TORONTO - MDS Inc. (TSX: MDS; NYSE: MDZ), a leading provider of products and services to the global life sciences markets, has served Atomic Energy of Canada Limited (AECL) with notice of arbitration proceedings. MDS will be 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. MDS has concurrently filed a court claim for $1.6 billion in damages against AECL, for negligence and breach of contract, and against the Government of Canada, for inducing breach of contract and for interference with economic relations.

"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, MDS Inc. "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."

MDS's primary objective through the legal proceedings is to have AECL honour 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 by patients worldwide 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, known as the MAPLE project. The project was intended to replace AECL's NRU reactor, which produces approximately 50 per cent of the world's medical isotopes.

AECL agreed to provide interim supply of medical isotopes from NRU until the MAPLE project was operational. 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 yet completed and costs had more than doubled, with MDS's investment exceeding $350 million. 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 commencing October 2008 and provide MDS with a 40-year supply of isotopes.

On May 16, 2008, AECL and the Government of Canada announced their intention to discontinue the MAPLE project without prior notice to or consultation with MDS. 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.

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