MDS sues AECL for $1.6 billion over Maple reactors

Canadian healthcare company MDS is suing Atomic Energy of Canada (AECL) for $1.6 billion ($1.58 billion U.S.) as part of an effort to compel AECL to resume work on new nuclear reactors to produce medical isotopes.

At the heart of the dispute is AECL's decision in May to discontinue the development of two Maple nuclear reactors for medical isotope production at AECL's Chalk River Laboratories facility in Ontario. Chalk River supplies more than two-thirds of the world's radioisotopes for MDS and its radioisotope developer MDS Nordion of Kanata, Ontario, which is responsible for approximately 50% of the world supply.

MDS alleges that AECL and the Canadian government made the decision to stop work on the Maple reactors without prior notice to or consultation with MDS and without disclosing any long-term plan for the supply of isotopes beyond extending the license of the existing National Research Universal (NRU) reactor.

MDS said that in 1996 it entered into an agreement with AECL for the design, development, and construction of the Maple reactors. The project was intended to replace AECL's NRU reactor, which was built in 1957.

In 2005, the project was not yet completed and costs had more than doubled, with MDS's investment exceeding $350 million, the company said. To address these issues, MDS entered mediation with AECL that resulted in a new agreement reached in 2006. The 2006 agreement stipulated that AECL would bring the Maple reactors into service in October 2008 and provide MDS with a 40-year supply of isotopes.

MDS stated that its objective is to have AECL honor its commitment to replace the NRU reactor by bringing the Maple reactors into service and provide a 40-year supply of medical isotopes under the terms of the 2006 agreement.

In the event that AECL does not comply, MDS also concurrently filed a court claim for $1.6 billion in damages for negligence and breach of contract. The legal action also accuses the government of Canada of inducing breach of contract and of interference with economic relations.

AECL's position is that it is in compliance with its agreements with MDS.

"AECL believes that it has met and continues to meet its obligations under its agreements with MDS Nordion," AECL said in a press release. "AECL will therefore vigorously defend both the arbitration and the civil action."

By Wayne Forrest
AuntMinnie.com staff writer
July 9, 2008

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