Top court to weigh Churchill Falls deal

ST. JOHN’S, N.L. — The Supreme Court of Canada will be asked Tuesday to reopen a notoriously lopsided 1969 deal that has so far generated more than $27.5 billion for Hydro-Québec, versus an estimated $2 billion for Newfoundland and Labrador.

Lawyer Doug Mitchell will argue the contract for the Churchill Falls hydro station in Labrador should be renegotiated to reflect vastly changed circumstances. He said negotiators almost 50 years ago could not have foreseen how energy markets would completely shift, allowing Hydro-Québec to buy that power at cheap fixed prices then sell it for huge profits.

The resulting disparity has fuelled a bitter feud between the two provinces.

“It’s a landmark contract in Canadian legal history,” Mitchell said. “It’s also an important point in law that many jurisdictions are wrestling with: What do you do if there are unforeseen circumstances that change the equilibrium of the contract? Does the law do nothing or does the law do something?

“It’s a topical issue in Quebec law and Canadian law more broadly — and, frankly, around the world.”

At issue is whether partners in long-term deals are obligated by so-called good-faith principles to adjust terms over time.

Hydro-Québec says it helped finance Churchill Falls in exchange for price guarantees that don’t expire until 2041.

Under the 1969 terms, Hydro-Québec agreed to buy almost all the energy from the Churchill Falls plant. The deal set a fixed price for that power that would decrease in stages over time.

Various aspects of the contract have already been argued before the top court on different legal principles, twice, without success for Newfoundland and Labrador.

A decision from the Supreme Court is not expected for several months.