Trade tribunal slams federal government on use of national security exceptions

The Canadian International Trade Tribunal has issued a scathing indictment of how the federal government's IT agency has invoked national security exceptions on big ticket purchases.

At issue was, among other things, a complaint from computer company Hewlett-Packard that Shared Services Canada had wrongly and arbitrarily invoked a national security exception on the $430-million contract for a powerful new weather-predicting supercomputer for Environment Canada. The contract, awarded in May 2016, also includes cloud storage, training, vendor support and maintenance.

National security exceptions exempt the government from trade rules that require bidders be treated equally, and allow it to set conditions that equipment be made in certain countries or that data must be stored or processed in Canada.

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In a decision handed down on March 20, which was only today posted to the tribunal's web site, presiding member Serge Fréchette found the Hewlett-Packard bid had not been entirely compliant with the contract's mandatory criteria.

Harsh words for SSC

Yet Fréchette had harsh words for how Shared Services Canada (SSC) continues to fight anyone who questions its use of national security exceptions (NSEs) in procurement. He took particular issue with how the agency continues to argue the tribunal lacks jurisdiction to hear such complaints. 

"SSC, in effect, treats the NSE as a general licence to void potential suppliers' right to seek review of government actions at the tribunal," he wrote. "SSC's stance is wrong because it ignores the text and purpose of the trade agreements and the tribunal's mandated role as set out by Parliament and the courts."

Fréchette also heaped scorn on claims from SSC that it is entitled to circumvent the trade tribunal without providing any justification, despite having been already twice rapped on the knuckles for making the same arguments in two earlier cases. 

"SSC again attempted here to revisit this issue, despite it having been settled by previous cases at the tribunal, which were not challenged in the courts," he wrote.

As for the blanket NSE itself, Frechette said the scope of its application is of concern.

"If a government institution's discretion in this regard is left unchecked, the tribunal believes that such a level and scope of exclusionary power is so significant that it could constitute a de facto nullification and impairment of the benefits of the trade agreements by arguably subtracting SSC entirely as a covered entity," he wrote.

SSC may have to rethink policy

The lawyer for Hewlett-Packard declined to comment on the ruling, but University of Ottawa law professor Sébastien Grammond said he thinks the agency is going to have to rethink its blanket NSE policy.

"This is a strong rebuke of a government attempt to shield itself from review," said Grammond. "It clearly says to the government, stop trying to shield yourself on the basis of national security when you're not even able to make a case for it."

Chris McLeod, head of commercial litigation at Mann Lawyers in Ottawa, has extensive experience arguing against the government's blanket NSE policy. He said the decision shows the tribunal is clearly frustrated with the actions of the federal government.

"I think the important takeaways for bidders in general are that the tribunal has affirmed the objectives of fostering transparency and non-discrimination in procurement in Canada, and clarified an important right to access its review mechanism," he said.

As for Shared Services Canada, spokesperson Andrée Grégoire told CBC News that on Wednesday, it filed an application for judicial review at the Federal Court of Appeal on "a discrete question of jurisdiction." As the matter is now before the courts, Grégoire said it would be inappropriate to comment on the tribunal's decision.

"Shared Services Canada is committed to fair, transparent and competitive procurement processes to obtain the best value for the Government of Canada, including in procurements for which the national security exception is invoked," Grégoire wrote in an email.