Heat Treat Industry News

January 16, 2010

U.S. Steel attacks investment act in court

U.S. Steel Corp. urged a Canadian judge to throw out a government lawsuit that claims the steelmaker failed to live up to commitments it made when it acquired Stelco Inc. in 2007.

The Investment Canada Act, under which the government sued in federal court, is unconstitutional because it's too vague and doesn't give companies a proper right to defend themselves, Michael Barrack, U.S. Steel's lawyer, said at a hearing in Toronto Tuesday. Investors can justify why they didn't comply with commitments made under the law, but aren't told how, he said.

"An investor is left to guess what ‘justifies non-compliance' means," Mr. Barrack said. The government is seeking as much as $14-million in fines, or an order forcing U.S. Steel to sell the Canadian operations, for failing to meet commitments that include maintaining employment levels and steel production at the plants in Hamilton, Ont., Mr. Barrack said.

Industry Minister Tony Clement has said the government can force U.S. Steel to live up to obligations made when it took over Stelco, Canada's last domestically owned steel mill. Mr. Clement said Canada can even unwind the deal, claiming the company broke its commitments under a law covering foreign takeovers.

It's the first time the Canadian government has sued an investor since the Investment Canada Act became law in 1984. The act provides for the review of "significant investments" in Canada by non-Canadians to ensure Canada benefits.

Pittsburgh-based U.S. Steel, the largest U.S.-based maker of the metal, acquired Stelco for US$1.2-billion in cash in 2007. Since then it has fired workers in the U.S. and Canada because of a drop in manufacturing, construction and automaking.

The company idled most of its operations in Canada in March, laying off 1,500 workers. It restarted one of two Canadian blast furnaces in August, allowing 800 employees to return to work.

Mr. Clement said in July the company had made promises when it bought Stelco regarding capital spending, research and production and isn't complying with those promises. He didn't elaborate on what the promises were.

Joe Schneider, Bloomberg - Published: Tuesday, January 12, 2010

Source: Bloomberg.com

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