Bill C-11 and the changing climate in Canadian federalism
Guest contributor Kees Westland explains how the Supreme Court of Canada’s recent reference opinion about carbon pricing legislation could affect the analysis of Bill C-11. Can Parliament enact minimum national standards in areas of shared jurisdiction under the trade and commerce power? As Westland observes, the inherently global nature of a problem can be an argument in favour of a federal approach. This piece is the ninth in a series of posts on the features, implications, and controversies surrounding privacy law reforms in Canada and around the world in an increasingly digital and data-rich context. Photo: Martin Lopatka.
One might not assume that Parliament’s efforts to address global climate change would have any bearing on Canada’s new privacy framework, but the Supreme Court of Canada’s recent reference opinion in the Reference re Greenhouse Gas Pollution Pricing Act (“GGPPA Reference”) could have important implications for Bill C-11—the proposed new federal legislation reshaping commercial privacy rules.
As earlier posts in the Schwartz Reisman Institute’s privacy series explain, Bill C-11 replicates many of the protections contained in the Personal Information Protection and Electronic Documents Act (PIPEDA), even while it adds significant new features. As a result, longstanding questions about PIPEDA’s constitutional validity (whether the law was enacted within the powers allocated to Parliament by the Constitution) presumably apply with equal force to the new framework. The question of validity might even assume greater importance going forward, since C-11 contains robust new enforcement provisions that will motivate organizations to take aggressive positions in litigation.
One feature of C-11 that will face particular scrutiny is its provision for “substantially similar” legislation by the provinces.
Under the proposed legislation, the Governor in Council (or “GIC”—effectively, the federal cabinet) may exempt organizations in provinces where “substantially similar” legislation is already in force (s. 119(2)). The GIC may also establish criteria for assessing provincial regulation and a process for making the determination (s. 119(3)). Finally, the Act appoints a Privacy Commissioner, who must provide an annual report in Parliament about “substantially similar” legislation in the provinces (s. 118(1)).
The cumulative effect of these provisions is to let provinces “opt out” of the federal scheme by enacting their own compliant legislation. And since Cabinet sets the criteria for compliant legislation, Bill C-11 creates the conditions for minimum national standards for privacy laws, to be fleshed out by the executive branch.
The Canadian government has expressed the view that legislation like PIPEDA and C-11 falls within its power to regulate “general” trade and commerce under section 91(2) of the Constitution Act, 1867. Under this provision, Parliament can regulate with respect to trade that affects the country as a whole, although it cannot regulate a particular trade or business.
The trouble is that one of the classical criteria for valid legislation under the general trade and commerce power is provincial inability: the scheme must be of such a nature that the provinces, acting either together or separately, would be constitutionally incapable of enacting it. A scheme that explicitly provides for substantially similar provincial legislation appears to concede on its face that the provinces are capable of enacting the identical scheme. Moreover, the counterargument—that only the federal government can enact a national scheme—appears at least to beg the question. Something does not become a valid subject for federal legislation simply because one puts the word “national” in front of it.
“If provinces, acting either together or separately, would be constitutionally incapable of enacting a certain legislative scheme, then it can be enacted under the federal general trade and commerce power. But a scheme that explicitly provides for substantially similar provincial legislation appears to concede on its face that the provinces are capable of enacting the identical scheme.”
The courts have not determined whether PIPEDA—which contains an analogous provision in paragraph 26(2)(b)—is valid trade and commerce legislation. Quebec filed an application for judicial reference in the provincial Court of Appeal in 2003, but the province ultimately did not enter written submissions. The challenge stated in the application was primarily based on paragraph 26(2)(b): Quebec took the position that “the exclusion process provided for in the Federal Act grants the federal government a right of review over the content of the Quebec Act, which is incompatible with the foundation of Canadian federalism.”
There has also never been a trade and commerce case at the Supreme Court that turned on a minimum national standard. An analogous provision was at issue in the Reference re Assisted Human Reproduction Act, which concerned the federal criminal law power.
In addition, the Federal Court of Appeal recently accepted that the provinces were unable to achieve the national aims of an impugned scheme, as they each had an inherent power to resile from it in future. Justice Nadon wrote that “The provinces’ sovereignty with respect to future legislative action makes [the impugned scheme] ‘qualitatively different from what the provinces, acting alone or in concert, could achieve.”
Photo: D. Gordon E. Robertson.
If the courts have not weighed in about PIPEDA’s validity, constitutional law experts, including former Supreme Court Justice Michel Bastarache, have consistently questioned whether a court would uphold PIPEDA—especially following the Supreme Court’s advisory opinion in Reference re Securities Act (2011). The Securities Reference remains the leading decision about the federal trade and commerce power. As such, it supplies a benchmark for determining C-11’s validity and must be addressed.
The Securities Reference
In the Securities Reference, the Court decided that the Canadian Securities Act, a proposed federal statute creating a single securities regulator, was invalid. The Securities Act included a provision that would have allowed provinces to “opt in” to the scheme. The Court’s opinion in the Securities Reference suggests that it will approach any attempt to enforce minimum standards in the Canadian marketplace most carefully.
It is tempting to conclude that, if “opt-in” securities legislation is invalid, then a fortiori C-11’s “opt-out” provisions must be constitutionally dubious. In my view, this conclusion would be incorrect. There are crucial distinctions between C-11 and the proposed Securities Act.
The pith and substance of the proposed Securities Act presented a “zero-sum game” for the Court, which questioned whether the government could regulate, “on an exclusive basis, all aspects of securities trading in Canada.” Worse still, the Securities Act would have ousted long-established provincial statutes, whose microeconomic aims it largely reproduced. The Supreme Court also appears to have accepted that the Securities Act descended into “industry-specific regulation”—placing it more clearly in provincial territory.
By contrast, C-11 appears to have distinctively national purposes, which are best served by minimum national standards. These objectives include promoting trust in the digital economy and ensuring the efficient transfer of data between Canada and other countries, notably the European Union—long the de facto standard setter for data governance rules. Canada is presently assimilated to intra-EU transmissions of data, which lowers the cost of entry for Canadian companies that want to do business in Europe.
Not incidentally, these purposes are distinctively commercial. The case for validity would be weaker had the federal government drafted a more privacy-centric bill, as some continue to advocate. While the federal government has means to protect individual privacy, including the criminal law power, the “general trade and commerce” branch is not a promising vehicle for safeguarding the civil rights of consumers per se.
Another distinguishing feature of C-11 is that, unlike the Securities Act, it affects an exceedingly wide array of businesses that collect personal information, not just businesses that ply a particular trade. As the Federal Court of Appeal recently accepted, digital commerce is “a pillar of Canada’s national economy, one that transcends industries, sectors and categories of market participants as well as provincial borders.” The criticism that PIPEDA (and by extension C-11) targets a specific industry or commodity—i.e. information—is clearly miscast, since C-11 does not exclusively regulate an industry that deals with information, nor does it treat information as a market commodity (like the “light” beer that was the subject of another leading case).
Another distinguishing feature is that there is no established background of provincial laws for C-11 to displace. To date, only two provinces have taken up PIPEDA’s invitation to enact “substantially similar” legislation. Furthermore, C-11 contemplates a patchwork of provincial legislation that might displace its application. This is very different from the proposed Securities Act, which would have forced provinces that wanted to be included in the scheme to suspend their existing securities laws (indeed, this was a prerequisite for the overarching goal of the Securities Act: setting comprehensive national securities regulation).
“The criticism that PIPEDA (and by extension C-11) targets a specific industry or commodity—i.e. information—is clearly miscast, since C-11 does not exclusively regulate an industry that deals with information, nor does it treat information as a market commodity.”
The Greenhouse Gas Pollution Pricing Act Reference
The Supreme Court’s recent opinion in the GGPPA Reference has significant implications for this discussion. The opinion concerned the “national concern” branch of Parliament’s residual power to maintain peace, order, and good government. As the Court has observed in the past, the national concern doctrine and the trade and commerce power, while analytically distinct, raise similar challenges for federalism. Accordingly, the GGPPA Reference also impacts the trade and commerce analysis.
Chief Justice Richard Wagner, who authored the majority opinion, clarified that a federal law may set minimum national standards in an area of presumptively provincial jurisdiction. This holding cements statements from the Court’s earlier jurisprudence. Indeed, in the Securities Reference, the Court stated that “[l]egislation aimed at imposing minimum national standards applicable throughout the country … might well relate to trade as a whole.”
Furthermore, the GGPPA Reference approved a scheme under which significant discretionary authority is delegated to the executive branch—dismissing the dissenters’ worries about the separation of powers by pointing to the availability of judicial review for regulation under the Act. Indeed, the Chief Justice characterised such delegation as an “incident of a flexible model designed to preserve provincial regulation.” Justice Côté, dissenting on this point, worried that the GGPPA gave the executive branch breathtaking scope for legislation. By comparison, the proposed Bill C-11 contemplates a modest role for the GIC.
The GGPPA Reference also includes guidance about how “inherently global problems” and international obligations guide the national concern analysis. While Parliament does not have a self-standing jurisdiction to implement treaty obligations, the inherently global nature of a problem can be an argument in favour of provincial inability to cover the problem adequately. At the same time, treaty obligations and international agreements can support a finding that a matter is qualitatively different from matters of provincial concern. Evidence that data governance poses “inherently global problems” will surely be helpful.
One final takeaway from the Court’s reasons in the GGPPA Reference is that in defending C-11 the federal government should be prepared to bring evidence of the truly “national” character of data governance. This evidentiary onus is consistent with the threat to provincial autonomy and the need for caution in applying the double aspect doctrine (which allows for both provincial and federal governments to legislate with respect to the same matter). As Chief Justice Wagner remarked, this consideration “takes on particular significance where, as in the case at bar, Canada asserts jurisdiction over a matter that involves a minimum national standard imposed by legislation that acts as a backstop.”
Conclusion
Parliament’s recent effort to upgrade Canada’s data governance legislation in the private sector provides for minimum national standards that govern in lieu of substantially similar provincial legislation. This approach represents a vision of cooperative federalism in the commercial sphere that has yet to be tested at the highest level (although similar arguments recently carried the day at the Federal Court of Appeal).
The Supreme Court’s reference opinion in the GGPPA Reference, which deals with an analogous issue, suggests that Parliament’s strategy is probably sound. The federal government may establish minimum national standards in its pursuit of otherwise valid objectives. When it comes to evolving and complex problem areas such as data governance or environmental regulation, the Court may be hesitant to rule out good faith attempts by Parliament to work with the provinces.
Editor’s note: Bill C-11 failed to pass when Canada’s federal parliament was dissolved in August 2021 to hold a federal election. In June 2022, many elements of C-11 were retabled in Bill C-27. Read our coverage of C-27.
About the author
Kees Westland is counsel at the Department of Justice Canada, National Litigation Sector (Ontario Regional Office). He completed his JD at the University of Toronto Faculty of Law in 2020. This post is based on research he conducted under the supervision of Schwartz Reisman Research Lead Lisa Austin.
The views expressed in this post are those of the author only and do not represent the views of the Minister of Justice and Attorney General of Canada, the Department of Justice Canada, or the Government of Canada.
