Remedies for private parties in the Agreement on Internal Trade

The Agreement on Internal Trade, signed in 1994 by Canada’s provinces, territories, and federal government, aims at promoting trade between provinces. Provincial, territorial, and federal governments have amended the AIT several times since its inception. The AIT now allows individuals and companies to challenge the actions of Canadian governments as inconsistent with AIT obligations. This post will outline the basic shape and steps of such a challenge.

This post will not cover how to challenge a government procurement decision such as the purchase of goods and services. The AIT provides for distinct procedures for those complaints.

What can an individual or company complain about under the AIT?

The core obligations of the AIT, set out in Chapter 4 of the agreement, consist of the following:

  • Reciprocal non-discrimination: Provinces, territories and the federal government must treat the goods, services, persons, or investments of one province or territory no less favourably than the best treatment accorded to their own goods, service, persons, or investments or those of any other province, territory, or country.
  • Right of entry and exit: Provinces, territories, and the federal government must not adopt or maintain measures which restrict or prevent the movement of goods, service, or investments across provincial or territorial boundaries.
  • No obstacles: Provinces, territories, and the federal government must ensure that measures adopted or maintained do not operate to create an obstacle to internal trade.

Separate chapters of the AIT specify how these core obligations apply to specific areas such as government procurement, investment, labour mobility, agricultural and food goods, alcoholic beverages, communications, and transportation.

Who can make a complaint?

To complain about a government measure under the AIT, individuals or companies must show a “substantial and direct connection” between the measure, themselves, and a provincial or federal government.

To show a substantial and direct connection to a province, the complainant must show the following:

  1. They reside or carry on business in the province;
  2. They have suffered an economic injury or denial of benefit;
  3. The consequences of that economic injury or denial of benefit are being felt in the province.

To show a substantial and direct connection to the federal government, the complainant must show not only an economic injury or denial of benefit, but that they have suffered the injury or denial as a result of being treated inconsistently with AIT obligations because:

  1. They are a federally-constituted entity; or
  2. They carry on a business that is a work, undertaking, business or service that is under federal regulatory authority.
What remedies are available to a successful complainant?

The most important remedy available is a finding by a hearing panel that the challenged measure does not comply with the AIT and a recommendation that the responding government modify the measure to render it consistent with the AIT. Damages are not available under the AIT.

Step one: Asking Government to Begin Proceeding

An individual or company must first formally request that a government (with whom they have a substantial and direct connection) bring the complaint on their behalf. A government has three possible responses to such a request:

  1. The government can choose not to bring the complaint on the complainant’s behalf;
  2. The government can bring the complaint on the complainant’s behalf; or
  3. The government can ask the complainant to exhaust other administrative remedies first.

A complainant may move forward with a complaint only if the government chooses not to bring the complaint on their behalf. If the government does not provide a response within 30 days of the request, it is deemed to have chosen not to proceed with the complaint.

Step two: Screening

Where a complainant moves forward on their own, the complaint must be reviewed by the “screener”. Screeners are independent officials, appointed by each government. In deciding whether to allow a complaint to proceed, the screener assesses whether the complaint is frivolous or vexatious or in bad faith, and whether there is a reasonable case in support of the complaint.

Step three: Consultations

If the screener allows the complaint to proceed, the complainant must then participate in a short period of consultations with the responding government – the government that passed the measure being challenged.

Step four: Establishing a Panel and Hearing a Complaint

After the period of consultations, the complainant can request the establishment of a panel to adjudicate the dispute. The complainant and the responding government each select a panellist from a roster of panellists nominated by provincial and federal governments. The responding government cannot choose one of its own appointees to the roster. The two panellists then agree on the appointment of a third panellist from the roster.

Once established, the panel adjudicates the complaint in accordance with the procedures under Chapter 17 of the AIT. This post will not review these procedures in detail. In sum, they are generally more flexible and streamlined than a court proceeding.

Following the hearing of the complaint, the panel issues a report setting out, among other things, the panel’s determination as to whether the government measure in question is inconsistent with the AIT and the panel’s recommendations to resolve the dispute. These recommendations can include the amendment or repeal of legislation. The panel may, in its discretion, award the complainant (but not the responding government) a limited portion of its legal fees. The panel must also divide, in its discretion, its own fees between the complainant and the responding government.

Step five: Implementation and Compliance

A complainant who is not satisfied that the responding government has implemented the panel’s recommendation may request that the panel conduct a compliance review. As part of such a review, the panel can impose a monetary penalty against a responding government. However, in private complaints under the AIT, this penalty is payable to the Internal Trade Advancement Fund, a fund administered by the Internal Trade Secretariat for various research, education, or other purposes.

What success have private persons had in making complaints?

There have been relatively few private challenges under the AIT.  The Internal Trade Secretariat maintains a compilation of the status of all AIT proceedings conducted to date. This compilation indicates that complainants have initiated 10 proceedings on their own behalf, while governments have initiated another 21 proceedings on behalf of complainants. Of the ten proceedings initiated by complainants, five have been terminated at the screener stage, two have succeeded in a panel proceeding, three were resolved by agreement between the complainant and the responding government, and one is currently inactive.

Conclusion

This is only a basic overview of the procedure of a private AIT complaint. As is clear from the above steps, private AIT complaints must pass through multiple thresholds before obtaining a determination of the merits of the complaint. However, these complaints nevertheless can lead to a finding that a government measure is inconsistent with AIT obligations and to a recommendation, backed by monetary penalties, that a responding government repeal or amend the measure.

To speak to someone about the Agreement on Internal Trade or other trade law issues, please contact David Wilson or Ben Grant at Conway Baxter Wilson LLP.

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