Canada High Court OK of Contract 'Reprisal Clauses' Upsets Industry
A Canada Supreme Court decision last month to uphold government agency use of “reprisal clauses” to blacklist contractors involved in project legal disputes has several construction sector groups pushing back.
Canadian contractors are blasting the court’s Dec. 12 decision in favor of local officials in British Columbia who barred an excavation firm from bidding on new work for two years because of a dispute over payment on a sewer project.
Industry groups are scrambling to find ways to mitigate the potentially devastating impact of the ruling, which they fear could encourage other cities and provinces to adopt similar restrictions.
The Canadian Construction Association says it will push for federal legislation to prohibit reprisal clauses from being used in contracts for projects that receive some amount of federal funding, said its president Mary Van Buren, who notes the Liberal government's stated commitment to spend more than $137 billion on infrastructure projects over 12 years,
She says the group will meet with federal officials to air its concerns.
“Our members are incredulous,” Van Buren said, claiming the ruling could have a devastating impact on smaller contractors that do lots of work on public works projects. “You can imagine if you are a contractor who relies heavily on this kind of business that would put you in a very precarious position,” she said.
The Supreme Court ruling dismissed an appeal by J. Cote & Son Excavating Ltd. after a British Columbia court last June upheld government use of reprisal clauses in bidding documents by government agencies, which bar companies from competing for work on a project if they are or have been involved in legal disputes with agencies.
In the case in question, the court upheld a decision by officials in Burnaby, B.C. to include a reprisal ban in documents that included the two-year bid ban for companies involved in disputes with the city.
The dispute hit the courts after J. Cote & Son challenged the ban after it was barred from bidding on new public works projects in Burnaby after a dispute over a sewer project payment.
CCA has been involved in the case as it has wound its way through the court system, helping the contractor with legal costs, Van Buren said.
The National Trade Contractors Council of Canada said it is now also is exploring ways to mitigate the impact.
“The decision effectively ... forces consultants and contractors who may have a dispute with the city to choose between pursuing their legal options or bidding on city contracts for the coming years,” said Sandra Skivsky, council chair.