Read the judgment

Now that the furor over the Supreme Court of Canada’s verdict on AbitibiBowater and the provincial government has settled a bit, I’m going to make a novel suggestion. Could everyone who’s outraged about the decision please take the time to actually read the verdict? It’s right here on the Internet, http://scc.lexum.org/decisia-scc-csc/scc-csc/scc-csc/en/item/

12749/index.do and it’s actually not complicated — despite the fact the case was argued by 23 lawyers at the Supreme Court.

The matter revolves around the appeal of a ruling by a Quebec judge who determined that environmental claims by the Newfoundland government for cleanup costs at a variety of former AbitibiBowater properties should not get priority treatment, but should instead be treated as any other unsecured creditor would be.

The crux of the case was whether the province’s environmental orders against Abitibi were a monetary claim. In the end, the court decided that if remediation work was done, the province would end up doing the work and charging the cost to the company. Because that would be a monetary claim, the court ruled, it would be no different from any other creditor’s claim.

“Subjecting such orders to the claims process does not extinguish the debtor’s environmental obligations any more than subjecting any creditor’s claim to that process extinguishes the debtor’s obligation to pay a debt,” the court decision states.

“It merely ensures that the province’s claim will be paid in accordance with insolvency legislation. Full compliance with orders that are found to be monetary in nature would shift the costs of remediation to third party creditors and replace the polluter-pay principle with a ‘third-party-pay’ principle.

“Moreover, to subject environmental protection orders to the claims process is not to invite corporations to restructure in order to rid themselves of their environmental liabilities. Reorganization made necessary by insolvency is hardly ever a deliberate choice, and when the risks corporations engage in materialize, the dire costs are borne by almost all stakeholders.”

For its part, the province argued — unsuccessfully — that environmental orders were not necessarily financial claims.

Judge Marie Deschamps had some problem with that: “What the province is actually arguing is that courts should consider the form of an order rather than its substance. I see no reason why the province’s choice of order should not be scrutinized to determine whether the form chosen is consistent with the order’s true purpose as revealed by the province’s own actions.

“If the province’s actions indicate that, in substance, it is asserting a provable claim within the meaning of federal legislation, then that claim can be subjected to the insolvency process.”

(The province already had some rights under federal insolvency law to recover remediation costs by levying a charge against Abitibi assets in the province. The problem with that was that the province had seized all of the available Abitibi assets here already.)

The judges also highlighted the particular circumstances of the case — among them, that the polluted properties were no longer in Abitibi’s control, and that the timetable for a full remediation plan was impossible. As the judges said, “because Abitibi lacked funds and no longer controlled the properties, the timetable set by the province … suggested that the province never truly intended that Abitibi was to perform the remediation work required by the orders. The timetable was also unrealistic. For example, the orders were issued on Nov. 12, 2009 and set a deadline of Jan. 15, 2010 to perform a particular act, but the evidence revealed that compliance with this requirement would have taken close to a year.” The judges also pointed out that the premier and other cabinet ministers had said publicly that money from the environmental action would offset any money Abitibi could get from claims against the province — in essence, framing the environmental orders as monetary already.

A lot of this could have been solved if the province had taken action before Abitibi went into creditor protection. The problem is, no government wants to be the straw that breaks the financial camel’s back and, in the process of protecting the environment, force a major employer into bankruptcy. That’s why governments often tread lightly with big polluters — especially with big polluters in already-fragile industries.

Are there things that governments can do? Certainly. One of the biggest would be to require major industries to post bonds to cover any potential environmental liability. Another would be to change the terms of Canada’s bankruptcy legislation to make it harder for companies to shed environmental liability — something you’re not going to see anytime soon from the Harper government.

In the simplest terms, the time to close the barn door is before the horse has decided to leave.

Russell Wangersky is The Telegram’s

editorial page editor. He can be reached by email at rwanger@thetelegram.com.