Lexpert US Guides

70 | LEXPERT • June 2019 | www.lexpert.ca/usguide Chapter 31. "ese changes mean that Canadian or American investors are limited to adjudi- cating future disputes in domestic courts or before other international arbitration tribunals," Pearson says. "And state-to-state dispute settlement may not provide redress for damages suffered by private investors as a result of CUSMA violations." Most surprising, perhaps, is the fact that the procurement provisions of CUSMA do not cover Canada. Instead, government procurement between Can- ada and the US continues to fall under the WTO's Government Procurement Agreement (GPA), to which both Cana- da and the US are parties. "e difference is that the GPA has higher thresholds than NAFTA did, which reduces the number of contracts that US and Canadian firms are eligible to bid on in each government's respective procurement markets," Pearson says. US attorneys and in-house counsel seek- ing to prosecute or enforce their clients' intellectual property rights in Canada will also notice CUSMA's impact. In the trademark arena, the USMCA will align the minimum duration of copy- right in Canada (and Mexico) with the "life plus 70 years" term that currently ex- ists in the US. e agreement also changes how in- ternet service providers (ISPs) deal with users' copyright infringement. Here, Canada will keep its "notice and notice" system under which the ISP forwards to its subscribers any notices of alleged infringement that it has received from a rights holder. e USMCA also provides ISPs with a "safe harbour." ISPs who remove material they know to be infringing and cooper- ate with copyright owners to deter illegal storage and transmission of copyrighted materials will be protected from liability for infringement. Under the agreement, Canada must also provide protection against the circumven- tion of digital locks and watermarks on copyrighted material and make those who engage in such behaviour subject to civil and criminal sanctions. them due to leave in December. "at is going to create problems be- cause the WTO is the most effective dispute resolution mechanism for trade issues," says Greg Tereposky of Tereposky & DeRose LLP in Ottawa. "In fact, there are many disputes that can only be dealt with at the WTO — even the new Canada-United States-Mexico Agreement [CUSMA] incorporates the WTO pro- cess by reference. e worst part is, there's no end in sight. "e US has not been transparent about what it will take to resolve the standstill," Tereposky says. "To the extent that they've used the issue to create lever- age, they've created it, and it's time for them to come forward, engage and pro- pose a solution." To Tereposky, the ongoing trade wars reflect an even larger problem. "Many of these tariffs and surtaxes have been widely regarded as protectionist, lack- ing a clear legal basis and more in the way of political and economic retaliation," he says. "To me, that's an indicated that we're pulling back from the rule of law." What appears to have happened is that the US, clearly the protagonist on this is- sue, has prompted smaller countries such as Canada to follow suit. "e Canadian Border Services Agency is now increasingly relying on ministerial discretion as a way of punishing foreign exporters," says Peter Kirby in Fasken Mar- tineau DuMoulin LLP's Montréal office. "We're seeing decisions, particularly anti- dumping decisions, that we never would have seen in the past." In the long run, Kirby maintains, that's not a good thing. "As a small nation, we're absolutely de- pendent on a rule-based system," he says. "Although we're trying to diversify our trading partners, the reality is that we're so subject to the whims of the US that we can't do it in the short term and it's not even clear that we'll do it in the long term." e bright spot, Tereposky believes, is that the mindset in North America isn't the norm. "e system may be breaking down here, but most of the rest of the world is trying to preserve certainty and predictability sur- rounding the rule of law," Tereposky says. Still, Kirby isn't sure that the pendulum will swing back should US President Don- ald Trump lose the next election. "e system's been undermined," he says. To be sure, there's a bright spot in the fact that the Canadian, American and Mexican government signed CUSMA in November 2018. But there remain signifi- cant political hurdles to overcome before it is ratified – particularly in the US – and comes into force. However that may be, the fact is that CUSMA does not purport to resolve the dispute over steel and aluminum tariffs. Trump retains his authority under the en- abling legislation, section 232 of the U.S. Trade Expansion Act of 1962, which allows him to restrict imports of goods that are "a threat to national security. Still, if and when CUSMA comes into force, the landscape will change yet again. Although most of the North American Free Trade Agreement's (NAFTA) provisions remain intact, particularly duty free treat- ment for almost all goods and retention of the binational panel dispute settlement mechanism, there are important changes that will govern cross-border trade between Canada and the US. One of the most significant changes is the phasing out of NAFTA Chapter 11's investor-state dispute resolution mecha- nisms. e parties to CUSMA, however, can challenge violation of investment protection by way of the state-to-state dispute settlement process described in Trade "We've been unbelievably busy with clients who come to us for help about the most advantageous way to procure goods and build products in ways that will mitigate the effect of the tariffs to the greatest extent possible." Darrel Pearson, co-head of international trade at Bennett Jones LLP in Toronto

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