In Hamilton, Ontario, the layoffs have already begun — the union says so — and in Ottawa the minister has set a deadline: five business days for Stelco Holdings to produce a plan to save up to 500 jobs, or face the government of Canada in court. The letter from Industry Minister Mélanie Joly to Stelco president Paul Simon, sent Monday, does not ask the company to explain itself. It informs the company that its written promises “do not cease to apply simply because business strategy or market conditions have changed.” As CBC News recounts, the threat now hanging over Stelco’s American owner has been carried out in this country exactly once. It was against this same steelworks, under a different American owner, seventeen years ago.
The present quarrel begins in 2024, when Ottawa approved Cleveland-Cliffs of Ohio buying Stelco for $3.4 billion in cash and stock. Under the Investment Canada Act, a foreign buyer must sign binding undertakings proving a “net benefit to Canada”; Cleveland-Cliffs promised to maintain at least the same number of unionized employees in Canada for five years, and the vast majority of non-unionized ones. Then came President Trump’s tariffs and the trade war, and last week Stelco announced it would idle production in Hamilton. CEO Lourenco Goncalves called the cuts necessary: the ability to sell steel into the United States, he argued, was an “underlying condition” of the deal. On Tuesday Joly answered with notable acid. “He’s in favour of these U.S. tariffs against steel,” she said of Goncalves. “They cannot say that this is now an act of God or force majeure.” Prime Minister Mark Carney has already vowed to pursue the company to the fullest extent of the law.
The last time the Crown sued a steelmaker
In 2007, U.S. Steel of Pennsylvania bought Stelco — then publicly traded — for about $1 billion US and renamed it U.S. Steel Canada, signing undertakings to hold Canadian employment for three years and lift Canadian steel production by at least 10 per cent. When the 2008 financial crisis gutted demand, the company closed most of the Canadian operations and laid off more than 1,500 people. In July 2009 the Attorney General of Canada sued. “As far as the public record shows, it is the only time Ottawa has gone to court over commitments like this,” Toronto business lawyer Nassira El Hadri told CBC News.
U.S. Steel’s defense, per a summary of filings compiled by a lawyer at Torys LLP, was twofold: the undertakings required compliance only at the end of the three-year term, and Industry Canada’s own guidelines excused investors from factors beyond their control — a global financial collapse, for instance. Read those two arguments again; they are the sound of every written promise ever made to a small country by a large company, dissolving in the rain.
The case never reached judgment. In late 2011 the Crown withdrew the suit for an out-of-court settlement: U.S. Steel would keep production alive in Hamilton and at Lake Erie and invest $50 million in modernization by the end of 2015. New undertakings were signed. They contained no minimum headcount. In 2014 U.S. Steel Canada filed for creditor protection; the American parent severed ties. A New York private equity firm acquired the steelmaker in 2016, and the Stelco name returned to the Toronto Stock Exchange the following year. Parliament, chastened, amended the Investment Canada Act in 2009 and 2012 to ease settlements and harden enforcement, and later raised daily non-compliance fines to $25,000.
The awkward hour of the host
El Hadri expects today the matter is “most likely going to end up in court” — though, she adds, a settlement is equally possible, depending on conditions inside Stelco. The court’s powers are wide, she notes, up to ordering a business sold: “We could end up with new commitments, which is what happened with Stelco in 2009.” Sandy Walker, co-chair of the competition and foreign investment review group at Dentons, says Stelco might yet reverse its layoffs to avoid trial — “that depends on how effective the Canadian government’s threats are” — and cautions that those Industry Canada guidelines on forces beyond a company’s control may yet let the company “off the hook” to some extent.
The timing, both lawyers agree, is delicate. Carney’s government is courting $1 trillion of investment over five years; last month it hosted hundreds of investors at a Toronto summit meant to loosen the country’s dependence on the United States. A government that sues a foreign investor sends a signal in two languages at once. “We are giving a signal to the world that... you have to respect our rules,” El Hadri said. Walker named the other anxiety: “It’s a difficult balance. The government has got to worry about looking weak.”
There is an old rhythm to it: the foreign buyer arrives with undertakings, the crisis arrives with exemptions, the lawyers arrive with settlements, and the workers of Hamilton read about all three in the newspaper. In 2009 the state sued, settled and saved the production lines, if not the headcount; within five years the owner was gone anyway. Whether the furnace or the promise outlasts the trade war is now, once again, a question for the courts — or for five business days.