The Alward government’s deal with J.D. Irving Ltd. that exchanges increased access to timber from Crown land for future investment and jobs is “already done,” according to a University of New Brunswick law professor.
Natural Resources Minister Paul Robichaud released the 25-year agreement with J.D. Irving Ltd. last week, a deal that Green Party Leader David Coon called “remarkable in its audacity.”
After the deal was released, Coon said he would explore legal options at challenging the agreement.
David Bell, a law professor who specializes in contract law, said the options of any government looking to back out of the deal are extremely limited.
“The contract that has already been entered into is a contract that the government of New Brunswick would have a great deal of difficulty extricating itself from,” Bell said on Information Morning Fredericton on Wednesday.
'The essential deal is already done. The deal that says how many jobs for how many trees, the architecture of the relationship in the future between J.D. Irving and the Crown is already in place.' - David Bell, UNB law professor
“The legislature can always get itself out of a contract because it can pass a law that says that the contract is extinguished and that Irving has no right to sue. But short of that, there does not seem to be any realistic way that the government of New Brunswick can get out of this deal.”
The idea of a New Brunswick government tearing up a contentious agreement is not completely foreign. During the NB Power sale debate in 2010, David Alward, as opposition leader, said he would consider nationalizing NB Power if the energy deal went through and he won the next election.
The Green Party’s Coon and Wally Stiles, a former Liberal natural resources minister, have both said the Irving deal could become an election issue.
But Bell said it is likely too late.
"The essential deal is already done. The deal that says how many jobs for how many trees, the architecture of the relationship in the future between J.D. Irving and the Crown is already in place," he said.
There is a provision that calls for the next phase of the deal to be signed by July 1. Bell said it’s possible the New Brunswick government could face financial damages from J.D. Irving if the deal isn’t finalized by that date.
Provisions favour Irving company
The contract law expert also said provisions of the deal are weighted in favour of the Irving company in other aspects.
He said the deal puts very specific obligations on the New Brunswick government in terms of what it must give to J.D. Irving in terms of wood supply.
“J.D. Irving’s obligations under the existing contract are only approximate. They are softened considerably,” he said.
“Some of the obligations are only those that are commercially reasonable, meaning that the obligations are not absolute, that they have to make business sense in the context of the day.”
There are other sections that are subject to “market conditions.” So, Bell said if the financial obligations would mean the company would no longer be profitable then “J.D. Irving is no longer obliged to live up to them.”
“So there does seem to be that imbalance, if you like, in the deal and that may be realistic in the context of a business operation, but I would have pointed that out, had I been asked,” he said.
The new agreement will see J.D. Irving's annual allocation of spruce, fir, jack pine and white pine increase to 2,027,000 cubic metres, with a minimum of 1,898,000 cubic metres of spruce, up from the current level of 1,500,000.
Premier David Alward said in March the new plan would add 500 new forestry jobs and 1,200 construction jobs to the economy.
J.D. Irving has committed to invest $513 million in capital investments in its mills, most of which will be pumped into Irving Pulp & Paper in Saint John.