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Highways - Ministry of Transportation (MOT). Thales DIS Canada Inc. v. Ontario (Transportation)
In Thales DIS Canada Inc. v. Ontario (Transportation) (Ont CA, 2023) the Court of Appeal considered the Canada-European Union Comprehensive Economic and Trade Agreement (CETA), here in the course of a successful Crown appeal of a JR finding that the bidding requirements were in violation of CETA.
In these quotes the court illustrates aspects of the functioning of Ontario’s Ministry of Transportation's (MTO) 'Fraud Prevention and Business Integrity Office', apparently an internal security branch:[45] MTO took the position that the Canadian production requirement did not breach the CETA, because it was permitted by the “public morals, order or safety” exception in Article 19.3. MTO submitted that this requirement was meant to reduce the risk of identity theft and fraud. In support of this position, MTO relied on a note (the “Fraud Note”) prepared by its Fraud Prevention and Business Integrity Office (“the Fraud Office”).
[46] The Fraud Note was attached to MTO’s response. The Fraud Note stated that the Fraud Office “works closely with … enforcement agencies in Ontario, Canada and throughout the world, as well as stakeholders including other provincial and national governments to ensure the integrity” of driver’s licences and other identification cards. The Fraud Note also stated that “incidents of theft and fraud are often deliberately under-reported or not reported for security reasons.” The Fraud Note explained that card stock is printed to “contain overt, covert and forensic level security features”, and that, once printed, the card is cut into individual blank cards with a unique stock number printed on each card. The Fraud Note then explained that “[b]ecause the manufacture of card stock is a complex, technical process and personalization is comparatively easier to forge, card stock has a high value to criminals and fraudsters.”
[47] The Fraud Note went on to describe two areas of risk if card stock were to be produced offshore outside of Canada. First, if card stock is produced outside of Canada, MTO would not have the same level of control it would have in supervising the security of the manufacturing process in Canada. Second, the transportation of card stock from offshore to Canada would increase the number of handovers and the opportunities for theft. The Fraud Note elaborated on each area of risk.
[48] The Fraud Note also mentioned that the American Association of Motor Vehicle Administrators (“AAMVA”) recommended in its “‘DL/ID Card Design Standard’ to centralize production and personalization wherever possible” (emphasis added).
[49] In its response, besides relying on the Fraud Note, MTO identified a two-step material necessity analysis which it said should be applied to determine whether the domestic production measure fell within the scope of the public morals, order or safety exception. First, the policy rationale must be materially connected to the protection of public morals, order or safety. Second, the domestic production requirement must be necessary in order to protect public morals, order or safety.
[50] MTO went on to apply this two-step analysis to the domestic production requirement for card stock. Relying on the Fraud Note, MTO stated that the measure is “clearly connected to protecting ‘public morals, order or safety’ of Ontario residents, as the measure is intended to, and will, mitigate the risk of danger or injury related to loss, theft or compromise from offshoring card stock production”. MTO next addressed the issue of necessity. In doing so, MTO relied on the WTO decision in Brazil – Measures Affecting Imports of Retreaded Tyres (2007), WTO Doc. WT/DS332/AB/R (Appellate Body Report), at para. 210, to argue that any alternative measure would have to preserve the Ontario government’s desired level of protection with respect to its objective of protecting against fraud and identity theft. MTO submitted that no alternatives would provide the level of protection it sought.
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