Flash: Court Rejects U.S. Steel Challenge to Investment Canada Act

June 15, 2010

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.

If you have any questions regarding the foregoing, please contact George Addy (416.863.5588), John Bodrug (416.863.5576) or Mark Katz (416.863.5578) in our Toronto office or Hillel Rosen (514.841.6443) in our Montréal office.

Davies Ward Phillips & Vineberg LLP, with more than 240 lawyers, practises nationally and internationally from offices in Toronto, Montréal and New York and is consistently at the heart of the largest and most complex commercial and financial matters on behalf of its North American and international clients.

The information and comments herein are for the general information of the reader and are not intended as advice or opinions to be relied upon in relation to any particular circumstance. For particular applications of the law to specific situations, the reader should seek professional advice.


Mark C. Katz

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