Good morning, committee members, my name is Chris McLeod. I'm head of commercial litigation with Mann Lawyers in Ottawa. I have practised in the area of commercial litigation and public procurement law for my entire career. I was the lead counsel in the MD Charlton Co. Ltd. case last year, which was the first time that the invocation of a national security exception has been found to be problematic by the Canadian International Trade Tribunal. I was honoured to receive your invitation here today, and I believe I can provide some context for the committee.
Based on my review of the transcripts of the last session, I thought I would start by providing a bit of an overview and intersection between public procurement and national security exceptions and how we get to some of the issues that we're seeing.
As you know, Canada has committed to various trade agreements, NAFTA, the Agreement on Internal Trade, and the WTO's Agreement on Government Procurement, among others. Included in all of these agreements are commitments with respect to promoting transparency, competition, fairness, and integrity when the Government of Canada is procuring goods and services.
The trade agreements are fairly specific about what these requirements are. There are different requirements and different wording in each agreement, but the general principles are there. There must be open process, such that Canada won't have technical specifications in their procurements that are biased in favour of one bidder or against another bidder. The timing of the procurement must allow bidders to provide a legitimate response to the solicitation. The bidders must know the evaluation criteria they need to meet and the bids must be evaluated against those criteria.
These and more are set out in the trade agreements, and they're the building blocks of this fair, transparent, and open procurement system.
Not all procurements will be subject to the trade agreements and these requirements. Certain goods and services are not subject to the agreements. In order to be subject to the trade agreements, the procurements have to meet certain thresholds that are set out in the agreements. Typically, a monetary threshold is broken down by type of good or service, and it's different depending on which trade agreement we're talking about. It's not uncommon to have one procurement in which multiple trade agreements and the obligations under those trade agreements are triggered.
By way of these trade agreements, Canada has also committed to providing a dispute body, a specialized body that has specialized expertise in dealing with alleged violations of these trade agreement obligations. That's the Canadian International Trade Tribunal, CITT.
If you're bidding on a government contract that is subject to one or more of the trade agreements, and the procurement you're bidding on meets the thresholds under the trade agreements so that they're triggered, and you feel that Canada has violated one or more of its obligations under the agreements, you can complain to the CITT and ask for relief. You can allege that there's an unfair process or unfair conduct and ask that it be addressed.
The CITT has a number of tools to deal with issues. They can recommend that the solicitation be cancelled and resolicited. They can award bid prep costs. They can award loss of profit if they're convinced that the complaining bidder would have otherwise won the bid.
The CITT's procedure is also designed specifically for procurement. Very much unlike a court, the CITT's process happens very quickly. You're talking about days as opposed to months and years. You're inside of 90 to 145 days as opposed to what could be a two-year to three-year process.
From a practical perspective the CITT plays a very important role. Typically, these goods need to be procured at the time they're being purchased, and if the procuring of those goods is tied up in the courts for years, it can set the government back. It's the same for bidders. My clients certainly want these issues resolved quickly as well, and the CITT offers a venue that does that very quickly, using its specialized expertise.
National security exceptions come into play because the trade agreements all recognize that there are instances where there are legitimate national security concerns at play for the Government of Canada, where procuring goods and adhering to these obligations under the treaty agreements just doesn't make sense from a practical perspective.
To give you an example, if you're purchasing military hardware, you may want to do it in secret. You may not want other countries to know what you're purchasing, or the technology that's included. Rather than reaching out to the market in general to procure these goods, you may want to limit it to a couple of trusted suppliers. There are some suppliers that are known for historically providing goods to Canada and our allies.
What's happened over the years is that when Canada has invoked a national security exception—as when my friend said here, deemed itself to have a national security concern that warrants moving away from the obligations under the trade agreements—Canada has done so in a comprehensive way. Canada has taken a position that when a national security concern arises with respect to one of the trade agreement obligations, that it dispenses with all of the commitments under the trade agreements, including dispensing with a bidder's ability to seek recourse to the CITT. That's the jurisdiction issue that's come up.
Canada's position has been and continues to be that where there's an NSE, a national security exception, the procurement is taken right outside of the trade agreements and therefore outside of the purview of the CITT. The CITT no longer has jurisdiction to hear the complaint. For a long time, the CITT agreed with Canada on this. Many bidders tried to challenge it and the CITT would consistently say, look, if a national security interest is triggered, all we can do is look to see whether the national security exception has been properly created—triggered basically. Technically, all they would look at is whether the person with the right authority signed off on it. As soon as you had that, that was it; it was outside of their hands, and off you went.
It came up in the testimony in February. There is other recourse with the courts, but for a lot of reasons it doesn't make sense practically. And frankly, the courts are moving away from administrative remedies for what they consider to be commercial undertakings by the federal government.
Over the years, this has created an environment that was frankly ripe for abuse. That was recognized by the courts and by the tribunal. I'm not suggesting that it was abused in every case, or even in most of the cases, but it would certainly allow the government to ignore its commitments, even if the commitments were not impacted by the national security concerns.
If we go back to the military hardware example, if the Government of Canada has an interest in keeping the procurement secret and maybe limiting the pool of bidders to trusted bidders, what's been happening over the years is that Canada also has taken a position that it can treat—within that small pool of bidders and that small pool of bids—those bidders unfairly, and the bidders have no recourse under the trade agreements or to the CITT.
What we argued in the MD Charlton case, and what the tribunal found for the first time, is that while there are instances where national security concerns would warrant excluding one of the obligations of the trade agreements, it should only be done to the extent necessary in the circumstances. If you can address a national security concern by running the solicitation in secret or limiting the number of bidders, within that pool of bidders, you should be treating them fairly, so that everyone has an equal opportunity to compete for work. It ensures competition and a fairness in the process.
Since that decision, and since your February 23, 2017 sitting, the CITT has followed up on the MD Charlton decision with the Hewlett-Packard decision. If you've had a chance to read that, it sets out in very detailed terms that the tribunal has gone to great lengths, and has done a great job of setting up the entire background, with respect to the issues of national security exceptions in their jurisdiction.
They have taken a new position on it, basically, a position that is consistent with the MD Charlton—