Canada: Canada v US Steel: Recent Developments Under the Investment Canada Act

Last Updated: October 20 2010

* Article by Sue-Anne Fox

Originally published in IBA's North American Regional Forum News, vol. 1, no. 1 | October 2010

For the first time in the 25-year history of the Investment Canada Act, Canada's foreign investment review legislation, the Canadian Government is suing a foreign investor for failing to honour commitments it made when it acquired a Canadian business. In July 2009, the Minister of Industry filed a Notice of Application with the Federal Court of Canada seeking an order to require United States Steel Corporation to fulfill undertakings it made to the Canadian Government when it acquired Canadian steelmaker Stelco Inc in 2007.1 The Minister requested that the Court order US Steel to: (i) increase steel production in Canada and maintain employment levels; and (ii) pay an 'administrative monetary penalty' ('AMP') of C$10,000 per day for breach of the undertakings.

When US Steel acquired Stelco, it undertook, among other commitments, to increase steel production in Canada by at least ten per cent and maintain Canadian employment levels. Instead, it closed most of Stelco's Canadian operations and laid off over 1,500 employees. According to court filings, US Steel has taken the position that it has not breached its undertakings because they require compliance to be measured at the end of their three-year term as opposed to a point in time within the three-year period. The company has also asserted that investors should not be held accountable for breaches due to factors beyond their control. For this, the company relies on guidelines issued by the Investment Review Division ('IRD') of Industry Canada stating that an investor will not be held accountable for breaching a commitment 'where inability to fulfill an undertaking is clearly the result of factors beyond the control of the investor.' US Steel also claims that the enforcement proceedings violate its rights under the Canadian Charter of Rights and Freedoms and the Canadian Bill of Rights.

US Steel's production undertaking provides that it 'will increase the annual level of production at the facilities of the Canadian Business by at least ten per cent over the Term.' Similarly, its employment undertaking provides that 'over the Term, [it] will maintain an average aggregate employment level at the Canadian Business of not less than 3,105 employees on a full time equivalent basis.' The undertakings define 'term' as three years from the date of the completion of the investment. Whether US Steel has breached the these undertakings will depend in part on whether compliance is required throughout the term or only at its end. It is also unclear how the Court will react to US Steel's suggestion that any inability to fulfill its undertakings is due to factors beyond its control.2 The IRD's guidelines were likely not intended to allow investors to breach multiple undertakings that formed the basis upon which the Minister concluded that the investment would be of 'net benefit' to Canada. Some media reports in 2009 suggested that US Steel was increasing production at facilities in the United States. That may raise questions about the extent to which the Canadian plant closures were truly 'the result of factors beyond the control of the investor' as opposed to a business decision to concentrate production in the United States.

In June 2010, the Federal Court of Canada released its decision on US Steel's claim that the proceedings were unconstitutional. The Court upheld the constitutional validity of the process and penalties for enforcing the Investment Canada Act.3 On 23 July 2010, the Federal Court of Appeal rejected US Steel's request to stay the enforcement proceedings pending its appeal of the Court's decision on the constitutional challenge.4

This case is an important reminder that the Canadian Government considers Canada's foreign investment review regime to be important and will enforce undertakings in cases involving material non-compliance. However, the Minister of Industry has also said that he has no intention of discouraging foreign investment and that '[w]e welcome foreign investors who can create jobs and opportunities for Canadians, who want to pursue research and development in Canada.' The government also amended the Investment Canada Act in 2009 to reduce the number of acquisitions subject to review. Shortly before the amendments were enacted, the Minister said, 'We are reducing the challenges currently facing international investors who want to invest here. This is critical, because international investment is vital to our country. It spurs innovation and enhances productivity. It makes our economy more dynamic and better able to compete in world markets. It provides greater access to capital and ideas, enabling Canadian companies to expand and improve. And it creates more jobs for Canadians.'

The US Steel case also serves as a reminder that investors should carefully assess business plans before entering into commitments with the government because future economic conditions are impossible to predict with certainty.

Investors should also expect the IRD to be more concerned about its ability to enforce undertakings in the future. More stringent drafting of undertakings (especially with respect to performance measurements) and more frequent compliance reporting (to increase the detection of possible violations) are likely to be the norm. However, absent similarly extreme circumstances, investors should expect enforcement actions to be the exception, rather than the rule.

The case is far from over. US Steel plans to appeal the constitutional issue and is expected to file a motion for an expedited hearing. The enforcement proceedings will now go ahead. Although no hearing date has yet been set, US Steel has requested an extension of time for it to deliver its responding material. Canadian lawyers can be expected to continue to watch this case closely given that the decision may have important implications for both the manner in which undertakings are drafted and enforced.

* Sue-Anne Fox is an associate in the Competition and Internationa 14 l Bar Asso ciation Le gal Pra cti ce Division Business immigration in Mexico Antitrust, and Foreign Investment Review Groups of Torys LLP in Toronto, Ontario. She would like to thank Omar Wakil for his comments on an earlier version of this article.


1 Under the Investment Canada Act, foreign investors must establish that their investment is 'likely to be of net benefit to Canada.' The Minister's approval is usually conditional upon investors entering into binding three to five-year undertakings with the government in which investors make commitments with respect to Canadian operations, production levels, employment levels, R&D expenditures and capital expenditures.

2 In practice, it is often possible to negotiate new or revised undertakings when an original commitment cannot be fulfilled. It is widely believed that a number of investors were released from commitments or negotiated revised undertakings because recent market conditions made it difficult to comply with undertakings entered into two or three years ago.

3 See Canada (Attorney General) v United States Steel Corporation, 2010 FC 642.

4 United States Steel Corporation v Canada (Attorney General), 2010 FCA 200.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions