Investor's Memorial
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REDACTED PUBLIC VERSION IN THE MATTER OF AN ARBITRATION UNDER CHAPTER ELEVEN OF THE NORTH AMERICAN FREE TRADE AGREEMENT AND THE UNCITRAL ARBITRATION RULES BETWEEN: UNITED PARCEL SERVICE OF AMERICA, INC. Investor AND THE GOVERNMENT OF CANADA Party INVESTOR’S MEMORIAL (MERITS PHASE) Appleton & Associates International Lawyers 77 Bloor Street West, Suite 1800 Toronto, Ontario M5S 1M2 Tel: (416) 966-8800 Fax: (416) 966-8801 RESTRICTED ACCESSi UPS Memorial DISSEMINATION PROHIBITED (Merits Phase) Table of Contents PART ONE: OVERVIEW ............................................... Page -1- PART TWO: STATEMENT OF FACTS .................................. Page -12- Chapter I. THE PARTIES ............................................ Page -14- A. The Investor: UPS.......................................... Page -14- 1. Overview of UPS’ Global Business....................... Page -14- 2. Corporate Organization................................ Page -15- B. The Investments: UPS Canada and Fritz Starber................... Page -16- 1. Business Operations of UPS Canada...................... Page -16- 2. Fritz Starber......................................... Page -17- C. Canada Post Corporation..................................... Page -18- 1. Organization and Mandate.............................. Page -18- 2. Special Powers and Privileges........................... Page -20- a. Exclusive Privilege ............................. Page -21- b. Other Special Powers and Privileges................ Page -21- 3. Judicial Consideration of Canada Post’s Powers ............ Page -23- a. Canadian Daily Newspaper Assn. v. Canada Post Corp. ............................................. Page -24- b. Canadian Union of Postal Workers v. Canada Post..... Page -25- c. Re City of Nepean and Canada Post Corp. ........... Page -26- d. Rural Dignity of Canada v. Canada Post Corp ........ Page -27- 4. The Universal Service Obligation (“USO”) ................ Page -27- a. The Universal Postal Union....................... Page -28- b. Canada’s Failure to Provide a Definition of the USO . Page -29- 5. History of Canada Post ................................ Page -31- 6. Business Operations................................... Page -32- 7. Purolator Courier Ltd. ................................. Page -35- Chapter II. CANADA POST’S COMPETITION WITH UPS CANADA ...... Page -37- A. The Canadian Courier Market................................. Page -37- B. Economic Analysis of Competitive Services ...................... Page -39- C. Canada Post Services Which Compete Against UPS Canada......... Page -40- 1. Domestic Courier Services ............................. Page -40- 2. Courier Services to and from the United States.............. Page -41- 3. Courier Services to Other Countries ...................... Page -42- 4. Service Features ..................................... Page -44- 5. Documents Produced by the Parties ...................... Page -44- RESTRICTED ACCESSii UPS Memorial DISSEMINATION PROHIBITED (Merits Phase) Chapter III. CANADA POST’S DISCRIMINATORY USE OF ITS MONOPOLY INFRASTRUCTURE ...................................... Page -46- A. Canada Post’s Monopoly Infrastructure ......................... Page -47- B. Canada Post’s Courier Services’ Use of Canada Post’s Monopoly Infrastructure ......................................................... Page -49- 1. Collection .......................................... Page -51- a. Mail Boxes.................................... Page -51- b. Post Offices and Retail Outlets .................... Page -52- c. Stamps and Meters.............................. Page -54- 2. Processing .......................................... Page -54- 3. Transportation ....................................... Page -55- 4. Delivery............................................ Page -58- 5. Management, Administration and Marketing ............... Page -61- 6. Monopoly Services Revenue ............................ Page -62- C. Canada Post’s Courier Services Do Not Appropriately Pay to Use the Monopoly Infrastructure.............................................. Page -63- 1. Canada Post’s Courier Services Have Failed to Pay The Market Price of Access to the Monopoly Infrastructure .................... Page -65- 2. Canada Post’s Courier Services Have Not Paid The Incremental Cost of Using the Monopoly Infrastructure ....................... Page -67- D. Canada Post’s Aggressive Pricing Strategy....................... Page -69- E. Conclusion................................................ Page -71- Chapter IV. LACK OF REGULATORY SUPERVISION OF CANADA POST ......................................................... Page -73- A. Early Reviews of Canada Post’s Conduct ........................ Page -74- 1. Initial Failure to Establish A Regulator ................... Page -74- 2. Postal Services Review Committee ....................... Page -75- B. The Canada Post Mandate Review ............................. Page -79- C. Canada’s Decision to Ignore Its Own Mandate Review ............. Page -84- 1. The Minister’s Response ............................... Page -84- 2. Inappropriate Reliance on Canada Post to Police Itself........ Page -88- D. Inadequacies of General Framework Legislation .................. Page -89- 1. The Financial Administration Act ........................ Page -90- 2. Limits of The Competition Act .......................... Page -91- Chapter V. CANADA CUSTOMS’ PREFERENTIAL TREATMENT OF CANADA POST .................................................... Page -95- A. Customs Laws and Procedures ................................ Page -95- 1. Canada Customs...................................... Page -95- 2. Postal and Courier Streams ............................. Page -96- B. The Postal Imports Agreement ................................ Page -98- 1. Canada Customs Charges Cost Recovery Fees to UPS Canada, but Exempts Canada Post ............................... Page -100- 2. Canada Customs Charges UPS Canada for Computer Linkage Systems, but not Canada Post.................................. Page -102- RESTRICTED ACCESSiii UPS Memorial DISSEMINATION PROHIBITED (Merits Phase) 3. Canada Customs Provides Canada Post Customers with Valuable Brokerage Services Without Charge ..................... Page -104- 4. Canada Customs Improperly Delegates Important Duties to Canada Post Employees......................................... Page -105- 5. Canada Customs Pays Canada Post for “Services” that UPS Canada Must Supply for Free ..................................... Page -107- C. Canada’s Exemption of Canada Post From Other Customs Obligations ........................................................ Page -111- 1. Canada Customs Allows Canada Post Far More Time to Remit Duties and Taxes ............................................. Page -111- 2. Canada Customs Fails to Levy Fines, Penalties and Interest Against Canada Post........................................ Page -112- 3. Canada Post is Exempted from Posting Bonds ............ Page -113- 4. The $5.00 Fee Collected by Canada Post is Exempt from Canada’s Goods and Services Tax .................................... Page -114- D. Canada Post Fails to Collect Duties and Taxes .................. Page -115- E. Harm ................................................... Page -118- Chapter VI. CANADA'S EXEMPTION OF CANADA POST FROM LABOUR LAWS ........................................................ Page -119- A. Rural Route Contractors .................................... Page -119- B. Pensions................................................. Page -120- Chapter VII. PUBLICATIONS ASSISTANCE PROGRAM RESTRICTIONS ........................................................ Page -122- Chapter VIII. THE FRITZ STARBER BID .............................. Page -125- PART THREE: LEGAL ARGUMENT ................................... Page -127- Chapter I. OVERVIEW OF THE LEGAL ARGUMENT ................. Page -127- Chapter II. GOVERNING LAW, INTERPRETATION AND BURDEN OF PROOF ........................................................ Page -131- A. Relevant Provisions in NAFTA............................... Page -131- B. Principles to be Followed in Interpreting the NAFTA ............. Page -135- 1. The Vienna Convention ............................... Page -135- 2. Approach Taken by Prior NAFTA Tribunals .............. Page -135- 3. The Cumulative Principle ............................. Page -137- C. The Tribunal’s Power to Draw Adverse Inferences ............... Page -138- D. The Burden of Proof ....................................... Page -141- Chapter III. STATE RESPONSIBILITY ................................ Page -144- A. The Threshold for State Responsibility is Inconsistency ........... Page