Canada can fine U.S. Steel: Court

Canada can fine U.S. Steel: Court. Canada has won a legal victory clearing the way for millions of dollars in penalties against U.S. Steel for its shutdowns of the former Stelco. In addition, an intervener in the case has asked for a forced sale of the Canadian steel icon. In a decision released yesterday, the Federal Court swept aside a U.S. Steel motion challenging the law under which the government sued the steelmaker. Barring an appeal to the Supreme Court, the verdict clears the way for a hearing on the basic issue: Did U.S. Steel break promises it made in 2007 to maintain production and employment in Hamilton when it bought Stelco? The suit, launched by the government almost a year ago, marks the first time an action has been taken under the Investment Canada Act to enforce such promises. "This is a tremendous victory for Canada," said Ken Neumann, Canadian director of the United Steelworkers union. "It says the government has the tools to ensure foreign investment carries a net benefit to Canada." When Stelco emerged from bankruptcy protection in 2006, it was owned by a group of hedge funds which, in 2007, sold the company for $1.9 billion to Pittsburgh-based U.S. Steel. That sale required approval by Industry Canada, and in asking for it, U.S. Steel promised to produce 4.35 million tons of steel each year and employ an average 3,100 workers. By March 2009, however, the company had idled the entire Hamilton operation, and in August it locked out the remaining workers at its Lake Erie plant in Nanticoke. In total, the American company put 2,100 Canadians out of work in order to consolidate production at its plants in Pennsylvania, Indiana and Alabama. Canada responded first with a demand that U.S. Steel explain itself, followed by a suit seeking fines of up to $10,000 per broken promise per day, dating from Nov. 1, 2008. The fine facing U.S. Steel could amount to $14.6 million, the company's lawyers have said. U.S. Steel challenged the suit on the grounds that it breached protections under the Charter of Rights and Freedoms by exposing executives to possible prison time for what was essentially a contractual dispute. In her decision, Justice Dolores Hansen of the Federal Court rejected that argument, saying prison was only a threat if the company and its executives were found in contempt of court for not paying fines, and that penalty would not be imposed under the act the company was challenging. In a brief interview, U.S. Steel spokesperson Courtney Boone said the company is reviewing the decision and refused further comment. U.S. Steel has said in the past its shutdown of Canadian plants was motivated solely by a collapse in the demand for steel during the worldwide recession of 2008-09. In addition, the Lake Erie lockout was settled this April, and many workers have been recalled to the Hamilton plant. Welland-based Lakeside Steel, an intervener in the hearing, has asked the government to seek a court-ordered sale of the former Stelco. It has argued in court documents the fines sought by the government will mean little to an industrial giant such as U.S. Steel, while an order to comply with the jobs and production commitments won't resolve "the long-term threat to the Canadian public interest that is posed by U.S. Steel's self-interested management" of its Canadian assets. In an interview, Lakeside president Ron Bedard said he was "pleased with the decision" but deferred all future comments until the document has been thoroughly reviewed. The United Steelworkers union, which has also been named an intervener in the suit, is seeking nearly $44 million in damages for lost wages and dues following the shutdowns.