BINATIONAL PANEL REVIEW
UNDER
THE NORTH AMERICAN FREE TRADE AGREEMENT
Article 1904

IN THE MATTER OF:

Synthetic Baler Twine With a Knot Strength Of 200 Lbs or less Originating in or Exported from the United States of America

Panel:

Robert E. Ruggeri, Esq.: Chairman

Edward C. Chiasson: Q.C.

Prof. David A. Gantz

Jane C. LuxtonEsq.

Prof. Leon E. Trakman

DECISION OF THE PANEL

(April 10, 1995)

Appearances:

John B. Laskin and John P. Koch argued for Bridon Inc. & Bridon Pacific Ltd.

John Syme argued for Canadian International Trade Tribunal. With him on the brief was Joel J.Robichaud.

Paul LaBarge argued for Tecsyn International, Inc. With him on the brief were David Liston and Greg Kanargelidis.

TABLE OF CONTENTS

OPINION AND ORDER OF THE PANEL

INTRODUCTION

PROCEDURAL HISTORY

OPINION

I. STANDARD OF REVIEW

II. ERRORS OF LAW AND FACT

A. Did the Tribunal Commit Errors of Laws or Jurisdiction in the Manner in Which it Treated Possible Causal Factors Other Than Dumped Imports from the United States?
1. The Relationship of Canada's GATT Obligations to SIMA in Determining Material Injury.

2. The Tribunal is Not Required, in Determining the Impact of Various Causal Factors, to Quantify and Segregate All Other Possible Causes of Injury.

B. Did the Tribunal Commit Errors of Law and/or Fact in The Manner in Which it Analyzed the Relationship of Various Factors Affecting Price in Determining Causation?
1. The Tribunal's Analysis of Portuguese Sales and Customer Purchasing Patterns was Within the Requirements of the Law and Supported by Facts in the Administrative Record.

2. The Tribunal's Analysis of Price Discrimination, and the Market Structure as Factors in Determining Causation Did Not Constitute Error.

3. The Tribunal's Analysis of the Effects of Price Leadership was Supported by the Record.

C. Did the Tribunal Commit Errors of Law and/or Fact by Considering Non-Price Factors and Failing to Consider Other Factors in its Determination of Material Injury?
l. Consideration of Allegedly "Irrelevant" Non-Dumping Factors by the Tribunal is Supported by the Facts of This Case.

2. Other Alleged Errors of Law or Fact Are Not Such as to Constitute Reversible Error.

III. FUTURE INJURY

IV. RELIEF

OPINION AND ORDER OF THE PANEL

INTRODUCTION

This Binational Panel was constituted pursuant to Chapter 19 of the North American Free Trade Agreement ("NAFTA") to review an April 22, 1994 finding of the Canadian International Trade Tribunal ("CITT" or "Tribunal"). The Tribunal found that the dumping of synthetic baler twine with a knot strength of 200 pounds or less originating in, or exported from, the United States of America had caused, was causing, and was likely to cause material injury to the production of like goods in Canada.

The Complainants, Bridon Cordage, Inc. and Bridon Pacific Limited, in their written submissions challenged the Tribunal's finding on several grounds:

Did the Tribunal commit an error of law or jurisdiction in the manner in which it applied, or failed to apply, the GATT Antidumping Code and other GATT-related rules? Did the Tribunal commit an error by not having segregated and quantified the other potential causes of injury to the Canadian industry when it determined material injury to the domestic market under Special Import Measures Act?

Did the Tribunal commit errors of law and/or fact in the manner in which it analyzed the price effects of imports from Europe (primarily Portugal), customer purchasing patterns, price leadership, and the Canadian market structure, when determining that dumped imports from the United States caused material injury to Canadian producers? Did the Tribunal commit errors of law and/or fact by considering non-price factors such as the geographical proximity of U.S. producers and the structure of in-season sales? Did it commit error by not considering such other non-price factors as the 1994 buying season, the actions of the largest Canadian producer of the like merchandise, and other aspects of the effects of European-sourced sales in determining material injury?

For the reasons more fully set forth in its Opinion hereafter, on the basis of the Administrative Record, the applicable law, the written submissions of the participants, and the public and in camera hearing held in Ottawa on January 5, 1995, the Panel: Affirms in part and Remands in part.

PROCEDURAL HISTORY

Following the filing of a dumping complaint by TecSyn International, Inc., and a notice of preliminary determination of dumping by the Deputy Minister of National Revenue for Customs and Excise ("Deputy Minister") which was published on January 15, 1994 , the Tribunal commenced a ¹ material injury inquiry under section 42 of the Special Import Measures Act ("SIMA"). The Deputy Minister's investigation of dumping covered importations of the subject goods from January 1 to June 30, 1993. On March 23, 1994, the Deputy Minister made a final determination of dumping with regard to the subject goods. The Tribunal held two days of hearings in Ottawa on March 28 and 29, ² 1994. The Tribunal's Finding was issued on April 22, 1994 and its Decision and Statement of Reasons were issued on May 9, 1994.

A Binational Panel was requested pursuant to Article 1904 of the NAFTA. Briefs were filed by the Complainants and the Respondents CITT and TecSyn. Counsel for the Complainants and the two Respondents appeared before the Panel during the hearing.

I. STANDARD OF REVIEW

Binational panels are directed by NAFTA Article 1904(3) to 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.

In the case of Canada, Annex 1911 defines the standard of review as the grounds set forth in subsection 18.1 (4) of the Federal Court Act. Subsection 18.1(4) provides that the Tribunal's ³ decisions will be reviewed on the grounds that it:

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

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

(c) erred in law in making a decision or 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 that it made in a perverse or capricious manner or 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 law.

There is a consensus among the participants in this case, and the Panel agrees, that the standard of review for questions of jurisdiction, including issues of natural justice, is "correctness". The tribunal concerned must be "correct" on questions of jurisdiction in order to be upheld. If the Tribunal is incorrect, the Panel is required to remand, with instructions for the tribunal to correct the error.⁵

The Panel holds, in this case, that no error of jurisdiction occurred. The Tribunal acted within its jurisdiction in terms of subsection 18.1(4) of the Federal Court Act. We find no instance in which it exceeded its statutory power.

The standard of review in issue in this case is limited to issues of law and fact. The standard of review ordinarily applied to questions of fact is that there must be a "rational connection" between the facts and the tribunal's finding. The Panel will remand only if "the evidence, viewed reasonably, is incapable of supporting [the Tribunal's] finding...." Such evidence need not be substantial; nor ⁶ unreasonability" standard. "[I]f there is any evidence capable of supporting a finding ... the need the Panel arrive at the same determination as the Tribunal in light of it. The standard of review ⁷ traditionally applied to alleged errors of law is "patent unreasonability". That test prescribes that a tribunal's determination be upheld unless it is contrary to reason or good sense, as when it is irrational. The test does not apply simply because the tribunal concerned is wrong on an issue of law.

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. ⁸

The "patent unreasonability" test gives rise to a very exacting standard of review. As was stated by McLachlin J. in W.W. Lester Ltd. v. U.A., Local 740⁹ Courts should exercise caution and deference in reviewing the decisions of specialized administrative tribunals, such as the labour board in this case... Only ... where the interpretation placed on the legislation is patently unreasonable, can a court interfere.¹⁰

In the case of Blanchard v. Control Data Canada Ltd. , Lamer J., as he then was, stressed that the ¹¹ "patent unreasonability" test required an exceptional degree of deference to be given to the tribunal's decision. He asserted that patent unreasonability "is a very severe test and signals a strict approach to the question of judicial review. It is nevertheless the test which this court has applied and continues to apply." ¹² court will defer to the Board's finding even though it may not have reached the same conclusion." McLachlin J. in Lester, supra note 6 at 418. In United Brotherhood of Carpenters and Joiners of America, Local 579 v. Bradco Construction Ltd. (Bradco), [1993] 2 S.C.R. 316, 340, Sopinka J. added: "Once it has been determined that curial deference to a particular decision of a tribunal is appropriate, the tribunal has the right to be wrong, regardless of how many reviewing judges disagree with its decision." Privative clauses are described as follows. "It is common for legislative bodies, when¹³ establishing a new administrative tribunal, to include in the constituent statute a "privative clause", which is a provision purporting to exclude judicial review of the tribunal's decision.

Privative clauses come in a variety of fairly standard forms. There is the "finality clause", which declares that the decisions of the tribunal shall be "final" and not subject to review; the "exclusive jurisdiction" clause declares that the tribunal's jurisdiction to decide issues before it is exclusive and unreviewable; the "no-certiorari clause" declares that certiorari and other remedies which would otherwise be available for review purposes are not available to review the tribunal's decisions; and one could also include "notice clauses" and "limitation clauses" which exclude review unless prior notice has been given or unless proceedings are brought within a short time." Peter Hogg, Constitutional Law of Canada 197 (Carswell, 1992).

Despite its customary application to errors of law, the "patent unreasonability" test does not apply in every case of an alleged error of law. Rather, it may apply when a privative clause excludes¹³ judicial review of the Tribunal's decision, or it may not apply to the extent that legislation or court decisions vary from it. This Panel has reconsidered the application of the "patent unreasonability" test for two related reasons. First, the present case follows a change in the Special Import Measures Act, in which the Tribunal's privative clause has been deleted. Second, this development has ¹⁴ particular significance in light of the Supreme Court's decision in Pezim v. British Columbia (Superintendent of Brokers). The Court stated that whether a Tribunal's decision was protected ¹⁵ by a privative clause was "crucial" in determining the degree of deference to be accorded to its decisions. ¹⁶

In view of this deletion of the privative clause from section 76(1) of the SIMA, and the ¹⁷ modified approach adopted by the Supreme Court to the standards of review in Pezim, the Panel will review herein the standard of review that ought to apply in the case at hand. ¹⁸

Effective January 1, 1994, the SIMA was amended to implement certain of Canada's obligations under Chapter Nineteen of the NAFTA. Among these changes, the Tribunal's privative clause, previously found in section 76(1), was deleted. Specific provision was made instead for judicial review of orders and findings of the Tribunal. While the Panel is unwilling to speculate as ¹⁹ to the specific intention of the legislature in deleting the Tribunal's privative clause from section 76(1), it considers that deletion relevant in determining the standard of review to apply here, particularly in light of Pezim.

In Pezim the Supreme Court of Canada recently articulated the standard of reviews as a ²⁰ spectrum. Iacobucci J., writing for the Court, articulated a spectrum of standards of review ranging from reasonableness to correctness, including patent unreasonability. He stated that the precise ²¹ standard to apply in each case depends upon an analysis of the function of a tribunal. Under the ²² heading, "Principles of Judicial Review", Iacobucci J. emphasized that what is "crucial is whether or not the agency's decisions are protected by a privative clause". He evaluated in the following ²³ manner the standard of review that ought to apply in the absence of a privative clause:

What is an appropriate standard of review for an appellate court reviewing a decision of a securities commission not protected by a privative clause when there exists a statutory right of appeal and where the case turns on a question of interpretation? ²⁴

Based on the specialized mandate of the British Columbia Securities Commission and the issue addressed by it, the Supreme Court concluded that the Commission's decision was entitled to "considerable deference". Iacobucci J. stated the issue in Pezim in this way: [E]ven where there is no privative clause and where there is a statutory right of appeal, the concept of the specialization of duties requires that deference be shown to decisions of specialized tribunals on matters which fall squarely within the tribunal's expertise.²⁵

Applying the reasoning of Pezim, it is apparent that the Tribunal in the case at hand continues to exercise a specialized function which the elimination of the privative clause did not alter. It is not disputed that the issues dealt with by the Tribunal fell within its specialized function. As a result, even in the absence of a privative clause, the decisions of the Tribunal are entitled to "considerable deference".

Beyond stating that the deference to be accorded the Tribunal concerned ought to be "considerable", the Supreme Court in Pezim did not determine the precise extent of deference to be applied in each specific case. Iacobucci J. noted, instead, that the degree of deference "ranges from the standard of reasonableness to that of correctness". He elaborated as follows: ²⁶

At a reasonableness end of the spectrum, where deference is at its highest, are those cases where a tribunal protected by a true privative clause, is deciding a matter within its jurisdiction and where there is no statutory right of appeal.²⁷

The Pezim case involved a tribunal's decision from which there was a statutory right of appeal, but which was not protected by a privative clause. As a result, the Court held that the applicable standard of review fell between the two extremes of correctness and patent unreasonability. It held further that the decision of the Securities Commission was not subject to the patently unreasonability standard, but to a standard of "considerable deference".²⁸

In the current case, while the Tribunal's decision is not protected by a privative clause, there is no right of appeal from its decisions. The only right that arises is one of judicial review. There is no reason, in logic or law, to conclude that it is entitled to anything less than "considerable deference". While that deference does not extend to the point of patent unreasonability, it resides close to that end of the spectrum of deference.

Complainants contend that, because binational panels are themselves expert in international trade, the Tribunal is not entitled to the same degree of deference that ordinarily would be accorded to it by the Federal Court. The Panel disagrees. Pursuant to the NAFTA, Article 1904(1), binational panel review replaces judicial review by domestic courts in certain defined circumstances. Paragraph 3 of Article 1904 provides:

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 states that the standard of review for Canada means "the grounds set out in subsection 18.1(4) of the Federal Court Act." Under section 18.1(4) the Federal Court is obliged by law to give "considerable deference" to the decisions of the Tribunal. In fulfilling their mandate to "apply the standard of review... that a court of the importing Party otherwise would apply" binational panels are obliged to apply the same standard that would be used by the Federal Court.

There is also a practical need for holding that binational panels should apply the same standard of review as that used by the Federal Court. This need is for certainty, consistency, and predictability in decision-making. In antidumping cases, where the Tribunal's investigation involves companies from countries that are both NAFTA Parties and non-Parties, the Tribunal's final injury determination could result in simultaneous review before both the Federal Court and a binational panel. Taking the Complainant's argument to its logical conclusion, the result would be that different standards of review would be applied to different participants in exactly the same circumstances. There is no indication in the NAFTA or in the SIMA that such a result was intended. To hold that the Tribunal is not entitled to the same degree of deference accorded by the Federal Court would unjustifiably open the door to forum shopping.

In advancing this argument, Complainants rely on certain provisions of the NAFTA respecting the qualifications of panelists. They also rely on the pronouncements of the Supreme Court of Canada in Canada (Attorney General) v. Mossop and Pezim. In Pezim, the Court stated: ²⁹ At the correctness end of the spectrum, where deference in terms of legal questions is at its lowest, are those cases ... where the tribunal has no greater expertise than the court on the issue in question...³⁰

Paragraph 1 of the NAFTA, Annex 1902.2, states that Chapter Nineteen Panelists shall be of good character, high standing and repute, and shall be chosen strictly on the basis of objectivity, reliability, sound judgement and general familiarity with international trade law. [Emphasis added.] Complainants assert that these criteria qualify binational panelists as "experts".

Based on the concept of relative expertise articulated in Mossop and Pezim, they argue that this Panel has the same relative degree of expertise as the Tribunal and therefore, that the Tribunal's decisions on issues of fact and law within its jurisdiction should not be entitled to deference. They conclude that a correctness standard should be applied in these circumstances.

The Panel holds that the requirement that panelists be familiar with international trade law under paragraph 1 of the NAFTA, Annex 1902.2 is not intended to modify the standard of deference that is ordinarily accorded an expert tribunal. The requirement that panelists be familiar with international trade law assists panelists to fulfil their mandate by making it easier for them to understand the types of issues that are dealt with by the Tribunal. The panel's expertise is somewhat analogous to the specialization which sometimes develops in divisional courts. That specialization does not alter the substantive mandate undertaken by the courts. Nor ought it to do so here.

The Panel holds that the standard of review applicable to these proceedings with respect to issues of jurisdiction is correctness. With respect to issues of fact or law within the Tribunal's area of expertise, the standard of review is considerable deference.

Continue on to Section II: Errors of Law and Fact

² Canada Gazette, No. 14, 2014-15 (April 2, 1994).

³ R.S.C.1985, c.F-7.

⁴ NAFTA Article 1911 defines "general legal principles" to include "principles such as standing, due process, rules of statutory construction, mootness and exhaustion of administrative remedies."

⁵ See, e.g., Public Service Alliance v. Canada (A.G.), [1991] 1 S.C.R.614; U.E.S. Local 286 v. Bibeault, [1988] 2 S.C.R.1048; Syndicat des employés de production du Quebec et de l'Acadie v. Canadian Labour Relations Board, [1984] 2 S.C.R.412. See, also, Certain Beer originating in or exported from the United States of American by G.Heileman Brewing Company, Inc., Pabst Company, and the Stroh Brewing Company for use or consumption in the Province of British Columbia, dated August 6, 1992, Canadian Secretariat, File CDA-91- 1901-01, at pp.11-13; In the Matter of: Final Determination of Dumping made by Revenue Canada Customs and Excise, Regarding certain Machine Tufted Carpeting originating in or exported from the United States of America, dated May 19, 1993, Canadian Secretariat, File CDA-92-1904-01 at 7-9.

⁶ Lester (W.W.) (1978) Ltd. v. United Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industry, Local 740, [1990] 3 S.C.R.644 at 669. [Hereinafter referred to as Lester.]

⁷ Id. at 668-69.

⁸ See, e.g., Canada (A.G.) v. Public Service Alliance of Canada, [1993] 1 S.C.R.941, at 964.

⁹ Lester, supra note 6 at 406.

¹⁰ Id.

¹¹ (1984), 14 D.L.R.(4th) 289 at 302.

¹² Id. Any evidence in support of the tribunal's finding is sufficient to satisfy the "patent

¹³

¹⁴ R.S.C.1985, c.S-15 (as amended), [hereinafter referred to as SIMA.]

¹⁵ [1994] 2 S.C.R.557, [hereinafter referred to as Pezim.]

¹⁶ Id. at 590.

¹⁷ On this issue, see National Corn Growers Association v. Canada (Import Tribunal), [1990],

¹⁸ 2 S.C.R.1324, at 1370. See, also, the Binational Panel Decision in Certain Flat Hot-Rolled Carbon Steel Sheet Products Originating in or Exported from the United States (Injury), CDA-93-1904-07, Decision of 18 May, 1994 [hereinafter, Hot-Rolled Steel] at 13-15. On the inference that a change in legislation is remedial, see the Interpretation Act,

¹⁹ R.S.C.1985, c.1-23, section 12. North American Free Trade Agreement Implementation Act, S.C. 1993, c.44, section s.17(1).

²⁰ Supra note 15.

²¹ Pezim, supra note 15, at 589-90 discussed in Canadian Broadcasting Corporation v. CLRB, S.C.C. January 27, 1995 at 14-15.

²² Id.

²³ Pezim, supra note 15 at 590 quoted in Canadian Broadcasting Corporation at 14. The approach of the Supreme Court in Pezim is consistent with that taken by the Binational Panel in Hot-Rolled Steel. There, after a review of the function of the Tribunal, the Panel concluded that "the applicable standard of review for errors of law within the specialized jurisdiction of the Tribunal is patent unreasonability." It went on to say that "this conclusion is given support by the existence in SIMA of the privative clause."

²⁴ Pezim at 588.

²⁵Id. at 591.

²⁶ Id. at 590.

²⁷ Id.

²⁸ Canadian courts have since begun to interpret the reasoning of the Supreme Court in Pezim. Some judges have suggested that "considerable deference" equates with "patent unreasonability". See, for example, Sivasamboo, et al. v. The Minister of Citizenship and Immigration, F.C.T.D., November 30, 1994, Richard J. (unreported) at 18. It is difficult to accept such a conclusion in all cases, although in extreme cases this might be so. See, for example, United Brotherhood of Carpenters and Joiners of America, Local 579 v. Bradco Construction Limited [1993] 2 S.C.R.316 at 332; and Lester, supra note 6 at 406.

²⁹[1993] 1 S.C.R.554, [hereinafter referred to as Mossop].

³⁰ Pezim, supra note 15 at 590.