Tempering R v Comeau : A Primer on the International Trade Debate (Part 2)

Comeau

This is the second of a two-part post outlining the constitutional issues in R v Gerard Comeau, an interprovincial trade case to be heard by the Supreme Court of Canada on 6 – 7 December 2017. In anticipation of the hearing, the posts offer a brief overview and analysis of the constitutional issues likely to be raised. Part I introduces the main constitutional issue – whether s 134(b) of the New Brunswick Liquor Control Act violates section 121 of the Constitution Act, 1867, which ostensibly prohibits the creation of trade barriers at provincial borders -and discusses the question in the context of the Court’s current preference for “flexible” federalism. Part II reviews the applicable case law and outlines the Court’s historical policy interests in arbitrating economic division of powers disputes. It also discusses the statutory interpretation issues likely to be raised at the hearing. The lower court ruling may be found here.

Analysis of Case Law: Balancing Fair National Competition with Provincial Autonomy

In the constitutional jurisprudence on division of powers questions relating to interprovincial trade, the frequency of jurisdictional overlap has prompted the SCC to develop a measured judicial response. In 2011, the Court articulated that “flexible federalism” is the preferred method of constitutional interpretation in Canada today (Reference Re Securities Act, [2011] 3 SCR 837, para 58 [Securities Reference]). Flexible or “cooperative” federalism is a framework of federal relations that acknowledges and accepts a considerable degree of overlap and interplay between the jurisdictions of the federal and provincial government (Canadian Western Bank v Alberta, [2007] 2 SCR 3, para 24 [CWB]). According to the Court in the Securities Reference, this approach is preferable because it gives substance to the balanced relationship sought between the two levels of government by the Constitution Act, 1867, in which each level of government is “coordinate but autonomous within their respective spheres of jurisdiction” (Reference re Secession of Quebec, [1998] 2 SCR 217, para 54 [Secession Reference]). The Court wrote that to achieve the fundamental goals of federalism, including “[reconciling] unity with diversity, [promoting] democratic participation by reserving meaningful powers to the local or regional level and … [fostering] cooperation among governments,” an even-handed judicial approach is required to adequately manage questions of overlapping jurisdiction, and a considerable degree of overlap and interplay between the levels of government is to be expected and tolerated (CWB, para 24).

It follows from the Court’s support for the framework of flexible federalism that in Comeau, the Court will likely seek to maintain a robust balance between provincial jurisdiction over property and civil rights (and its expression in statutes such as trade restrictions at provincial borders) and the federal trade and commerce power. The rulings in CWB and General Motors v City National Leasing ([1989] 1 SCR 641 [GM]) demonstrate the Court’s tendency to arbitrate economic division of powers disputes by seeking to preserve this balance. As such, their logic is instructive for envisioning the Court’s eventual response to Comeau, and warrants a brief overview. CWB and GM are also relevant because they demonstrate the Court’s policy interests in economic division of powers questions: balancing between empowering the federal government to regulate the national economy to ensure fairness of competition, and maintaining provincial power over local economic interests.

In GM, the Court emphasized the importance of retaining federal control over the regulation of economic competition, and articulated a preference for an integrated scheme of interprovincial trade overseen by Parliament (pg. 680 – 683). By contrast, in CWB, the Court chose to intentionally protect provincial economic regulatory authority by refusing a federal challenge to provincial regulation of insurance products. In CWB, a provision of the Alberta Insurance Act regulating the sale of insurance products by federally incorporated banks survived a constitutional challenge when it was held to exist independently of the federal jurisdiction over banking. The appellant federal banks had brought a constitutional challenge under the interjurisdictional immunity doctrine, arguing that in attempting to regulate insurance sales, the Insurance Act impeded a matter at the core of the federal banking power and should be rendered null and void (CWB, para 36). In CWB the Court confined the application of the interjurisdictional immunity doctrine to precedent on the grounds that it was not favoured by the dominant tide of constitutional interpretation, which, reflecting the tenets of cooperative federalism, found that courts should not privilege the ordinary operation of federal statutes over provincial ones. Although ostensibly reciprocal on its face, the interjurisdictional immunity doctrine operated in practice to asymmetrically invoke “federal immunity at the expense of provincial legislation” (CWB, para 35). To the extent that it skewed constitutional challenges in favour of federal jurisdiction, “the sweeping immunity argued for by the banks” was found “[un]acceptable in the Canadian federal structure” (CWB, para 35).

CWM and GM are illustrative of the Court’s approach to division of powers disputes around economic regulation, and may foreshadow the Court’s response to Comeau. Both cases articulate how the SCC has increasingly sought to interpret division of powers questions in line with the dominant tide of cooperative federalism. Further, they articulate the Court’s strong normative interest in maintaining a balance between the federal prerogative to regulate the national economy to ensure fairness of competition, and protecting provincial economic autonomy. After the hearing, the Supreme Court will be obliged to determine whether Justice LeBlanc’s reasons in Comeau coalesce with or contradict the Court’s preferred method for handling economic jurisdictional challenges.  It is possible that given the centrifugal orientation of Justice LeBlanc’s reading, the Court will find that the Justice’s interpretation offends the current method of arbitrating division of powers disputes in the spirit of flexible federalism. However, the defence will invariably reference the SCC case law that suggests an economic union, or a single national economy, is part of the federation’s design. In Morguard ([1990], 3 SCR 1007), for example, the Court referred to “the obvious intention of the Constitution to create a single country,” referencing sections 91(2), section 121, and section 6 of the Charter. This line of case law lends credence to the Comeau defence’s argument that section 121 was always intended to create economic unity across the provinces, and only through legislative misreading has the opposite occurred.

Constitutional Interpretation Issues

The Comeau hearing is undeniably part of the SCC’s “barn burner” fall session this year because the Court will elaborate anew on the historically contentious question of what constitutes an appropriate balance between provincial and federal economic regulatory authority. In doing so, the Court will likely consider multiple competing factors, including the wording and historical intention of the constitutional text, and the development of constitutional interpretive strategies from past to present day. In Comeau, the proper reading of section 121 will likely be a potent aspect of the decision, as the way the provision is read, narrowly or broadly, will be critical in determining the legitimacy of both the Liquor Control Act and other provincial laws that seek to regulate or restrict the movement of products across provincial borders.

If read broadly, the language of section 121 (“All Articles of the Growth, Produce, or Manufacture of any one of the Provinces, from and after the Union, be admitted free into each of the other Provinces”) seems to imply a robust prohibition on any form of interprovincial trade barrier, whether tariff or non-tariff. This was the reading upheld by the lower court ruling. By contrast, if read narrowly, section 121 would prohibit only the imposition of tariff barriers at provincial borders. This is the reading historically upheld in section 121 jurisprudence. In particular, the decision in Gold Seal v Alberta ([1921] 62 SCR 424 [Gold Seal]) established that the “real object of the clause” was to prohibit the establishment of customs duties between provinces (Comeau, para 107). In doing so, Gold Seal “rang the death knell” over the supposed constitutionally protected right to interprovincial free trade (Gold Seal, pg. 456). However, in the New Brunswick Provincial Court, Justice LeBlanc relied on an originalist interpretive strategy to read section 121 expansively, based on new historical evidence presented by the defence. This evidence from the constitutional drafting process supported the inference that the framers intended to implement interprovincial free trade (Comeau, paras 178-87). In Justice LeBlanc’s view, the evidence was compelling enough to “fundamentally shifted the parameters of debate” around the scope of section 121, liberating him from the obligation of vertical stare decisis and allowing him to overturn the Gold Seal precedent (Comeau, para 125).

Part of the constitutional interpretation issue the Court will be pressed to address is whether Justice LeBlanc’s expansive reading of section 121 is consistent with the modern approach to constitutional interpretation set out in Rizzo & Rizzo Shoes ([1998] 1 SCR 27 [Rizzo]). In Rizzo, Justice Iacobucci set out a composite strategy for statutory interpretation: readings cannot be founded on the wording on the legislation alone, but must take into account the words of the act “in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament” (Rizzo, para 21). Rizzo marked the first articulation of the purposive approach to statutory interpretation which is now the norm.

At issue in the Comeau ruling is the question of whether Justice LeBlanc’s broad reading of section 121 pays due diligence to the “entire context” of the provision as part of the Constitution Act, 1867, as required by Rizzo. While Justice LeBlanc’s originalist reading of the provision has been commended for its fealty to legislative intent (see e.g. Malcolm Lavoie) it may also be read as overemphasizing Parliament’s intention at the expense of the other factors in the purposive approach, such as the overall “scheme of the Act.” As it stands, the broad thrust of Justice LeBlanc’s reading has the effect of a general and undefined narrowing of multiple heads of provincial jurisdiction, most notably section 92(13). Meanwhile, the maintenance of two “coordinate and autonomous” levels of government is key to fulfilling the federalist arrangement that structures the Constitution (Secession Reference, para 54). The Court has intentionally given effect to this understanding of the federation’s design through relying on the principles of flexible or co-operative federalism when arbitrating division of powers disputes. In the Comeau hearing, the Crown may argue that the purposive approach to statutory interpretation does not lend itself to a reading of the Constitution Act, 1867 such as Justice LeBlanc’s, which significantly bolstered one legislature’s regulatory authority at the expense of the other level of government. On the other hand, the Comeau defence may lean on their new evidence of legislative intent and argue that Justice LeBlanc’s ruling gives effect to the constitutional text by implementing a single national economy. They will likely find support for this proposition in SCC case law such as Morguard [1990], 3 SCR 1007), where the Court recognized “the obvious intention of the Constitution to create a single country,” referencing sections 91(2), section 121 and section 6 of the Charter (pg. 1079).

Conclusion

Ultimately, the framework of the Canadian constitution privileges a nuanced and good-faith approach to balancing federal and provincial economic interests. After hearing the Comeau arguments on 6 – 7 December 2017, the Court will undoubtedly have to decide whether Justice LeBlanc’s ruling jars or coalesces with this organizational principle. It is reasonable to predict that if the Court disagrees with Justice LeBlanc, they will similarly not suggest that a protectionist approach to provincial industry is the proper resolution to the question of section 121, as the Comeau defence presented compelling evidence that an open borders policy is the preference of Parliament. However, this preference must be counterbalanced against the needs of the province to ensure the survival of their local industries and revenue sources. When it considers the Comeau ruling, the Court will have the opportunity to decide whether Justice LeBlanc’s originalist interpretation of section 121 is an advancement or a retraction from the current practices of Canadian federalism.

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