On April 1, in the British Columbia Supreme Court, Justice Shelley Fitzpatrick issued an order that forces Nova Scotia into a “mediation” process in the BC court, where Northern Pulp and six related companies have been enjoying creditor protection since June 2020.
The process will be handled by a “court appointed” monitor that Northern Pulp chose — retired Supreme Court of Canada judge Thomas Cromwell.
Fitzpatrick’s order states that the process in the BC court is to settle claims that Northern Pulp and Paper Excellence have made against the province in the Nova Scotia Supreme Court.
The claims are huge.
Late last year, Northern Pulp and nine other Paper Excellence companies, together with their owners Paper Excellence Canada and Hervey Investment B.V., with an address-of-convenience in Netherlands (the world’s 4th top tax haven), filed a statement of claim against the province for what they called “indemnified losses” caused by the 2020 closing of the pulp mill and loss of the use of Boat Harbour for its effluent, nine years before its contract ended in 2030.[1]
They calculate those losses at $450 million, and that is the amount of the legal action they launched against the province.
A lawsuit against the “province,” of course, really means against the people of Nova Scotia, as they are the ones who will be paying when the $450 million lawsuit and other legal claims and disputes are “settled.”
The BC court order forcing the province into an unwanted mediation process about the claims was not an April Fool’s Day joke, but the people of Nova Scotia could be excused for wishing it was.
It is definitely not good news for the province.
A quick recap of how we got here.
Creditor protection in BC, a lawsuit in NS
In late 2019, the provincial government of then-Premier Stephen McNeil informed Northern Pulp that its proposal for an effluent treatment facility for its aging pulp mill in Pictou County had not passed muster. The company would need to prepare a full environmental assessment report, and could take up to two years to do so.
In spite of immense pressure from Northern Pulp, large mill owners, and Unifor that represented the mill workers, McNeil’s government refused to amend the Boat Harbour Act to allow Northern Pulp to continue using it for its pulp effluent until a new treatment facility was up and running.
The mill went into hibernation, and in May 2020 Northern Pulp withdrew its environmental application for a new treatment facility.
A month later, Northern Pulp together with six related Paper Excellence companies, declared themselves “insolvent.” They petitioned for creditor protection in the BC Supreme Court, seeking and receiving relief from debt payments.
Among those debts is nearly $85 million to the province of Nova Scotia, which they don’t have to repay while under creditor protection.
In October 2021, Nova Scotia’s Superintendent of Pensions filed a statement with the court expressing “significant concerns” about Northern Pulp’s failure to make contributions to “special pension payments,” saying that this was “contrary to the Nova Scotia Pension Benefits Act.”
Shortly after that, Paper Excellence and the same petitioners filed their $450 million statement of claim in the NS Supreme Court.
And then in early February 2022, Bruce Chapman, “general manager (Northern Pulp) of Paper Excellence Canada Holdings Corporation (“PEC”)” and general manager of the six other companies under creditor protection, filed Affidavit 11 in the BC Supreme Court, requesting a “mandatory mediation process” to be led by Thomas Cromwell at $8,000-a-day.[2]
The next day, Northern Pulp filed their application for the mediation process.
Not in Nova Scotia’s interest
In their response to the application, Nova Scotia’s legal counsel, Robert Grant and Maurice Chiasson, strongly opposed the mediation process.
They wrote that it was “not appropriate” for many reasons.
Among them, Grant and Chiasson argued, is that the province has “no liability” as a result of the Boat Harbour Act, and that such negotiation would not be “in the public interest” at this time.
They noted that the pleadings for the statement of claim filed with the NS Supreme Court in December 2021 had not yet closed.
They also stated that Northern Pulp was seeking to “shift the oversight of the Nova Scotia Litigation” into the BC court.[3]
According to Grant and Chiasson, Northern Pulp was “seeking significant powers for the Court-appointed mediator that fall outside of what would otherwise be available, including the power of ‘dealing with any Court, regulatory body or other government ministry, department or agency.’”
Even this language is “inappropriate,” they wrote, as it would “permit the mediator to interpose himself into the EA [environmental assessment] Process for the Project [to transform the mill and develop a new effluent treatment system] in a manner “which would undermine the integrity of the regulator regime.”
They pointed out that the “environmental assessment process will not conclude until mid-2024. Only once the EA Process is successfully completed can a replacement effluent treatment plant be built.”
Nova Scotia’s legal counsel raised serious concerns about what could happen if the BC Supreme Court granted Northern Pulp’s application for a mediator, saying:
The EA Process for the Project will entail a hearing before an independent review panel and a final decision by the Minister of the Environment and Climate Change. There is no room in this process for ex parte dealings on the part of the mediator. The EA Process is independent from interference through the Nova Scotia Litigation of these CCAA [Companies’ Creditors Arrangement Act] proceedings, and such independence cannot be subject to interference from the Applicants’ [the Northern Pulp companies’] financial convenience.
Their arguments continue, but their message couldn’t be clearer.
If the BC Court approved Northern Pulp’s application for a court-appointed mediator, it would not bode well for Nova Scotia.
Well, that is exactly what Justice Fitzpatrick did on April 1, when she gave Northern Pulp what it asked for.
In her order, Fitzpatrick wrote that “any settlement agreement reached” through the mediation process “shall be binding upon the parties … subject to the approval of this Court to the extent such settlement agreement affects the interests of any of the Petitioners [Northern Pulp and the other Paper Excellence affiliates in creditor protection].
The only apparent concession, if one can even deem it one, that Judge Fitzpatrick made to the province is to exclude environmental regulatory approval proceedings from any mediation claims.
All in the Widjaja family
It’s good to see the province standing up to Northern Pulp’s owners, but the odds don’t seem to be in the province’s favour, and really, it’s all come a little too late.
Northern Pulp is no corporate pip-squeak or short on persuasive powers, and decades of giveaways to the owners of the Pictou County pulp mill by Nova Scotian politicians have created this fine pickle in which the province now finds itself.
We’ll get to that, but first a quick look at what Nova Scotia up against when it is facing off with Northern Pulp.
Northern Pulp is a Paper Excellence company with its parent, Paper Excellence B.V., registered at the same address-of-convenience in Netherlands, a popular tax haven, as Hervey Investments B.V., which owns 70% of the Northern Pulp companies, or “petitioners,” under creditor protection in the BC Supreme Court.
Paper Excellence is part of the “complicated and opaque” multi-billion-dollar corporate empire of Sinar Mas owned and run by the Sino-Indonesian multi-billionaire Widjaja family, with hundreds of associated companies managed by the same family, many of them incorporated in tax haven countries.
Paper Excellence is related through its parent Sinar Mas to Asia Pulp and Paper (APP), which 68 organizations around the world describe in a 2021 letter as a “notorious conglomerate” that evidence links to “30 years of deforestation, forest and peat fires, and the destruction of wildlife habitat in the 2 million hectares of land under their control.”
Asia Pulp and Paper also has a dismal financial record. Its 2001 default on nearly US$14 billion was not repaid, and it is described as “the biggest default by an emerging markets corporate name,” a “dubious record that APP still holds today.”
Plagued by creditors looking to get back what they were owed, the Widjaja family founded the Paper Excellence Group in 2006, and started scooping up pulp mills and fibre allocations in the western hemisphere.
Paper Excellence is owned by Jackson Widjaja, the son of the chair of the Sinar Mas Group, which owns APP.
Most of the pulp from Paper Excellence mills in Canada goes to Asia and is purchased by APP.
No matter what the formal structure is, it doesn’t change the fact that Sinar Mas, APP and Paper Excellence are all in the Widjaja family.
Parents are anything but “insolvent”
Between 2007 and 2020, Paper Excellence acquired two pulp mills in southern France, and 10 in Canada (Saskatchewan, Nova Scotia, and British Columbia), only five of which they have kept in operation.
In the two years since the “insolvent” Northern Pulp family of companies have been under creditor protection in the BC Supreme Court, their Paper Excellence parent has gone forth in the world and found billions of dollars to spend on massive acquisitions in the Americas.
In early 2021, after a three-year legal dispute, Paper Excellence completed its US$ 4.7 billion acquisition of Eldorado Brasil Celulose, giving it a foothold in South America.
In an “all-cash transaction” in November 2021, Paper Excellence then acquired North American pulp and paper giant Domtar for US$ 3 billion.
The Domtar deal gives Paper Excellence a large presence in the US, with control over nine “manufacturing and converting facilities” in 15 states, and an additional 12 pulp and paper mills in North America.
Three of the mills are in Canada, in Quebec, Ontario and BC. However, the Competition Bureau of Canada agreed to the merger of Paper Excellence and Domtar — “two of Canada’s largest pulp and paper manufacturers” — only on condition that Paper Excellence sell the Domtar mill in Kamloops, BC to an independent buyer.
Related: Paper Excellence’s very big deal
In other words, Paper Excellence and the corporate empire of the deep-pocketed Widjaja family are formidable foes in any court battle.
Who landed us in this pickle?
Northern Pulp is a relatively new player in Nova Scotia, having acquired the mill only in 2011 from two US-based private equity firms for an undisclosed sum.
The trail of special agreements and favours that Nova Scotian politicians — and their PR and legal allies — have accorded the owners of the pulp mill goes back decades, and Nova Scotians have those politicians to thank — or to blame — for the legal and financial quagmire in which the province now finds itself.
In their December 16, 2021 statement of claim to the NS Supreme Court, the Northern Pulp companies, Paper Excellence and Hervey Investment B.V. refer to:
- A series of agreements from 1995 signed by the Liberal government of Premier John Savage, including an Indemnity Agreement that provided the mill owners, and almost anyone associated with the mill in any way (and their successors), indemnity in perpetuity from any liabilities or costs, and a Memorandum of Understanding stipulating that this also includes indemnity against any Ministerial director or any future environmental laws, and an Acknowledgement Agreement that specified Nova Scotia would not only share the cost of installing aerators in Boat Harbour, but would also be entirely responsible for remediation of the Boat Harbour facility.
- An agreement signed in October 22, 2002 by the Executive Council of Premier John Hamm’s Progressive Conservative government extending the pulp mill’s lease to use Boat Harbour for its effluent until 2030.
In December 2021, the Halifax Examiner reported in detail on these agreements and all the ways that provincial politicians have sold Nova Scotians down the river over the years, offering grants, tax breaks, Crown leases, loans, and favours to the large, foreign-owned corporations that have owned the mill since it opened in 1967.
Related: The Pictou mill: fleecing Nova Scotia for 53 years – and counting
The list of politicians who have been extremely generous with the mill is long, and includes former premiers from all three political parties – Robert Stanfield, G.I. Smith, John Savage, John Hamm, Rodney MacDonald, and Darrell Dexter.
The lawyer who was representing the mill owners in 1995 when the Indemnity Agreement was signed “to provide the broadest possible indemnity to the Indemnified Parties,” and whose signature is on some of them is Bernie Miller. Miller would then act as a registered lobbyist for Northern Pulp from 2009 until 2014, the year Premier Stephen McNeil named him deputy minister of the Office of Priorities and Planning and Senior Executive Advisor to the Executive Council Office, and later also of Strategy Management and of Business.
Interestingly, McNeil seems to be the only premier who ever refused to be cowed by the mill owners.
There are also a fair number of people who have stepped through revolving doors from the corridors of power into PR firms to shill for the mill over the years.
One is former Premier Stephen McNeil’s chief of staff Kirby McVicar of Iris Communications who was a lobbyist for Northern Pulp from 2018 until November 2020.
Related: Northern Pulp lobbyists and the revolving door with government
Another is Sasha Irving, of Public Affairs Atlantic, the PR firm that appears to have run the campaign that resulted in the gutting of the Biodiversity Act in 2021.
In the 2003 provincial election, Irving was the press secretary for Progressive Conservative Premier John Hamm, who in 2010 became chair of the board of Northern Pulp, where he remained until he left quietly shortly after the mill closed in 2020. Irving was also press secretary for Progressive Conservative Premier Rodney MacDonald, who replaced John Hamm as premier in 2006.
In January of this year, Sasha Irving was hired as Northern Pulp’s Vice President of Corporate Affairs.
No indemnity for Nova Scotians
Now that BC Supreme Court has decided in Northern Pulp’s favour, and is forcing Nova Scotia into a court-mandated mediation process with a mediator chosen by Northern Pulp, to examine the wrongs that Paper Excellence claims have been done to it, it seems an appropriate moment to reiterate what I wrote in that December article about how the pulp mill owners — with their political accomplices — have fleeced Nova Scotians for more than half a century:
Perhaps it’s time Nova Scotians had their day in court to document all the damages and costs they have incurred since the pulp mill first opened in 1967 — and will continue to incur for many years to come — because of its massive environmental and economic liabilities.
Many of the immense costs — to human health for example — have never been tallied.
The damage to the province’s Acadian forests will take centuries to repair, if indeed it can even be done.
When it comes time to decommission the mill itself and clean up the toxic mess of Abercrombie Point, including a plume of mercury in the bedrock underneath the former Canso Chemicals plant, it’s hard to imagine that a single one of the current or former corporate owners will step forward with the hundreds of millions of dollars (or more) that will be needed to undertake that massive task.
But Nova Scotians will be there to try to clean up the mess and shoulder the huge bills the corporate profiteers leave behind in Canada’s Ocean Playground.
They always are.
Maybe it’s also time to ask Bernie Miller, who left the public service after Tim Houston’s Progressive Conservatives won the 2021 provincial election, if he would consider developing a new Indemnity Agreement, this time one that would protect Nova Scotians, their forest ecosystems, water, and air from any damages and liabilities that Paper Excellence companies might inflict on the province.
Notes
[1] The 11 plaintiffs in the case against Nova Scotia in the NS Supreme Court are listed in Exhibit B on page 12 of Affidavit 11 of Bruce Chapman: (1) Northern Pulp Nova Scotia Corporation; (2) Northern Timber Nova Scotia Corporation; (3) Northern Resources Nova Scotia Corporation; (4) 3253527 Nova Scotia Limited; (5) Northern Pulp NS GP ULC; (6) Northern Pulp NS LP; (7) 3243722 Nova Scotia Limited; (8) Northern Timber Nova Scotia LP; (9) 1057863 B.C. Ltd; (10) Paper Excellence Canada Holdings Corporation; and (11) Hervey Investment BV (Netherlands). The total estimated losses are on page 61 of the same document.
[2] Page 67 (Exhibit D) of Affidavit No. 11 of Bruce Chapman submitted on February 3, 2022 to the British Columbia Supreme Court, and available here.
[3] Robert Grant and Maurice Chiasson lay out the “Position of the Province” on pages 2 – 5 of their response to the application by Northern Pulp for mandated mediation in the BC Supreme Court. That March 18, 2022 response is available here.
Thank you Halifax Examiner for informing us what is a public disgrace
As a “fleeced citizen”, all I can think to say to Northern Pulp and its facilitators is what Brian Mulroney said with loathing in the House once to the government of the time, “Ton temps viennent, mes petits bouffons.”
This whole thing just stinks.
And if they ever open the mill again it will really stink.