On May 31, 2007, the Supreme Court of Canada released two long-awaited and important decisions – Canadian Western Bank v. Alberta and British Columbia (Attorney General) v. Lafarge Canada Inc. These decisions will have a significant impact on the approach to be followed in division of powers cases and should be of interest to federally regulated undertakings.
At issue in Canadian Western Bank was whether Alberta’s provincial insurance regulations were constitutionally inapplicable to or inoperable in respect of the promotion of authorized types of insurance by Canadian chartered banks. Eight major banks argued that, under the doctrine of interjurisdictional immunity, Alberta’s regulations were inapplicable to banks, as they affected activities that lay at the core of “banking”, a matter within exclusive federal jurisdiction. The banks further argued that the provincial regulations were inoperable under the federal paramountcy doctrine. According to the banks, the provincial regulations conflicted with the federal regulatory scheme that explicitly authorized the banks to promote certain limited classes of insurance. The Supreme Court of Canada rejected both arguments and held that the constitution did not prevent Alberta’s regulations from governing the banks’ insurance promotion activities.
The issue before the Court in Lafarge Canada Inc. was whether the City of Vancouver’s zoning and development by-law was constitutionally inapplicable to or inoperable in respect of a proposed ship offloading and concrete batching facility to be built on lands owned by the Vancouver Port Authority. Lafarge and the Vancouver Port Authority argued that the municipal by-law was inapplicable as it would interfere with federal legislative competence over federal public property and navigation and shipping. A majority of the Court rejected arguments based on interjurisdictional immunity, but agreed with the Attorney General of Canada that the municipal by-law conflicted with applicable federal land-use and planning rules and, as such, was inoperable under the paramountcy doctrine.
INTERJURISDICTIONAL IMMUNITY REVISITED
In both cases, Justices Binnie and LeBel wrote the majority reasons, while Justice Bastarache issued a concurring opinion. The majority reasons in Canadian Western Bank and Lafarge signal a concern with the potential centralizing effect of the doctrine of interjurisdictional immunity and suggest that the doctrine should not be used as a primary tool for refereeing federal-provincial jurisdictional conflicts.
In the majority’s view, division of powers cases should first be resolved under a “pith and substance” analysis. If both the provincial and federal legislative regimes are valid, the matter should next be considered under the paramountcy doctrine.
The majority is of the view that laws will not be constitutionally inapplicable unless they adversely impact a core or essential element of the section 91 subject matter or, in the case of an undertaking, impair matters that are indispensable or necessary to the undertaking. Except for matters to which the courts have applied interjurisdictional immunity in the past, this doctrine will be relegated to the third step of the division of powers analysis.
PARAMOUNTCY ALIVE AND WELL
At the same time, however, the decisions in Canadian Western Bank and Lafarge Canada Inc. continue the trend of an expansive approach to the paramountcy doctrine. Conflict between federal and provincial laws is no longer limited to cases where simultaneous compliance with the two laws is impossible. A conflict giving rise to federal paramountcy will also be found to exist where application of the provincial law would frustrate the purpose of the federal legislation. Moreover, in Lafarge Canada Inc. the majority has adopted an even more liberal test for operational conflict. Although dual compliance in Lafarge Canada Inc. was, strictly speaking, possible, the majority found an operational conflict because a judge would arrive at a different result depending on whether the federal or provincial law were applied. As a result, arguments based on paramountcy will likely become more prevalent in division of powers cases.