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CITTing In
Hurray! We lose

by Paul M. Lalonde

Lawyers who have been around a while know that sometimes when you lose, you win. (The reverse is also true of course, but lawyers don't like to dwell on that.) The recent Federal Court case of E.H. Industries Ltd. v. Canada (Minister of Public Works) is an excellent illustration of this phenomenon. Reading the press releases issued by E.H. Industries (EHI) that trumpet the merits of the decision, one would think EHI had just been handed a huge victory. In fact, the company lost. What gives?

This case involved an application for judicial review of a decision by the Canadian International Trade Tribunal (CITT) to reject a complaint by EHI concerning the latest twist in the infamous maritime helicopter procurement saga. EHI had complained that the procurement by Public Works and Government Services Canada (PWGSC) on behalf of the Department of National Defence was intentionally structured to discriminate against EHI.

EHI's complaint was aimed at a Letter of Interest (LOI) posted on the MERX in August of last year. The LOI provided general information to potential bidders with respect to the upcoming solicitation and sought to identify bidders interested in being prime contractors for supply of the helicopters. It also outlined the anticipated steps in the proposed procurement procedure, which included mandatory pre-qualification, distribution of a draft request for proposals and, finally, the solicitation of bids through a final and official Request for Proposal (RFP). The LOI made it clear that it was not a call for tenders or an RFP and that no contract would be entered into based on the responses to the LOI. Nor could it be misconstrued that the LOI was a commitment that the government would issue an RFP.

EHI submitted a response to the LOI within the designated time period and also filed a complaint with the CITT alleging that PWGSC had structured the procurement procedure in an intentionally discriminatory manner contrary to the Agreement on Internal Trade. Upon receipt of a complaint, the tribunal must make an initial evaluation of the case to see whether a full-blown investigation is warranted. In this case, the tribunal refused to launch an investigation for two reasons: the complaint did not raise a reasonable indication of a breach of the trade agreements; secondly, it was premature.

EHI sought judicial review of this decision before the Federal Court of Appeal. The court's judgment is fascinating in its contrasts. It rejected EHI's application and confirmed the tribunal's broad discretionary powers with respect to undertaking an investigation. Although the court agreed with the tribunal's finding as to the premature nature of the complaint, it was critical of the tribunal's approach to the substance of the complaint.

Among other things, the court said that the tribunal was "wrong…to examine the merit of the complaint." According to the court, the CITT should have limited its decision to the issue of prematurity and that the "conclusions it has reached on the merit of the complaint have, of course, no value as a precedent."

The court went on to review some of the more jarring highlights from the evidence submitted by EHI on discrimination, including an email from a senior military officer stating that choosing the EHI helicopter would be "political suicide." In light of such material, the court concluded that the evidence "may eventually demonstrate that the procurement procedure suffered from patent politicization within the Department of National Defence." (Note the judge's odd wording: "may" demonstrate "patent" politicization. It is like saying something "may be certain" or "appears to be obvious.") The sense is that the judge was appalled by some of the evidence but could do nothing about it, given the nature of the proceeding. At least the court was able to ensure that EHI could choose to take another kick at the can.

On the other hand, the judge also said that the evidence "does not reveal discrimination against EHI at this preliminary stage of the process and the ongoing consultative process with industry." So, in the end, the court's true assessment of the evidence remains, at best, ambiguous.

That did not deter EHI from publicly rejoicing at the judgment. The company likely knew its case was weak on prematurity, but was pleased to achieve its strategic goal of reserving all rights to complain about the process at a later date. At the same time, the court's suggestions of evidence of "patent politicization" must have been a welcome bonus.

The maritime helicopter procurement has dragged on for many years, plagued with more than its fair share of troubles. If nothing else, this latest case demonstrates that there remain serious concerns in the industry about the process and that the parties are going to push their positions to the fullest extent at every stage; the stakes are certainly high enough. All this makes the following fearless prediction one of the easiest I have made: we will see more legal wrangling in this file - and more disturbing accusations. As this procurement mess drags on, I hope our aging fleet of Sea King marine helicopters continue to fly safely.

Paul M. Lalonde practices international trade and procurement law with the firm Heenan Blaikie in Ottawa and Toronto.



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