MDS has filed a court claim for $1.6 billion in damages against Atomic Energy of Canada Limited (AECL), for negligence and breach of contract, and against the Government of Canada, for inducing breach of contract and for interfering with the company’s ability to produce medical isotopes.
MDS has concurrently served AECL with notice of arbitration proceedings, seeking an order to compel AECL to fulfill its contractual obligations under its 2006 interim and long-term supply agreement (ILTSA) and if not granted, seeking significant monetary damages.
The Toronto-based MDS said its primary objective through the legal proceedings is to have AECL honor its long-standing commitment to replace the National Research Universal (NRU) reactor by bringing the Maple reactors into service, and provide a 40-year supply of medical isotopes, required internationally for serious medical needs.
In 1996, MDS entered into an agreement with AECL for the design, development and construction of two new nuclear reactors and a processing facility—the Maple project. The project was intended to replace AECL's NRU reactor, which produces approximately 50 percent of the world's medical isotopes.
AECL agreed to provide interim supply of medical isotopes from NRU until the Maple project was operational, according to MDS. The Maple project was to be completed by the year 2000 at a planned cost to MDS of $145 million.
By 2005, the project was not completed and costs had more than doubled, with MDS said its investment exceeding $350 million. To address the issues, MDS entered mediation with AECL that resulted in a new agreement reached in 2006, which stipulated that AECL would bring the MAPLE reactors into service commencing October 2008 and provide MDS with a 40-year supply of isotopes.
“We have had to resort to taking these steps to protect the interests of patients, the nuclear medicine community, our shareholders and our customers,” said Stephen P. DeFalco, president and CEO of MDS. “We are disappointed that AECL and the government decided to abandon the Maple project without establishing a clear plan for the long-term supply of critical medical isotopes.”
On May 16, AECL and the Government of Canada announced their intention to discontinue the Maple project without prior notice to or consultation with MDS, according to the company. MDS also said that AECL and the government also made their announcements without disclosing any long-term plan for the supply of isotopes beyond extending the license of the NRU.
Prior to their announcement, MDS said that in regular reviews with AECL to discuss the status of the Maple project, AECL had consistently maintained that it would complete the reactor project.
AECL has stated that its decision will not impact current supply of medical isotopes from the NRU, and the government has stated that it would like AECL to pursue an extension of the NRU operation beyond its current license. While MDS supports this decision, the company said it does not believe that it adequately addresses long-term supply.