Supreme Court Holds Environmental Orders Can Be Compromised In CCAA Proceedings

On December 7, 2012, the Supreme Court of Canada released its decision in Newfoundland and Labrador v. AbitibiBowater Inc. The Supreme Court held that orders issued by environmental regulators requiring the remediation of contaminated property can, if certain criteria are met, be characterized as monetary claims, and those claims can be subject to compromise in insolvency proceedings. This decision has important implications for commercial lenders, restructuring companies and stakeholders of companies that have historical environmental liabilities.

Key Facts

AbitibiBowater Inc. (collectively with its affiliates, "Abitibi"), a pulp and paper manufacturer headquartered in Montréal, operated in Newfoundland and Labrador (the Province) for more than a century. In 2008, however, after suffering significant financial distress, Abitibi announced that its last paper mill in the Province was scheduled to close in March 2009. Subsequent to the announcement but prior to the