Williams move
will have ripple effect
MADELAINE
DROHAN
GLOBE
AND MAIL UPDATE
the original purpose is no longer being served?
That is the peg on which Danny Williams, the Premier
of
land and assets held by Delaware-incorporated forestry
corporation AbitibiBowater in central
before its Christmas break.
At first glance, his proposition has some merit.
Timber, water and land are, after all, public resources to be used for the
public good. The rights were given under a
1905 agreement with a predecessor company to AbitibiBowater on the understanding that it would use them
to fuel a pulp and paper mill in central
No mill, no rights, says the Premier. His stand is
much applauded, even by the provincial opposition parties. Yet popularity with
voters will be no defence if the
legal case is not airtight. And while governments have to
defend the interests of the people they represent, they must also be sensitive
to the long-term effects of
their actions. If Mr. Williams' action leads to an
investment chill, or retaliation by the company or the
will turn into a defeat.
It's not hard to see why the Premier has won plaudits
within the province (although they are not universal). He is skillful at exploiting
the well-honed sense of
grievance in the province, the belief that Newfoundlanders have
been cheated in the past by fast-talking foreigners who have profited
handsomely from the
province's natural wealth.
Indeed, there is talk that following the AbitibiBowater legislation, Mr. Williams may want to
consider tackling the
There are enough similarities with the AbitibiBowater situation to get the population stirred up.
The rights were originally acquired in 1905, when
was an independent British colony, by the British-backed
Anglo-Newfoundland Development Corp. They were passed down through a series of
acquisitions and
mergers to AbitibiBowater.
As for the legal case, Mr. Williams contends that the
1905 agreement clearly ties the rights to the operation of a mill in Grand
Falls-Windsor. No mill, no rights.
Yet the fact that the Premier felt compelled to pass
legislation to this effect seems to indicate that there is room for a different
interpretation.
AbitibiBowater certainly seems to think so. Its stiffly worded
letter to the Premier suggests a legal challenge will soon follow, if not a
challenge under the North
American free-trade agreement. Mr. Williams has brushed this off as mere sabre-rattling and he may be right. Not every company
threatening
Chapter 11 challenge under NAFTA follows through. At
least seven have filed notice and then either withdrawn from the fight or
allowed their challenge to
become inactive.
Still, if the rights and assets in question are
valuable enough for the province to suspend and expropriate, they are likely
worth fighting for by the company.
What the agreement actually says is a matter for legal
experts. If you are one and want to take a crack at it,
provided a copy of the original text, plus a lot of other
relevant information, on his site at bondpapers.blogspot.com.
It doesn't require a law degree, however, to see that
the dispute will have ripple effects beyond AbitibiBowater.
Other companies will be looking at their
agreements with the provincial government to see whether actions
they take in the face of a weak global economy might draw similar fire.
As for new investors, who may have been considering
economy recovers enough to encourage companies to invest again.
But that, too, may be an outcome of this affair.
The answer to the question that started this column
has two parts. A government should be able to take back rights granted as long
as it has the legal right to do so
under the agreement it has signed. That is not yet clear in
the case of AbitibiBowater.
Yet even when it is within its legal rights, a
government needs to weigh the benefit of regaining rights and land against the
possible long-term damage it could be
doing to business confidence.
Mr. Williams has addressed
the first point. Now he needs to address the second.