Posted by Gordon LaFortune on Feb 2, 2015

With the conclusion of the Trans Pacific Partnership (TPP) negotiations possibly in sight, there is some discussion of potential changes to Canada’s supply management system for dairy, poultry and eggs.  While it is possible that Canadian negotiators will accede to demands by trade partners and liberalize access to the supply managed sectors, after years of living with the current system, we should note that supply management is resilient.  Time and time again, supply management has survived trade negotiations and disputes largely intact.  Even the concessions made in the Canada – E.U. Comprehensive Trade and Economic Agreement (CETA) negotiations only amount to a mere nibbling around the edges. Supply management will likely end at some point, but that point is probably very far off into the future. This is so for both non-economic and non-trade policy reasons. Supply managed producers are far better organized than producers in any other Canadian agriculture sectors due to the mechanism established to operate the system.  Supply management is directed by a complex web of legislation, regulations and Orders that operate to control the domestic production of supply managed products, like poultry and dairy.  Included within this structure are inter-related Federal and Provincial producer organizations that work with their Federal and Provincial supervisory bodies to establish production levels in Canada.  Given the coordination within the industry, producer organizations can easily call on their producer members to put pressure on politicians knowing that their members will likely respond favourably. Supply managed producers also have a tangible interest beyond their daily business operations because of their quota value.    When supply management was established, producers were given quota, at no cost, based on their historic production.  Since then, producers have bought, sold, and traded quota and many have used it as security.  As a result, individual producers have significant value invested in quota which they generally treat as an asset.  Taking dairy as an example, in the August 2011 edition of MacLeans, Andrew Coyne reported that the average quota value was approximately $25,000 per cow[1].  According to Farm & Food Care Ontario, there are 70 cows in an average milking herd.[2]  At $25,000 per cow, the quota value...

Posted by Gordon LaFortune on Jan 12, 2015

There has been vocal opposition to Investor-State Dispute Settlement (ISDS) arbitration provisions in Canada’s international trade agreements since the NAFTA entered into force in January 1994.  Most recently, opponents have made the same arguments against ISDS in the Canada – E.U. Comprehensive Economic and Trade Agreement (CETA).  After twenty years of NAFTA ISDS experience, it seems appropriate to consider whether any of the arguments raised against NAFTA ISDS are valid.  Based on a comprehensive review of that experience, it appears that many of them may not be. ISDS has been included in Canadian international trade agreements since before the NAFTA and is structured to allow investors to use arbitration when they consider that action(s) taken by the host government has violated the investment obligations in the trade agreement to their detriment.  For example, ISDS arbitrations have been launched in cases where the investor believes that the host government has expropriated its investment without due process or compensation, or where the host government has taken action tantamount to expropriation that has undermined the value of the investor’s investment.  ISDS cases have also been launched in cases where the investor believes that it is receiving less favourable treatment than that accorded to domestic investors in the host country, in similar circumstances.   The arbitration is taken under international rules and was intended to allow investors to use arbitration rather than the domestic court systems of the host country.  Canadian negotiators obviously believed that ISDS would benefit Canadian investors and have continued to include ISDS in Canada’s international trade agreements. Those opposed to ISDS generally make two broad claims.  First, that ISDS gives preferential treatment to foreign investors by allowing them to use arbitration instead of domestic courts.  Second, that ISDS can be used by foreign corporations to force the Government of Canada to abandon appropriate regulatory measures in favour of other measures that benefit those foreign investors. Since the NAFTA entered into force 20 years ago in 1995, foreign investors have taken a total of thirty five arbitration cases against Canada under NAFTA ISDS   Fifteen of these cases have been withdrawn or are currently inactive.  Eleven cases have been settled, and nine...

Posted by Gordon LaFortune on Dec 16, 2014

The majority of procurement complaints filed with the Canadian International Trade Tribunal (“CITT”) are rejected without inquiry because they were not filed in time.  The CITT has no option but to reject these complaints because it has no authority to conduct inquiries into complaints filed outside the ten working day period set in the CITT Procurement Inquiry Regulations.  Seeing so many potential suppliers denied the right to have their complaints heard because they waited too long is frustrating for practitioners.  These companies and individuals invested both time and effort in preparing and filing bids in response to government tenders. In some cases, these companies and individuals may believe that they have been unfairly treated through the procurement process. Unfortunately, for those who wait too long, the right to seek a CITT review is lost on the basis on an error that could have been avoided through simple planning. The CITT has the authority to conduct inquiries into procurement complaints that meet the following requirements: The complaint is in writing and identifies the complainant, the designated contract and the government institution that awarded or proposed to award the contract; The complaint contains a detailed statement of the legal and factual grounds of the complaint and states the relief requested by the potential supplier; The complaint includes all information and documents relevant to the complaint; and The complaint is filed within the deadline set out in the Canadian International Trade Tribunal Procurement Inquiry Regulations. Potential suppliers should already have access to the information needed to meet most of the above requirements from the process of having reviewed and responded to the tender.  A potential supplier can identify itself, the government department or agency involved and the solicitation.  Based on their knowledge of their product/service and their market, the potential supplier should have a fairly good idea as to when they are being unfairly treated, which is the basis for the grounds of the complaint.  The materials that the potential supplier obtains and develops through the procurement process, including the tender documents, any e-mails or other communication from the Government department or agency and the bid, are the relevant information that must...

Posted by Gordon LaFortune on Dec 3, 2014

The recent Federal Court of Appeal decision in Canada (Border Services Agency) v. Dorel Industries Inc., 2014 FCA 258 (CanLII) [“CBSA v. Dorel“], has made it more important for importers, who receive duty drawback or other refunds from the Canada Border Services Agency (CBSA), to obtain Advanced Rulings so they can keep that money. The CBSA’s ability to recover duty drawback payments made to an importer came up CBSA v. Dorel in connection with duty drawback payments made to Dorel on futon covers imported from China and exported to the U.S.  Dorel imported futon covers from China, inserted a futon mattress in the futon cover, punched plastic jiffies through the mattress in a process called “tufting”, closed the zipper on one end of the cover and packaged the covered futon mattress with a metal frame for export to the U.S.  In response to Dorel’s request for a Same Condition Process Ruling, the CBSA issued the “same condition” ruling on September 14, 2011.  The Same Condition Process Ruling allows drawback or deferral of customs duties on goods exported in the “same condition” in which they were imported. Imported goods may undergo certain operations in Canada and still meet the criteria to be considered to be exported in the “same condition” so long as they do not materially alter the characteristics of the good. Dorel was paid drawback of duties paid on the imports on the basis of this “same condition” ruling.  The Federal Court noted that there was no suggestion that Dorel misrepresented its process or that it failed to disclose information when it requested the “same condition” ruling. Dorel did not make false representations to the CBSA or conceal relevant information concerning its process in its Duty Drawback Application.  Dorel did not obtain an advance ruling before importing and exporting the futons, but in the circumstances probably did not consider that an advance ruling was necessary. Following an audit of Dorel’s facility, the CBSA concluded that the product did not qualify for “same condition” treatment.  The CBSA issued a new “same condition” ruling on February 23, 2012 to replace the original ruling.  On the basis of that new ruling,...

Posted by Gordon LaFortune on Nov 17, 2014

Investor Statement Dispute Settlement (“ISDS”) is an arbitration process included in many international trade agreements (i.e. NAFTA’s Chapter 11). ISDS allows a foreign business or individual, who has made or is seeking to make an investment in one of the countries that is a Party to such a trade agreement (the “Host Country”), to challenge a measure adopted by the host country if the measure violates investment obligations and detrimentally affects the value of the investment.  The independent and binding third-party arbitration available through ISDS is usually described as an alternative to using the domestic courts of the host country.  In some cases it may be the best and most direct option available to the investor. While their authority must be determined on a case-by-case basis, domestic courts are unlikely to make a direct review and determination, or even consider disputes based on a claim that there has been a violation of international investment obligations such as the National Treatment or the Most Favoured Nation Treatment (“MFN”) obligation.  National Treatment and MFN obligations are included among the investment obligations in most international trade agreements.  MFN requires that foreign investors and their investments receive treatment by the host country that is “no less favourable’ than the treatment it accords, in “like circumstances”, to investors and investments of any non-party. The National Treatment obligation ensures that a host country accords to foreign investors and their investments, treatment that is “no less favourable” than the best treatment it accords to its domestic investors in “like circumstances”. As a result of both the National Treatment and MFN obligations, a foreign investor and its investments in the host country are entitled to the best treatment accorded by that host country to any other investor or investment in like circumstances. The National Treatment and MFN standards apply only to actions taken by the host country’s government that have an impact on a foreign investor and/or their investment in the host country.The treatment accorded to investors and investments is generally set out in legislation, regulation or administrative action and, in most cases, falls squarely within the host government’s domestic legal authority.  Domestic courts usually apply domestic...