Supreme Court Rules Securities Act Not Valid Under Commerce Clause

The judgment of the Supreme Court of Canada in the Reference re Securities Act 2011 SCC 66 has just been released. The opinion of the Court—a single judgment—finds, in sum, that:

This is not a case of a valid federal scheme that incidentally intrudes on provincial powers. It is not the incidental effects of the scheme that are constitutionally suspect; it is rather the main thrust of the legislation that goes beyond the federal power. . . .

The Securities Act as presently drafted is not valid under the general branch of the federal power to regulate trade and commerce under s. 91(2) of the Constitution Act, 1867.

In paragraph 132 (underlined in the online version at the Court offers advice:

It is not for the Court to suggest to the governments of Canada and the provinces the way forward by, in effect, conferring in advance an opinion on the constitutionality on this or that alternative scheme. Yet we may appropriately note the growing practice of resolving the complex governance problems that arise in federations, not by the bare logic of either/or, but by seeking cooperative solutions that meet the needs of the country as a whole as well as its constituent parts.

This will be a serious blow to the federal government and, quite likely, to other legislation that walks close to the line of provincial powers, such as PIPEDA perhaps. It leaves Canada as one of the few countries in the world without a single, national act regulating securities.

This entry merely reports the fact of the release of the opinion and its conclusion. We’ll do a follow-up soon, collecting the views of commentators from around the country.


  1. Hmmmm …

    “[47] Canada bases its argument that the proposed Act is constitutional entirely on the s. 91(2) general trade and commerce power. It does not rely on the s. 91(2) power over interprovincial trade which gives Parliament the power to legislate on interprovincial and international aspects of securities. Nor does it invoke other heads of powers under the Constitution. The only question before us therefore is whether the Act can be supported under the general trade and commerce power.”

    No doubt the Conservative gov’t, which is we all know is fronted by a clique driven to make the illegitimate federal gov’t supreme at the expense of the legitimate provincial gov’t’s (notwithstanding the provisions of the Constitution Act 1867) has a valid legal (i.e. not-political) explanation for why it so limited its argument.

    I say, conspiracy theorists unite (excluding Mel Gibson).

    I see that the Finance Minister was quick with a statement: ““We have the decision and we will respect it. It is clear we cannot proceed with this legislation,” said Mr. Flaherty in a brief statement circulated by his office. “We will review the decision carefully and act in accordance with it.”

    Lot’s of wiggle room in that one.

    In a legally unrelated matter, Globe & Mail reports, today, that a Federal Court judge “has ordered the fed gov’t “$200,000 in legal costs incurred by Jean Chrétien in his fight to restore his name after being blamed for the sponsorship scandal by the Gomery inquiry in 2005.

    However, the Prime Minister’s Office called the ruling “disappointing,” and said the money rightly belongs to taxpayers.

    “It is our belief that the Liberal Party must pay back the millions of dollars stolen from taxpayers through the sponsorship scandal. We call on Jean Chrétien to give this $200,000 back to taxpayers on behalf of the Liberal Party,” PMO spokesman Carl Vallée told The Globe and Mail.”

    Those who care about these things will recall that Liberal ex-PM convinced the Federal Court that Gomery Commission was wrong in also blaming him, in the manner the report did, for the sponsorship debacle and dishonesty.

    A naive person might ask why the PMO didn’t make the a similar statement about a 2 million dollar payment received by a Progressive Conservative ex-PM where, as it turns out, the gun was more than just smoking (at least morally).

  2. I found this quote in The Globe interesting,

    The dean of Toronto’s Osgoode Hall Law School, Lorne Sossin, said the ruling presented a narrow, backward-looking view of federalism and sent a message that the court does not take capital markets seriously.

    “I think the Constitution, for the last 80 years or so, we’ve been saying is a living tree. This looks more like a view of the Constitution that’s likely to wither on the vine,” Mr. Sossin said.

    He said the court clearly thought it needed to send a message to Ottawa that it should seek to engage in “co-operative federalism” with the provinces, and negotiate a new regulator rather than impose one.

  3. Doesn’t a “living constitution” require “living government(s)” with “living ethics” aka “the deed”? We have seen political actions, re-action and inaction that can build walls of negativity that can choke the life out of any opportunity for equality and progress in this country.
    What is needed is a principle-based approach (enhanced collaborative regulatory model)which establishes well-defined values and enduring beliefs that influence the decision-making process to better address the local and global problems.
    In my humble opinion, the only right duty of distinction (principle)vs. a power-liability relationship is the one decided upon by the SCC … because united we stand. Isn’t that the constitution as a “living tree”? Conversely, divided we will continue to look backward, point fingers, lament, build walls and likely wither on the vine.
    The opportunity has been created now let’s seize it….working together in full support of the living.

  4. Michael Geist posted this column in The Toronto Star today:

    Are Canada’s digital laws unconstitutional?–geist-are-canada-s-digital-laws-unconstitutional

    As Simon has done above, Geist speculates on the opinion’s implications for legislation such as PIPEDA. Geist also mentions the model Uniform Electronic Commerce Act (provincially and territorially enacted) potential anti-spam legislation, and Bill C-11 (copyright).

  5. As a principal author of the Uniform Electronic Commerce Act, I hasten to point out that Professor Geist mentions it as a good example of respecting and acting within interlocking responsibilities, not as something that is potentially unconstitutional in the light of the Securities regulation reference.

    So Part 2 of PIPEDA (the ‘ED’ part = electronic documents), being an enactment of the then-current draft of the UECA, is still clearly within federal power.

  6. What is interesting about the UEC Act is that it already brings the federal, provincial and territorial governments together to work on digital legislation. The fact that the federal government has taken the lead is a matter which, thus far, has not been disputed by the provinces/territories who have a shared responsibility in the decision making/enactment processes. One could argue that the principles embodied under this Act support “co-operative federalism” and a living constitution.

    The question to be answered moving forward is: What can be gained by walking the line together vs. crossing the line separately? If the provinces/territories become dissatisfied with the Federal Government’s lead they can speak up and suggest a better way or choose a new leader from among the representatives. This is a democracy at work.

  7. I appreciate the clarification. Yes, Prof. Geist does note it as precisely such an example, explaining why the model UECA (in its non-ED parts) ultimately was enacted provincially and territorially. (I wouldn’t want my quick summary to suggest he says otherwise.)

    I like the characterization of the digital legislation based on the uniform model as co-operative federalism. Legislative success of this sort in areas involving interlocking responsibilities benefits greatly from model legislation and law commission study, in my view.

  8. Co-operative federalism has been the purpose, one might say, of the Uniform Law Conference of Canada since its founding in 1918. The UECA is one good example among many.

    The federal government joined the Conference in the 1940s, in part as a forum for criminal law changes (administration and law), and in part for civil-side initiatives where the federal government has an interest. That is not on all of the ULCC’s projects, but a substantial number.

    The ULCC has long-standing links to law reform bodies – directors of the BC and Alberta institutes have been president of the Conference, and senior officials of other provincial law reform bodies frequently attend the annual ULCC meetings. The bodies cooperate during the year on projects as well.

    The ULCC also gives smaller jurisdictions a chance to have their say in legislation that is likely to be adopted across the country, so they don’t just end up taking what some larger province has done, without any input.

    Other ‘digital legislation’ produced by the ULCC includes the Uniform Electronic Evidence Act (1998, fairly widely adopted) and the Uniform Privacy Protection Act (Data Breach Notification) of 2010.