No Standing: From 9 AM to 4 PM MON to FRI, or in the Case of Northrop Overseas, Never
In Northrop Grumman Overseas Services Corporation Corporation v Canada,  3 SCR 309, the Supreme Court of Canada (“SCC”) planted the legal equivalent of the classic “No Standing” street sign in the grave of Northrop Overseas’ complaint against Public Works. Like its street sign equivalent, standing is a mode of regulating traffic into forums such as courts and administrative bodies. Northrop Overseas had applied for standing to bring a complaint against Public Works in the Canadian International Trade Tribunal (“CITT”). Public Works chose another company over Northrop Overseas in its tender for proposals for the procurement of military goods. In its complaint, Northrop Overseas alleged that Public Works failed to properly evaluate bids pursuant to Article 506(6) of the Agreement on Internal Trade (“AIT”). Public Works challenged Northrop Overseas’ standing to file a complaint with the CITT because the former is not a “Canadian supplier,” and correspondingly, not subject to the AIT.
The Legal Framework
The SCC decision written by Rothstein J. is a straightforward and clear exercise in statutory interpretation. It is so much so, that one is led to ponder whether Northrop Overseas was employing a spaghetti theory strategy: throw everything on the wall and see what sticks. I say that because the outcome of this exercise was so obviously in favor of Public Works’ position, especially in the face of clear precedent, that it is perplexing as to why this case made it all the way up to the SCC. The likely answer is that the SCC wanted to resolve the inconsistency that was created by CITT in granting Northrop Overseas standing to bring a complaint pursuant to the AIT. In cases prior to this decision, the CITT had previously held that only Canadian suppliers could bring complaints based on the AIT.
Rothstein J. begins his analysis by examining s. 30.11(1) of the Canadian International Trade Tribunal Act, RSC 1985, c 47 (4th Supp), which governs standing. It states: “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 that the Tribunal conduct an inquiry into the complaint.” In s. 30.1, a “potential supplier” is a bidder or a prospective bidder on a designated contract,” while a “designated contract” is a contract for the supply of goods or services to the government. As well, s. 3(1) of the Regulations states that a “designated contract” is one that is described in certain applicable free trade agreements. Had Canada included military procurement in NAFTA or the WTO Agreement on Government Procurement, then Northrop Overseas could have easily accessed the CITT to argue its complaint.
Contrary to Northrop Overseas’ argument that standing only requires one to be any “potential supplier” under a “designated contract,” Rothstein J. interprets the AIT to include a requirement that a supplier be Canadian. According to Article 501, the purpose of AIT is to provide equal access for “all Canadian suppliers.” The latter is defined as a supplier having “a place of business in Canada,” in Article 518. Since Northrop Overseas did not have an office in Canada, it was not a Canadian supplier. Rothstein J. bolsters his position by referring to the Preamble of the AIT, which strongly indicates that it is a “domestic free trade agreement.” As such, it does not make sense that a foreign supplier, whose government failed to negotiate for it to be a part of AIT, should be able to access the benefits designed to facilitate domestic free trade. Rothstein J. pokes additional holes in Northrop Overseas’ tenuous position by noting that an extension of the benefits of AIT to everyone would reduce the Canadian government’s leverage in trade negotiations. If everyone could access the benefit of convenient dispute resolution in the CITT, the government would no longer possess the leverage necessary to secure access to foreign markets for Canadian suppliers. Although alternative dispute resolution is typically cheaper and a less invasive process than going to court, the CITT is a product of voluntarily negotiated agreements between governments. The SCC cannot extend this benefit to Northrop Overseas, for this would impose on the will of the Canadian government.
Freeriding its Way up to the SCC
Rothstein J.’s decision implicitly touches on the dilemma of the tragedy of the commons caused by freeriders. Perhaps “tragedy” is a strong word to use in the circumstances, seeing as the complaint filed by Northrop Overseas would not have led to the destruction of the CITT. As well, the so-called commons in question is not wholly public; access is limited to those that negotiated access. Notwithstanding these shortcomings, the point is that the CITT is a good that requires maintenance and proper subscription to it. Based on the facts at hand, the CITT is a public good in that it promotes domestic trade and ensures that taxpayers are getting the most for their money through an efficient procurement system. Northrop Overseas acted as a freerider by attempting to access the CITT via the courts and circumvent negotiated trade agreements bestowing access. It attempted to transform a privately accessed good (that is for the ultimate benefit of Canadian society) into a commons that anyone can exploit. Fortunately, the Federal Court and the SCC properly utilized standing to regulate access to this commons. By employing clear and straightforward statutory interpretation in the spirit of the AIT to decide the issue of standing, the SCC’s message was clear: it will not fall prey to attempts to use judicial intervention in what is properly the realm of governments.
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