In this politically-charged case, a majority of the Supreme Court of Canada (SCC) determined that environmental remediation orders issued against AbitibiBowater Inc. (Abitibi) in respect of contaminated industrial sites could be stayed and subject to a claims procedure order in the context of creditor protection proceedings under the Companies' Creditors Arrangement Act (CCAA). Although the case did not involve a mining company, it may have more general application if regulators begin seeking increased security in respect of regulatory approvals as a means of ensuring that environmental obligations will be satisfied in the event that a proponent seeks creditor protection.
Abitibi and its affiliated companies were involved in industrial activity in Newfoundland and Labrador for over 100 years, until 2008 when its last mill was closed. In April 2009, Abitibi filed for insolvency protection in the United States and also sought a stay of proceedings under the CCAA in Canada. Later that year, the Newfoundland and Labrador minister of environment and conservation issued five remediation orders to Abitibi, requiring it to submit remediation plans and to complete approved remediation actions, in respect of five industrial sites in the province. The cost to implement the remediation plans was estimated to be from "the mid-to-high eight figures" to "several times higher."
On the day that the remediation orders were issued, the Province also sought a declaration that the CCAA proceedings did not bar the enforcement of the orders. The primary basis for this position was that the remediation orders were non-monetary statutory obligations and therefore were not "claims" under the CCAA that could be stayed or subject to a claims procedure order. The court of first instance dismissed the Province's motion, and the Québec Court of Appeal denied the Province leave to appeal.
In dismissing the Province's appeal, the SCC noted that for an environmental protection order to be subject to CCAA proceedings, the environmental protection order must satisfy three criteria: there had to be a debt, a liability or an obligation owing to a creditor; the debt, liability or obligation had to be incurred before the debtor became bankrupt and a monetary value could be attached to the debt, liability or obligation. The first two criteria were easily satisfied. It was the third criterion that warranted consideration, because the Province had not formally exercised its power to ask for the payment of money. Notwithstanding this fact, there was sufficient certainty that the regulatory body would ultimately perform remediation work and assert a monetary claim against the debtor, thereby satisfying the third requirement.
In reaching its decision, the SCC was mindful of policy arguments raised by the Province and certain interveners. One such argument was that treating a remediation order as a claim in an insolvency proceeding would extinguish the debtors environmental obligations and thereby undermine the polluter-pay principle. The SCC soundly rejected this argument, noting that subjecting a remediation order to the CCAA process merely ensures that the creditor's claim will be paid in accordance with insolvency legislation. Were it otherwise, the costs of remediation would shift to thirdparty creditors, including involuntary creditors, and would result not only in the Province having super-priority, but in the acceptance of a "third party-pay" principle in place of a polluter-pay principle.
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