Ontario cities in limbo

  • July 20, 2023
  • Melanie Benedict

The Ontario Superior Court of Justice (Divisional Court) (“Court”) recently quashed two decisions by Ontario’s Ministry of Transportation (“MTO”) in Thales DIS Canada Inc v Ontario (“Thales”).1 The Court found that the request for bids (“RFB”) in dispute did not comply with the Government of Ontario’s obligations under the Canada-European Union Comprehensive Economic Trade Agreement (“CETA”).2 The Court of Appeal for Ontario granted leave to appeal on November 9, 2022.3

Municipalities will be interested in whether the Court of Appeal lends any credence to the concurring opinion of D.L. Corbett J, who agreed with the majority decision of Nishikawa J (Wilton-Siegel J. concurring) but arrived at the decision for different reasons. Specifically, if the Court of Appeal agrees with D.L. Corbett J’s reasoning with respect to the lack of a CETA-compliant bid dispute mechanism, Ontario municipalities will be left in limbo because municipalities are not a party to the trade agreement, constitutionally lack such power, and therefore cannot implement a CETA-compliant bid dispute mechanism.



Thales involved an application for judicial review brought forward by the Applicant, Thales DIS Canada Inc. (“Thales”). The MTO had issued a RFB with a tender for a Card Production and Photo Comparison Technology Service Provider. The RFB contained a domestic production requirement, which Thales alleged was counter to the CETA.4 Thales had disputed various aspects of the RFB, including the domestic production requirement, through the government’s internal bid dispute mechanism. MTO dismissed Thales’ complaint, with the Director, Program and Policy Enablement (“Director”), Supply Chain Ontario of the Ministry of Government and Consumer Services finding the complaint to be unsubstantiated.5

Legal history and main legal issues

Thales applied for judicial review based on both MTO’s issuance of the RFB and the dismissal of its complaint by the Director. It argued that the domestic production requirement in the RFB violates the non-discrimination provisions contained in Chapter 19 of the CETA, which deals specifically with government procurement and includes central, sub-central, municipal government entities, and government enterprises. Thales also alleged that the decision by the Director to dismiss Thales’ complaint was biased and procedurally unfair.6 In applying for judicial review, Thales asked for the dismissal of its complaint pursuant to section 2(1) of the Judicial Review Procedure Act (“JRPA”).7

MTO took the position that (1) the RFB was not reviewable by the Court; (2) the decision by the Director was fair and reasonable; and (3) the domestic production requirement falls within the public safety exception to the non-discrimination provisions of the CETA, specifically Article 19.3. The MTO also contended that the application was moot because Thales ranked fourth of four bidders once the tender process had been completed.8

Decision by the Director

Considering the decision by the Director, the Court found that judicial review was available because the Respondent’s decision to dismiss Thales’ complaint was an exercise of state-decision making authority of a sufficiently public character.9 The applicable standard of review was determined to be reasonableness.10 The Court concluded that the Director’s decision that the domestic production requirement was “necessary” within the meaning of Article 19.3(2) of the CETA was unreasonable.11 The Court reasoned that (1) the Director did not arrive at her conclusions in conformity with the applicable test as set out in Brazil — Measures Affecting Imports of Retreaded Tyres (Complaint by the European Communities) (2007), a World Trade Organization Appellate Body decision,12 and (2) she failed to properly apply the principles of that test.13 The Court further found that it was not possible to identify a rational or logical chain of analysis regarding the Director’s decision.14 Thus, the Court concluded that the Director’s decision was unreasonable because she had failed to consider available, less trade-restrictive alternatives to the domestic production requirement.15

Accordingly, the appropriate remedy was certiorari under section 2(1) of the JPRA.16 The Court did not remit the case back to the Director because the Court found that the only reasonable conclusion the Director could have made was that the domestic production requirement contravened the CETA.17

Issuance of the RFB

Considering the issuance of the RFB and its review, the Court stated that it was not strictly necessary to review the RFB for clarity and the resolution of any outstanding questions as to the status of the RFB. However, it chose to do so despite the Respondent taking the position that the Court did not have jurisdiction.18 The Court, in examining the current state of the law with respect to the process of government contracts for goods and services, found it usually fell within the realm of private law as a commercial matter. Judicial review is not usually available unless there are statutory provisions or regulations prescribing how the government agency is to enter into such a contract.19 However, relying on the reasoning and test set out in Bot Construction v Ontario (Minister of Transportation)20 and Air Canada v Toronto Port Authority,21 respectively, the Court reasoned that this matter could be brought within the purview of public law for the purposes of public review as it was sufficiently coloured with a public element, flavor, or character. One reason for this finding was that judicial review was necessary to clarify the status of the RFB in light of the decision by the Director being found unreasonable and in light of the consequential relief.22

Adopting a reasonableness standard of review, the Court found the issuance of the RFB, including the domestic production requirement, was unreasonable based on the Director’s decision being found unreasonable, to the extent that the domestic production requirement breaches the non-discrimination provisions of the CETA and not justified by the public safety exception.23 Thus, the appropriate relief according the Court was to quash the RFB.

Impact on municipalities and the considering the concurring decision

The majority decision of Nishikawa J (Wilton-Siegel J. concurring), to which D.L. Corbett J concurs, has a number of implications and consideration for municipalities in Ontario. The main implication is that all municipal procurement may be subject to the CETA. In determining that the issuance of the RFB, including the domestic production requirement, was unreasonable, one factor considered was the lack of consideration given to the CETA when issuing the RFB.24 Where there is no clear evidence that the CETA was considered, courts will likely proceed on the basis that the government entity had not considered the issue – boosting the allegation that such a procurement was unreasonable.25 In addition, any decision reached within the procurement process will likely need to conform to Canada’s international obligations to be considered reasonable.26 A well-reasoned decision with a chain of analysis that is both rational and logical leading to the conclusion, and which includes the correct application and analysis of any legal tests and reasoning is key to a finding of reasonableness.

However, D.L. Corbett J’s concurring opinion raises a potential issue of both jurisdiction and compliance with the CETA that the Court of Appeal may address. While he agreed with the majority’s decision regarding the reasonableness of the Director’s decision and the issuance of the RFB, he arrived at his decision by different reasoning. He found that the Court lacked jurisdiction to review the RFB but was only doing so because the decision-maker below did not have jurisdiction to hear the appeal and there were no other bodies with jurisdiction to review, thus the Rule of Law required that it be done.27 He argues that a judicial review would further breach the CETA and that the Court should not invoke its equitable jurisdiction to further breach Ontario’s obligations under the CETA. Instead, he argued that the Court should decline to review the Director’s decision substantively, quash the decision on jurisdictional grounds, and then review the RFB.28 In the majority’s decision, the Court acknowledged that a determination has not been made with respect to the lack of CETA-compliant bid dispute mechanism.29 Therefore, the Court of Appeal may possibly make a determination on this issue.

If the Court of Appeal determines that an internal bid dispute mechanism similar to the one in Thales, where the decision by the MTO was “appealed” to the Director, was sufficient to comply with the CETA, then municipalities in Ontario have recourse to implement such a system. However, should the Court of Appeal decide otherwise, municipalities would not functionally be able to comply with the CETA because municipalities are not a party under the definition of “Parties” and lack the appropriate power to establish such a mechanism.30 It is Parties that are responsible for implementing a dispute resolution mechanism at both the federal and provincial/territorial level under Chapter 19.31 D.L. Corbett J here is persuasive in arguing that “Ontario has failed to implement a CETA-compliant dispute resolution process. Ontario’s choice to resort to an internal bid dispute process to decide a claim under CETA was a breach of CETA.”32 The Respondent had conceded at trial that the Director’s decision did not comply with Article 19.17.4 of the CETA, which requires an “impartial administrative or judicial authority that is independent of its procuring entit[y]”33. However, unlike the Province of Ontario, who could rectify this deficiency by implementing an independent tribunal or body to hear such appeals through an enabling legislation, municipalities cannot do the same, as they constitutionally lack such power and, as a creature of statute, only hold power delegated to them by the province.34


Overall, while municipalities should be interested to see if the Court of Appeal agrees with the majority’s decision that the Director’s decision was unreasonable and thus should be quashed, municipalities should also pay particular attention to what the Court of Appeal may or may not say about the issue of a CETA-compliant bid dispute mechanism. Should the Court of Appeal follow the line of reasoning articulated by D.L. Corbett J, a municipality will not be able comply with its obligations under the CETA and could only mitigate its legal risks until such a CETA-compliant bid dispute mechanism is implemented by the Province of Ontario.

Disclaimer: This article was produced by the author in their individual capacity and does not reflect the opinion of Halton Region. It was originally published on the OBA Municipal Law Section’s articles page, on February 21, 2021.

Melanie Benedict is an articling student in the Legal Services, Legislative & Planning Services division at The Corporation of the Regional Municipality of Halton, Ontario. She obtained her Juris Doctor from the University of Manitoba.


1 Thales DIS Canada Inc v Ontario, 2022 ONSC 3166 [Thales].

2 Canada-European Union Comprehensive Economic and Trade Agreement, Canada and the European Union, 30 October 2016 (Not in force but provisional application of most of the agreement; received Royal Assent on 16 May 2017) [CETA].

3 Court of Appeal for Ontario, “Motions for Leave to Appeal – 2022”, online.

4 CETA, supra note 2.

5 Thales, supra note 1 at para 1 and 2.

6 Ibid para 2 and 19.

7 Judicial Review Procedure Act, RSO 1990, c J1 [JPRA]; Ibid para 74.

8 Thales, supra note 1 at para 3 and 20.

9 Ibid at para 76.

10 Ibid at para 80.

11 Ibid at para 91 and 132.

12 Brazil — Measures Affecting Imports of Retreaded Tyres (Complaint by the European Communities) (2007), WTO Doc. WT/DS332/AB/R (Appellate Body Report); Ibid, at para 46, 90, and 93.

13 Ibid at para 93.

14 Ibid.

15 Ibid at para 125.

16 JPRA, supra note 5.

17 Ibid at para 138.

18 Ibid at para 139 and 140.

19 Ibid para 141.

20 Bot Construction v Ontario (Minister of Transportation)(2009), 99 OR (3d) 104 (Div Ct) [Bot Construction].

21 Air Canada v Toronto Port Authority, 2011 FCA 347 [Air Canada].

22 Ibid at para 147.

23 Ibid at para 151.

24 Ibid at para 152.

25 Thales, supra note 2 at para 152.

26 Ibid at para 89.

27 Ibid at para 159.

28 Ibid at para 160.

29 Ibid at para 77.

30 CETA, supra note 2 at art 1.1.

31 CETA supra note 2 at ch 19.

32 Thales, supra note 1 at para 160.

33 Ibid at para 168.

34 Paul Emanuelli, “Treaty Myths and Compliance Strategies” (12 July 2017), online; Brenda C Swick, “Public procurement in Canada: overview” (1 June 2014), online; Thomas S Kuttner, “Administrative Tribunals in Canada” (6 February 2006), online.