Canada: The Impact Of The USA PATRIOT Act In Canada

The USA PATRIOT Act—short for the "Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001"—is intended to facilitate the fight against terrorism. As originally passed, sixteen key provisions of the Act were set to expire at the end of 2005, but in late July the U.S. House of Representatives and the U.S. Senate voted to renew them. Since the House and Senate bills are not identical, the form of the final legislation—which will likely include some minor amendments to the Act—still has to be worked out by a congressional Conference Committee.

The Act has expanded U.S. government surveillance powers, raising privacy concerns well beyond America’s borders. In Canada, these concerns centre on the possibility that personal data entrusted to U.S.-based service providers (and other entities), or even their Canadian affiliates, may be subject to production orders on the basis of U.S. anti-terrorism legislation.

Since the legislation now appears set to remain in place for the foreseeable future, it is important that Canadian businesses consider whether USA PATRIOT Act issues might affect them. This update briefly outlines the relevant provisions of the legislation and analyzes its possible effects north of the border. In particular, we consider the case of a British Columbia public service union that went to court in 2004 and 2005 in an effort to prevent the B.C. government from outsourcing certain Medicare-related administrative functions to an affiliate of a U.S. firm. The union argued, in part, that the outsourcing would expose certain personal health care information to disclosure under the USA PATRIOT Act.

The Foreign Intelligence Surveillance Act

The USA PATRIOT Act generally extends existing powers rather than creating entirely new ones. The Foreign Intelligence Surveillance Act, or FISA, dates from 1978 and originally gave U.S. officials the authority to gather intelligence, by electronic means only, on foreign agents in the U.S. and abroad. In 1994, FISA was extended to allow secret physical searches of homes and offices. Central to the FISA process is the Foreign Intelligence Surveillance Court (the "FISA Court") comprised of U.S. federal judges who exclusively hear Justice Department requests for warrants relating to foreign intelligence investigations. The FISA Court conducts its hearings in camera and almost never publishes its rulings. There is provision for appeal to a Foreign Intelligence Surveillance Court of Review, which sat for the first time as recently as 2002.

Those served with a FISA court order are prohibited from disclosing that they have been the subject of the order or of an ensuing search. Disclosure of the existence of a National Security Letter—discussed below in relation to section 505 of FISA—is also prohibited.


In its original form, FISA was an information and evidence gathering tool to be used against agents of foreign governments, rather than a prosecutorial tool to be used in criminal investigations against U.S. citizens. The USA PATRIOT Act introduced four important changes that make it easier for the Justice Department to obtain FISA warrants:

  • Search and surveillance authority more widely available (s.218)
    This is one of the most significant changes. Before the USA PATRIOT Act, physical searches and electronic surveillance could only be conducted under FISA if their purpose was solely foreign intelligence gathering. The USA PATRIOT Act amended FISA to allow the FISA Court to authorize physical searches and electronic surveillance where foreign intelligence gathering is a significant purpose, not necessarily the only purpose. This may make it easier to obtain FISA Court warrants generally.
  • Threshold lowered (s.215)
    This change makes it easier to obtain warrants with respect to those under suspicion of involvement in terrorism not associated with a specific foreign government. Prior to the USA PATRIOT Act, a FISA order required specific evidence that the individual who was the subject matter of records being sought was either a foreign power or an agent of a foreign power. By amending section 215, the USA PATRIOT Act reduced this threshold to a demonstration that the records are sought for an authorized investigation to obtain foreign intelligence information not concerning a U.S. person or to protect against international terrorism or clandestine intelligence activities.
  • Subject-matter scope broadened (s.215)
    The USA PATRIOT Act significantly expands the subject matter over which orders may be granted under section 215 of FISA. Previously, FISA Orders were limited in scope to certain business records held by public carriers and accommodation, physical storage or vehicle rental facilities; this has been expanded to include "any tangible things" without restriction regarding the types of organizations holding such tangible things.
  • The July 2005 legislation discussed above would impose new sunset clauses on section 215: 10 years in the case of House Bill H.R.3199 and 4 years in the case of Senate Bill S.1389. While these and other differences between the bills have yet to be reconciled by the congressional Conference Committee (in keeping with U.S. legislative procedure), it appears highly likely at the time of writing that section 215 will remain in place for at least four more years.
  • National Security Letter regime expanded (s.505)
    The USA PATRIOT Act expands the circumstances under which the FBI can issue National Security Letters to compel the disclosure of customer information and also expands the range of potentially affected industries. Previously, the FBI was entitled to issue a National Security Letter to compel financial institutions, phone companies or Internet service providers to disclose information about their customers upon the demonstration of specific facts in support of the letter. The USA PATRIOT Act has lowered this evidentiary threshold to establishing relevance to an authorized intelligence investigation. In addition, the list of entities subject to the security letters has been expanded to include travel agencies, real estate agents, the U.S. Postal Service, jewellery stores, casinos and car dealerships.

The British Columbia Proceedings

While the USA PATRIOT Act has received publicity worldwide, its potential extra-territorial effects became a major issue in Canada when the British Columbia Government and Service Employees’ Union ("BCGEU") raised the spectre of FISA production orders in connection with a B.C. government proposal to outsource certain administrative and billings-related aspects of the province’s Medicare and Pharmacare plans. The government had selected a Canadian subsidiary of U.S.-based Maximus, Inc. as its service provider.

The BCGEU filed a complaint with the B.C. Privacy Commissioner, arguing that, if the outsourcing went forward, the USA PATRIOT Act could potentially be applied to compel disclosure to the U.S. government of confidential information concerning British Columbians. After a public input process, the Privacy Commissioner produced a report concluding that a FISA Court order might indeed require a U.S. corporation to produce records held in Canada by a Canadian subsidiary, notably where a person within the U.S. has the legal or practical ability to obtain the records. A determination of "legal ability" in this context would likely depend on the U.S. definition of "control" which (as the Privacy Commissioner noted) has been found on the basis of corporate relationship alone, including a U.S. corporation’s ability, directly or indirectly, to elect a majority of the directors of a foreign corporation.

The Privacy Commissioner proceeded to make sixteen recommendations, including amendments to legislation, introducing a government litigation policy to prevent disclosure of personal information, obtaining assurances from the U.S. government that the USA PATRIOT Act will not be used to obtain personal information in Canada and requiring close monitoring of contract performance.

The B.C. legislature then amended the Freedom of Information and Protection of Privacy Act (FOIPPA) and, over the BCGEU’s objections, concluded the outsourcing agreement with Canadian subsidiaries of Maximus in late 2004. In that agreement, the subsidiaries were structured as a chain of wholly-owned Canadian business corporations descending as follows from the U.S. parent:

  • Maximus, Inc. (U.S. parent)
  • Maximus Canada Inc. (Canadian corporation)
  • Maximus BC Health Inc. (B.C. corporation)
  • Maximus BC Health Benefit Operations Inc. (B.C. corporation)

The structure was described as follows by the Court:

In order to isolate [Maximus BC Health Inc. and Maximus BC Health Benefit Operations Inc.] from Maximus Canada and Maximus Inc. (U.S.A.) the Master Services Agreement provides that the shares of Maximus BC Health Inc. will be held in trust by a trust company operating in the Province of British Columbia. The beneficial interest in those shares is to be held by Maximus Canada. The trust provision in the contract is one of the default remedies that the Province has in relation to a breach or prospective breach by Maximus. In the event such an event occurs or will occur or is likely to occur, the trust company, who holds legal title to the shares, will deliver the shares to the Province of British Columbia who will be able to take ownership and act accordingly. In the event the default or anticipated default is resolved, the process is to be reversed.

The agreement further stated that at all material times Maximus BC Health and Maximus BC Health Benefit Operations "are under the policy guidelines and oversight of the Province of British Columbia."

On March 23, 2005, the Supreme Court of B.C. rejected the BCGEU’s petition for various declarations and an order quashing the agreement. Mr. Justice Melvin found that section 30 of FOIPPA required only that a public body make "reasonable" security arrangements and that this requirement, together with the requirement in section 30.1 that a public body’s information be stored in and accessible only from Canada, had been met. It is not surprising that the Court found that the Maximus contract complied with FOIPPA, given that FOIPPA had been amended with the contract in mind.

The judgment also considered the application of the Charter of Rights and Freedoms to the situation. Melvin J. held that the right to privacy found in section 7 of the Charter is not absolute. Where parties have taken "all reasonable steps" to ensure confidentiality, any minor risk of disclosure that might remain is not a breach of anyone’s Charter rights. In this case FOIPPA and the contract itself contained provisions adequate to reduce the risk to an acceptable level. These included FOIPPA’s whistle-blowing protections (s. 30.3) and its provisions ensuring that records are kept in private and within Canada (e.g. s. 30.1) as well as the following contractual provisions:

  • A trust provision providing that if a risk of disclosure occurs the Province obtains the shares and operates the system until the risk disappears.
  • Restrictions on use and control of electronic equipment by employees.
  • A $35M penalty for breach of confidentiality.
  • A provision stating that all of the information remains the property of the Province.
  • A contractual non-disclosure of data provision.
  • A provision that Maximus agrees that it is subject solely to the laws of B.C. and Canada.

Going Forward

It is likely that, absent any clear agreement between the Canadian and US governments, there will continue to be a relatively small but nonetheless significant risk that personal information maintained by Canadian affiliates of U.S. corporations could be subject to disclosure under FISA. The existence of such a risk might discourage some Canadian organizations, especially governmental authorities, from outsourcing functions that include access to personal information to U.S.-based or U.S.-affiliated service providers. The Maximus decision suggests some measures that might potentially reduce this risk.

The risk of losing contracts because of the outsourcer’s concerns about disclosure under FISA must be weighed, of course, against the economic and informational benefits of maintaining seamless digital networks and the possibly prohibitive costs of segregating Canadian data from access and control by U.S. entities. The Maximus ruling is helpful, but the result appears to have depended on Maximus’ commitment to segregate its Canadian data in Canadian locations controlled by Canadian subsidiaries.

In considering the application of the USA PATRIOT Act to personal information under their control, Canadian organizations should bear the following in mind:

  • Historical evidence suggests that the risks associated with, and injury resulting from, USA PATRIOT Act disclosures may not be significant:
    While the USA PATRIOT Act has received a great deal of publicity, the U.S. government already had the ability, under FISA, to obtain personal information about non-residents (albeit not as much and not as easily as is now the case). The thousands of warrant requests approved between 1978 and 2001 might have included some that referred to Canadians, but their use does not appear to have created any significant difficulties for businesses based in Canada.1
  • Even if an organization can succeed in removing its data from the reach of the USA PATRIOT Act, it will not necessarily be secure against exposure to security-related investigations.
    Canada has comparable legislation to the USA PATRIOT Act. Introduced in response to the 2001 terrorist attacks, Canada’s Anti-terrorism Act expanded the intelligence gathering and surveillance powers of CSIS, the Canadian intelligence and security agency. While a warrant is required by CSIS for surveillance activities or the seizure of information, the warrant application is heard in private by specially designated judges, much as is the case under FISA. Various privacy oversight officials have voiced concern about or opposition to a number of the changes effected by the Anti-terrorism Act.
    In addition, subsection 7(3)(c.1) of PIPEDA, Canada’s federal privacy legislation, makes an exception for disclosure to "government institutions" where (i) such an institution has "indicated that it suspects that the information relates to national security, the defence of Canada or the conduct or international affairs" or (ii) where "the disclosure is requested for the purpose of enforcing any law of Canada, a province or a foreign jurisdiction, carrying out an investigation…or gathering intelligence for the purpose of…any such law."
  • USA PATRIOT Act concerns will arise for many Canadian organizations whether or not they provide any information to an external service provider.
    To create greater efficiencies, many organizations share common networks with affiliated American organizations. Personal information residing on such shared networks will potentially be accessible to U.S. authorities under FISA, even if such personal information does not belong to the American organizations which have access to the networks. For licensing and information sharing purposes, creating an isolated network for Canadian personal information may be extremely costly. Also, while the B.C. decision suggests that isolating Canadian data may be of value in avoiding the application of the USA PATRIOT Act, it is still too early to say with confidence that this view will prevail in the courts of the other Canadian provinces and territories.
  • If organizations possess only non-sensitive personal information, the financial and logistic consequences of implementing measures to mitigate or reduce the possible application of the USA PATRIOT Act may not be warranted.
    When considering the possible application of the USA PATRIOT Act, each organization should consider the sensitivity of the personal information in its possession and whether such personal information would likely be (i) relevant in connection with intelligence gathering activities related to national security; and (ii) of concern to the subject individuals if it was disclosed in connection with intelligence gathering activities related to national security.

1 It is estimated that between 1979 and 2001 more than 14,000 warrant requests were made to the FISA Court, of which all but five were approved. Stephen J. Schulhofer, "No Checks, No Balances: Discarding Bedrock Constitutional Principles" in Richard C. Leone and Greg Anrig Jr., eds., The War on Our Freedoms: Civil Liberties in an Age of Terrorism (New York: Public Affairs Press, 2003) 74 at 81.

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

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
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).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions