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Canada, U.S., Cuba – The Spirit of Free Trade and Building Ports – Part 1

Posted by on Jan 21, 2015

To quote a well-known Canadian singer, “isn’t it ironic, don’t you think …” As the United States is moving to end over half a century of frozen relations with Cuba, and is poised to end trade embargos that sideswiped Canadian business, it is also taking steps to keep Canadian steel out of a construction project on Canadian soil by applying Buy America Rules outside its borders.  The result is that the Government of Canada has been compelled to issue an Order under the Foreign Extraterritorial Measures Act (FEMA) to counter the application of Buy America to the Prince Rupert Ferry Terminal project.  FEMA, which was enacted in 1985 to deal with extraterritorial application of U.S. trade sanctions aimed at Cuba, has only been used once before (in 1992) to prevent Canadian Corporations from taking any steps following U.S. measures prohibiting commercial relations with Cuba.  The FEMA is now being used for a second time, but the issue is not Cuba or the global application of U.S. sanctions on a third party. For the first time, FEMA is being rolled out in the bi-lateral context. Last November, we reported on Canada’s concerns about the application of U.S. Buy America rules to a major infrastructure project at the Port of Prince Rupert, British Columbia [see https://www.wl-tradelaw.com/buy-america-affecting-projects-in-canada/]. The project involves the upgrade of the Prince Rupert ferry terminal on British Columbia’s West Coast.   The Alaska Marine Highway System has exclusive use of the ferry terminal, which services passengers shuttling between Alaska and British Columbia, as part of a 50-year lease agreement between the Alaska Department of Highways and the Prince Rupert Port Authority. The State of Alaska maintains that the $15 million project is subject to Buy America because the funding comes from the U.S. Federal Highway Administration.  Thus, in spite of the fact that the project is located on Canadian soil, all iron and steel used in the Prince Rupert Project must be of U.S. origin. While Canada has made its objections to the application of Buy America legislation in this case quite clear, along with its overall opposition to the policy, the next legal step was announced on January 19,...

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ISDS (Investor State Dispute Settlement) – Different Perspectives

Posted by on Jan 19, 2015

A recent study by the Canadian Centre for Policy Alternatives (CCPA) has found that Canada has been the target of more claims under the North American Free Trade Agreement (NAFTA) investor-state dispute settlement (ISDS) mechanism than the U.S. or Mexico. [https://www.policyalternatives.ca/publications/reports/nafta-chapter-11-investor-state-disputes-january-1-2015].   The CCPA affirmed its abolitionary stance on ISDS by stating that “the pervasive threat of investor-state challenge under NAFTA Chapter 11 puts a chill on public interest regulation” and that “current trends will only worsen unless political and legal action is taken.” ISDS, also known as Chapter 11 under NAFTA provides foreign investors, including Canadians, the right to seek compensation for damages when host state governments violate NAFTA investment obligations including:  protection in cases of expropriation, as well as National Treatment and Most Favoured Nation Treatment standards, among others. These provisions allow private investors from Canada, Mexico and the U.S., to launch an action for compensation directly against the host state where that state implements or enforces measures that damages the investor’s investment. NAFTA’s Chapter 11 provides investors with direct access to third-party adjudication before an impartial international tribunal. Relying on the national courts of the host country to enforce obligations under NAFTA is not always easy, impartial or even possible in all cases.  Since regulations affecting individual investors would not normally be challenged by governments through state-to-state dispute settlement, the creation of ISDS as a stand-alone procedure appears to be a reasonable step for a sovereign state to take. There have only been 77 cases brought under NAFTA’s Chapter 11 since it came into force in 1994. That represents a rough average of 3.7 cases per year in its 20 year lifespan, in comparison to the several thousands of domestic commercial cases being launched in each respective signatory country on an annual basis. In total, there have been 35 claims against Canada, 22 against Mexico and 20 against the U.S. It is important to note that out of the 35 cases noted against Canada, 15 of them were withdrawn. This means that there were only 20 “real” cases brought against Canada, which represents an average of one case per year. Interestingly, out of the 77 overall claims...

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Investor-State Dispute Settlement: There’s no Reason for Any Fuss

Posted by 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...

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NAFTA Chapter 11 Investment Provisions – A Basic Overview

Posted by on Dec 19, 2014

A few weeks ago we published presentations on Free Trade and on NAFTA Chapter 11 as  firsts in a series of articles and materials on that subject. Seeing as Woods, LaFortune LLP has a great deal of experience in NAFTA investor-state litigation, we thought it might be useful to provide a review of the basic elements of the investment provisions in NAFTA’s Chapter 11. Over the next few weeks, we will provide additional commentary on one of many hot topics in trade law debates – investor state dispute settlement (ISDS). For many, this debate began a little over 20 years ago with NAFTA Chapter 11. The full presentation touching on the investment provisions of NAFTA’s Chapter 11 (National Treatment, Most-Favoured Nation, Fair and Equitable Treatment etc.) is available under our publications section – NAFTA Chapter 11 Investment Provisions...

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Government Procurement: Protecting the Right to File a Bid Challenge Complaint

Posted by 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...

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RMB Trading Hub and the Canada-China FIPA

Posted by on Dec 15, 2014

With the aim of increasing international business and investment between Canada and China, Prime Minister Stephen Harper and Chinese Premier Li Kegiang announced in November that Canada would be designated as an official Renminbi (“RMB”) currency trading hub. With the RMB, also commonly referred to as the Yuan, having recently emerged as the second most prominent currency in trade finance behind the U.S. dollar, countries around the globe have been aggressively competing and bidding against one another to establish their own RMB trading centers. The RMB currency trading hub, which is estimated to become operational in Canada over the next three to six months, will be the first of its kind in North America. This move represents an important competitive advantage for Canada on the international trade and international finance plane. In simple terms, the RMB currency trading hub is a centre authorized to complete RMB transactions at stable and predictable exchange rates. Currently, Canadians buying and/or selling in China typically have to convert monies used to finance their deals into an intermediary currency, which most often than not, is the U.S. dollar. An RMB currency trading hub in Canada will allow Canadian companies to transact directly in RMB, thus eliminating the often costly U.S. dollar middleman. In other words, the Canadian dollar will be valued directly against the RMB for the first time, thereby eliminating the additional layer of uncertainty in the foreign exchange market when converting in and out of the USD. The introduction of the RMB trading hub in Canada is anticipated to significantly reduce transaction fees for both importers and exporters. The Canada Chamber of Commerce stated in a Report that over the next decade, “the direct benefits of an RMB trading hub would be an additional $21-32 billion of exports, plus potential discounts in imports totalling $2.8 billion.” HSBC Bank Canada indicated that the increase in investment that would be driven by the presence of an RMB trading hub in Canada would easily be in the range of $22 million by 2018. China’s growth as an economic superpower is significant for global investment and holds particular importance for Canadians. China currently ranks as the...

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