The Comprehensive Economic and Trade Agreement (CETA) is a new treaty between the European Union (EU) and Canada. It is expected to create a new free trade zone that encompasses the twenty-eight Member States of the European Union, as well as the ten provinces and three territories of Canada. The Federal Government of Canada expects that the CETA will boost trade by 20% as a result of reduced tariffs. It should be brought into force shortly, once the EU completes its legislative and regulatory processes.
Currently, the government procurement market in Canada is worth at least CAD 100Bn per year. The CETA is expected to provide unprecedented market access to EU firms bidding on contracts owned by Canadian municipal and provincial government entities. It is predicted to enable the privatization of goods and services, and to outline a national treatment obligation and minimum standards for public procurement processes.
Following the Agreement, European suppliers will be eligible to apply for procurement contracts that have low thresholds (near CAD 315,500 for goods and services contracts, CAD 657,000 for utilities and ~CAD 8.2Mn for infrastructure projects), allowing most procurement contracts to be open to European firms. Canadian municipalities will no longer legally be able to give preference to local content requirements in the procurement process. This change could lead to significant administrative costs and litigation risks as some European companies may experience legal challenges when local Canadian governments are forced to report on and defend their procurement choices.
Municipalities will likely face increased costs from providing the federal government with information about their procurement activities. Administrative costs are projected to increase for the following activities:
- Providing information and statistics about procurement practices and activities to federal government
- Publishing detailed notices and announcements of intended procurements
- Issuing tenders in accordance with the CETA procedures and technical specifications
- Accounting to unsuccessful suppliers for their procurement decisions and defending their actions if challenged by suppliers
The privatization of services is an increasing concern for municipalities. Through the CETA, European firms will be allowed to control essential municipal services, such as the utilities sector, leading to potential legal disputes between European companies and Canadian municipalities. The privatization of municipal services could make it difficult to re-municipalize, since these services could be subject to legal disputes between municipalities and suppliers, such as the case in Hamilton, ON from 1994-2004.
Some of the key legal aspects related to the CETA include:
- Municipalities will need to provide unsuccessful EU bidders with sufficient time to appeal against municipal decisions
- Municipalities will need to decide who will handle orders to suspend procurement while the resolution for an appeal is found
- Municipalities will need to consider who will pay the damages to unsuccessful bidders should a municipality fail to comply with CETA rules
Full understanding of the rights and regulations outlined under the CETA will help municipalities prevent potential damages and risks. It will be critical for you to protect your interests should disputes arise due to contracts with foreign suppliers.
The Canadian Economy will be a topic of discussion at the inaugural JLT Canada Public Sector Summit 2017, hosted in The Blue Mountains from October 18th to 20th. For more information about the event, or if you wish to register your interest in attending, please visit the event page here.
At JLT Canada our clients come first. As your partner, we work with you to find solutions that are most beneficial to your municipality. For more information on our Public Sector insurance offerings or related advice, please contact Meghan Callaghan, Vice President – Public Sector, at ClientFirst@jltcanada.com.