Posted by Woods LaFortune LLP on Nov 10, 2014

Air Transport Agreements (ATAs) are treaties signed between two countries allowing international commercial air transport services between their territories. These cover matters as diverse as overflight rights, airline designation, safety, and security, use of airports, customs, tariffs, sales and transfer of funds, ground handling and most importantly, traffic rights. The latter are the core economic rights of such treaties, which can specify the number of airlines that can serve the market, the capacity they can offer between them and at intermediate points, and the cities of the two countries between which they can operate. Traffic rights are typically the most contentious issues of an ATA, making them each a kind of trade agreement applying specifically to air transport services trade. The rights granted by ATAs belong to the negotiating countries, each country then designating specific airlines to operate them. The basis for modern ATAs date back to the Chicago Convention of 1944, a multilateral treaty that determined that the commercial aspects of air transport agreements were to be dealt with bilaterally rather than multilaterally. This Convention also created the International Civil Aviation Organization – ICAO, a United Nations Agency with its headquarters located in Montreal. As a key element of the Chicago Convention, it was agreed that no scheduled international air service may be operated over or into the territory of a contracting state without their express permission. Over the following years, ICAO developed a series of traffic rights, known as freedoms of the air. Totalling nine, these freedoms continue to form the basis of rights exchanged bilaterally in air services negotiations today. They are, essentially, in respect of scheduled international air services. ICAO characterizes all “freedoms” beyond the Fifth as “so-called” because only the first five “freedoms” have been officially recognized as such by international treaty. These are: the right to fly across its territory without landing; the right to land in its territory for non-traffic purposes; the right to put down, in the territory of the first State, traffic coming from the home State of the carrier; the right to take on, in the territory of the first State, traffic destined for the home State of the...

Posted by Woods LaFortune LLP on Nov 1, 2014

Part of ongoing negotiations since 2009, an agreement in principle was finally reached on October 18, 2013 on the Canada-EU Comprehensive Economic and Trade Agreement (CETA). Described as Canada’s most ambitious trade agreement to date, the CETA will help solidify Canada’s important economic relationship to the EU. The Canada-EU relationship is currently a high priority for the Canadian government given the EU’s position as Canada’s second largest trading partner in goods and services. Since the conclusion of negotiations, CETA, and specifically its Investor State Dispute Settlement (ISDS) provisions, have been the subject of much controversy. Fueling critics is the fear that foreign investors and foreign corporations will now be able to seek and collect billions of dollars in compensation from the Host State’s Government, when it creates or enforces rules, laws or policies that negatively impact their bottom line. In addition, there is a growing fear that the ISDS provisions will result in the Host State Government’s loss of capacity to protect important industries of national interest (i.e. natural resources) to the benefit of foreign investors. In reality, the investment provisions of the CETA, including its ISDS provisions, are in line with best practices in EU member states’ existing Bilateral Investment Treaties (BITs). The provisions are also in line with Canada’s 2004 Model Foreign Investment Promotion and Protection Agreement (FIPA). The reason the inclusion of ISDS provisions is to provide foreign investors the right to seek compensation for damages arising out of breaches of investment related obligations (such as Expropriation, Most Favoured Nation, National Treatment and Fair and Equitable Treatment) by Host State Governments. In other words, the ISDS provisions allow a private investor of a Contracting Party to launch an action for compensation directly against a Contracting Party State where the State implements or enforces measures that damage the foreign investor’s investment. Investment protection measures, combined with ISDS, are meant to promote investment and enhance the  overall predictability of the policy framework governing Foreign Direct Investment (FDI). In addition, the provisions maintain Host Countries’ rights to regulate public policy objectives. Much like the case of the Canada-China FIPA, a deeper and more detailed analysis of the text of...

Posted by Gordon LaFortune on Oct 27, 2014

Importers used to Canada’s rules of origin may be surprised to discover that the Canadian International Trade Tribunal (CITT) has determined that those rules do not apply in anti-dumping and countervailing injury cases (SIMA cases taken under the Special Import Measures Act (SIMA) and Regulations) and has subsequently developed new rules of origin to apply in these cases. Because the CITT’s new rules may conflict with Canada’s other existing rules of origin, a company that determines the customs duties to apply to imported goods on the basis of an existing set of rules of origin may find that those goods are assessed SIMA duties on the basis of the CITT’s new rules. The issue arises when finished goods shipped to Canada are produced using inputs from a country that is subject to SIMA duties. This was the case in Ideal Roofing (AP-2013-008 and AO-2013-009) which concerned the origin of fasteners shipped to Canada from the U.S., and whether those fasteners would be subject to SIMA duties under a finding against fasteners from China and Chinese Taipei. The fasteners imported from the U.S. were described as fastener systems produced from duds/blanks imported from Chinese Taipei. While the duds/blanks were used as inputs in the U.S., they would have been subject to SIMA duties had they been shipped directly  to Canada from Chinese Taipei. The importer argued that the processing in the U.S. transformed the Chinese Taipei-origin duds/blanks into U.S. – origin finished fastener systems that would not be subject to SIMA duties. The importer relied on Canada’s existing rules of origin, including NAFTA’s tariff shift rules and regional value content rules. The CITT rejected these arguments and noted that Parliament had not referred to any of these rules in the SIMA or SIMA Regulations and concluded that this meant that Parliament did not intend for these rules to be applied in SIMA cases. Therefore, the CITT developed its own rules of origin based on the definition of “origin” and “originate” in the Canadian Oxford Dictionary. The CITT noted that “origin” and “originate” mean the beginning or source of a thing. Relying on these definitions, the CITT began the process of...

Posted by Michael Woods on Oct 24, 2014

By now, those following Canada and Mexico’s ongoing campaign for fair trade in the North American cattle and beef industry will have seen that the “two amigos” have won yet another battle in the trade dispute with the United States regarding its meat-labeling regulations. On October 20, 2014, a World Trade Organization (WTO) Compliance Panel found that U.S. meat labeling regulations, as set out in its revised Country of Origin Labeling (COOL) measure, violated WTO provisions by according less favourable treatment to Canadian and Mexican livestock than that accorded to “like” U.S. livestock. COOL violated these agreements by detrimentally affecting the competitive opportunities available to imported livestock from both Canada and Mexico. For details see http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds384_e.htm#bkmk384rw. That’s the good news for the Canadian and Mexican cattle industry. What’s not so good is that this is the third time that COOL has been referred to the WTO Dispute Settlement Process and the third time that the U.S. rules have been declared offside. Canada first took the original COOL measures to the WTO in 2008. Since then, there have been a lot of trips back and forth to Geneva, but with each loss, U.S. legislators have actually managed to make the successive “reformed” regulations even more trade restrictive. In fact, the trade dispute over beef, cattle and pork goes back to 2003 when the United States closed the Canada-U.S. border after a single case of bovine spongiform encephalopathy (BSE), otherwise known as mad cow disease. Gordon LaFortune, managing partner at Woods, LaFortune LLP, and I represented a group of 109 feedlot operators from Alberta and Saskatchewan in the fight to re-open the trade border. Among other things, we argued that free trade and the North American Free Trade Agreement (NAFTA) led to a fully integrated North American market and made the border closing both absurd and a violation of the letter and the spirit of free trade. Fortunately, the border was re-opened, but only after a four and a half year batter that represent important economic losses to those in the cattle industry. COOL has now introduced a new attack on the letter and spirit of free trade. While the WTO...

Posted by Woods LaFortune LLP on Oct 21, 2014

Negotiations for a bilateral Foreign Investment Promotion and Protection Agreement (“FIPA“) between Canada and China have been ongoing for over a decade. They commenced in 1994, were interrupted pending China’s accession to the World Trade Organization (“WTO“), and resumed in September 2004. After much debate and no shortage of opposition, the Canada-China FIPA (“C-C FIPA“) was signed on September 9, 2012 and officially came into force on October 1, 2014. The main purposes of a FIPA are to establish clear investment rules and measures to protect foreign investors against discriminatory or arbitrary government practices, to provide effective compensation in the event of an expropriation and to enhance the overall predictability of the policy framework governing foreign investments. The existence of a FIPA has proven to be useful in terms of promoting the parties’ respective markets as a stable destination for investment with clearly defined and enforceable rules. In fact, foreign investors often look to the existence of a strong investment protection agreement as a key consideration in their decision-making process. It is important for both Canadian and Chinese businesses and investors to understand what their respective rights are and how they will be protected under this new agreement. Foreign investment has become an essential corporate strategy for many Canadian companies competing in the global economy, allowing them to gain access to foreign markets, acquire new technologies, and gain access to investors and funding among a panoply of other important benefits. Although the statistics show that inflows of foreign direct investment (“FDI“) from China into Canada are increasing, they remain but a small portion of the total FDI inflows into Canada, leaving much potential for expansion and growth. The C-C FIPA represents the first major economy-wide agreement between Canada and China. Given the protections offered under the Agreement, Canadian businesses will have further impetus to expand their presence in, and partnerships and investments with China to truly take advantage of the economic possibilities. The C-C FIPA creates a certain degree of security which can only serve to encourage further investment between both countries and help Canadian businesses gain access to the rapidly developing Chinese market. The C-C FIPA does provide...

Posted by Woods LaFortune LLP on Oct 14, 2014

The South Park Bridge Project (the “Project“) in Morrison, Colorado has recently attracted a great deal of attention. At issue was the fact that Canadian steel was used in the reparations to the South Park Bridge. As a federally funded initiative, the use of Canadian-origin steel in the Project repairs would violate Buy America provisions. As  a result, this may lead to a complete withdrawal of U.S. federal funding if the Canadian steel is not entirely removed from the bridge. The cost of removal, which would require that the bridge be dismantled, was estimated to be around US$30,000.00. The Buy America provisions require that U.S. products and materials be used in transportation infrastructure projects valued over US$100,000.00. Specifically, mass transit-related projects in the U.S. must only use 100% U.S. steel, iron and manufactured products. Although the U.S. government recently decided not to require that the Canadian steel be removed, there is mounting pressure on the Canadian Government to implement reciprocal local content restrictions. For instance, the Canadian Manufacturers and Exporters (CME) organization has been actively lobbying the Canadian Government to retaliate against the Buy America provisions by banning the use of foreign products and materials in any major federal infrastructure projects. The CME specifically suggested a ban for the $5 billion replacement of Montreal’s Champlain Bridge. As it stands, the Canadian Government has not shown any intention to acquiesce to CME’s request. This retaliatory approach does raise an important question in terms of the impact such potentially reciprocal provisions may have on free trade, and specifically, on U.S. – Canada economic integration. If both Canada and the U.S. adhere to and/or implement retaliatory bans on each other’s products, the impact is forcefully negative for both Canadian companies having invested in the U.S. and for American companies having invested in Canada. The situation also raises the question of consistency of the U.S. Buy American provisions with North-American Free-Trade Agreement (“NAFTA“) and World Trade Organization (“WTO“)...