Federal government challenges trade tribunal's jurisdiction, with one eye on NAFTA

The Canadian government is hoping to convince the Federal Court of Appeal to stop a trade tribunal from hearing any more disputes involving big-ticket purchases covered by national security exceptions.

Shared Services Canada, the federal government's tech support agency, has asked the appeal court to review a ruling made by the Canadian International Trade Tribunal on a complaint about a $430-million contract for a powerful new weather-predicting supercomputer.

As with virtually every large procurement made by Shared Services Canada, the supercomputer contract was subject to an omnibus national security exception that went into effect in 2012. Such exceptions have also been applied to the purchase of parkas and binoculars.

National security exceptionspermit the government to buy goods and services outside regular trade rules and treaties. They also allow Shared Services to set specific conditions, such as where equipment must be made.

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Hewlett-Packard lost its bid for the multi-year supercomputer contract. It asked the Canadian International Trade Tribunal to intervene, arguing that Shared Services Canada wrongly and arbitrarily invoked a national security exception on the contract.

In its April decision, the trade tribunal upheld Shared Services' decision to award the contract to IBM.

Jurisdiction questioned

Yet within days, the government asked the Federal Court of Appeal to dismiss the tribunal's November 2016 decision to hear the case in the first place.

The government argues the tribunal has no jurisdiction to hear complaints on contracts covered by the 2012 omnibus national security exception, which includes such services as email, computer networks and data centre infrastructure.

In an email to CBC News, a spokeswoman for Shared Services said the agency has every right under existing trade agreements to invoke exemptions when the government considers a procurement to be indispensable to national security.

I think the government is attempting to set a precedent. It's important at the moment, especially with NAFTA on the table, that they have a clear domestic decision on how to deal with procurement and national security exceptions- Sarah Goldfeder, trade specialist

Monika Mazur added that up until last year, the trade tribunal refused to conduct inquiries into purchases subject to the exceptions.

"Given the CITT'sdecision marked a significant departure from previous jurisprudence, SSC has sought judicial review in order to obtain clarity on the law," wrote Mazur.

In documents filed in court, the government has explained why it needs the Federal Court of Appeal to step in.

"The answer to the jurisdictional issue Canada raises in this judicial review affects the regulatory oversight of billions of dollars per year in federal procurements," wrote Michael Morris, senior general counsel for the federal government.

"Further, Canada continues to initiate procurements subject toNSEs(national security exceptions)."

NAFTAa factor

Sarah Goldfeder, a trade specialist and fellow at the Canadian Global Affairs Institute, said it's important this question be resolved soon.

"I think the government is attempting to set a precedent. It's important at the moment, especially with NAFTA on the table, that they have a clear domestic decision on how to deal with procurement and national security exceptions," she told CBC News.

"What you have in the U.S. is an administration that's sitting there saying, 'We want access to all of your markets and there are no exceptions.' Yet the United States holds back a fair amount of its procurement market.

"And so (Canada)needs a clear decision so they know exactly what groundwork they're operating from as they pursue the procurement discussion."

Earlier this year, when the tribunal ruled on Hewlett-Packard's complaint,presiding member Serge Frchettearticulated a significant amount of concern about the use of national security exceptions (NSEs).

"(Shared Services Canada), in effect, treats the NSE as a general licence to void potential suppliers' right to seek review of government actions at the tribunal," Frchette wrote.

Goldfeder said that was a fair assessment, given the dual roles of the tribunal: protecting Canadian interests as well asthe integrity of trade agreements signed by government.

"It's important as Canada enters into more free trade agreements that the trade tribunal have an eye toward both sides," she told CBC News.

Tribunal to intervene

Technically, Hewlett-Packard is the respondent in the Federal Court of Appeal case. But given how the government has asked for clarity on a technical issue of tribunal jurisdiction, it bowed out.

So for the first time in 14 years, the tribunal sought and was granted leave to intervene on one of its very own decisions.

It argues the government's application is moot because it came monthstoo late; it also points out the tribunal upheld the decision to award the contract to IBM.

If the Federal Court of Appeal decides to proceed with the judicial review, the tribunal said its point of view must be represented.

"This court has recognized on several occasions that the CITT is the expert tribunal tasked by Parliament with responsibility for overseeing the procurement activities of the federal government and interpreting the trade agreements," submitted the tribunal.

For its part, the government has welcomed the tribunal's application for intervenor status.

"Without the CITT's intervention, there would be no party to present opposing viewpoints on either the question of mootness or, in the event the court exercises its discretion to hear this application, on the merits," wrote Morris.

On Sept. 1, Federal Appeal Court Judge Richard Boivin gave both sides 30 days to submit legal arguments on Shared Services' original request for judicial review.