In August 2018, the Attorney General of Québec announced its intention to appeal the decision of the Superior Court of Québec, which held that the Québec government's controversial attempt to force Internet Service Providers ("ISPs") to block certain iGaming sites is unconstitutional.
As discussed in our article last month, see "Quebec's Superior Court Rules that Bill 74 is Unconstitutional," on May 17, 2016, the Québec government passed the omnibus Bill 74, which contained unprecedented Internet-censoring provisions. Bill 74 introduced amendments to the Consumer Protection Act that would purportedly restrict illegal online gambling by requiring ISPs to block persons in Québec from accessing unlicensed iGaming websites.
Two months after the enactment of Bill 74, a group of Canada's largest ISPs commenced legal proceedings and sought a declaration from the Superior Court of Québec stating that the amendments encroached upon federal jurisdiction and, therefore, were unconstitutional and of no force and effect. Concurrently in July of 2016, the Public Interest Advocacy Centre ("PIAC") also filed an application with the Canadian Radio-television and Telecommunications Commission ("CRTC") objecting to the law on similar grounds. Shortly thereafter, in September 2016, the CRTC temporarily suspending PIAC's application while the constitutional issues went before the courts.
On July 24, 2018, the Superior Court of Québec held that the provincial rule creating mandated ISP blocking for unlicensed iGaming sites that compete with Loto-Québec is unconstitutional and ultra vires the powers of the Province. Although consumer protection is a matter of provincial jurisdiction, the Court concluded that both the object and the effects of Bill 74 encroached upon two areas of exclusive federal jurisdiction: telecommunications and criminal law. As a result, the legal and practical effects of Bill 74 were outside of the scope of the provincial jurisdiction.
The Court's ruling was a major loss to Loto-Québec as the Court concluded that the impugned measure was designed to prevent competitive iGaming sites from being available in the Province rather than to protect Québecois consumer health as Loto-Québec had suggested.
The Québec Government Appeals Ruling of the Superior Court
On August 21, 2018, the Attorney General of Québec filed a Notice of Appeal with the Québec Court of Appeal. The provincial government submitted that the trial judge erred in his determination of the true character of the impugned provisions when assessing the "pith and substance" of Bill 74. Citing the Parliamentary debates, the provincial government asserted that the purposes of the legislation—gaming, consumer protection, prevention of crime, and public health—are intra vires the Province. In its Notice of Appeal, the Attorney General rejects Justice Pollet's conclusion that the true purpose of the legislation was to thwart competition in an effort to increase Espacejeux's market share and consequentially enable the Province to earn more money. To this end, the Province recognizes that although it will derive income from the enactment of the Bill, this fact is neither incompatible with nor does it negate the legitimacy of the stated goals.
The Attorney General further submitted in its filing that the provincially regulated activity of crime prevention could not be invalidated on the basis that its enforcement incidentally relates to the federally regulated telecommunications industry. Lastly, the Attorney General submitted that the trial judge wrongfully disregarded the provincial aspect applicable to the regulation of gaming activities as affirmed by subsections 92 (13) and (16) of the Constitution Act.
If the Québec Court of Appeal sides with the Attorney General, it may overrule the decision and reinstate the constitutionality of Bill 74. The timeline of the Province's appeal is unknown, but it is expected to take at least several months.
Anticipated Impact on the iGaming Industry
What is certain is that the Superior Court decision is a blow to the provincial monopolies across Canada, which seek to maintain the exclusive control of iGaming in Canada under the monopoly established by the Criminal Code. The Superior Court ruling has sent a message to provincial governments: attempts to instigate Internet site-blocking schemes to further a province's goals, whether economic or otherwise, will likely to be unsuccessful. Deference must be accorded to the CRTC and, given its cautious attitude towards using its designated power to block websites, it seems unlikely that a province will be successful in its attempt to do so. As a practical consideration, if the decision of the Superior Court is reversed, Bill 74 would require Canadian ISPs to invest in new and expensive infrastructure to engage in the requisite blocking capabilities, the costs of which are likely to be subsidized by consumers nationally.
Will the Québec Court of Appeal uphold the decision that represents a crack in the provincial iGaming monopoly? Will it encourage offshore iGaming sites to continue to target Canadians? Only time will tell.
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