Blog

Welcome to the Canadian American Bar Association’s newsletter. In this and future issues, we will highlight cross-border developments and CABA’s recent activities, as well priorities set by the CABA executive in consultation with members of its advisory board and its membership at large.

Cross-Border Legal Practice Amidst a Pandemic

COVID-19 is having an unprecedented impact on Canada-U.S. relations and on the nature and means of cross-border legal practice. From border restrictions to economic hardships and the challenges of remote work, the cross-border legal industry is among many disrupted by the Pandemic and continues to adjust to a new way of doing business.

1) The Border

Half a million people and roughly $2.7 billion CAD in goods and services ordinarily cross the Canada-U.S. border every day.

The land border between the two countries was closed to non-essential travel on March 21, 2020, and border restrictions have since been renewed on a monthly basis five times, most recently through September 21, 2020. Additional targeted health-related restrictions have further limited travel, including a Canadian requirement for a two-week isolation period for most travelers returning to Canada from international destinations, a U.S. freeze on certain immigrant visas and a U.S. restriction on entry to non-citizens or permanent residents who have recently been to certain countries, including China, the Schengen area, and the United Kingdom. Limitations on cross-border mobility are exerting a heavy toll on important business travelers, retail and tourism sectors, and on cross-border communities, families, and property owners.

Five months into the land border closure, cross-border stakeholders are urging public officials to develop science-driven criteria for safely easing border restrictions. On July 3^rd, members of various congressional districts along the U.S. Northern border petitioned top Canadian and U.S. officials to begin crafting a “comprehensive framework for phased reopening of the border based on objective metrics and accounting for the varied circumstances across border regions.” On July 20^th, the bi-national Future Borders Coalition encouraged the Acting Secretary of Homeland Security to convene “a Joint Task Force – composed of government officials, public health experts, and supported by an Advisory Committee of private sector leaders – to begin working on a set of risk-mitigating measures and health-related protocols with a view to establishing a balanced regulatory framework for the orderly, safe, and gradual easing of border restrictions.”

These advocacy efforts are expected to continue and grow as both countries begin transitioning to a more sustainable border-crossing regime. CABA is monitoring these developments closely.

2) The Cross-Border Economy

Following a sudden and severe contraction in March, the cross-border economy has begun its recovery. Cross-border mergers and acquisitions are growing in volume and more frequently involve insolvency and restructuring components. Trade corridors are reporting that freight traffic is approaching pre-Pandemic levels as manufacturers restart operations consistent with health guidelines.

The hardest hit businesses remain those, like the hospitality industry, that rely on cross-border visitors and spending. The multi-billion-dollar tourism industry remains much diminished on both sides of the border.

The Pandemic has also presented certain regions with economic opportunity. For example, some cross-border communities are positioning themselves as regional platforms for reshoring supply chains for protective equipment and medical supplies that will serve both countries in the post-Pandemic economy. In May, the Washington-based Canadian American Business Council launched an online campaign aimed at “a common cross-border manufacturing response as we tackle the COVID-19 public health crisis and help our shared economies to rebuild and recover.”

3) Cross-Border Legal Practice

Cross-border legal practitioners are adjusting to this new business environment. Among other things, corporate deal-making now involves an intense legal focus on the distribution of risks related to health emergencies and direct governmental intervention in the economy. Rapid regulatory developments have proliferated, insurance disputes abound, and arbitration is becoming increasingly attractive as litigants seek to avoid in-person interaction and mitigate the impact of any future court closures. With business travel at a standstill and in-person interactions limited, cross-border lawyers are having to find new ways of developing business.

Here is some of what lawyers on both sides of the border are saying about cross-border legal practice in a Pandemic:

• “From a cross-border disputes point of view, the pandemic has accelerated and expanded some practices that were already underway. We are now seeing more virtual meetings, case conferences and discoveries, of course, but also more virtual contested motions, trials, arbitrations and appeals. This has permitted some international cases to advance more quickly and cost-effectively, particularly where parties, experts and witnesses are all over the globe.” (Bradley E. Berg, Litigation & Arbitration Partner, Blakes (Toronto)).

• “At BLG, we saw a number of deals stall at the beginning of the pandemic. While some of those transactions did not restart because of questions of valuation or otherwise, many deals have proceeded and new transactions are on the rise. As expected, we are now seeing an increase in cross-border transactions with an insolvency or restructuring component. There has also been a marked increase in cross-border tech deals, many of which are proceeding as auctions. We’ve seen a lot of creative drafting of MAE clauses and tailoring of reps and interim period covenants due to COVID, which has been interesting as deal professionals adapt to the new normal.” (Neil E. Hazan, Corporate Partner, BLG (Montreal)).

• “Not surprisingly, the global reach of the COVID-19 pandemic appears to have had a parallel impact on both sides of the border. The slowdown (and, in some industries, screeching halt) of the economy has left U.S. and Canadian businesses and deal makers similarly impacted; first and foremost by having to deal with the resulting uncertainty which has not only affected revenues but also the availability of financing to weather the storm or pursue opportunities that have resulted from the dislocation. As the situation unfolded, many market participants have adjusted to the reality and are returning to a new normal while others have had to restructure, with industries like oil & gas, hospitality and travel being among the most affected.” (Ariel J. Deckelbaum, Mergers & Acquisitions Partner, Paul Weiss (New York)).

• “Since the start of the pandemic, cross-border clients, particularly in the consumer product area, are increasingly relying on online marketing, branding and sales tools in order to be able to push out new advertising content and to address, not only health and safety concerns, but also social justice issues that have come to the forefront. Cross-border clients are also pivoting towards increased e-commerce traffic. For some clients, this has expanded or shifted the consumer base and/or consumer purchasing habits for their products and brought to the forefront certain legal, regulatory and contract issues, such as development of new product lines designed to better fit the ‘new normal,’ advertising disclosures,  privacy compliance and online sales terms, that may not have otherwise have been a focus.” (Sarah M. Robertson, Intellectual Property Partner, Dorsey & Whitney (New York, Toronto)).

• “The developments on both sides of the Canada-U.S. border in the field of immigration have been so numerous and regular that it is difficult to keep up with them. Confusion over what policy rules where is part of this new normal. Clients call asking about what should be routine entry to the U.S. Canada regarding business or tourism but the answers are not routine. Borders are closed. Consulates are not operating. People sometimes cannot join their loved ones on the other side of the border and are stuck in limbo. Practicing immigration law related to cross border travel is more complicated than ever.” (Andy Semotiuk, U.S. and Canadian Immigration Attorney, Pace Law Firm (Toronto)).

• “We are finding the cross-border travel restrictions are interfering with our practice. Both in staying in touch with existing clients and colleagues, and in making new connections, Zoom and email are not good substitutes for face-to-face interactions. The whole virtual environment feels artificial, and requires a different approach that is still being developed. It is too easy to miss non-verbal cues on a screen, and the informality that surrounds a normal meeting (standing in the hall, sharing a coffee or a drink together) is completely absent.” (Mark R. High, Member, Dickinson Wright and President of the Canada-U.S. Businesses Association (Detroit)).

CABA is making available links to additional cross-border resources relating to the Pandemic here.

Supreme Court of Canada Rules on Transnational Arbitration  in the Context of the Gig Economy

Even prior to the Pandemic, arbitration was a vital underpinning of international commerce. As we observe elsewhere in this Newsletter, this is likely to continue and accelerate in the current public health environment. As such, arbitration policy is a topic of growing interest to cross-border practitioners.

In Uber Technologies Inc. v. Heller, 2020 SCC 16, the Supreme Court of Canada addressed the viability of arbitration involving international parties in the context of the gig economy. The case involves a class proceeding by Uber’s Ontario-based drivers against the company’s Canadian, United States, and Dutch entities for their alleged violation of provincial employment standards legislation. The trial judge initially stayed the court proceedings on Uber’s motion on the basis of an arbitration clause in the company’s services agreement purporting to refer the dispute to mediation and arbitration proceedings seated in the Netherlands. The trial judge also ruled that the drivers’ challenge to the validity of clause would be determined by the arbitrator rather than a court.

The majority of the Supreme Court of Canada (8-1) upheld the Ontario Court of Appeal’s reversal of the trial judge’s order.

It held that where the claimants’ costs of initiating arbitration present a reasonable prospect that the matter will not be brought before the arbitrator, it is for the court to resolve all challenges to an arbitration clause’s validity. Finding that this principle applied to the case at hand, the Court examined Uber’s arbitration clause and found that it was the product of unequal bargaining power, represented an improvident bargain, and was therefore invalid. The Supreme Court’s ruling opens the way for Ontario’s Uber drivers to continue their suit against Uber in Ontario Superior Court. The Court’s reasons can be consulted here.

CABA participated in the appeal before the Supreme Court as an intervener with an international perspective. Without taking a position on the merits, CABA made written and oral submissions emphasizing the need for arbitration to continue serving the expectations of international parties while respecting domestic public policy objectives. CABA emphasized the need for courts to articulate predictable rules regarding when they will decide the validity of an arbitration clause, or else refer that determination to the arbitrator, and canvassed how other leading jurisdictions have crafted arbitration policy in the employment context.

United States-Mexico-Canada Agreement Coming into Effect

On Canada Day (July 1) of this year, in the midst of the ongoing Pandemic and related threats to cross-border trade flows described elsewhere in this Newsletter, supporters of international trade on both side of the border celebrated the entry-into-force of the United States-Mexico-Canada Agreement, alternatively referred to by some as the new North American Free Trade Agreement.

The result of extensive negotiations over the past three and a half years culminating in an agreement on September 30, 2019, the USMCA preserves the important benefits of NAFTA, including tariff-free access for most goods, vital automobile supply chains and the cross-border mobility of numerous professions, while strengthening provisions dealing with labor, environmental and intellectual property considerations, among others.

CABA previously distributed a bulletin at the time the parties reached agreement over the USMCA.  Over the course of the USMCA negotiations, CABA also advocated for the preservation of certain features of NAFTA, including in particular the cross-border mobility of legal professionals.

The coming into effect of new national security-based U.S. tariffs on Canadian aluminum on August 16, 2020, a measure also taken during the course of the USMCA negotiations and on which CABA also provided submissions, demonstrates that cross-border trade negotiations will continue to preoccupy cross-border trade practitioners for the foreseeable future.

CABA White Paper on the Extraterritorial Transmission of  Citizenship

Following on from its successful work in advocating for the recognition of expatriate voting rights before the Supreme Court of Canada, CABA is pleased to announce that it is in the process of collaborating on an exhaustive comparative report on the rules for citizenship transmission to children of Canadian citizens born abroad.

In 2009, the Canadian Parliament limited the transmission of citizenship by descent in such circumstances to one generation born abroad.  Known as the “first generation limitation,” this legislation barred the eligibility of second and third generation children for citizenship in a manner that is unusually definitive, when viewed against the policies of peer countries.

The pending white paper is expected to track the evolution of citizenship transmission rules in Canada, compare the Canadian approach to that of the United States and a select group of other countries, and to outline the costs and benefits of each country’s approach, within the broader ambit of the meaning of citizenship in an interconnected world.

The project is being led by respected University of Ottawa, Faculty of Law, professor Michael Pal, an expert on democracy, comparative constitutional law, and election law. CABA anticipates making the report publicly available by 2021.

If you are interested in lending support to this project, please visit our portal or contact president@canambar.com.

Thank you for your interest in CABA.

The CABA Executive

CABA is a proud supporting organization of CanArbWeek (Sept. 21-25).