Washington Times | December 19, 2001 | By Carter Dougherty
A Canadian company involved in Northern Virginia's Mixing Bowl road-construction project is suing the federal government under NAFTA on the grounds that laws channeling money to U.S.-based companies violate the 1994 agreement.
ADF Group, a steel-fabrication company near Montreal, is charging that restrictions its U.S. subsidiary faced during its work on the Springfield interchange project ran afoul of rules in the North American Free Trade Agreement that require equal treatment for Canadian companies. It is claiming $90 million in damages.
At issue are long-standing "Buy America" laws aimed at ensuring that federal procurement contracts, including those for highway construction, benefit American companies.
The State Department, which is defending the United States against the charges, said in a Nov. 29 submission to the international tribunal hearing the case that the lawsuit is "without merit" and "should be dismissed in [its] entirety."
The legal challenge is being brought under a NAFTA procedure that allows companies to seek monetary damages from governments.
The United States has become a target of suits like the one ADF is bringing since NAFTA was completed in 1994, although the process exists in other treaties. Decisions, which can take years, are handed down by tribunals and cannot be appealed.
Industry groups have long defended the system as an important protection for foreign investors who contribute to a country's economic well-being. But Stephen Canner, vice president for investment financial services at the Washington-based U.S. Council for International Business, conceded that cases like the one involving ADF are generating enormous controversy.
"It's political dynamite," Mr. Canner said. "We've wrapped ourselves in the flag with these 'Buy America' laws."
A wide array of critics -- ranging from conservative lawmakers worried about an erosion of American sovereignty to liberals who fear changes to environmental regulations -- have repeatedly warned about the NAFTA process. Now, those critics see a serious threat to laws aimed at keeping federal dollars in the United States.
"If this case goes forward, it puts a nail in the coffin of another NAFTA lie: that [Buy America] laws are exempt," said Mary Bottari, an analyst with Public Citizen, an anti-NAFTA activist group founded by Ralph Nader.
The ADF case has raised eyebrows among people who follow NAFTA dispute cases because many members of Congress assumed when they voted for the agreement in 1994 that it does not affect Buy America laws.
But Charles Roh, a former negotiator with the Office of the U.S. Trade Representative, said that government agencies that are listed in the NAFTA text cannot discriminate against Canadian and Mexican companies.
"For the agencies that are covered, the Buy American rules really don't apply," Mr. Roh said.
The Virginia case originated in 1999, when ADF's American subsidiary became a subcontractor in the massive eight-year project to upgrade the Mixing Bowl in Springfield, where the Capital Beltway intersects two other interstates and a major state highway.
The Virginia Department of Transportation awarded a major contract to Shirley Contracting Corp. of Lorton. Shirley gave a portion of the business to the U.S. subsidiary of the Canadian company.
Pierre Paschini, ADF's president and chief operating officer, refused to discuss the case when reached by telephone. Shirley also declined to speak about it.
The value of ADF's subcontract with Shirley amounted to $14.3 million, but the Canadian company is claiming damages of $90 million. That sum represents 15 percent of the estimated $589.5 million price tag for the Mixing Bowl project.
ADF specializes in the design and fabrication of enormous structural-steel pieces, such as those used to support a highway overpass. Its contract with Shirley included requirements, mandated by federal Buy America laws, that the steel be finished in the United States.
Since the U.S. government is financing the Springfield project, its contractors have to follow federal guidelines, even though Virginia administers the money.
To complete its work for the Springfield project, which would mostly be done at its plant in Florida, ADF wanted to perform work on American-made steel at its Canadian plant. When Virginia authorities learned of the plan, they wrote ADF to tell them it would run afoul of Buy American rules.
After several months of communication between the federal and state governments, ADF relented and contracted with several U.S. companies, thus avoiding any work at its Canadian facility.
In July 2000, ADF filed a notice that it would sue, arguing that NAFTA prohibits governments from denying procurement dollars to Canadian companies. The case has been bogged down in procedural disputes since then, and only entered its substantive phase late last month, when the U.S. government filed its first brief.Washington Times:
