Will Ottawa really take Stelco to court? Here's what happened last time

Stelco Holdings has days to share a plan to save hundreds of Ontario steel workers from layoffs already underway — or it risks legal action from the Canadian government. The clock is ticking on what lawyers say is a test of how foreign investors are held to account as Prime Minister Mark Carney seeks to lure more of them to Canada amid a bitter trade war with the United States.

2009 was 'only time Ottawa has gone to court over commitments like this,' lawyer says

Jeff Lagerquist · CBC News

· Posted: Oct 08, 2026 2:32 PM EDT | Last Updated: 2 minutes ago

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Stelco Holdings has days to share a plan to save hundreds of Ontario steel workers from layoffs already underway — or it risks legal action from the Canadian government. 

The clock is ticking on what lawyers say is a test of how foreign investors are held to account as Prime Minister Mark Carney seeks to lure more of them to Canada amid a bitter trade war with the United States. 

So, how idle is the threat? And is it likely to save workers' jobs? Here's what we know from the last time the federal government took the U.S. steelmaker to court.

2 decades since Ottawa fought ex-Stelco owner in court

In 2007, Pennsylvania-based U.S. Steel announced a deal to acquire Stelco, then a publicly-traded company, for about $1-billion US, and the company was renamed U.S. Steel Canada.

Major foreign investments must benefit the domestic economy, per the Investment Canada Act. So, foreign buyers must give legally binding written commitments — called undertakings — to the federal industry minister to prove the deal provides a "net benefit to Canada."

At the time, U.S. Steel agreed to several such undertakings, including a three-year commitments to maintain Canadian employment levels, and increase steel production in Canada by at least 10 per cent.

However, when the 2008 financial crisis sapped global demand, U.S. Steel closed most of Stelco's Canadian operations and laid off over 1,500 employees. 

WATCH | Union says layoffs have begun:

Layoffs start at Hamilton Stelco plant, union says

4 hours ago|

Duration

7:19

Layoffs at the Stelco steel plant in Hamilton, Ont., are underway and expected to roll out over three weeks, says Ron Wells, president of United Steelworkers Local 1005. Stelco worker Jordan Williams says he received his layoff notice at the end of his shift on Wednesday.

The Attorney General of Canada filed a lawsuit against U.S. Steel in July 2009.

"As far as the public record shows, it is the only time Ottawa has gone to court over commitments like this," Toronto-based business lawyer Nassira El Hadri told CBC News.

According to a summary of court filings compiled by a lawyer at Toronto-based Torys LLP, Stelco argued the undertakings only required compliance at the end of their three-year term, not before. 

Stelco also said that per Industry Canada guidelines its investors should not be held accountable for factors beyond their control, like the unfolding financial crisis.

Last legal battle ended in deal to keep making steel

The Attorney General of Canada formally withdrew the lawsuit in late 2011, ending in an out-court-settlement before the court could make a judgment. 

U.S. Steel agreed to keep production alive in Hamilton and Lake Erie, and to make $50 million in new capital investments by the end of 2015 to modernize its operations. It agreed to new undertakings with Ottawa, but those did not include minimum worker headcount requirements.

But before then, in 2014, U.S. Steel Canada filed for creditor protection, and the American parent company severed ties with its Canadian operations. 

In 2016, a New York-based private equity firm acquired the steelmaker. The Stelco name was revived when the company returned to the Toronto Stock Exchange the next year.

The dispute prompted updates to the Investment Canada Act in 2009 and 2012 to make settlement negotiations easier, and strengthen enforcement. The government later raised daily non-compliance fines to $25,000, and tightened reviews for sensitive industries.

What's happening now at Stelco?

Flash forward to 2024, when Ottawa approved Ohio-based Cleveland-Cliffs' $3.4-billion cash-and-stock deal to buy Stelco.

The conditions included a promise to maintain at least the same number of unionized employees in Canada for five years, as well as the vast majority of non-unionized workers, according to a government statement at the time.

Last week, Stelco announced a plan to idle certain production in Hamilton, resulting in up to 500 layoffs company-wide. The union says layoffs are already underway.

Cleveland-Cliffs CEO Lourenco Goncalves said the cuts are necessary and justified by the Canada-U.S. trade war, arguing that Stelco's ability to sell steel to the U.S. was an "underlying condition" of the deal.

But in a letter Monday to Stelco president Paul Simon, Industry Minister Mélanie Joly gave Stelco five business days to share a job plan, or face legal action.

And on Tuesday, Joly slammed Goncalves's public support of American steel tariffs.

"He's in favour of these U.S. tariffs against steel," she said. "They cannot say that this is now an act of God or force majeure."

Will Stelco fight Ottawa in court again?

El Hadri says the matter is "most likely going to end up in court."

She points out that Joly's letter does not ask Stelco and Cleveland-Cliffs for an explanation about why they plan to lay off workers. It states the company's commitments "do not cease to apply simply because business strategy or market conditions have changed."

"It may end up in a settlement as well, but it all depends on the economic conditions, like what's going on inside Stelco," El Hadri told CBC News.

The court has "wide powers" at its disposal, she said, including putting a business up for sale.

"We could end up with new commitments, which is what happened with Stelco in 2009."

• Video

  Joly: Stelco must provide plan to keep jobs within 5 days

• Video

  Layoff uncertainty 'a roller-coaster' for Stelco workers

Sandy Walker, co-chair of the competition and foreign investment review group at the global law firm Dentons, says it's still possible that Stelco could reverse course on its full layoff plans to avoid going to court.

"That depends on how effective the Canadian government’s threats are," she said told CBC News.

"There are many reasons why [it] may not end up in court, but may end up with a variation of its undertakings, or otherwise settling with the Canadian government."

At the same time, Walker says those Industry Canada guidelines on factors beyond a company's control may let Stelco "off the hook" to some extent.

What does this mean for PM's agenda?

Both Walker and El Hadri agree the timing is somewhat awkward, given Ottawa's push for $1-trillion worth of investments across the country over the next five years.

Last month, Carney hosted hundreds of deep-pocketed investors at an investment summit in Toronto in a bid to spur deals, and cut reliance on the United States.

"We are giving a signal to the world that ... you have to respect our rules," El Hadri said.

"It's a difficult balance," Walker said. "The government has got to worry about looking weak."

ABOUT THE AUTHOR

Jeff Lagerquist is a senior writer with CBC News based in Toronto. Originally from Erin, Ont., he studied journalism at Toronto Metropolitan University. Jeff previously worked as a senior reporter for Yahoo Finance Canada. He was also a reporter and digital producer for CTV National News, BNN Bloomberg and The Financial Post. He was also a Columbia University energy journalism fellow for 2025.