Supreme Court of Canada to consider final ruling on provincial free trade case

Submissions heard by reps from liquor, cannabis, shipping, and dairy farming industries

The determinative hearing in the high-profile case of R. v. Comeau took place last week, with a veritable Royal Rumble of intervening parties on both sides offering submissions, including groups such as the Montreal Economic Institute, the Canadian Federation of Independent Businesses, and the Consumers Council of Canada, as well as national brands like Cannabis Culture and Federal Express Canada.

The case centers around a decision made by a New Brunswick trial court, and then upheld by the Superior Court of New Brunswick, ruling that the provisions of the province’s liquor laws that prohibit transporting more than a specified amount of liquor into NB from another province are unenforceable on the grounds that they conflict with Section 121 of the Constitution Act of 1867.

Section 121 states:

“All Articles of the Growth, Produce, or Manufacture of any one of the Provinces shall, from and after the Union, be admitted free into each of the other Provinces.”

Lawyers for the Crown appealed the court’s decision repeatedly, citing a 95-year old interpretation of Sec. 121 by a temperance-era judge who asserted in the 1921 case of Gold Seal vs Alberta that the section focused on customs duties only. By that interpretation, provinces could not charge customs duties on imported goods, but they could create statutory regulations that act as barriers to interprovincial trade.

Conversely, the position presented by Comeau is that the plain language in Sec. 121 means that any barrier to the free movement of goods is prohibited, whether that barrier comes in the form of a tariff or not.

That position was ratified by the judge presiding over the case at the trial court level, Justice LeBlanc, who wrote in his report that “Prohibition of import in aid of temperance legislation is not within the purview of [Sec. 121].”

Last week was the Crown’s last chance to appeal the ruling. That appeal took place in the highest court in Canada on Wednesday and Thursday, with submissions from over 30 intervening parties over the course of the two-day hearing.

The Crown

On December 6th, the court heard submissions on behalf of the Crown from the attorneys general of all provinces and territories except Manitoba and Yukon.

Appellant submissions largely moved in lock-step, citing the Gold Seal vs Alberta ruling and concerns over the potential reversal of 95 years of previously settled law.

Intervenors for the Crown argued that overturning the restrictive interpretation from 1921 and reverting to an interpretation based purely on the phrasing used in the Constitution Act could lead to a subsequent wave of court challenges, as previous rulings based on the Gold Seal decision could be brought back before the courts.

Other arguments from provincial AGs included numerous references to Section 91 and Section 92 of the Constitution Act, pertaining to jurisdictional responsibility.

Although presenting as an intervenor for the Crown, the AG of Alberta accidentally stood in support of barrier-free trade, touting Alberta’s liquor distribution system as the best in Canada—currently Alberta is the only province in the country with no monopoly on liquor distribution at the wholesale or retail level.

A representative of one provincial government also inferred that Section 121 related chiefly to socioeconomic conditions that were present at the time the Act was written, calling the section “spent legislation” in the context of modern circumstances. That inference was all but walked back later, when the question was raised as to whether the statement should be interpreted as a call to remove the section from the Act altogether.

In support of intraprovincial free trade

The following day, submissions were presented by intervenors in support of the Comeau rulings previously delivered by, and subsequently upheld by the courts of New Brunswick.

The list of intervenors included, as one would expect, a number of alcoholic beverage producers and groups like the Alberta Small Brewers Association. But perhaps less expected were submissions from the Dairy Farmers of Canada, Egg Farmers of Canada, Chicken Farmers of Canada, and Turkey Farmers of Canada, echoing that at the core of the case is an issue that affects numerous industries in the same way—the issue of government keeping a monopoly over industry, and creating regulatory schemes that result in interprovincial trade barriers.

A common theme among intervenors was the importance for courts to look at not just the purpose of an impugned statute, but also the effects.

A number of intervenors expressed support for an inquiry that would take into consideration both the “essence and purpose” of the legislation as well as the practical effects.

“Failing to allow courts to inquire into the effects of legislation,” argued Kirk Tousaw, council for intervenor Cannabis Culture, “simply means that legislators seeking to enact interprovincial trade barriers need only be clever and careful in their drafting.”

Tousaw cautions that this kind of fire-and-forget legislation runs contrary to the way the Supreme Court approaches constitutional interpretation in other areas.

“Simply and exclusively looking to the purpose of legislation,” Tousaw continued, “rather than also considering the practical effect of that legislation, leads to what Cannabis Culture respectfully suggests is convoluted reasoning—the idea that a provincial liquor distribution branch that markets, publicizes and generates significant revenues from the sale of alcohol is doing so to improve public health.”

While the purpose of the Gold Seal ruling was to facilitate the alcohol prohibition regime that was still in force in a number of provinces in 1921, the practical effects of that ruling have included the development of provincial monopolies that impose discriminatory costs on out-of-province producers, or that limit those out-of-province producers’ access to retail distribution within the province.

The submission from Federal Express Canada emphasized that e-commerce transactions are a common feature of consumer life in modern-day Canada, adding that the enactment at issue in this case prohibits such transactions.

Online sales allow consumers to purchase products from any province and have them shipped directly to their home. Tousaw highlighted the fact that when the Gold Seal ruling was decided there was no conception of retail sales of this nature.

Re-inventing the wheel

In a feat of the purest irony, while Cannabis Culture’s submission was being presented in support of Justice LeBlanc’s ruling, Ottawa police were conducting a dispensary raid just down the street from the proceedings.

“Dispensaries obtain their products from a wide variety of unlicensed producers and processors, and do not discriminate based on province of origin,” related Tousaw.

Tousaw expressed Cannabis Culture’s support for the approach Alberta has taken in regulating alcohol—an approach that does not impose a provincial monopoly, and allows private retail distribution in combination with fair and equal access to that retail system by alcohol producers, irrespective of their geographic location within Canada.

“This approach is consistent with keeping regulatory control over the product,” said Tousaw, “without running afoul of the plain language of Section 121 by impeding the free flow of commerce across provincial boundaries.”

“Prohibiting private dispensaries from participating in the licit cannabis industry,” he later added, “works contrary to the goal of the federal legislation, and contrary to a balanced approach to federalism and the free flow of trade across the country.”

The Comeau hearing marks the final case for Chief Justice McLachlin, who has heard over 2,000 appeals and rendered over 400 rulings in her career as the longest-serving, and first female Chief Justice.

Her final ruling is anticipated in 2018, while a number of provinces are currently planning to launch provincial cannabis distribution monopolies in July of that year.

Related: Provincial cannabis monopolies might be dead in the water before the first gram is sold

Featured image by Jamie McCaffrey.

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  1. Jason Reply

    For the layman, such as myself for things like this, does this mean it's over with no changes in sight?

    Or, is there another court date set to resume this?

    1. Maxcatski Reply

      The Supreme Court will render their decision in the new year, Jason. The hearings are complete but it will take a while to develop and write up the ruling.

      It seems ironic that the Gold Seal precedent arose from alcohol Prohibition but will now affect cannabis legalisation.

      Public opinion seems to favour free trade. The justices, however, are concerned about upsetting a complicated interprovincial regulatory system.

      Supreme Court rulings typically take 4 to 6 months. However, the retirement of Beverly McLachlan, the current Chief Justice, may affect the schedule.

      Let's hope the court rules in favor of free trade.

      1. Jason Reply

        Fabulous, thanks for the reply!