland and Labrador in Bill 75.
  • Fair compensation: Under NAFTA, AbitibiBowater is entitled to compensation "without delay" for the "fair market value" of each of its expropriated investments. Bill 75 does not ensure payment for the fair market value of the expropriated rights and assets.
  • Treatment in accordance with International Law: NAFTA obliges Canada to provide treatment "in accordance with international law," which includes international standards of "fair and equitable treatment." The bill's seizure of AbitibiBowater's rights and assets was arbitrary, irrational and discriminatory, in violation of these standards.
  • Denial of justice: Bill 75 purports to strip AbitibiBowater of any rights to access the courts, which is independently a violation of NAFTA.
  • Discrimination: AbitibiBowater should be afforded the same rights and privileges as all other domestic and foreign investors. Bill 75 is retaliatory in nature and discriminates against the company.

"AbitibiBowater has been engaged with the government of Canada and the government of Newfoundland and Labrador in an effort to achieve a fair and equitable settlement and avoid 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," said David Paterson, AbitibiBowater president.

"It is our obligation to defend the interests of our stakeholders and ensure we receive compensation for the fair market value of the expropriated assets, plus additional damages. We are disappointed that a settlement acceptable to all parties has not yet been reached and we still hope that this issue can be resolved by a negotiated settlement with the government of Canada," concluded Paterson.

The expropriation relates to a broad range of AbitibiBowater's rights and assets in Newfoundland and Labrador, including land rights, timber rights, water use rights, and various other related rights and business partnerships. These rights and assets can be traced back in part to grants by the provincial government and its predecessors, and to numerous third-party transactions. In addition to the substantial sums it expended to acquire these rights, the company has invested hundreds of millions of dollars in the province over the last century, ranging from capital investments in mill and hydroelectric generation operations to road projects that have helped build rural Newfoundland.

Because the company is incorporated in the state of Delaware and carries out business activities in the United States, the expropriation of rights and assets represents a breach of Canada's obligations to a U.S. investor under Chapter 11 of NAFTA.

AbitibiBowater has been involved in consultations with the U.S. State Department, Treasury Department, the Department of Commerce, and the U.S. Trade Representative since the expropriation. In an official statement, the U.S. State Department expressed concern about the action. As well, at a recent investment conference, representatives from the states of Alabama, Mississippi, Tennessee, Georgia, and South Carolina also raised the expropriation with officials from the governments of Canada and Newfoundland and Labrador.

AbitibiBowater produces a wide range of newsprint, commercial printing papers, market pulp, and wood products. It is the eighth largest publicly traded pulp and paper manufacturer in the world. AbitibiBowater owns or operates 22 pulp and paper facilities and 27 wood products facilities located in the United States, Canada, and South Korea. Marketing its products in more than 90 countries, the company is also among the world's largest recyclers of old newspapers and magazines, and has third-party certified 100% of its managed woodlands to sustainable forest management standards. AbitibiBowater's shares trade over-the-counter on the Pink Sheets and on the OTC Bulletin Board under the stock symbol ABWTQ.


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