Federal government will defend Port Hawkesbury Paper against $70M claim

The Port Hawkesbury Paper mill operates in Point Tupper, N.S. on August 26, 2013. (CTV Atlantic)

MONTREAL -- The federal government said Thursday it will mount a vigorous defence against a $70-million claim for compensation that Resolute Forest Products plans to file under the North American Free Trade Agreement.

The Montreal-based company said late Wednesday that it's seeking compensation for losses from the closure of its Laurentide mill in Quebec.

Resolute says the closure of its mill in Shawinigan, Que., was a result of competition from a rival paper mill in Port Hawkesbury, N.S., that reopened in 2012 with provincial government assistance.

Under NAFTA rules, the federal government is responsible for acts taken by provincial governments.

"The government of Canada is currently assessing the information provided in the notice of arbitration under NAFTA Chapter 11 as filed by the (Resolute) on Dec 30, 2015," the Global Affairs Department said in an email Thursday.

"The government of Canada will vigorously defend this case."

The provincial government issued a similar statement saying it will defend Nova Scotia's interests in the case.

The Port Hawkesbury mill, idled for about a year before it was purchased by Pacific West Commercial for $33 million, restarted with provincial government aid of more than $124 million over 10 years. That was in addition to $36.8 million the Nova Scotia government spent keeping the mill in a so-called hot idle state before striking the deal with Pacific West Commercial.

Resolute contends that the government assistance to Pacific West Commercial led to the closure of its Laurentide mill in October 2014 after 126 years of operation. The company had also laid off 111 employees in late 2012 after it permanently shut down a paper machine at the plant following a drop in demand.

In addition to claiming direct losses of some $70 million, Resolute is seeking unspecified consequential damages "and additional costs and relief deemed just and appropriate by an arbitral tribunal."