U.S. Steel plant in OntarioFred Lum/The Globe and Mail
A U.S. steel company says legislation governing foreign investment in Canada is "essentially flawed" because it doesn't define how an investor can justify failure to meet promises made to the government.
United States Steel Corp. was in Federal Court on Tuesday, arguing that a case against it should be thrown out due to the legal flaws in the Investment Canada Act.
The federal government has said the company failed to adequately justify its failure to meet employment and production promises it made when it bought Stelco Inc.
But U.S. Steel lawyer Michael Barrack told court that the act doesn't explain what constitutes an adequate justification.
"That's where the imprecision and vagueness of the statute is," Mr. Barrack said.
"How do I justify its non-compliance? How do I avoid having the government come and force me to sell my property? How do I behave in an acceptable way?"
The company's constitutional challenge of the act rests on the premise that the act is quasi-criminal in nature because of the penalties it imposes on a foreign investor that fails to meet its promises, but doesn't afford the investor all the rights allowed in a criminal case.
For example, Mr. Barrack argued that U.S. Steel has not been told by Industry Minister Tony Clement why its 88-page explanation of why the economy prevented it from meeting its promises wasn't enough of a justification under the act.
In a criminal case, the company would have the right to know the full case against it before it had to defend itself, the lawyer said.
This wouldn't be true of a civil case. But because the act aims to levy punitive fines that could amount to as much as $14.6-million - far more than the typical damages awarded in a civil case - it should be treated as a criminal case, U.S. Steel argued.
Mr. Barrack described the act's fine of up to $10,000 a day for as long as the company is in non-compliance as "a fine, which by its magnitude, would appear to be imposed with the purpose of redressing a wrong done to society" - as in a criminal case.
U.S. Steel's constitutional challenge to the Investment Canada Act is the first since it was adopted 24 years ago.
The government will make its arguments Wednesday.
Under the Investment Canada Act, a federal review is required any time a Canadian company with assets of more than $312-million is purchased by a foreign entity.