Not so fast, the quarrel over PAP with UPS may not be over, says law firm

An article published by the blue-chip law firm Blake, Cassels and Graydon LLP suggests that the sigh of relief about the decision in the court case involving United Parcel Service and Canada Post may be premature.

You may recall an item here in June reporting that UPS had initiated a trade challenge before a North American Free Trade Agreement tribunal in January 2000, claiming not less than US$ 160 million in damages, alleging that Canada Post was benefiting from undue privileges as a government-owned corporation, that Canada Post got preferential treatment from Canada Customs, that its pricing policies gave it an unfair advantage and that Canada Post unfairly favoured its subsidiary (and direct UPS competitor) Purolator.

UPS also claimed the Publications Assistance Program of the Department of Canadian Heritage was contrary to Canada’s national treatment obligation because it requires publishers to deliver their publications through Canada Post to obtain the subsidy.

The tribunal's final decision said that Canada had met its NAFTA obligations and dismissed UPS’s claim for damages.

The Blake's article summarizes the matter in some detail and comments:

The decision in United Parcel Service v. Government of Canada was awaited with bated breath among businesses and governments involved in providing overlapping goods and services. Some aspects of the Tribunal’s decision rejecting UPS’s claims against the Government of Canada, such as the drawing of a distinction between postal services and courier services, deal exclusively with postal industry. However, other aspects of the decision have wider implications. For instance, the Tribunal’s finding that the conduct of Canada Post was commercial and not governmental in nature suggests that governmental services that are operated on a commercial basis may not run afoul of NAFTA requirements. The Tribunal’s finding that the delivery aspect of the PAP was integral to the program and therefore protected under the cultural exemptions of NAFTA suggests that where certain commercial aspects of a service that fall under a NAFTA exemption are considered integral to delivery of the service, these too may be protected by the exemption.

While these findings of the Tribunal may lead to NAFTA governments heaving a collective sigh of relief, the respite could be short-lived. The Tribunal appears to have taken a questionable interpretation of some aspects of the NAFTA, such as the definition of "like circumstances" and the protection of delivery mechanisms under the cultural exemption, and a challenge to other governmental services may not take long in developing. Indeed, the detailed dissenting opinion of Cass provides some insight into the weakness of the Tribunal’s decision, and could be the springboard for future claims.