In its October 2024 decision in Thales DIS Canada Inc. v. Ontario, the Supreme Court of Canada dismissed a bid dispute over made-in-Canada requirements in an Ontario government identification card solicitation. While the ruling was a victory for the Ontario government, the Supreme Court’s decision leaves other Ontario public institutions in a state of uncertainty regarding treaty-based bid protest procedures.
Divisional Court Voids Procurement
By way of background, the complainant, Thales DIS Canada Inc. (Thales), who is part of a French-based multinational company with a Polish subsidiary that produces identification cards and passports at its facility in Gdansk, Poland, challenged the domestic production requirements contained in an Ontario government tender call.
The Ontario government rejected the initial complaint in an internal bid protest decision. However, Thales brought a successful judicial review challenge to court. In its June 2022 ruling, the Ontario Divisional Court struck down the government’s internal bid protest decision, finding that the government’s decision-maker failed to properly apply the legal test for determining whether “public safety” reasons could be relied on to impose restrictive specifications in the bid solicitation. After determining that the government failed to pass that test, and therefore breached the neutrality standards contained in the Canada-European Union Comprehensive Economic and Trade Agreement (CETA), the Divisional Court voided the tender call.
Higher Courts Leave Legal Vacuum
However, as discussed below, in a December 2023 decision, the Ontario Court of Appeal overturned the Divisional Court ruling. The complainant appealed to the Supreme Court of Canada, but in October 2024 Canada’s high court refused to hear the case, without providing any reasons for rejecting the appeal, leaving a state of uncertainty over treaty-based bid protest procedures in Ontario in the wake of the Ontario Court of Appeal decision.
For example, while the original Divisional Court ruling applied international legal standards from the World Trade Organization’s “Brazil Decision” to support the conclusion that the Ontario government breached applicable trade treaty rules by improperly relying on “public safety” concerns to impose domestic production requirements on the tendered contract, the Ontario Court of Appeal rejected the lower court’s approach, finding that the Divisional Court overreached by introducing its own analysis of the issues instead of restricting itself to reviewing the reasonableness of the government’s internal bid protest decision.
The Court of Appeal also ruled that if the Divisional Court found flaws in the government’s decision, it should have directed the government to conduct a reconsideration instead of voiding the government’s internal decision and substituting its own ruling in its place.
Further, the Court of Appeal ruled that the Divisional Court did not have the power to strike down the tender call since the government’s internal bid protest mechanism created an alternative forum for the dispute that effectively extinguished the court’s powers to directly review the solicitation under the trade treaty.
Finally, the Court of Appeal questioned whether the courts should play any role in determining the adequacy of Ontario’s bid protest mechanism under CETA, stating that the matter could more appropriately be resolved directly between Ontario and its trade treaty partners.
In summary, rather than serving as a forum where bidders could initiate bid protests, seek court-based rulings on the merits of the bid dispute, and seek court-based judicial review remedies, the Ontario Court of Appeal’s ruling reduced the role of the courts to reviewing the validity of the Ontario government’s internal bid protest decisions. Moving forward, this limited scope of review significantly restricts judicial oversight in Ontario, at least as it relates to treaty-based bid disputes involving provincial government procurements.
Impact on Ontario Public Institutions
While the Court of Appeal ruling effectively leaves the Ontario government free to regulate itself under the trade treaties with limited judicial oversight, this does little to help other Ontario public institutions. Notwithstanding its trade treaty obligations under CETA, the Ontario government has not created a bid protest mechanism for Ontario municipalities, universities, colleges, school boards or health sector entities. Further, it is not clear whether the scope of Ontario’s internal bid protest mechanism applies to Ontario government agencies since the details of those provincial procedures are not public and the government does not publish its decisions.
By contrast, decades ago Canada’s federal government empowered the Canadian International Trade Tribunal to hear bid protests relating to the federal government’s trade treaty obligations, and more recently Canada’s western provinces have adopted a bid protest mechanism that makes public institutions in those jurisdictions subject to bid protests through binding commercial arbitrations. Quebec has also adopted formal bid protest mechanisms. The legal rulings made under these independent procedures form part of the publicly available case law that informs legal standards in public procurement across Canada.
Similar formal bid dispute mechanisms, whether through the courts or other independent adjudicative bodies, also exist in the United States, across the European Union, and in most other rules-based jurisdictions. For example, Malta, a small jurisdiction operating under European Union procurement rules, has a long-established Public Contracts Review Board that has over twenty years of bid dispute rulings published online.
While the Ontario government has set up an opaque internal bid protest mechanism for itself, it has left other Ontario public sector institutions who are subject to the same treaties to fend for themselves in a legal vacuum. For example, it is not clear that the logic of the Court of Appeal’s ruling that narrowed the scope of judicial review due to Ontario’s alternative bid protest mechanism would also apply where another Ontario public institution adopts its own internal bid protest procures. Unlike the Ontario government, who is a party to the trade treaties, (only the federal, provincial and territorial governments are parties to the treaties, other public institutions are subject to the obligations agreed to by those senior level governments) other Ontario public institutions do not have the authority to create bid protest mechanisms under the trade treaties. That is the responsibility of the senior government.
While general administrative law principles could apply to narrow judicial review challenges in circumstances where, beyond the trade treaties, a public institution in Ontario adopts its own internal bid protest procedures as part of its broader internal governance framework, it is not clear that the Ontario courts would recognize such local bid protest mechanisms as limiting their judicial review powers.
Future Considerations
While these issues could have been properly addressed as they were federally through the creation of a specialized tribunal, or in Western Canada through binding commercial arbitration procedures, the Ontario government’s lack of leadership in this area, when combined with the Ontario Court of Appeal’s restrictive approach, and the Supreme Court of Canada’s lack of interest in considering these critical issues, does little for Ontario’s international credibility at a time when global trade issues are a matter of increasing national importance.
