ARTICLE 1904

BINATIONAL PANEL REVIEW PURSUANT TO THE

NORTH AMERICAN FREE TRADE AGREEMENT

DECISION OF THE PANEL ON STANDARD OF REVIEW

ON REVIEW OF THE CANADIAN INTERNATIONAL

TRADE TRIBUNAL FINDING

May 19, 1999

This Decision is divided into two parts. The first part deals with the nature of standards of review governing errors of jurisdiction, law and fact and their applicability in this case. This first part is divided into two subparts - the majority opinion and the concurring opinion. The second part issues a remand order to the Canadian International Trade Tribunal (the "CITT") to interpret section 43(1.01) of the Special Import Measures Act ¹ ("SIMA") and to apply that interpretation to the case. On compliance of the CITT with this remand order, the Panel will render its final decision.

The law governing the applicable Standard of Review is provided under the North American Free Trade Agreement ("NAFTA") Articles 1904(3), 1911, Annex 1911, SIMA subsection 77.011 and the Federal Court Act 2 s. 18.1(4).

Section 77.015(1) of the SIMA provides:

A panel shall conduct a review of a definitive decision in accordance with Chapter Nineteen of the North American Free Trade Agreement and the rules.

NAFTA Article 1904 provides:

2. An involved Party may request that a panel review, based on the administrative record, a final dumping or countervailing duty determination of a competent investigating authority of an importing Party to determine whether such determination was in accordance with the antidumping or countervailing duty law of the importing Party. For this purpose, the antidumping or countervailing duty law consists of the relevant statutes, legislative history, regulations administrative practice and judicial precedents to the extent that a court of the importing Party would rely on such materials in reviewing a final panel review provided for in this Article, the antidumping and countervailing duty statutes of the Parties, as those statutes may be amended from time to time, are incorporated into and made a part of this Agreement.²

3. The panel shall apply the standard of review set out in Annex 1911 and the general legal principles that a court of the importing Party otherwise would apply to a review of a determination of the competent investigating authority.

Annex 1911 of the NAFTA provides: standard of review means the following standards, as may be amended from time to time by the relevant Party:

(a) in the case of Canada, the grounds set out in subsection 18.1(4) of the Federal Court Act, as amended with respect to all final determinations;

Section 18.1(4) of the Federal Court Act provides that the Panel may grant relief if it is satisfied that the CITT:

(a) acted without jurisdiction, acted beyond its jurisdiction or refused to exercise jurisdiction.

(b) failed to observe a principle of natural justice, procedural fairness or other procedures that it was required by law to observe;

(c) erred in law in making a decision or an order, whether or not the error appears on the face of the record;

(d) based its decision or order on an erroneous finding of fact it made in a perverse or capricious manner without regard for the material before it;

(e) acted or failed to act, by reason of fraud or perjured evidence; or

(f) acted in any other way that was contrary to the law.³

In reviewing the determination of an investigative authority, a NAFTA Panel must apply the "general legal principles" that a court of the importing Party otherwise would apply to a review of the determination of a competent investigating authority. These "general legal principles" in the domestic law of Canada include the legal principles that guide Canadian courts in their review of administrative decisions. Applied to this case, the Panel is bound to apply those "principles" in reviewing the determination of the CITT in a comparable manner to the Federal Court of Canada’s review of the determination of an investigating authority within its general jurisdiction.

Section 28(1)(e) of the Federal Court Act, provides that the Federal Court of Appeal has jurisdiction to hear and determine applications for judicial review made in respect of the CITT. The power of this Panel, therefore, to review the determination of the CITT is different in kind from the power of a court to hear an appeal. A court of appeal has broad jurisdiction to overturn the finding of a lower tribunal. A tribunal with the power of judicial review, such as that invested in this Panel, has the power only to review the determination of the lower tribunal and to refer actual or suspected errors back to that lower tribunal for reconsideration. In all other respects, the determination of the lower tribunal must be accorded curial deference. The Supreme Court of Canada has noted:

It is trite to say that the jurisdiction of a court on appeal is much broader than the jurisdiction of a court on review. In principle, a court is entitled, on appeal, to disagree with the reasoning of a lower tribunal. However, within the context of a statutory appeal from an administrative tribunal, additional consideration must be given to the specialization of duties. Although an appeal tribunal has the right to disagree with the lower tribunal on issues which fall within its scope of the statutory appeal, curial deference should be given to the opinion of a lower tribunal on issues which fall squarely within its area of expertise.⁴

Applied to the current case, in exercising its power of review the Panel cannot substitute its opinion for that of the CITT on grounds that the reasoning of the CITT is defective, or even wrong. Nor can it insist that its determination of law or fact is right and that the Panel’s reasoning is "better" than that of the CITT. As was stated in United Brotherhood of Carpenters and Joiners of America, Local 579 v. Bradco Construction Ltd.:

..the court will defer even if the interpretation given by the [labour] tribunal to the collective agreement is not the "right" interpretation in the court's view nor even the "best" of two possible interpretations, so long as it is an interpretation rationally attributable to the words of the agreement.⁵

In exercising its power of review, this Panel is entitled to determine only whether the CITT has committed a "reviewable error," consisting of an error of jurisdiction, error of law, or error of fact. The Panel cannot remedy that perceived error itself. Nor can it substitute its preferred remedy for that of the CITT. In accordance with article 1904, it is empowered to refer the matter back to the CITT for its consideration.

Defining and Applying Standards of Review

In determining whether to remand a matter to the CITT for its consideration, the Panel must determine whether the CITT has erred and further, whether that error constitutes a "reviewable error" of jurisdiction, law or fact. An error of jurisdiction arises where the CITT has acted without jurisdiction, in excess of its jurisdiction, or contrary to the principles of natural justice, as are outlined in Section 18.1(4) (a) and (b) of the Federal Court Act above. In determining whether a matter under review is jurisdictional, this Panel must establish whether the legislature intended the matter in issue to be within the jurisdiction conferred on the CITT.⁶

The Panel arrives at this legislative intention by examining, inter alia, the wording of the enactment conferring jurisdiction on the CITT, the reasons for the CITT’s existence, its area of expertise and the nature of the problem before it and the Panel.⁷ Should the Panel determine that the CITT acted in accordance with its jurisdiction, it must thereafter decide whether the CITT has committed any errors or law or fact within that jurisdiction that are "reviewable." An error of law arises if the Panel finds that the CITT erred in interpreting or applying the law in regard to a matter within its jurisdiction. An error of fact arises if the Panel finds that the CITT has committed an error in construing the facts in the exercise of its jurisdiction. In determining whether the CITT has committed an error of jurisdiction, law or fact, the Panel must identify the applicable standard of review by which to evaluate the nature of the error and the extent to which it is "reviewable." Ultimately, it must distinguish "reviewable errors" which it may remand to the CITT from non-reviewable errors.

The standards of review according to which the Panel determines whether an error of the CITT is reviewable ranges along a spectrum. That spectrum ranges from a standard of "correctness," to a standard of "reasonableness," to a standard of "patent unreasonableness."⁸

In regard to errors of jurisdiction, the standard ordinarily applicable is "correctness." The CITT must be "correct" in the exercise of its jurisdiction. The applicable standard of review in regard to errors of law and fact varies from a standard of "reasonableness" to a standard of "patent unreasonableness." In cases where there is a right of appeal and the absence of a privative clause, the standard of review ordinarily is one of "reasonableness" in respect of errors of law and fact. The court of appeal must determine whether the expert tribunal acted "reasonably." ⁹

In cases where there is a right of review from an expert tribunal, but not a right of appeal, and where there is a privative clause, the standard of review is one of "patent unreasonableness." The reviewing body must determine whether the expert tribunal has committed an error that is "patently unreasonable." In cases in which there is a right of review, the absence of a privative clause, and when the tribunal subject to review is expert and is acting in accordance with its statutory authority, the Federal Court of Canada ordinarily applies a standard of "patent unreasonableness".

The applicability of the standard of "patent unreasonability" was recently reiterated by the Federal Court of Appeal in reviewing determinations of law and fact within the jurisdiction of the CITT. In Canada (Attorney General) v. Symtron Systems Inc.,¹⁰

Linden J. reviewed the decision of the CITT in regard to government procurement projects under Chapter 10 of the North American Free Trade Agreement. He concluded in light of prior decisions of both the Supreme Court of Canada and the Federal Court of Appeal:

Pursuant to the decisions of the Supreme Court of Canada [See Note 11 below]¹¹ and this Court [See Note 12 below]¹² the standards of review to be employed are as follows: (1) when making a determination within its jurisdiction, decisions of the CITT may only be overturned if they are patently unreasonable; (2) when making a decision regarding its own jurisdiction, the CITT must be correct.¹³

The Panel is bound by such determinations of the Court of Appeal in the case at hand. The Panel will apply these standards of review to this case. The "reasonableness" standard of review does not apply in this case. The standard of reasonableness applies when a statute both lacks a privative clause and contains a right of appeal. That standard applies when a decision is unreasonable on the basis of the facts on which it was made. As was stated in Southam, an unreasonable decision is one made in the face of a contradiction in a premise or an invalid inference.¹⁴ There is no right of appeal in respect of section 42 of the SIMA. The CITT is an expert tribunal whose decisions are entitled to great deference. Staffed by adjudicators with specialized knowledge, it has statutory authority to interpret and apply the SIMA and to decide international trade cases falling within its jurisdiction.

The decisions of the CITT, in the exercise of these functions, are entitled to great deference. As the Supreme Court of Canada held in Pezim, notwithstanding the absence of a privative clause, a lower tribunal’s expertise in exercising statutory authority is a compelling reason to accord it judicial deference. Consequently, even where there is no privative clause and where there is a statutory right of appeal, the concept of specialization of duties requires that deference be shown to decisions of specialized tribunals on matters which fall squarely within the tribunal's expertise. This point was reaffirmed in United Brotherhood of Carpenters and Joiners of America, Local 579 v. Bradco Construction Ltd., [1993] 2 S.C.R. 316 where Sopinka J., writing for the majority, stated the following at p. 335:

...expertise of the tribunal is of the utmost importance in determining the intention of the legislator with respect to the degree of deference to be shown to a tribunal's decision in the absence of a full privative clause. Even where the Tribunal's enabling statute provided explicitly for appellate review, as was the case in Bell Canada, supra it has been stressed that deference should be shown by the appellate tribunal to the opinions of the specialized lower tribunal on matters squarely within its jurisdiction.¹⁵

Similarly, in National Corn Growers Association v. Canada (Import Tribunal), the Supreme Court accorded great deference to an expert tribunal experienced in the intricacies of international trade and that dealt with a large volume of trade law cases.¹⁶

Deference is also accorded to specialized tribunals in the manner in which they weigh evidence in exercising their statutory authority. It is a function of a specialized, expert tribunal such as this one to weigh and balance those factors and to decide the importance to be given to each. In law, as opposed to metaphysics, the study of causes is the examination of the potency of certain facts in the production of certain results. Realistically, this is a question of fact.¹⁷

Applied to this case, the CITT has considerable expertise in interpreting statutes within its jurisdiction, in accordance with the authority accorded it by section 42 of the SIMA. It is expert, too, in examining evidence and according relative weight to different facts in issue.

Given that the CITT is an expert tribunal with wide statutory authority and experience in interpreting and applying the SIMA, its decisions are entitled to great deference, even in the absence of a privative clause. As the Supreme Court of Canada held in Mossop:

... even absent a privative clause, the courts will give a considerable measure of deference [to highly specialized bodies] on questions of law falling within the expertise of these bodies because of the role and functions accorded to them by their constituent Act.¹⁸

This deference is owed, as stated by the Supreme Court of Canada, because the expertise of a tribunal is the "most important of the factors a court must consider in settling on a standard of review."¹⁹ To similar effect, the courts in Bell Canada,²⁰  Bradco ²¹ and Pezim ²² have all accorded great deference to decisions of lower tribunals regarding issues of material injury and causation falling squarely within their expertise. Although an appeal tribunal has the right to disagree with the lower tribunal on issues which fall within its scope of the statutory appeal, curial deference should be given to the opinion of a lower tribunal on issues which fall squarely within its area of expertise.²³

Given the deference to be accorded to the CITT in the exercise of its jurisdiction on questions of law and fact, this Panel is required not to remand unless it considers that the CITT may have committed a "patently unreasonable" error.²⁴As was stated in Domtar Inc. v. Quebec (Commission d’appel en matière de lésions professionnelles, "the patently unreasonable error test is the pivot on which judicial deference rests."²⁵

The patently unreasonable standard is variously defined. The Supreme Court of Canada in Southam held that, in order to find the decision of a lower tribunal "patently unreasonable," that decision must have no "basis in law". A patently unreasonable conclusion is one that had no basis in the evidence, or was contrary to the overwhelming weight of the evidence.²⁶A patently unreasonable error arises when the lower tribunal acted clearly and openly "irrationally," and when its decision is incapable of having any rational explanation. Absent such irrationality, the lower tribunal "has the right to be wrong." As was stated in CUPE Local 963 v. N.B. Liquor Corp:

The tribunal has the right to be wrong. Under this standard a court cannot set aside a tribunal’s decision merely because it disagrees with it but can do so only where the decision "cannot be sustained on any reasonable interpretation of the facts or of the law or where it is "clearly irrational.²⁷

A decision that is patently unreasonable constitutes "a fraud on the law or a deliberate refusal to comply with it."²⁸ As a result, the Supreme Court of Canada has stated, in cases like Canada (A.G.) v. PSAC, that the "patent unreasonableness" test is a "very strict test" and that errors of law and fact are reviewable only when they are "clearly irrational": 

It is not enough that the decision of the Board is wrong in the eyes of the court; it must, in order to be patently unreasonable, be found by the court to be clearly irrational.²⁹

The Supreme Court has held further that, if there is any evidence in support of the lower tribunal’s determination, the reviewing court must treat that determination as "rational."

...a finding or decision of a tribunal is not patently unreasonable if there is any evidence capable of supporting the decision even though the reviewing court may not have reached the same conclusion.³⁰

The Complainant argues that a "patently unreasonable" test is inapplicable because the SIMA now specifically excludes a privative clause. It is true that, in implementing the North American Free Trade Agreement, on January 1, 1994, Parliament repealed and re-enacted SIMA section 76(1) and did not include a privative clause.³¹

However, the removal of the privative clause under the SIMA has not displaced the "patently unreasonable" standard as the applicable standard of review in respect of errors of law and fact.³²

In a series of cases since January 1, 1994, the Federal Court of Appeal has held that the patently unreasonable standard continues to apply to such errors. In Stelco v. Canadian International Trade Tribunal et al., it stated:

We cannot see any practical difference between the standard in subsection 18.1(4) of the Federal Court Act and the standard of patent unreasonableness.³³

To a similar effect, the Federal Court of Appeal held in Canadian Pasta Manufacturer's Association v. Aurora Importing & Distributing Ltd., et al. we are dealing with a specialized tribunal whose decisions are entitled to a high degree of deference and should only be overturned if they manifest that character of patent unreasonableness which is the modern standard for judicial review in such cases.³⁴

The Federal Court also applied the standard of patent unreasonability in the more recent case of Canada (Canadian Wheat Board) v. Unicone Industriali Pastai Italiani.³⁵

As was discussed earlier in this decision, the Federal Court of Appeal recently applied the standard of patent unreasonability specifically to the review of a determination of the CITT, in Canada (Attorney General) v. Symtron Systems Inc.³⁶

That case, released on February 5, 1999, is determinative in this case. There Linden J. cited as authority for the patent unreasonability test decisions of the Court of Appeal and the decisions of Mossop, Pezim and Southam rendered by the Supreme Court of Canada. ³⁷

To similar effect, in the recent Premier Choix decision, the Federal Court adopted a patent unreasonability standard even though the applicable legislation did not contain a privative clause. As was stated there: 

In light of the new teachings of the Supreme Court of Canada, like Letourneau J.A., therefore, I am of the view that the most appropriate standard of review in this case should continue to be patent unreasonableness. I am persuaded that the absence of a statutory right of appeal, the wide discretion given to the Board, and the highly technical nature of the Board's subject matter warrant the utmost deference, even though there is no privative clause...³⁸

Other NAFTA panels, too, have applied the standard of patent unreasonability since the removal of the privative clause from the SIMA in January 1, 1994. In Hot-rolled Carbon Steel Sheet, that NAFTA Panel held:

On questions of law within the Tribunal's expertise, the Panel would remand only if the Tribunal's findings were patently unreasonable. On issues of fact, the Panel would not reweigh the evidence, but would remand the Tribunal's finding if there were no rational connection between the evidence and the Tribunal's finding.³⁹

The Complainant argues that Onion ⁴⁰ gives rise to a fourth standard of review on questions of law and fact which is more than "reasonableness" but less than "patent unreasonableness." That court does discuss a "fourth standard" of review which provides for more deference to be given to a lower tribunal's finding than to expert tribunals with a statutory right of appeal, but slightly less deference than to tribunals’ decisions protected by a true privative clause. But the court in Onion still insists that "great deference is to be shown to the Tribunal’s decisions particularly when dealing with questions that go to the heart of its expertise." It also concludes that the CITT’s error was "patently unreasonable" on the facts. As a result, its comments about a "fourth standard" are at most dicta and are not binding upon this Panel. It is well established in the Law of Canada that obiter dicta are not binding authority unless they express a legal proposition that is a necessary step to the judgment pronounced by the Court in the case in which the dicta is found.⁴¹

In concluding on standards of review, the Panel holds that, under Canadian Law, the CITT is subject to a "correctness" standard of review in respect of errors of jurisdiction and a "patent unreasonableness" standard in respect of both errors of law and fact.

Continuation: ii) Concurring opinion of Panelists Hernan Garcia-Corral and Loretta Ortiz AHLF Standards of Review

² R.S.C. 1985, c.F-7.

³ Federal Court Act, R.S.C. 1985, c.F-7 as amended s.18 1(4).

⁴ Bell Canada v. Canada (C.R.T.C.), [1989] 1 S.C.R. 1722 at p.1744-45.

⁵ [1993] 2 S.C.R. 316 (NFLD). See, CITT Brief at 16.

⁶ See eg., U.E.S. Local 298 v. Bibeault [1988] S.C.R. 1048 [hereinafter Bibeault].

⁷ See further, Pezim v. British Columbia (Superintendent of Brokers), [1994] 2 S.C.R. 557 [hereinafter Pezim] at 590-5.

⁸ Pezim, supra note 7; Canadian Broadcasting Corp. v. Canada (Labour Relations Board), [1995] 1 S.C.R. 157 [hereinafter Canadian Broadcasting Corp.] at p. 178.

⁹ On the application of a standard of ?reasonableness? where there is a right of appeal and the absence of a privative clause, see Pezim, supra note 7; and Director of Investigation and Research v. Southam Inc., et al., [1997] 1 S.C.R.748; [1997] D.LR. (4th) 1 [hereinafter Southam].

¹⁰ [1999] F.C.J. No. 178. Court File Nos. A-787-97, A-700-97, para. 45 [hereinafter Symtron].

¹¹ Canada (Attorney General) v. Mossop, [1993] 1 S.C.R. 554 [herinafter Mossop]: Pezim, supra note 7; Southam, supra note 9.

¹² See, e.g., British Columbia (Vegetable Marketing Commission) v. Washington Potato and Onion Assn. [1977] F.C.J. No. 1543 (Fed. C.A.) (Q.L.) [hereinafter Onion]. See also Deputy Minister of National Revenue for Customs and Excise v. Hydro-Quebec (1994), 172 N.R. 247 (Fed. C.A.) at para. 16.

¹³ Onion, supra note 12 at para. 45.

¹⁴ Southam, supra note 9.

¹⁵ Pezim, supra note 7 at 591-592.

¹⁶ [1990] 2 S.C.R. 1324 [hereinafter Corn Growers] at 1348, per Wilson J.

¹⁷ CITT brief at 22 quoting Sacilor Acieries v. Anti-dumping Tribunal (1986), 9 C.E.R. 210 (F.C.A.)

¹⁸ Mossop, supra note 11 at 584 (per La Forest J.)

¹⁹ See, Southam, supra note 9 at para. 50; Pushpanathan v. Canada (M.C.I.), [1998] 1 S.C.R. 982 [hereinafter Pushpanathan]at para. 32.

²⁰ Bell supra note 4 at 1744.

²¹ United Brotherhood of Carpenters and Joiners of America, Local 579 v. Bradco Construction Ltd., [1993] 2 S.C.R. 316 [herinafter Bradco] at 335.

²² Pezim, supra note 7 at 404.

²³ Bell supra note 4 at 1744.

²⁴ Symtron, supra note 10 at para 45.

²⁵ [1993] 2 S.C.R.756 at 77 (per J?Heureux-Dube).

²⁶ Southam, supra note 9. See also Canada (A.G.) v. PSAC [1993] 1. S.C.R. 941, 963-64.

²⁷ [1979] 2 S.C.R. 227 [hereinafter CUPE] at 237.

²⁸ See, CUPE, supra note 27 at 237.

²⁹ [1993] 1 S.C.R. 941, 963-64[964]. As was stated in CAIMAW v. Paccar of Canada Ltd. [1989] 2 S.C.R. 983 [hereinafter CAIMAW] at 1003 (B.C.): "a tribunal has the right to make errors, even serious ones, provided it does not act in a manner "so patently" unreasonable that its construction cannot be rationally supported by the relevant legislation and demands intervention by the courts upon review."

³⁰ See, Bradco, supra note 21 at 687-88 (discussing a labour arbitration). To a similar effect, see Lester (W.W.) (1978) Ltd. v. United Association of Journeymen etc. of the Plumbing and Pipefitting Industry, Local 740 [1990] 2 S.C.R. 644 (Nfld.) [hereinafter Lester].

³¹ Section 76 now provides: ?[S]ubject to subsection 61(3) and Part I.1 or II, an application for judicial review of an order or finding of the Tribunal under this Act may be made to the Federal Court of Appeal on any of the grounds set out in subsection 18.1(4) of the Federal Court Act." This new version of SIMA section 76(1) eliminates the pre-existing provision that the Tribunal's decisions were "final and conclusive.? In effect, by removing the privative clause, section 76(1) now states that all decisions are reviewable under s. 18.1(4) of the FCA.

³² Southam, supra note 9 at p. 772.

³³ (May 23, 1995) A-360-93 (F.C.A., unreported) [hereinafter Stelco].

³⁴ (1997) 208 N.R. 329; FCA file no. A-473-96 [hereinafter Pasta] at 3.

³⁵ [1998] F.C.J. No. 173, February 9, 1998 [hereinafter Unicone] at paras 4 and 7.

³⁶ Symtron, supra note 10 at para. 45.

³⁷ See, Symtron, supra note 10.

³⁸Reseaux Premier Choix Inc. v. Canadian Cable Television Association [1997] F.C.J. No.1723 [hereinafter Choix] at para. 17.

³⁹ (1994), CDA-93-1907-07 at 15.

⁴⁰ Onion, supra note 12.

⁴¹ Reference Re Canada Temperance Act, [1939] 4 D.L.R. 14 (Ont. C.A.) affd. (P.C.)