Court rules U.S. Steel case must proceed

The Federal Court of Appeal has rejected U.S. Steel'srequest to cancel a hearing into promises itmade in acquiring Stelco and ordered thatthe Canadian government's lawsuit against the steelmaker proceed without delay.

Ottawa is protesting the company's shutdown of two Ontario mills during the 2008-2009 recession.

The company acquired those assets in 2007 when it bought out Hamilton-based steelmaker Stelco Inc. At the time, U.S. Steel promised to "maintain employment levels" at the sites in order to win Ottawa's support.

In shuttering the mills last year, the federal government says the company failed to adequately justify its failure to meet promises on production, research and development and capital spending in Canada.

In July, Industry Canada sued U.S. Steel in federal court for breaching the terms of the takeover under the Investment Canada Act the first time Ottawa has done so to a company in the Act's 24-year history.

The Pittsburgh-based steelmaker had asked for a stay in the case that was filed against it, saying it would appeal an earlier ruling that found Ottawa's arguments were valid and constitutional.

On Monday,the court rejected that, ruling U.S. Steel's argument was based on opinion rather than evidence and ordered the case to proceed.

"This ruling stands up for the principles for which the Investment Canada Act was created," said Ken Neumann, national director for the United Steelworkers union (USW).

If the steelmaker is found to haveacted illegally, itcould face a multimillion-dollar fine or be forced to sell its Canadian assets. Welland, Ont.-based Lakeside Steel has previously expressed an interest in buying the former Stelco assets.

"This is an important day in the process of making companies like U.S. Steel live up to their promises and provide a 'net benefit' to Canada, Canadians and our communities," USW lawyer Paula Turtle said.