June 13, 2007
No. 78
The Honourable David Emerson, Minister of International Trade, and the Honourable
Lawrence Cannon, Minister of Transport, Infrastructure and Communities, today
welcomed a favourable decision from the arbitration tribunal in the UPS v. Government
of Canada dispute initiated under NAFTA’s Chapter 11.
“I am pleased with the tribunal’s decision. It confirms that Canada is meeting its NAFTA
obligations. We did not discriminate against UPS and treated them fairly,” said Minister
Emerson.
In January 2000, United Parcel Service of America, Inc. initiated a legal challenge
against Canada, alleging that Canada Post was benefiting from undue privileges as a
government-owned corporation. The hearing was held in December 2005 in
Washington before a tribunal constituted under NAFTA Chapter 11. The tribunal issued
a final decision on this matter on June 11, 2007, confirming that Canada had met its
NAFTA obligations and dismissing UPS’s claim for damages.
“Canada’s right to operate a public postal service was never challenged,” declared
Minister Cannon, “but some Canada Post specialized services were targeted. We are
very satisfied with the tribunal’s decision.”
Under the NAFTA, Chapter 11 provides rights and protections for investors and
investments in member countries. Companies that believe these investor rights have
been violated have direct access to dispute settlement before an impartial arbitration
tribunal.
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A backgrounder is attached.
For further information, media representatives may contact:
Jennifer Chiu
Press Secretary
Office of the Minister of International Trade and Minister for the Pacific Gateway and
the Vancouver-Whistler Olympics
613-992-7332
Trade Media Relations Office
Foreign Affairs and International Trade Canada
613-996-2000
http://www.international.gc.ca
Backgrounder
UPS CHAPTER 11 LEGAL CHALLENGE
In January 2000, UPS initiated a legal challenge against Canada under the
investor-state dispute settlement procedures of NAFTA Chapter 11, claiming not less
than US$160 million in damages. In particular, UPS alleged that:
• Canada Customs’ treatment of UPS Canada is discriminatory in comparison to
the treatment of Canada Post;
• Canada Post’s pricing policies afford an unfair advantage to Canada Post’s
products over those of UPS Canada and are contrary to national treatment;
• Canada Post provided preferential access to its infrastructure to Purolator; and
• the Publications Assistance Program of the Department of Canadian Heritage is
contrary to Canada’s national treatment obligation because it requires publishers
to deliver their publications through Canada Post to obtain the subsidy.
The recent Chapter 11 tribunal decision dismisses all of UPS’s claims.
With respect to the alleged discriminatory customs treatment, the tribunal recognized
the differences between postal traffic and courier traffic and concluded that UPS and
Canada Post were not in like circumstances; therefore, there was no violation of
national treatment.
The tribunal found that the alleged conduct by Canada Post was commercial and not
governmental in nature, and therefore that Canada Post was not in that respect subject
to a national treatment or minimum standard of treatment obligation.
The Canadian Heritage Publications Assistance Program was upheld as a measure
designed to assist cultural industries and therefore fell within the scope of NAFTA’s
cultural exemption. In any event, the tribunal found there was no violation of national
treatment.
On the matter of costs, the tribunal ordered that the parties bear their own costs and
share equally the arbitration costs.
NAFTA Chapter 11 was negotiated to promote business among the United States,
Canada and Mexico. It provides rights and protections for investors and investments in
NAFTA countries. Companies that believe these investor rights have been violated
have direct access to dispute settlement before an impartial tribunal.
