Capital Power Spinoff Challenged In Court

Three labour unions challenged city council's private approval of a multi-billion-dollar deal involving Epcor shares at the Alberta Court of Queen's Bench last week.

The Alberta Federation of Labour, with Civic Service Union 52 and the Canadian Union of Public Employees 30, attacked the behind-closed-doors approach of councillors and Mayor Stephen Mandel in April to help place the municipally owned utility's power generation branch with a new company, Capital Power, and offer public shares.

"We believe city council acted illegally," Alberta Federation of Labour president Gil McGowan says. "We argued that the process followed by council contravened important sections of the Municipal Government Act, in particular the sections requiring council to make their decisions in public forums and the sections related to delegation."

Bill Pidruchney, a local lawyer and former head of the Alberta Securities Commission, attempted to get an injunction against the sale of shares in Capital Power on similar gounds in July, and lost.

Councillors have argued they are exempt from making decisions in the public domain while acting as shareholders, as they do with Epcor. However, McGowan thinks the shareholder title does little to defend their private actions.

"The MGA says that the council has to meet in public, but it doesn't say anything about shareholders," he explains. "The shareholders group has no legal existence under the MGA, which clearly states that city council can only delegate its decision making authority to committees of council, or the chief administrative officer.

"Therefore any decision made by that group is not valid."

Epcor spokesperson Tim le Riche disagrees: "The only thing we can say is what we've been saying all along, and that is that Epcor believes the claims are without merit, and we will vigourously defend ourselves as we have done."

With arguments from Epcor, city council, and the union coalition completed, the case now awaits Justice Stephen Hillier's deliberation.
If he decides the union coalition's claims do have merit, it is possible the sale of shares may be declared invalid.

McGowan recognizes the huge implications of such a ruling.

"There's absolutely no doubt that a declaration from the court nullifying the privatization will cause a huge headache for everyone who bought shares in the initial public offering," he says. "But in our perspective, the interests of investors have to take a back seat to the interests of the people who own the assets and didn't have a say in their sale."
A ruling is expected to come down in the coming weeks.

See Magazine, Thurs Sept 17 2009
Byline: Tim Cooper

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