Canada (Attorney General) v. Northrop Grumman Corporation

Canada (Attorney General) v. Northrop Grumman Corporation
Court (s) Database
Federal Court of Appeal Decisions
Date
2008-05-22
Neutral citation
2008 FCA 187
File numbers
A-310-07
Notes
Reported Decision
Decision Content
Date: 20080522
Docket: A-310-07
Citation: 2008 FCA 187
CORAM: LÉTOURNEAU J.A.
SEXTON J.A.
RYER J.A.
BETWEEN:
ATTORNEY GENERAL OF CANADA
Applicant
and
NORTHROP GRUMMAN OVERSEAS SERVICES CORPORATION
and LOCKHEED MARTIN CORPORATION
Respondents
Heard at Ottawa, Ontario, on February 5, 2008.
Judgment delivered at Ottawa, Ontario, on May 22, 2008.
REASONS FOR JUDGMENT BY: RYER J.A.
CONCURRED IN BY: SEXTON J.A.
DISSENTING REASONS BY: LÉTOURNEAU J.A.
Date: 20080522
Docket: A-310-07
Citation: 2008 FCA 187
CORAM: LÉTOURNEAU J.A.
SEXTON J.A.
RYER J.A.
BETWEEN:
ATTORNEY GENERAL OF CANADA
Applicant
and
NORTHROP GRUMMAN OVERSEAS SERVICES CORPORATION
and LOCKHEED MARTIN CORPORATION
Respondents
REASONS FOR JUDGMENT
RYER J.A.
INTRODUCTION [1] This is an application for judicial review of a decision of the Canadian International Trade Tribunal (“the CITT”) (File No. PR 2007-08), upholding, in part, a complaint of an alleged breach of Article 506(6) of the Agreement on Internal Trade (the “AIT”) made by Northrop Grumman Overseas Corporation (“Northrop Overseas”), pursuant to subsection 30.11(1) of the Canadian International Trade Act, R.S.C. 1985 (4th Supp.), c. 47 (the “Act”) and the applicable provisions of the Canadian International Trade Tribunal Procurement Inquiry Regulations, S.O.R./93-602 (the “Regulations”). The complaint relates to a Department of National Defence (“DND”) requisitioned procurement that was issued by the Department of Public Works and Government Services Canada (“PWGSC”) under a request for proposal under Solicitation No. W8475-02BA1/C and File No. 230bb.W8475-02BA1 (the “RFP”). Unless otherwise indicated, all references to an Article in these reasons shall be to the corresponding provision of the AIT.
[2] The application before this Court deals only with the issue of whether the CITT had jurisdiction to hear the complaint.
[3] PWGSC contends that Northrop Overseas has no standing to make the complaint because Northrop Overseas is not a Canadian supplier, within the meaning of Article 518 (a “Canadian supplier”). As a result, PWGSC argues that the CITT has no jurisdiction to hear the complaint. In response, Northrop Overseas submits that Canadian supplier status is not a precondition to the jurisdiction of the CITT to hear a complaint with respect to an alleged breach of the AIT. In any event, Northrop Overseas contends that it does have the status of a Canadian supplier.
BACKGROUND
[4] Northrop Grumman Corporation (“Northrop Parent”) is a U.S. corporation, incorporated in the State of Delaware. It provides a wide range of services, including information and technology services, electronics, aerospace systems and marine systems. It operates through a number of divisions and related corporate entities.
[5] Northrop Overseas is a Delaware incorporated corporation that is a wholly-owned subsidiary of Northrop Parent.
[6] Northrop Grumman Canada (2004) Inc. (“Northrop Canada”) is a Canadian incorporated corporation that is a subsidiary of Northrop Parent and a sister corporation to Northrop Overseas. Northrop Canada also operates, when appropriate, as a Canadian business for the delivery of products and services in co-ordination with Northrop Overseas. In relation to Contract W8482-071072/001/QC, dated December 20, 2006, between PWGSC and Northrop Overseas, Northrop Canada and Northrop Overseas entered into an agreement which provided that marine navigation equipment, the subject of that contract, could be delivered to the Government of Canada through the auspices of Northrop Canada. The record before the Court does not contain any reference to any similar type of agreement between Northrop Overseas and Northrop Canada in relation to the provision of the goods and services that are the subject of the RFP.
[7] The procurement described in the RFP was for 36 Advanced Multi-role Infrared Sensor (AMIRS) targeting pods, including spares, equipment and training for use with the Canadian Forces fleet of CF-18 aircraft.
[8] In response to the RFP, bids were submitted by Northrop Overseas, Lockheed Martin Corporation (“Lockheed”) and Raytheon Corporation (“Raytheon”).
[9] PWGSC awarded the contract to Lockheed on March 22, 2007. Under the contract, Lockheed is to be paid US$89,487,521 for the AMIRS targeting pods and US$50,357,649 in respect of in-service support.
[10] On April 17, 2007, Northrop Overseas filed a complaint with the CITT stating that PWGSC had failed to evaluate the bids in accordance with the evaluation plan (the “Evaluation Plan”) included in the RFP. Consequently, Northrop Overseas alleged that PWGSC had violated Article 506(6).
[11] On April 25, 2007, the CITT notified PWGSC and Northrop Overseas that the complaint had been accepted for inquiry in accordance with subsection 30.13(1) of the Act and subsection 7(1) of the Regulations. However, prior to hearing the merits of the complaint, the CITT requested PWGSC to provide its position with respect to whether Northrop Overseas has standing to make the complaint.
[12] In response to the CITT’s notification, on May 2, 2007, PWGSC applied to the CITT for an order dismissing the complaint on the basis that Northrop Overseas does not have standing to file a complaint in respect of an alleged breach of a provision of the AIT because Northrop Overseas is not a Canadian supplier. In that correspondence, PWGSC noted that the Letter of Interest that it published on MERX, an electronic-tendering service, referred to the AIT but not to either of the other two trade agreements in relation to which the CITT has jurisdiction to hear complaints, namely, NAFTA and the Agreement on Government Procurement, as defined in section 2 of the Regulations. In particular, at page 2 of that correspondence, PWGSC explained why NAFTA and the Agreement on Government Procurement were specifically inapplicable to the procurement embodied in the RFP, stating:
2. This requirement [the RFP] falls under Federal Supply Classification (FSC) Group 12, Fire Control Equipment, subcategory 1230 – “Fire Control Systems” and is subject to the Agreement on Internal Trade (AIT). Pursuant to paragraph 2 of the North American Free Trade Agreement (NAFTA) Annex 1001.1b-1, Section A, for procurement on behalf of DND, only the goods listed in Section B of the Annex are included in coverage. Also, pursuant to paragraph 1 of the Notes under NAFTA Annex 1001.1b-2, all services, with reference to goods purchased by DND that are not identified as subject to coverage under Annex 1001.1b-1, are also excluded from coverage. FSC Group 12 is not included under NAFTA Annex 1001.1b-1, Section B. Consequently, this requirement is excluded from coverage under the NAFTA. A similar exclusion applies under the World Trade Organization Agreement on Government Procurement, Canada Index. It is also noted that as the requirement is for armaments, it is also subject to the International Trade in Arms Regulations (ITARs).
Thus, this correspondence postulates that the goods and services contemplated in the RFP were specifically excluded from the scope of NAFTA and the Agreement on Government Procurement but were not excluded from the scope of the AIT. However, as will be seen later in these reasons, this correspondence does not indicate that all of the entities that submitted bids pursuant to the RFP would, by virtue of having submitted bids, necessarily have the requisite standing to file complaints in respect of alleged breaches of the provisions of Chapter Five of the AIT. Moreover, a review of the RFP that was included in the record reveals that the RFP, itself, makes no reference to the AIT.
THE DECISION OF THE CITT
[13] The CITT granted Lockheed and Raytheon intervener status in the proceedings, which dealt with both the jurisdictional issue and the merits of the complaint.
[14] On June 8, 2007, the CITT held that it had jurisdiction to conduct an inquiry with respect to the complaint. In its reasons for this decision, which were issued on September 12, 2007, the CITT stated that its jurisdiction to hear procurement complaints is based upon the provisions of sections 30.1 to 30.19 of the Act. These provisions create a dispute resolution mechanism in respect of the procurement provisions of trade agreements, including the AIT. The CITT referred specifically to subsection 30.11(1) of the Act, which reads as follows:
30.11(1) Subject to the regulations, a potential supplier may file a complaint with the Tribunal concerning any aspect of the procurement process that relates to a designated contract and request the Tribunal to conduct an inquiry into the complaint.
30.11(1) Tout fournisseur potentiel peut, sous réserve des règlements, déposer une plainte auprès du Tribunal concernant la procédure des marchés publics suivie relativement à un contrat spécifique et lui demander d’enquêter sur cette plainte.
[15] The CITT held that the term “potential supplier” identifies the person who has standing to initiate a complaint under subsection 30.11(1) of the Act and that the term “designated contract” identifies the subject matter of the complaint. Those definitions, in section 30.1 of the Act, were reproduced by the CITT and read as follows:
"potential supplier" means, subject to any regulations made under paragraph 40(f.1), a bidder or prospective bidder on a designated contract.
«fournisseur potentiel » Sous réserve des règlements pris en vertu de l’alinéa 40f.1), tout soumissionnaire — même potentiel — d’un contrat spécifique.
"designated contract" means a contract for the supply of goods or services that has been or is proposed to be awarded by a government institution and that is designated or of a class of contracts designated by the regulations
«contrat spécifique » Contrat relatif à un marché de fournitures ou services qui a été accordé par une institution fédérale — ou pourrait l’être — , et qui soit est précisé par règlement, soit fait partie d’une catégorie réglementaire.
[16] The CITT stated that subsections 3(1) and 7(1) of the Regulations set more precise parameters for the exercise of the CITT’s jurisdiction to hear procurement complaints. The CITT referred to subsection 3(1) of the Regulations and reproduced it, in a partially redacted form, to reflect the inapplicability of NAFTA and the Agreement on Government Procurement, as follows:
3(1) For the purposes of the definition “designated contract” in section 30.1 of the Act, any contract or class of contract concerning a procurement of goods or services or any combination of goods or services, as described in … Article 502 of the Agreement on Internal Trade, … is a designated contract…
3(1) Pour l’application de la définition de «contrat spécifique» à l’article 30.1 de la Loi, est un contrat spécifique tout contrat relatif à un marché de fournitures ou services ou de toute combinaison de ceux-ci, accordé par une institution fédérale — ou qui pourrait l’être — et visé, … à l’article 502 de l’Accord sur le commerce intérieur…
[17] The CITT noted the reference in subsection 3(1) of the Regulations to Article 502 but did not reproduce that Article. Instead, at paragraph 19 of its reasons, the CITT stated:
19. Article 502 of the AIT essentially limits the coverage of the procurement chapter of the AIT to procurement over specified dollar values and excludes certain procuring entities from coverage.
As will be seen later in these reasons, the CITT failed to consider an important component of Article 502. The relevant portion of that provision is as follows:
Article 502: Scope and Coverage
1. This Chapter applies to measures adopted or maintained by a Party relating to procurement within Canada by any of its entities listed in Annex 502.1A, where the procurement value is:
(a) $25,000 or greater, in cases where the largest portion of the procurement is for goods;
[Emphasis added.]
The decision of the CITT discloses no indication that the CITT considered the underlined portion of that Article.
[18] The CITT stated that subsection 7(1) of the Regulations further delineates the jurisdiction of the CITT by specifying three conditions that must be met before a complaint can be accepted. The CITT reproduced subsection 7(1) of the Regulations, which reads as follows:
7(1) The Tribunal shall, within five working days after the day on which a complaint is filed, determine whether the following conditions are met in respect of the complaint:
(a) the complainant is a potential supplier;
(b) the complaint is in respect of a designated contract; and
(c) the information provided by the complainant, and any other information examined by the Tribunal in respect of the complaint, discloses a reasonable indication that the procurement has not been carried out in accordance with … Chapter Five of the Agreement on Internal Trade…
7(1) Dans les cinq jours ouvrables suivant la date du dépôt d’une plainte, le Tribunal détermine si les conditions suivantes sont remplies :
a) le plaignant est un fournisseur potentiel;
b) la plainte porte sur un contrat spécifique;
c) les renseignements fournis par le plaignant et les autres renseignements examinés par le Tribunal relativement à la plainte démontrent, dans une mesure raisonnable, que la procédure du marché public n’a pas été suivie conformément … au chapitre cinq de l’Accord sur le commerce intérieur…
[19] The CITT held that because Northrop Overseas made a bid in response to the RFP and because the contract related to a procurement of the type contemplated by Article 502, there was a designated contract. It followed that the conditions in paragraphs 7(1)(a) and (b) of the Regulations had been satisfied. The CITT further held that nothing in the definition of “potential supplier” or “designated contract” imposes a nationality requirement on a complainant.
[20] As subsection 7(1)(c) of the Regulations requires a reasonable indication that there has been a violation of a provision of Chapter Five of the AIT, the CITT held that if the particular provision of that Chapter that has allegedly been violated imposed a nationality requirement on the complainant, the CITT would not have jurisdiction to hear the complaint, unless such a requirement had been met.
[21] The CITT rejected PWGSC’s argument that, since the definition of designated contract in subsection 3(1) of the Regulations refers to a contract described in Article 502, the CITT only has jurisdiction to hear a complaint in respect of such a contract if it is made by a Canadian supplier, having regard to the stated purpose of Chapter Five of the AIT, in Article 501, and the overall context of the AIT itself, as evidenced by Article 101(3). In doing so, the CITT held that Articles 101(3) and 501 were not substantive provisions. In addition, the CITT held that nothing in those provisions expressly imposed the Canadian supplier limitation that was argued by PWGSC and that the absence of such a limitation would not prevent the achievement of the stated goal, in Article 501, of equal access for all Canadian suppliers in procurements conducted by the parties to the AIT.
[22] The CITT observed that Article 504(6) indicates that the parties to the AIT did not intend to limit the rights resulting from Chapter Five of the AIT only to Canadian suppliers. The CITT reasoned that if Chapter Five of the AIT was intended to offer protection only to Canadian suppliers, rather than to all suppliers, there would be no need for Article 504(6), which provides circumstances in which a procuring party may limit tendering to Canadian goods and suppliers.
[23] The CITT concluded that the fact that the AIT provided definitions of both supplier and Canadian supplier served as an indication that each term was to be given a distinct meaning, with each being ascribed different treatment in a number of provisions in Chapter Five of the AIT, citing Sullivan and Driedger on the Construction of Statutes as authority for that conclusion. Accordingly, the CITT rejected the contention that both terms essentially meant Canadian suppliers.
[24] Ultimately, the CITT concluded that Article 506(6), the specific provision that was alleged to have been breached, did not contain anything that indicated that it was to be applicable only in respect of bids made by Canadian suppliers. That being the case, Northrop Overseas did not need to be a Canadian supplier in order for the CITT to have jurisdiction to hear its complaint that PWGSC had breached Article 506(6) in relation to the RFP. In so concluding, the CITT noted that its decision was contrary to its earlier decisions. The CITT cited five such inconsistent decisions and observed that the submissions that it heard appeared to be more detailed than those that were made in the prior inconsistent decisions.
PROCEDURAL HISTORY
[25] After hearing this application on February 5, 2008, the Court issued a direction on February 26, 2008, requesting that the parties address the following question:
If Northrop Overseas Grumman Overseas Corporation is not a Canadian supplier as defined in Article 518 of the AIT, can it be said that Article 101(1) of the AIT renders the AIT inapplicable to Northrop Overseas on the basis that a sale of goods by Northrop Overseas to the Department of National Defence could not constitute “trade within Canada”?
ISSUE
[26] The issue in this application is whether the CITT has jurisdiction to hear the complaint of Northrop Overseas that, in relation to the bid that it submitted in response to the RFP, there has been a breach of Article 506(6).
ANALYSIS
Standard of Review
[27] In Dunsmuir v. New Brunswick, 2008 SCC 9, the Supreme Court of Canada stated that a two step process is to be followed in determining the applicable standard of review in relation to the decision of a tribunal. At paragraph 62, Bastarache and LeBel JJ. stated:
In summary, the process of judicial review involves two steps. First, courts ascertain whether the jurisprudence has already determined in a satisfactory manner the degree of deference to be accorded with regard to a particular category of question. Second, where the first inquiry proves unfruitful, courts must proceed to an analysis of the factors making it possible to identify the proper standard of review.
[28] In my view, the prior jurisprudence of this Court has satisfactorily determined that a determination of the jurisdiction of the CITT is a question of law in respect of which the standard of review is correctness (see Canada (Attorney General v. Symtron Systems Inc., [1999] 2 F.C. 514 at paragraph 45 (C.A.), and E.H. Industries Ltd. v. Canada (Minister of Public Works and Government Services), 2001 FCA 48 at paragraph 5).
Legislative Framework
[29] The Federal Government is a party to the AIT, NAFTA and the Agreement on Government Procurement. Each of these trade agreements obligates the Federal Government to establish an independent complaint procedure that can be utilized by complainants with the requisite standing who allege that Federal Government procurements have not been conducted in accordance with the applicable provisions of the trade agreement or agreements that relate to such procurements.
[30] Pursuant to the provisions of its enabling statute, the CITT is the body that undertakes this oversight. To this end, subsection 30.11(1) of the Act provides for the making of complaints to the CITT concerning Federal Government procurements under each of these trade agreements. The complainant must meet the definition of potential supplier, an actual or potential bidder on a designated contract, and the procurement in respect of which the complaint is made must relate to a designated contract. The designated contract requirement is the basis upon which the applicable trade agreement is determined.
[31] Subsection 30.11(1) of the Act also refers to the Regulations. Subsection 3(1) of the Regulations embellishes upon the definition of designated contract in the Act and provides the linkage between the complaint and the particular trade agreement. Subsection 7(1) of the Regulations precludes the CITT from hearing a complaint unless three conditions are present. The complaint must be made by a prospective bidder and must relate to a designated contract. In a sense, these two conditions merely repeat the corresponding requirements of subsection 30.11(1) of the Act. The third condition in paragraph 7(1)(c) of the Regulations obligates the CITT to determine, based upon the information that is available to it, that there is a reasonable indication that a procurement has not been conducted in accordance with the provisions of the applicable trade agreement. This requirement obligates a complainant to provide a reasonable indication that there has been a breach of a provision of one of the three trade agreements. To do so, the complainant must establish that the provisions of an agreement apply to both the subject matter of the procurement and the circumstances of that complainant.
[32] The procuring party is likely to specify the trade agreement or agreements that it believes to be applicable to the subject matter of the procurement, such as was done by PWGSC in the instant circumstances when it referred to the AIT in the Letter of Interest published on MERX. In some instances, the subject matter of the procurement may be within the scope of all three of the trade agreements. In those circumstances, can any aggrieved bidder claim a breach of the provisions of whichever of those trade agreements that such bidder may prefer? In my view, the answer is no. To enable itself to complain of a breach of a trade agreement and thereby obtain the benefits provided under such agreement, the complainant must show not only that the subject matter of the procurement is contemplated by the particular agreement but also that the trading activities that would be undertaken by the complainant if it were the successful bidder in the procurement process are of the type that the parties to the particular trade agreement intended to include within the scope of that agreement. In my view, it is not enough for an aggrieved bidder to demonstrate that it has made a bid in response to a procurement in respect of which it was permitted to bid.
The AIT -- General
[33] It is common ground that neither NAFTA nor the Agreement on Government Procurement has application with respect to the procurement that was undertaken by the issuance of the RFP. These two agreements are inapplicable because the subject matter of the RFP is specifically excluded from the scope of those agreements. This was explained in the excerpt from the correspondence of PWGSC to the CITT that was reproduced in paragraph 12 of these reasons. Accordingly, the AIT is the only trade agreement that could be applicable in relation to the procurement under consideration.
[34] In relation to the interpretation of the provisions of the AIT, it is noteworthy that the AIT is an agreement – not a statute – that has been entered into, according to its Preamble, by the Government of Canada and its provinces and territories, for the purposes specified in those provisions.
[35] The website of the Internal Trade Secretariat (online: Agreement on Internal Trade <http://www.ait-aci.ca>), which administers the AIT, informs that the focus of the AIT is on the reduction of domestic trade barriers within eleven specific sectors: procurement, investment, labour mobility, consumer-related measures and standards, agricultural and food products, alcoholic beverages, natural resource processing, energy, communications, transportation and environmental protection.
[36] Chapter One of the AIT is entitled Operating Principles. In it, the parties stated their objective in entering into the AIT and a number of principles in relation to its intended operation. Two important provisions of Chapter One of the AIT are Articles 100 and 101, which read as follows:
Article 100: Objective
It is the objective of the Parties to reduce and eliminate, to the extent possible, barriers to the free movement of persons, goods, services and investments within Canada and to establish an open, efficient and stable domestic market. All Parties recognize and agree that enhancing trade and mobility within Canada would contribute to the attainment of this goal.
Article 101: Mutually Agreed Principles
1. This Agreement applies to trade within Canada in accordance with the chapters of this Agreement.
2. This Agreement represents a reciprocally and mutually agreed balance of rights and obligations of the Parties.
3. In the application of this Agreement, the Parties shall be guided by the following principles:
(a) Parties will not establish new barriers to internal trade and will facilitate the cross-boundary movement of persons, goods, services and investments within Canada;
(b) Parties will treat persons, goods, services and investments equally, irrespective of where they originate in Canada;
(c) Parties will reconcile relevant standards and regulatory measures to provide for the free movement of persons, goods, services and investments within Canada; and
(d) Parties will ensure that their administrative policies operate to provide for the free movement of persons, goods, services and investments within Canada.
4. In applying the principles set out in paragraph 3, the Parties recognize:
(a) the need for full disclosure of information, legislation, regulations, policies and practices that have the potential to impede an open, efficient and stable domestic market;
(b) the need for exceptions and transition periods;
(c) the need for exceptions required to meet regional development objectives in Canada;
(d) the need for supporting administrative, dispute settlement and compliance mechanisms that are accessible, timely, credible and effective; and
(e) the need to take into account the importance of environmental objectives, consumer protection and labour standards.
[Emphasis added.]
[37] Article 100 states that the purpose of the AIT is the reduction and elimination, to the extent possible, of barriers to the free movement of persons, goods, services and investments within Canada and to establish an open, efficient and stable domestic market, i.e. a market within Canada. The stated purpose of the parties to the AIT is clearly relevant to the interpretation of the provisions of the AIT.
[38] Article 101(1) specifies that the AIT applies to trade within Canada in accordance with the Chapters of the AIT. In so specifying, Article 101(1) delineates the scope of the AIT, limiting its application to trade within Canada.
[39] The specific and limited focus of the AIT on domestic Canadian trade, as evidenced by Articles 100 and 101(1), is paralleled in Article 102(1)(a) of NAFTA, in which the specific and limited focus of that agreement on cross-border trade is evident. That provision reads as follows:
Article 102: Objectives
1. The objectives of this Agreement, as elaborated more specifically through its principles and rules, including national treatment, most-favored-nation treatment and transparency, are to:
(a) eliminate barriers to trade in, and facilitate the cross-border movement of, goods and services between the territories of the Parties;
[40] The interpretation of the provisions of the various Chapters of the AIT, including Chapter Five, entitled Procurement, is informed and circumscribed by the provisions of Chapter One of the AIT. Thus, having regard to Article 101(1), an activity that does not constitute trade within Canada will not be within the scope of the AIT. It follows, in my view, that a bidder must demonstrate that its prospective or actual trade activities in respect of a particular procurement constitute trade within Canada before that bidder will be entitled to claim any of the benefits of the AIT in relation to such procurement. The numerous references in Article 101(3) to the phrase “within Canada” also reinforce the domestic flavour of the AIT.
The AIT - Procurements
[41] Chapter Five of the AIT deals with government procurements, one of the eleven specific sectors referred to above, in respect of which domestic trade barriers are to be reduced or eliminated. The purpose of Chapter Five is stated in Article 501, which reads as follows:
Article 501: Purpose
Consistent with the principles set out in Article 101(3) (Mutually Agreed Principles) and the statement of their application set out in Article 101(4), the purpose of this Chapter is to establish a framework that will ensure equal access to procurement for all Canadian suppliers in order to contribute to a reduction in purchasing costs and the development of a strong economy in a context of transparency and efficiency.
[Emphasis added.]
[42] Article 502 deals with the scope and coverage of Chapter Five of the AIT. The relevant portions of that Article, which are short and bear repetition, are as follows:
Article 502: Scope and Coverage
1. This Chapter applies to measures adopted or maintained by a Party relating to procurement within Canada by any of its entities listed in Annex 502.1A, where the procurement value is:
(a) $25,000 or greater, in cases where the largest portion of the procurement is for goods;
[Emphasis added.]
[43] In accordance with Article 502(1), before Chapter Five can be applicable, three conditions must be met. First, the procurement must have been undertaken by the Federal Government, a provincial Government or an entity listed in Annex 502.1A of the AIT. Secondly, the particular government entity must have been engaged in a procurement within Canada. Finally, the value of the procurement must meet or exceed specified monetary thresholds.
[44] Article 504 provides for reciprocal non-discrimination by the Parties to the AIT in respect of the goods and services and the suppliers of a particular province or region. Not all discrimination is prohibited. Articles 504(5) and (6) permit a Party to accord a preference for Canadian value-added and may limit its tendering to Canadian goods or suppliers in specifically described circumstances.
[45] Article 506 specifies a number of procedural rules that are to be applied in the conduct of procurements that are covered by Chapter Five, that is to say procurements that fall within the purview of Article 502, which applies to procurements within Canada.
[46] Articles 513 and 514 provide for bid protest procedures with respect to procurement complaints. Federal Government procurements are covered by Article 514. The CITT is mandated to consider complaints in relation to Federal Government procurements that are covered by Chapter Five of the AIT.
[47] Article 518 defines Canadian supplier and place of business as follows:
Canadian supplier means a supplier that has a place of business in Canada
place of business means an establishment where a supplier conducts activities on a permanent basis that is clearly identified by name and accessible during working hours.
The alleged breach of a Provision of Chapter Five of the AIT
[48] In the circumstances under consideration, Northrop Overseas has complained that in the procurement initiated by the RFP, PWGSC failed to evaluate the bids in accordance with the Evaluation Plan, and thereby committed a breach of Article 506(6). That provision reads as follows:
Article 506: Procedures for Procurement
(6) In evaluating tenders, a Party may take into account not only the submitted price but also quality, quantity, delivery, servicing, the capacity of the supplier to meet the requirements of the procurement and any other criteria directly related to the procurement that are consistent with Article 504. The tender documents shall clearly identify the requirements of the procurement, the criteria that will be used in the evaluation of bids and the methods of weighting and evaluating the criteria.
The CITT’s Jurisdiction to hear the Complaint
[49] As previously noted, subsection 30.11(1) permits a potential supplier, within the meaning of section 30.1 of the Act (a “potential supplier”), to file a complaint concerning any aspect of a procurement process that relates to a designated contract, within the meaning of section 30.1 of the Act and subsection 3(1) of the Regulations (a “designated contract”). To demonstrate that it has the status of a potential supplier, a complainant must show that it is an actual or prospective bidder on a designated contract. It is not enough to demonstrate that a bid will be, or has been, made in response to a government call for tenders. It must also be shown that the bid will be, or has been, made on a designated contract.
[50] The challenge facing Northrop Overseas, in my view, relates to the definition of designated contract. If Northrop Overseas cannot demonstrate that it bid on a designated contract, then it will not be a potential supplier since potential supplier is defined to mean a bidder or potential bidder on a designated contract. In the present circumstances, in order to fall within the definition of designated contract, the contract in question must be shown to be a “…contract…concerning a procurement of goods or services…as described in Article 502 of …” the AIT. To meet this requirement, Northrop Overseas must demonstrate that the contract that it seeks as a result of participating in the procurement process is, or would be, a contract described in Article 502. In my view, this means that a contract cannot be a designated contract unless it meets the three conditions that are described in Article 502(1). To reiterate, those conditions are as follows:
(a) the procurement must be undertaken by a government entity, that is to say the contract that is to be undertaken must have a government entity as one of its parties;
(b) the procurement must be within Canada; and
(c) the value of the subject matter of the procurement must exceed a minimum threshold.
[51] In the circumstances under consideration, I am of the view that the problem lies within the second of these three conditions. To meet that condition, the complainant must demonstrate that the contract that it would obtain, if it were the successful bidder in the procurement, is one that provides for a procurement within Canada. Otherwise, that contract cannot satisfy the portion of the definition of designated contract in subsection 3(1) of the Regulations that stipulates that the particular contract must be one described in Article 502.
[52] The Court requested submissions from the parties as to whether the supply of the goods and services contemplated by the RFP would constitute trade within Canada, as contemplated by Article 101(1). In response, Northrop Overseas contended that the more precise question is whether such a supply would constitute a procurement within Canada, as stipulated in Article 502(1). In my view, this more precise focus is useful. However, I am satisfied that “trade within Canada” is at least as broad a concept as “procurement within Canada”, and it is reasonable to conclude that, for the purposes of the circumstances under consideration, the only difference between the two phrases is that in the phrase used in Article 502(1) – procurement within Canada – one of the parties to the potential transaction is identified as a government or a government entity. Apart from that distinction, both phrases require that the particular activity (an activity that constitutes trade) must be “within Canada”. While “within” is not defined, in my view, it means “inside”.
[53] Thus, before a contract can be said to be one described in Article 502, and therefore, a designated contract, in my view, the potential complainant must demonstrate that, having regard to its particular circumstances, it has met the “within Canada” requirement. It will not be sufficient for a potential complainant to demonstrate that some other potential complainant has met the “within Canada” requirement so as to establish that in the circumstances of that other potential complainant, the designated contract requirement has been met.
[54] Northrop Overseas argues that this requirement is met because the goods and services contemplated by the RFP are to be delivered to DND inside Canada. In my view, this argument cannot be accepted. Indeed, if it were, a government entity could avoid the application of the AIT simply by specifying a non-Canadian delivery point for the goods that it wishes to acquire.
[55] PWGSC and Lockheed argue that if the contract were to be awarded to Northrop Overseas, the fulfillment of that contract would entail a movement of the goods in question across the Canada-U.S. border, which would fail to meet the “within Canada” requirement. In my view, that assertion has merit and the resulting transaction would more properly constitute “international” trade, and not “internal” Canadian trade or trade inside Canada.
[56] The “within Canada” requirement in Articles 101(1) and 502(1) is consistent with one of the general objectives of the AIT stated in Article 100, (i.e. to reduce or eliminate, to the extent possible the free movement of persons, goods, services and investment within Canada) and with the stated purpose of Chapter Five of the AIT, in Article 501 (i.e. to establish a framework that will ensure equal access to procurement for all Canadian suppliers). In my view, that requirement contemplates that the parties to the trade or the procurement are situated within Canada to the extent necessary to effectuate the particular transaction inside Canada. Clearly, the governmental party to the contract is situated in Canada. It follows that the “within Canada” requirement will be met if the non-governmental party has a sufficient presence in Canada to enable it to effectuate its obligations under the procurement contract from inside Canada.
[57] In dissenting reasons, my colleague Létourneau J.A. has raised the issue of whether the phrase “marchés publics suivants, passés au Canada”, which appears in the French version of Article 502(1), has a meaning that is different from the meaning that I have ascribed to the phrase “procurement within Canada” in the English version of Article 502(1), even though no argument to that effect was raised by any of the parties in this appeal and the record before the Court does not contain the French version of that provision. The English and French versions of Article 502(1) read as follows:
Article 502: Scope and Coverage
1. This Chapter applies to measures adopted or maintained by a Party relating to procurement within Canada by any of its entities listed in Annex 502.1A, where the procurement value is:
(a) $25,000 or greater, in cases where the largest portion of the procurement is for goods;
[Emphasis added.]
Article 502 : Portée et champ d'application
1. Le présent chapitre s'applique aux mesures adoptées ou maintenues par une Partie relativement aux marchés publics suivants, passés au Canada par une de ses entités énumérées à l'annexe 502.1A:
a) les marchés d'une valeur d'au moins 25 000 $ et portant principalement sur des produits:
[Je souligne.]
[58] As I have indicated, the English version of the phrase should be interpreted as having essentially the same meaning as the phrase “trade within Canada”, as used in Article 101(1) and as I have interpreted above, with the exception that one of the parties to the trade activity – the procuring party – is a government entity. Since the existence of a potential difference between the English and French versions of Article 502(1) was not argued by any party in the appeal, I will not undertake a consideration of the issue of the existence, if any, of such a difference and impact of any such demonstrated difference upon my interpretation of the phrases “procurement within Canada”, in Article 502(1), and “trade within Canada”