Canadian Environmental Obligations in Bankruptcy Laws

December 7, 2012 10:02 pm Published by Leave your thoughts

Canadian Environmental Obligations in Bankruptcy Laws

The Supreme Court of Canada says a bankrupt company doesn’t have to pay to clean up the environmental mess it left at a mill in Newfoundland and Labrador.

The case concerns Resolute Forest Products, formerly known as AbitibiBowater.

‘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…. It merely ensures that the province’s claim will be paid in accordance with insolvency legislation.”—Supreme Court of Canada

The Provincial Government has legislation that requires companies that cause any environment damage to be responsible to clean it up.  But who pays for the cleanup if the company is no longer around to foot the bill. As in this case the polluting company stopped operating, putting people out of work, canceling contracts and leaving other debts unpaid.

Essentially the Supreme Court is saying that the Company still has an obligation to clean up environmental damage, but since it is not around to fund the costs of the cleanup with ongoing operations, the costs of that clean up are the same as the other creditors of the company.  In this case, the $100-million cleanup cost will fall to the Provincial Government who then must stand in line with all of the other unsecured creditors as governed by the Bankruptcy and Insolvency Act.

In this case the Newfoundland and Labrador Provincial Government had expropriated assets which they can use to fund some of the cleanup..  However, in future cases where there are no assets remaining for unsecured creditors, there would be nothing available to help pay for the costs of cleanup other than individual taxpayers IF the clean up is actually done.  Once again, the environment gets the short stick.


See Also: Corporate Bankruptcy

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