On May 25, 2011, the Federal Court of Appeal
released its decision in Canada (Attorney
General) v United States Steel Corp. In this decision, the FCA
dismissed the appeal of US Steel, affirming the decision of the
lower court to the effect that s. 39 and 40 of the Investment Canada
Act (ICA) do not violate s. 11(d) of the Charter and s. 2(e) of the Bill of
Rights. Accordingly, the constitutional
validity of monetary penalties issued by a court under s. 40 of the
ICA, in response to a breach of undertaking, has once again been
By way of background, on July 17, 2009, the Minister of Industry
asked the Federal Court to impose retroactive penalties against US
Steel under s. 40 of the ICA for allegedly breaching two
undertakings made by US Steel as conditions for the Minister's
approval of the 2007 acquisition of Stelco, one of the last
Canadian-owned steel companies in Canada. The Act allows for fines
of $10,000 per day per breach, until such a time that US Steel
complied with the undertakings. US Steel opposed the penalties,
arguing that ss. 39 and 40 of the Act violated s. 11(d) of the
Charter (the presumption of innocence for persons charged
with an offence) and s. 2(e) of the Bill of Rights (the
right to a fair hearing in accordance with the principles of
fundamental justice). In its June 14, 2010
decision, the Federal Court rejected US
Steel's arguments. It ruled that the s. 40 penalties fell
outside the ambit of s. 11(d) because, following the Supreme Court
of Canada in R. v
Wigglesworth, the penalties were not criminal
in nature, nor did they impose true penal consequences. Further,
the Federal Court rejected the Bill of Rights argument
because US Steel had not been denied natural justice or procedural
fairness in this case. US Steel appealed to the FCA, leading to the
decision just issued.
The FCA dismissed the appeal, following the reasoning that in
order for s. 11(d) of the Charter to apply to a
proceeding, the proceeding must either be criminal in nature or
lead to truly penal consequences. The FCA affirmed that the
proceedings under s. 39 and 40 of the ICA met neither of these
criteria, and therefore s. 11(d) was not applicable. In so ruling,
the FCA confirmed two important points. First, it confirmed that
the purpose of the s. 40 sanctions is to encourage timely
compliance with undertakings made under the ICA, rather than to
punish foreign investors for a societal wrong. Second, it confirmed
the proposition that a large monetary penalty does not
automatically imply a penal consequence. This proposition
recognizes that large fines are sometimes required to deter large
corporations from flouting regulations, so that fines are not
simply regarded as a cost of doing business.
Significantly, the FCA ruled that even the possibility of
contempt proceedings, which are available under s. 40(4) of the
ICA, do not render the proceedings criminal in nature,
notwithstanding the fact that contempt proceedings can result in
imprisonment. This is because US Steel would only face the
possibility of contempt proceedings if it was able but unwilling to
pay the penalty. Further, any contempt proceedings would arise
separately from the current proceeding and would attract full
Charter protection at that time.
This decision is significant because it confirms that the
Minister of Industry can validly impose sanctions for breaches of
undertakings made by foreign investors under the Investment
Canada Act. Further, the principles espoused in the case may
be transferable to other administrative monetary penalties, such as
those in the Competition
Act, the validity of which have yet to be
tested in court.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
The Commissioner of Competition addressed innovation, enforcement and policy initiatives at the Competition Bureau in his keynote speech, "Strengthening Competition: Innovation, Collaboration and Transparency."
Used car listing website operator CarGurus Inc.'s attempt to force rival Trader Corporation to supply it with vehicle listing data has encountered a dead end as the Competition Tribunal denied it leave to commence a private application under several provisions of the Competition Act.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).