JON JOHNSON

CYNDEE TODGHAM CHERNIAK

Testimony Before Senate Standing Committee

on Banking, Trade, and Commerce

Internal Barriers to Trade (May 11, 2016)

R. v. Comeau

New Brunswick Prov. Crt• Para 193 – subsection 134(b) of the Liquor Control Act

(NB) constitutes a trade barrier and is unconstitutional re

Section 121 of the Constitution Act, 1867

• Para 191 - Section 121 should be interpreted as

permitting “free movement of goods among the provinces

without barriers, tariff or non-tariff…”

• Para 101 – “The Fathers of Confederation wanted free

trade between respective jurisdictions … the Union meant

free trade, the breaking down of all trade barriers as

between provinces forming part of the proposed Dominion

of Canada …”

Vision

2

R. v. Comeau -Speeches &

Orations of Fathers of Confederation• “… if we wish … to establish a commercial union, with

unrestricted free trade, between people of the five provinces …”

Sir John A. MacDonald, February 6, 1865

• “Union of all Provinces would break down all trade barriers

between us” – George Brown, September 12, 1864

• “Now we desire to bring about that same free trade in our own

colonies” – Alexander Galt, November 1, 1865

• ”Union is free trade among ourselves …Give us Union and the

East shall have free trade with the West.” - Alexander Galt,

February 7, 1865

• “… the chief benefits expected to flow from Confederation was

the free interchange of the products of the labour of each

province” – Alexander Galt, November 23, 1864

Solutions

3

R. v. Comeau

Next Steps• Appeal?

• Federal Government sending a Reference to the

Supreme Court of Canada

• The end arrives sooner

• Control the issues

• Ask whether Section 91/92 powers must be read in the context

of Article 121

• SCC decision could have wide-ranging effects

Solutions

4

Northrop Grumman Overseas Services

Corporation v. AG of Canada

[2009] 3 SCR 309• What does the Supreme Court of Canada say?

• “The AIT is an inter-governmental agreement entered into by the executive

of the federal, provincial and territorial (except Nunavut) governments.” “It is

not a piece of legislation. The executive cannot displace existing laws by

entering into agreements, though agreements may bind it … Of course, the

legislature can choose to adopt an agreement in whole or in part and give it

the force of law …”

• “… the fact that part of the AIT has been adopted in legislature should not

obscure the fact that it was not drafted as legislation… the AIT is a political

document. Many of its provisions express general principles or goals that

are not directly enforceable…”

• “… the [AIT] pertains to domestic trade within Canada. Essentially, it is a

domestic free trade agreement.”

5

Vision

Listing Trade Barriers -

Reference to the CITT• Section 18 of the CITT Act

“The Tribunal shall inquire into and report to the Governor in Council

on any matter in relation to the economic, trade or commercial

interests of Canada with respect to any goods or services or any class

thereof that the Governor in Council refers to the Tribunal for inquiry.”

• Previous reports

• GC-90-001 – Competitiveness of Canadian Fresh & Processed

Fruit & Vegetable Industry

• GC-92-001 - Competitiveness of Canadian Cattle and Beef

Industries

• GC-97-001 – # of Reports- Profile of Canadian Dairy Industry /

International and Domestic Laws / Import Regimes for Dairy

Products

Solutions

6

Provincial Government

Procurement under AIT• Governments procure goods & services

• No effective accelerated alternative dispute

resolution mechanism at provincial level

• Recourse to provincial courts – judicial review

• Costly

• No stop work orders (CITT can issue stop work

orders re Fed procurements)

• Procurement obligations are not implemented in

provincial laws

Solutions

7

Dispute Resolution• Importance of Effective Dispute Resolution

• Trade Agreements Model

• Investor/State Model

• Force of Law Models

Solutions

8

Trade Agreements Model• WTO, NAFTA, CETA, etc.

• Available only to governments – non government parties

don’t have standing

• Panel decides whether a measure is inconsistent with

the agreement and recommends that the measure be

brought into conformity

• Losing government may comply but can’t be forced to

• In the case of non-compliance, winning government may

retaliate by withholding benefits under the trade

agreement

• AIT dispute settlement closely follows this model

Solutions

9

Investor/State Model• NAFTA investment chapter, CETA, FIPPAs

• Non-government parties (i.e. investors) do have

standing

• No need for a complaining investor to secure

support of its government

• A tribunal decides whether the measure complained

of breaches the provisions of the agreement

• If breach found, the tribunal awards damages to the

complaining investor but the measure can remain in

effect if the losing government chooses

• Contrast with AIT dispute settlement

Solutions

10

Force of Law ModelsNAFTA Chapter Nineteen

• Binational panel review of certain decisions in

antidumping and countervailing actions

• Incorporated into the domestic legal systems of

each of Canada, the U.S. and Mexico

Federal CITT Bid Challenge Procedure

• Applies to AIT, NAFTA and WTO

• Legally enforceable results for individual suppliers

against Federal Government

Relevance to AIT

11

Vision

Adjudicative Bodies• NAFTA – Chapter Twenty and Chapter Nineteen - ad

hoc panels chosen from rosters

• NAFTA investor/state and FIPPAs – ad hoc tribunals

chosen from rosters

• CETA investor/state – CETA Tribunal and CETA

Appellate Body

• WTO Agreement – ad hoc panels but a permanent

Appellate Body

• AIT - ad hoc panels chosen from rosters – would AIT

dispute resolution be more effective if the adjudicative

body were permanent?

• An existing Court or administrative Tribunal?

• A new permanent Tribunal to hear AIT cases?

Solutions

12

Federal Involvement in Internal

Trade Barriers• Umbrella under federal laws

• Provincial liquor monopolies – Importation of Intoxicating

Liquors Act

• Supply management regimes – dairy, eggs, poultry

• Regulatory requirements differing from province to

province

• Can result from federal government policy e.g. leaving climate

change approach to provinces

• Address through harmonization and mutual recognition

Solutions

13

Jon R. Johnson

jonrjohnson@rogers.com

Phone: (416) 597-4121

Cyndee Todgham Cherniak

cyndee@lexsage.com

Phone: (416) 307-4168