OTTAWA – The Supreme Court of Canada has ruled against the government of Newfoundland and Labrador in its effort to force insolvent newsprint giant AbitibiBowater Inc. pay for an environmental cleanup.
The high court acknowledged the so-called “polluter pay” principle, but ruled it wasn’t enough to give the province the victory it has now failed to achieve in three levels of court.
The province wanted the top court to decide if a debtor’s statutory duty to remove environmental contamination is extinguished under Companies’ Creditors Arrangement Act.
The company, now operating as Resolute Forest Products (TSX:RFP), had filed for protection under the act in 2009.
The province wanted to force the company to clean up five contaminated sites, which has been estimated to cost between $50 million and $100 million.
They include a defunct Grand Falls-Windsor paper mill in central Newfoundland that the province expropriated in December 2008.
The Quebec Court of Appeal earlier refused to hear the province’s appeal against the Montreal-based company.
The Supreme Court ruled 7-2 against the province, essentially telling it that it had to get in line with other creditors.
Writing for the majority, Justice Marie Deschamps, who is now retired, said allowing the province to operate outside the bankruptcy law regime would be akin to asking all other creditors to pay the province.
The ruling acknowledged the “polluter pay” principle but said in this case it did not give the province any special status that would move it ahead of other creditors.
“In the insolvency context, the province’s position would result not only in a super-priority, but in the acceptance of a ‘third party-pay’ principle in place of the polluter-pay principle,” Deschamps wrote.
“Nor does subjecting the orders to the insolvency process amount to issuing a licence to pollute, since insolvency proceedings do not concern the debtor’s future conduct. A debtor that is reorganized must comply with all environmental regulations going forward in the same way as any other person.”
The case has been politically charged and attracted attention from the governments of Alberta, Ontario and British Columbia as well the environmental group, Friends of the Earth, which were all granted intervener status.
The province rushed through legislation to seize Abitibi timber and water rights, along with a hydroelectric power station, after the failing company announced it was closing the Grand Falls-Windsor mill.
The federal government subsequently agreed to pay AbitibiBowater $130 million to settle a claim under the North American Free Trade Agreement.