A foreign buyer secures approval for a Canadian acquisition by promising to preserve employment. Trade conditions deteriorate. The business announces layoffs.
Does the economic explanation change the legal obligation?
That question sits at the centre of Stelco’s dispute with Ottawa. Bloomberg reported on October 10 that the Cleveland-Cliffs subsidiary intends to proceed with hundreds of Ontario layoffs and disputes the government’s position that the cuts breach commitments associated with its acquisition. Stelco’s letter to Industry Minister Mélanie Joly points to tariffs and the Canada-U.S. trade conflict as circumstances beyond its control.
For Canadian transaction lawyers, the dispute puts renewed attention on what happens to Investment Canada Act undertakings after a deal closes - and commercial assumptions change.
What Cleveland-Cliffs promised
In its October 30, 2024 announcement, Innovation, Science and Economic Development Canada described acquisition approval as contingent on binding, five-year undertakings.
The publicly identified employment commitment was to retain at least the number of unionized employees employed when the transaction was announced, alongside the vast majority of non-unionized employees. Other commitments concerned Stelco’s Hamilton headquarters, collective agreements, employee benefits and pensions, capital expenditures, research and development, and emissions intensity.
Those commitments formed part of the acquisition’s stated net benefit to Canada. They therefore have significance beyond the buyer’s commercial plans.
Why the precise wording matters
The government announcement identifies the substance of the employment promise. It does not reproduce the complete undertaking agreement.
That limits what outsiders can responsibly conclude about the dispute. The operative wording could matter to how employment levels are measured, which entities must comply, and whether particular circumstances affect performance.
Stelco’s position also deserves careful description: the company disputes that the proposed layoffs breach its undertakings. That is different from conceding a breach and asking to be excused.
For counsel, the distinction directs attention to two separate questions: what the obligation requires, and what legal significance attaches to the circumstances the company invokes. Evidence of commercial pressure cannot answer the first question without examining the undertaking itself.
Ottawa has a statutory enforcement route
Section 39 of the Investment Canada Act permits the minister, where the statutory conditions are met, to demand that an investor remedy a default, explain why no contravention exists, or justify non-compliance with an undertaking.
If a demand is not complied with, section 40 permits an application to a superior court. Available orders include directing compliance with a written net-benefit undertaking. The legislation also provides for other remedies, subject to the court’s findings and the circumstances.
These provisions establish an enforcement process. A government assertion of breach does not itself establish the result of that process.
The lesson for acquisition counsel
The practical implications extend beyond steel.
Employment undertakings should receive the same attention after closing that they receive during regulatory negotiations. Counsel should identify who monitors compliance, how relevant workforce figures are calculated, and when operational decisions must be escalated.
Where circumstances deteriorate, contemporaneous evidence matters: the financial impact, alternatives considered, communications with government and the connection between external events and the proposed response.
The dispute also illustrates a transparency problem. Public commitments can become central to political accountability while their detailed legal terms remain unavailable to the people affected.
The durability of a takeover promise is tested when keeping it becomes expensive.
For another example of why statutory recourse matters, see our analysis of Ontario’s arbitration appeal bar in Grace v. Mexico.