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Introducing the New Canada-Europe Comprehensive Economic and Trade Agreement

By Paul Emanuelli (extracted from the fourth edition of Paul Emanuelli’s Government Procurement textbook, forthcoming in 2017).

In February 2017, after prior ratification by its constituent members, the European Parliament ratified the Canada-Europe Comprehensive Economic and Trade Agreement (“CETA”), with the ratification and implementation date within Canada scheduled for July 1, 2017, the same effective date as the new Canadian Free Trade Agreement (“CFTA”). After the terms of the CETA were negotiated, and while that treaty was undergoing its complex ratification process across Europe, the governments across Canada negotiated the terms of the new CFTA to replace the prior Agreement on Internal Trade (“AIT”). This ensured a better harmonization of standards to avoid giving European suppliers more opportunities to bid within Canada than those provided to Canadian suppliers.

While the CETA Chapter 19 government procurement provisions may have been the catalyst for updating the AIT, once the CFTA comes into effect the day-to-day impact of the CETA on government procurement operations across Canada will be minimal since the rules under the two treaties are substantially similar and are triggered first under the CFTA, since that treaty has far lower thresholds for publicly tendering government contracts. In other words, once public institutions perform the necessary updates to their government procurement policies, protocols and procedures to ensure compliance with their new CFTA duties, those measures will, for the most part, also address their obligations under the CETA.

While minor but potentially significant differences in wording are contained in the two treaties, which may be interpreted to create distinct duties in the future, the key procurement obligations contained in the CETA are substantially the same or similar as those contained in the somewhat more detailed CFTA rules. The key differentiating factor of the CETA, when compared to Canada’s other international trade treaties, such as the North American Free Trade Agreement (“NAFTA”), is that the benefits of reciprocal non-discrimination (or “national treatment”) given to suppliers across the trading blocks are much more expansive in scope. Unlike the North American Free Trade Agreement, the CETA obligations apply beyond federal government procurement to also include sub-federal entities. In other words, the CETA obligations apply to government entities at all levels of government across Canada and Europe and open bidding opportunities to suppliers at a much deeper level across the trading blocks. As discussed further below, like the CFTA, the CETA also contains far more robust enforcement mechanisms at all levels of government, when compared to the former AIT.

Turning to the details of the CETA, the key provisions are as follows:

  • The obligations to publicly tender a contract apply at much higher contract value thresholds under the CETA which, like the CFTA, are indexed to inflation for future adjustments.
  • The CETA rules include additional exemptions for national security and military procurement.
  • The contract quantification rules for determining contract value are largely harmonized, although the CETA provisions are somewhat more detailed.
  • The CETA rules contain somewhat more detailed requirements regarding the duty to publish general information and rulings relating to government procurement disputes and enforcement mechanisms.
  • The CETA protocols contemplate a five-year grace period before all entities must be posting their bid opportunities electronically at single point of access. This is consistent with the CFTA provisions recognizing the Canadian federal government’s role in creating this central access point in Article 506 of the CFTA.
  • The standard content requirements in the CETA for the information required in a tender call are largely harmonized with the CFTA requirements.
  • The prohibitions against using unnecessarily restrictive pre-conditions to competition, such as prior supplier experience, as well as the debarment protocols, are harmonized with the CFTA rules.
  • The provisions regarding the use of prequalification processes and supplier lists are similar to the CFTA rules, but the CETA rules appear to create stricter standards regarding the ongoing obligation to allow new suppliers onto suppliers lists while those lists remain in use.
  • The protocols around technical specifications are largely harmonized with the CFTA protocols.
  • The timelines for public posting are potentially more onerous under the CETA rules, since they expressly require a minimum of 40 days as default, whereas the CFTA protocols are more ambiguous in requiring a “reasonable” amount of time. However, the CETA rules are more detailed in allowing for much shorter bidding periods where advanced notices and electronic tendering are used.
  • The protocols for using negotiations in procurement processes are largely harmonized with the CFTA rules, although the CFTA rules are more detailed in the use of concurrent and consecutive negotiation processes.
  • The CETA protocols surrounding the use of electronic auction provisions are harmonized with the CFTA provisions.
  • The limited tendering and “sole sourcing” direct award protocols are largely harmonized, although the CFTA provisions are more detailed and include areas which may no longer apply at the higher contract value thresholds contained in the CETA.
  • The CETA tendering process protocols, including the rectification of unintentional errors in bid submissions, the duty to run a fair process and the duty to award to the best bid are largely harmonized with the CFTA protocols; however, the CETA rules include express obligations to prevent conflict of interest and corrupt practices not present in the CFTA rules.
  • The CETA administrative or judicial review protocols for formal bid dispute processes are largely harmonized with the CFTA provisions and contemplate a far more rigorous enforcement regime than that which existed at sub-federal levels in Canada under the prior AIT.

While the CFTA contains more detailed protocols in certain areas, including legitimate objective exceptions; the exclusion of certain types of procurements; the use and quantification of contract extensions; certain express anti-avoidance and prohibited practice protocols; the use of buying groups; small business set-aside programs; specific details regarding concurrent and consecutive negotiation processes; the special treatment of entrenched incumbencies; and debriefing duties, for the most part the express provisions contained within the CETA are largely consistent with their equivalent provisions in the CFTA. As noted above, while minor variations in wording may have a substantive impact in the interpretation of the duties under the two treaties, for the most part, July 1, 2017 represents a new era in the harmonization of domestic and international government procurement standards across Canada and between Canada and Europe.

As noted above, like the CFTA, the CETA will introduce a more robust bid dispute regime when compared to the past protocols contained under the former domestic trade treaty, the AIT. This will ultimately bring the rest of the Canadian public sector up to, and potentially beyond, the enforcement standards that have historically been in effect for decades at the federal level under the Canadian International Trade Tribunal. Thus, the decades-deep body of fair competition case law under the federal Tribunal will have an expanding relevance across Canada in the years to come. Public institutions at all levels will be interpreting and navigating their new trade treaty duties under an enhanced enforceability regime, where not only domestic suppliers but also international suppliers will have the right to challenge the trade treaty compliance of government procurement decisions in formal legal proceedings. The prior rulings of the Canadian International Trade Tribunal will likely bear a more significant weight than ever before with government institutions at all levels across Canada and will likely have a significant impact in informing future decisions under the new enforcement regimes.