Originally published in Blakes Bulletin on Competition,
Antitrust & Foreign Investment, March 2012
On January 30, 2012, the Royal Bank of Scotland N.V. (Canada)
Branch (RBS Canada) brought an application before the Ontario
Superior Court (the Court) seeking to strike down an order issued
by the Court pursuant to section 11 of the Competition Act
(Act). The order, which was obtained on an ex parte basis
by the Commissionerof Competition (Commissioner), required that RBS
Canada produce an extensive amount of documentation in the
possession, power or control of two of its foreign affiliates.
In May 2011, the Commissioner obtained section 11 orders against
five banks being investigated by Canadian, U.S. and EC antitrust
authorities for allegedly participating in a conspiracy to fix the
interest rates for inter-bank loans. Section 11(1)(b) of the Act
allows the Commissioner to apply to the court on an ex
parte basis for an order compelling the production of records
from any person that has or is likely to have information relevant
to the Commissioner's inquiry. Where the Commissioner has
sought an order under section 11(1)(b) in respect of a corporation,
the presiding judge also may order an affiliate of that corporation
to produce records, even if the affiliate is located outside Canada
and is not controlled by the recipient of the section 11 order.
The Commissioner granted RBS Canada two extensions to comply
with the section 11 order. When the Commissioner denied the
company's third extension request, RBS Canada applied for, and
received, a stay of the order on the condition that it file an
application to challenge the order by January 30, 2012.
In its application, RBS Canada has alleged that the section 11
order should be set aside based on the following grounds:
The statutory precondition for an order compelling production
of the foreign documents under section 11(2) was not met because no
documents were sought from RBS Canada under section 11(1)(b).
The Commissioner did not provide full and frank disclosure to
the Court by failing to make it clear in her ex parte
application that no request for documents was being made pursuant
to section 11(1)(b).
RBS Canada (or any subsidiary corporation for that matter)
cannot compel its foreign parent or sibling corporations to produce
documents by virtue of corporate law principles of control.
The section 11 order violates sections 7 and 8 of the
Canadian Charter of Rights and Freedoms because, inter
alia, the failure to produce foreign documents exposes the
officers, directors and agents of the Canadian subsidiary to penal
sanctions, even though compliance is beyond their control.
If a final judgment is rendered in this case, it will be the
first since 2008 when the Labatt Brewing Company, represented by
Blakes, successfully brought a motion setting aside the Commissioner's section
11 order in relation to the Commissioner's inquiry into
Labatt's acquisition of Lakeport Brewing Income Fund. In that
case, the Federal Court set aside the section 11 order on the
grounds that the disclosure made by the Commissioner to secure the
order was "misleading, inaccurate and incomplete", and
had the court received complete disclosure, it would not have
granted the order.
Although Toshiba Canada commenced proceedings in 2009 to set
aside the foreign aspects of a section 11 order issued to it in
2007, those proceedings have been held in abeyance for some
The RBS Canada case will be followed with particular interest.
Indeed, the case could have significant implications concerning the
ability of the Commissioner to investigate foreign corporations for
potential breaches of the Act. The case also could have
constitutional repercussions, particularly in respect of the scope
of Charter protections afforded to corporations and their
An update on notification thresholds
The book value of assets threshold applicable to direct
acquisitions by WTO investors under the Investment Canada
Act has increased from C$312-million to
C$330-million for 2012. The transaction-size
threshold under the Competition Act (i.e., the book value
of the target's assets in Canada or gross revenues from sales
in or from Canada) has increased from C$73-million to
C$77-million for 2012. The party-size threshold
under the Competition Act (i.e., the aggregate book value
of the assets in Canada or revenues from sales in, from and into
Canada of the parties and their affiliates) remains unchanged at
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