TORONTO — United States Steel Corp. (NYSE:X) will challenge a Federal Court decision to uphold the Investment Canada Act, the latest in an already year-long feud with Ottawa.

The Pittsburgh-based steel giant said Tuesday it has filed a notice of appeal of the ruling that allows the federal government to proceed with a lawsuit against the company.

Legal experts say the battle could draw out for years, as U.S. Steel can still appeal to the Supreme Court if it loses its appeal at the Federal Court of Appeal, a proceeding that alone could drag into next year.

Ottawa has argued the company's shutdown of steel mills in Hamilton and Nanticoke, Ont., during the 2008-2009 recession broke employment and production promises made when the U.S. steel producer bought the former Stelco Inc. in 2007.

If the steelmaker is found to have illegally broken promises it made to Ottawa when it bought Stelco for more than $1 billion, it could face a multimillion-dollar fine or be forced to sell its Canadian assets.

Lynn Meahan, spokeswoman for Industry Minister Tony Clement, said the ministry was disappointed that U.S. Steel has appealed the decision.

"The court has already confirmed the minister's ability to initiate proceedings to enforce the undertakings given under the Investment Canada Act," she said.

Ottawa argued U.S. Steel broke commitments made when the Stelco takeover was approved under the Investment Canada Act when it slashed its workforce to 23 per cent of the 3,100 people it had promised to employ.

The steelmaker has not denied that it broke its promises, but says it was justified because the global recession decimated demand for the metal used in everything from construction to cars and trucks and appliances.

However, Clement said that wasn't a good enough reason and took the company to court in July 2009.

The company would not comment Tuesday because the case is still before the courts.

But U.S. Steel has said the actions by Ottawa, including the prospect of a $10,000 a day fine against the company, violated the Charter of Rights and Freedoms, arguing it doesn't give foreign companies the rights required under Canadian law.

The fine could amount to $14.6 million in U.S. Steel's case, the company's lawyers have said.

The steelmaker has argued that the Investment Canada Act imposes penal consequences -- a fine of $10,000 a day for as long as the company is in contravention of its promises, or the divestiture of its Canadian assets -- without giving it the rights guaranteed under a criminal proceeding.

The argument was rejected by Justice Dolores Hansen earlier this month.

However, even if U.S. Steel loses at the federal court level, the company's arguments have a real shot at reaching the Supreme Court, says Mark Katz, a partner with the competition and foreign investment review practice at Davies Ward Phillips & Vineberg in Toronto.

Katz said U.S. Steel's case meets two important conditions to be granted leave to for the Supreme Court --it deals with an issue of national importance, and hasn't been decided on before.

This is the first time the Investment Canada Act had been tested in court since it was implemented by the Conservatives in the mid-1980s.

Katz said deep-pocketed U.S. Steel basically has nothing to lose in issuing the appeal.

"It's no cost to initiate the appeal, and so its just a matter of preserving your rights, so to my mind .... it would seem logical to launch the appeal and then you see what happens, at least this way you haven't lost the right to appeal."

Richard Powers, a corporate law expert and associate dean at the University of Toronto's Rotman School of Management, says it's unlikely the company will win the appeal, a process that will take at least six to eight months.

A Supreme Court hearing could take another two or three years, he added.

Powers said the company is drawing out the proceedings to bide time as the economy improves, putting it in a better position to prove its argument that laying off workers was necessary during the economic downturn.

Ken Neumann, national director of the United Steelworkers Union, says it's disturbing that the company continues to delay the government's enforcement proceedings, the merits of which have already held up in court.

"The members and the unions should be made whole for the violation of their rights that the government under the Constitution had negotiated and U.S. Steel failed to live up to."

He says its likely his union will again apply for intervener status in the case.

U.S. Steel is an icon in the North American steel business and traces its roots to Andrew Carnegie and the robber baron age of the early 1900s. The company is a major integrated steelmaker with operations in Canada, the United States and Europe and employs more than 43,000 people.

In trading on the New York Stock Exchange, U.S. Steel shares fell $2.44 to US$39.11, a drop of 5.9 per cent.