Canada’s economic relationships with the People’s Republic of China continue to grow each year, creating attractive partnership opportunities for Canadian and Chinese companies. Despite the obvious benefits of such growth, Canadian and Chinese companies should be aware of the sleeping dragon that can surface in the event of a contract or trade dispute, based on differences in how some parties approach the process of dispute resolution. These differences can add cost and complexity, as well as uncertainty, to an already complicated process. This bulletin highlights some of these differences and offers suggestions to mitigate the risks that can arise in the course of resolving a dispute involving Canadian and Chinese companies.

Given the legal, commercial and cultural diversities between Canada and China, it is not surprising that there could be differences in how some parties in each country approach dispute resolution. These differences often relate to the significance of the terms of a contract or trade legislation, rules of procedure and court (or tribunal) orders. Being aware of these potential differences can reduce the likelihood of unwelcome surprises in the event that a dispute arises regarding a proposed or completed transaction. This is particularly important given the additional (and typically unbudgeted) operational and financial resources that may be required in order to resolve the dispute.

Canadian Dispute Resolution Processes: Designed to Deliver Compliance and Certainty

In Canada, the framework and structure of commercial and trade dispute resolution is carefully prescribed by legislation and rules of procedure, such as each province’s Rules of Court, each arbitration centre’s Rules of Procedure, and, in the case of trade disputes, the Special Import Measures Act, the Customs Act and related Canadian legislation. These various sets of rules prescribe numerous mandatory steps and timelines for the resolution of disputes in each forum. Canadian courts have expressly stated that parties’ contractual and legislative obligations should be given effect barring very good reasons otherwise, in aid of providing market certainty. As such, Canadian courts and tribunals seek to ensure the litigation process closely follows the rules of procedure in order to resolve disputes in a manner that is intended to be both just and efficient.

Similarly, the Canada Border Services Agency (CBSA) and the Canadian International Trade Tribunal (CITT) have consistently demonstrated an intention to investigate allegations of trade law violations in order to ensure strict compliance with trade legislation. Both agencies are governed by legislation that sets tight timelines and filing requirements, and which offers limited flexibility. Imports from China have often been the target of such investigations. A recent example is the January 12, 2012 CITT preliminary injury determination regarding stainless steel sinks imported from China. The CITT concluded that there is evidence that discloses a reasonable indication that dumping and subsidizing of the imports have caused or are threatening to cause injury to the domestic industry. As a result, a full inquiry will proceed, and duties may be assessed on the subject imports.

Failure to abide by the terms of a contract, trade legislation, or the rules of procedure invites an adverse ruling by a court, arbitrator, the CBSA or the CITT. Further failure to abide by such an order will result in additional consequences and penalties, including increased legal costs. Companies operating in Canada should be aware that Canadian courts will expect strict compliance on these matters and will penalize contraventions of such rules, particularly once an order has been issued setting out clear expectations and deliverables. Read the complete article here.

Source: Roy Millen and Andrew Crabtree — Blake, Cassels & Graydon LLP