Earlier this year, the Federal Court of Canada heard an application by U.S. Steel Corp. challenging the constitutionality of the enforcement provisions of the Investment Canada Act ("ICA").
U.S. Steel, which has been sued by the Canadian government for allegedly breaching undertakings provided to secure approval of the acquisition of Stelco Canada in 2007, argued that the enforcement process under the ICA violates Canada's constitutional protections safeguarding the right to a fair hearing.
In a decision released yesterday, the Honourable Madame Justice Hansen dismissed U.S. Steel's application. She held that, having regard to the context and potential consequences of enforcement proceedings under the ICA (which do not involve the imposition of a true penal consequence), the ICA process satisfies all of the requisite constitutional requirements.
Subject to appeals, yesterday's Federal Court decision opens the way for judicial consideration of the merits of the Canadian government's case against U.S. Steel. That decision could have important implications for the future enforcement of undertakings provided under the ICA, as it will have to deal with the important question of when and to what extent foreign investors can back away from commitments provided to the Canadian government due to economic circumstances beyond their control.
The Federal Court's decision is available at http://cas-ncr-nter03.cas-satj.gc.ca/rss/USSTEEL-EN-order.pdf.
Authored by Mark Katz.
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