In ruling 5-0 that the proposed federal Securities Act is
invalid, the Alberta Court of
Appeal upset the conventional
wisdom in more ways than one.
Not only was the outcome
unexpected; even more surprising was the court’s reasoning.
There are three battlegrounds
in federalism litigation: characterization, interpretation and
empirics. In plain terms, the parties can argue about how to
describe the law being challenged,
about the scope of the pertinent
constitutional powers, or about the
consequences of whether a government can enact the challenged law.
Until two weeks ago, most
people assumed that the federal
Act’s validity would turn on
empirics. The Court of Appeal’s
judgment suggests that the
pivotal issue actually lies elsewhere. Characterization, not
empirics, is why the federal government lost in Alberta. Characterization is also the key to
understanding why the Supreme
Court should not follow the
Alberta Court’s example.
Let’s start with what happened in the Court of Appeal.
Ottawa’s strategy was to argue
that, in the contemporary Canadian economy, “comprehensive
national securities regulation”
achieves something that mere
“securities regulation” enacted by
the provinces cannot. The argument relies on the so-called
General Motors doctrine, which suggests “provincial incapacity” and
“extraprovincial consequences”
are indicators of valid federal
legislation under the trade and
commerce power. The doctrine
invites empirical argument.
In rejecting the federal argument, the Court of Appeal went
beyond saying that the empir-
ical case had not been made out.
More basically, it objected to
what it viewed as the principle
underlying the argument.
According to the court, the fed-
eral government was trying to
invoke practical considerations
as a warrant for effecting a
“wholesale transfer of constitu-
tional jurisdiction.”
Why did the court think that
recognizing federal power to
enact securities legislation
would amount to a “transfer of
jurisdiction”? The answer is that
the court had already concluded
that securities laws are, in prin-
ciple, within the exclusive juris-
diction of the provinces.
In characterizing the proposed Act, much earlier in its
reasons, the court had written
that “the regulation of the securities industry is a matter of
property and civil rights.” With
that sentence, the game was
already over. Any law student
can tell you that the regulation
of a single industry comes within
exclusive provincial jurisdiction
over property and civil rights. If
that’s what federal securities
legislation is— the regulation of
a single industry — the proposed
Act is invalid.
So, what should the Supreme
Court do?
There’s a right way and a
wrong way to do characteriza-
tion. Characterizing a law is not
about reducing the law to a
label, such as “securities regula-
tion” or even “comprehensive
national securities regulation.”
The task, instead, is to describe
the features of the law that are
most salient in assessing its
constitutional validity — typ-
ically, the law’s purposes and
the means it employs.
spective of regulating highway
traffic or from the federal perspective of suppressing behaviour that imperils public safety.
It’s clear that Parliament
cannot seek to achieve its
broader economic objectives by
means of a law the main feature
of which is the regulation of a
single industry. That’s what the
Court of Appeal thought the
federal government was trying
to do. However, it’s a mistake to
characterize federal regulation
of securities transactions as the
“Why did the court think that recognizing federal
power to enact securities legislation would
amount to a ‘transfer of jurisdiction’? The answer
is that the court had already concluded that
securities laws are, in principle, within the
exclusive jurisdiction of the provinces.
Securities laws therefore
have two aspects. On the one
hand, there’s an investor protec-
tion aspect. By analogy to con-
sumer protection, this is the
basis on which provincial secur-
ities legislation has repeatedly
been upheld. On the other hand,
there’s an economy-wide alloca-
tive efficiency aspect, which
brings securities regulation
within the concept of “the regu-
lation of trade and commerce.”
This is no different from the
nearly identical but nonetheless
valid federal and provincial laws
that, for instance, penalize
impaired driving. These may be
viewed from the provincial per-
regulation of a single industry.
Ian Lee is an associate professor in the faculty of law at the
University of Toronto.
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Email us at: tlw@lexisnexis.ca
BCCA rejects appeal of sentence for financing terrorism
GARY OAKES VICTORIA
B.C.’s top court has thrown out
a Crown appeal in upholding a
six-month jail sentence for financing terrorism in Canada under
s. 83.03 of the Criminal Code.
Justice Kathryn Neilson
pointed out that the sentence
imposed on 47-year-old Prapa-
haran Thambaithurai “would
ordinarily be viewed as a harsh
penalty for a first offender with an
otherwise unblemished record.”
She explained that three
years ago, Thambaithurai spent
time canvassing members of the
Vancouver Tamil community to
raise money, some of which he
knew was destined to help the
Liberation Tigers of Tamil
Eelam (LTTE).
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