Tempering R v Comeau : A Primer on the Interprovincial Trade Debate (Part 1)

Comeau

This is the first 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. Part II also discusses the statutory interpretation issues likely to be raised at the hearing.

Introduction

In October 2012, Gerard Comeau bought fifteen fateful cases of beer from Wysote’s Convenience Store in Pointe-a-la-Croix, Quebec. Upon crossing the provincial border en route to his residence in Tracadie, New Brunswick, Mr. Comeau was stopped and charged with violating section 134(b) of the New Brunswick Liquor Control Act, prohibiting the possession of liquor not purchased from the provincial liquor corporation (R v Comeau, 2016 NBPC 3 at para 1 [Comeau]). While section 134(b) does not explicitly prohibit the movement of liquor products across provincial borders (it prohibits possession of alcohol exceeding a certain limit within the province not purchased from the provincial liquor corporation), it is recognized in the judgment that the provision only comes into play when alcohol products move across provincial lines (Comeau, para 27). It is further acknowledged that the provision has the effect of acting as an indirect, non-tariff trade barrier (Comeau, para 27). In his defence, Mr. Comeau brought a constitutional challenge against the provision on the grounds that it violated section 121 of the Constitution Act, 1867 (The Constitution Act, 1867 (UK), 30 & 31 Vict, c 3, s 91.2, reprinted in RSC 1985, Appendix II, No 5. At s 121 [Constitution Act, 1867]), which reads “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.” Section 121 has colloquially been dubbed the “free trade provision.” According to the defence, section 121 mandates interprovincial free trade across the nation, and section 134(b) of the Liquor Control Act implements a prohibited non-trade barrier on the cross-border movement of alcoholic goods.

In a surprise ruling, Justice Ronald LeBlanc of the New Brunswick Provincial Court agreed, rendering section 134(b) of no force and effect (Comeau, para 193). In doing so, Justice LeBlanc made a landmark alteration to existing section 121 jurisprudence, which had historically established that the provision prohibits tariff-based trade barriers, but left the question of non-tariff barriers open (see e.g. Gold Seal v Alberta, [1921] 62 SCR 424, affirmed in Atlantic Smoke Shop Ltd v Conlon, [1943] 4 DLR 8). Based on new historical evidence of the legislative intent of the constitutional drafters, Justice LeBlanc ruled that section 121 prohibits both tariff and non-tariff barriers alike (Comeau, para 186), “with great trepidation” overturning almost a century’s worth of jurisprudence on the proper scope of the provision (para 189). After the Court of the Queen’s Bench of New Brunswick declined to hear the appeal, the New Brunswick government successfully appealed to the Supreme Court of Canada (“SCC” or “the Court”), where the case will be heard on 6 – 7 December 2017.

The main constitutional issue in the case is the proper scope of section 121: does the provision in fact mandate free trade across the provinces? Justice LeBlanc’s expansive reading of section 121 raises questions not only about the correct interpretation of the provision, but about the proper approach to resolving interprovincial trade disagreements in Canada’s contemporary federal framework. Many commentators view Justice LeBlanc’s overturning of precedent as a necessary fix to a longstanding historical misunderstanding of legislative intent: Canada was always supposed to have interprovincial free trade, and only through interpretive error have we ruled otherwise (see e.g. Malcolm Lavoie). By contrast, other commentators view the ruling as an unfair erosion of provincial economic autonomy. As a blanket prohibition on all forms of interprovincial trade barriers, Comeau significantly curtails the provinces’ ability to regulate the movement of goods across provincial borders. Pre-Comeau, the provinces were able to regulate cross-border transactions, including imposing non-tariff barriers, as a valid exercise of provincial jurisdiction over property and civil rights (Constitution Act, 1867, s 92(13)). However, the Comeau defence successfully argued that the non-tariff barriers should be disallowed because they impose on the federal government’s exclusive jurisdiction over interprovincial trade and commerce (Constitution Act, 1867, s 91). Given that the provinces are the legislatures more likely to enact restrictive border-based trade regulations, Comeau narrows the scope of provincial regulatory authority over cross-border transactions without supplying any compensatory rebalancing mechanism. This is worrying to some commentators, who are concerned about the intrusion of federal economic regulatory authority on provincial rights.

After the December hearing, it will be incumbent upon the Court to decide whether reading section 121 as a prohibition on all forms of cross-border provincial barriers is a valid exercise of the federal government’s trade and commerce power over interprovincial trade, or an unfair intrusion into the provinces’ property and civil rights power. If confirmed at the appellate level, the Comeau ruling may set an unsettling precedent of eroding the provinces’ section 92(13) powers on the grounds that border restrictions have incidental effects on interprovincial trade. It is also possible that the sweeping scope of the Comeau decision will be considered inconsistent with the current trend in constitutional jurisprudence toward taking a flexible, ameliorative approach to division of powers questions. According to some commentators (see e.g. Gary Gilman), the ruling offends the Court’s preference for “flexible” or “co-operative” federalism, or tolerance for overlapping areas of provincial and federal jurisdiction. However, it is equally possible to argue that significant SCC case law has recognized an economic union, or a single national economy, as part of the federation’s design. From this perspective, upholding a robust reading of section 121 gives effect to, rather than detracts from, the original vision of the federation embedded in the Constitution Act, 1867.

Section 121 and the Division of Powers Issue

The constitutional question in Comeau is fundamentally an inquiry about which level of government is entitled to regulate the movement of goods across provincial borders. Undoubtedly, the upcoming hearing will address whether Justice LeBlanc’s reading of section 121 to mandate free trade across the provinces is a legitimate exercise of the federal government’s trade and commerce power, as claimed by the defence, or an unfair intrusion into the province’s jurisdiction over civil and property rights.

In the constitutional text, the regulation of interprovincial trade falls under the jurisdiction of federal Parliament under the Constitution Act, 1867 section 91(2), or the trade and commerce power. Jurisprudence stemming from the Citizens’ and the Queen Insurance Cos v Parsons in 1881 has divided the trade and commerce power into two branches: the extraprovincial trade branch, covering international and interprovincial trade, and the “general regulation of trade affecting the whole dominion” or GRT branch. Pursuant to the extraprovincial branch, federal Parliament is given jurisdiction over interprovincial trade. The exercise of federal authority over interprovincial trade frequently overlaps with the provincial powers granted by section 92 of the Constitution Act, 1867, particularly with the section 92(13) power over property and civil rights. Section 92(13) is an exceptionally broad provision, and given that section 134(b) of the Liquor Control Act sought to regulate private ownership of liquor products from outside the province, it is likely that the Act was enacted pursuant to this power. It is worth noting that the Act touches numerous other heads of provincial power as well. As the purchase and tax on liquor products from provincial liquor commissions is a valuable source of provincial revenue, the legislation may fall within the section 92(12) power over direct taxation. Jurisdiction may also be claimed as an extension of the section 92(16) power over matters of a local nature, the matter being protection of the provincial liquor monopoly.

While both the federal trade and commerce power and provincial property and civil rights are described in the Constitution Act as “exclusive” (Constitution Act, 1867, s 91), section 92(13) and section 91(2) overlap frequently and exist in tension with one another. For example, trade and commerce is often conducted through the formation of contracts, “which give rise to ‘civil rights’ over ‘property’” (Peter W Hogg, Constitutional Law of Canada 4th ed (Toronto: Carswell, 1997) at 530). One issue to be decided by the SCC is whether the ruling adequately preserves provincial regulatory authority over property and civil rights. Some commentators have expressed concern that the judgment jeopardizes valid provincial laws (including those that impose non-tariff barriers) which are in pith and substance related to intraprovincial trade and are valid exercises of the section 92(13) power, on the grounds that they incidentally impact interprovincial trade. The provincial Crown will likely make much of this point during the hearing, as the Liquor Control Act implicates several key legislative areas in which the provinces are highly invested. While the federal government has an unassailable monopoly over interprovincial trade, the provinces have clear interests in maintaining a regulatory foothold over matters implicated in the cross-border movement of goods, including protecting local industries and guarding lucrative sources of provincial revenue. The Crown will likely raise these issues when arguing that Comeau represents a significant erosion of provincial jurisdiction. The Court may also be made to address charges from the Crown that Comeau erases the provinces’ ability to enact legislation around domestic industries, threatening to disrupt democratic decision-making at the local level and gloss over the provincial distinctiveness that underpins Canada’s federal arrangement.

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