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CCCA_V4No1_Col-McCarthys-FIN.qxd:CCCA_V1No2_Col-Litigat-V1.qxd 2/3/10 12:39 PM Page 37 A discriminatory system Legal Update – McCarthy Tétrault LLP of procurement review Foreign bidders on federal government contracts lose AIT protections. he Supreme Court of Canada recently AGP, the foreign supplier now only has suppliers have standing to bring complaints Theld, in Northrop Grumman Overseas recourse to the Federal Court by way of based on the AIT, the court noted that the Services v. Canada (Attorney General), that an judicial review of the contract award.This contract for military goods at issue was not a unsuccessful bidder on a procurement con- recourse is limited, and the remedies are “designated contract” under the NAFTA or ducted by the federal government must be a much more restrictive compared to those the WTO-AGP because its subject matter “Canadian supplier” in order to have stand- available through the CITT. did not fall within the scope of either of ing to bring a complaint before the 5 The consequence of limiting standing those trade agreements. By contrast, the Canadian International Trade Tribunal under the AlT to Canadian suppliers is court noted that AIT does apply to all pro- (CITT) based on theAgreement on Internal a double bifurcation of the bid com- curements by PWGSC or DND and that the Trade (AIT). plaint system. goods were not excluded from the AIT. This decision has far-reaching conse- a) Canadian suppliers have standing to Had Northrop Overseas's argument pre- quences for foreign bidders on federal gov- make AIT-related complaints to the vailed, it would have gained rights under the ernment contracts: CITT, but their non-Canadian com- AIT despite the United States Government 1 A non-Canadian supplier whose contract petitors do not. not being a party to the AIT and notwith- is not covered by the North American b) Successful non-Canadian suppliers standing that this type of military equipment Free Trade Agreement (NAFTA) or the are now required to intervene to is specifically excluded from the scope of cov- World Trade Organization Agreement on defend their awards in proceedings erage under the NAFTA and theWTOAGP. Government Procurement (WTO-AGP) before the CITT, but would not have The Supreme Court of Canada has thus procurement provisions now has no an equal right to pursue remedies decided that the provinces and Canada, recourse to the CITT,only normal judicial before the CITT if their intervention which negotiated the AIT to gain for their review (see point 4 below). Meanwhile, were unsuccessful. taxpaying citizens the benefits of competition that supplier's Canadian competitors do 6 Such a bifurcated bid complaint system in procurement, really only meant to have have recourse under the AIT, the NAFTA will result in conflicting decisions and that benefit apply to intra-Canadian compe- and the WTO-AGP, as well as under nor- increased costs. tition. It has also decided that, though mal judicial review. 7 The procurement obligations in the trade Parliament deliberately chose to send all pro- 2 If, however, NAFTA and AGP are not agreements now confer different rights. A curement challenges to a single authority — excluded, that foreign supplier can go to non-Canadian supplier will no longer be the CITT — some can go there and some the CITT but can only invoke the protec- able to rely on the protections afforded cannot,and those that do go there can invoke tions of NAFTA and WTO-AGP, not under theAIT,which are,in certain aspects, this protection or that depending on the those of the AIT. different from and more demanding than “Canadian-ness” of the complainant. 3 Non-Canadian bidders on federal govern- those of the NAFTA orWTO-AGP. The only way to cure the obviously dis- ment contracts, if they are not covered 8 The Supreme Court of Canada decision criminatory and doubly bifurcated system of under the NAFTA or the WTO-AGP, itself may be seen as a “discriminatory procurement review now in place is for ought to ensure that their bids are made measure” subject to challenge under the Parliament to make clear that its intention through and fulfilled by their Canadian sub- NAFTA and WTO-AGP. really is that all bidders should play by,and be sidiary or a Canadian entity with a “place protected by, the same rules. of business in Canada” in order to take The ruling advantage of the fair-bidding protections in In interpreting the AIT and the CITT Act, Brenda C. Swick is a partner in McCarthy the AIT and to have standing to complain the Supreme Court was influenced by what Tétrault’s litigation group and a member of the about the award before the CITT. Canada had agreed to in the NAFTA and firm’s international trade and investment law group. 4 If the goods are excluded from the scope the WTO-AGP. In rejecting Northrop Ms. Swick can be reached at 613-238-2135 of coverage under the NAFTA andWTO- Overseas' argument that non-Canadian (bswick@mccarthy.ca). PRINTEMPS 2010 CCCA Canadian Corporate Counsel Association 37