Canada: Focus On Federal Advocacy And Policy

Introduction
By John F. Blakney and Cyrus Reporter, Co-Editors

Issue #1, March 2007

Focus on Federal Advocacy and Policy is a joint publication of Fraser Milner Casgrain’s Federal Regulatory and Public Policy Practice Groups of the firm’s Ottawa office.

Published quarterly, Focus on Federal Advocacy and Policy will present brief analytic reviews of new or proposed federal regulatory and public law issues.

Cabinet Committee Structure Under the Conservative Government
by Kristen Rudderham

The structure and role of Cabinet committees is one way to enhance and define the power of a Prime Minister. Prime Ministers have used committees of key Ministers to control the Cabinet as a decision making forum and to recognize the political significance of certain Ministers. Cabinet committees act as a filter for Cabinet of the whole to debate specific issues and initiatives in detail and to decide what goes forward as proposed government policy.

Prime Minister Harper has reintroduced the concept of centralized Cabinet decision-making, concentrating it within two Cabinet committees. He has reintroduced the Planning & Priorities ("P&P") Committee and split the substantive and procedural elements of the government policy by maintaining the Operations Committee.

The P&P Committee assists the Prime Minister in determining the over-all philosophical priorities of substantial government policy. The Operations Committee handles the implementation and strategic legislative strategy of those policies.

Membership in these committees is telling. Prime Minister Harper has placed a number of his key Ministers in lead roles on these committees. The P&P is chaired by the Prime Minister. P&P is vice-chaired by Lawrence Cannon, Harper’s Quebec Lieutenant. Members include Minister Nicholson, Minister of Justice. This is a logical choice given the Harper government’s focus on law and order issues. Minister of the Environment, John Baird is also a member; reflecting the priority Canadians have placed on the Environment. The Ministers responsible for Seniors, Agriculture, Foreign Affairs, Public Safety, Treasury Board, Indian and Northern Affairs, Industry, Health and Finance are also all members. For consistency, all of the Chairs of the five substantive Cabinet committees sit on P&P as well.

The Operations Committee is mandated to provide day-to-day coordination of the government’s agenda, including issues management, legislation, house planning, and communications. This committee is charged with executing the decisions of the P&P Committee and is chaired by key Minister, the Minister of Indian and Northern Affairs, Jim Prentice. The committee is vice-chaired by Government House Leader, Minister Peter Van Loan.

Other Cabinet committees include the only statutory committee: Treasury Board, as well as committees in substantive areas: Social Affairs, Economic Affairs, Foreign Affairs and National Security, and Environment and Energy Security. Noteworthy is the addition of the Environment and Energy Security Committee, a reflection of the significance how environment issues have dominated during this government’s first year in office.

The impact of the Cabinet committee structure is often evident in the personalities that emerge as characteristic of different governments. A new era of Cabinet Committee structure developed during the Trudeau years. During this time, the tradition of informal cabinet structures gave way to an extensive central agency organization that formalized the roles of Cabinet committees and Privy Council departments, epitomized by the introduction of the P&P Committee and the Treasury Board. This was in part a response to the rapid growth of the Federal government during this period. The Prime Minister became the "court of last resort". This structure created an extensive hierarchy for policy development and implementation that required much coordination between Departments, the complimentary sections within the Privy Council Office and the Cabinet committees. Prime Minister Mulroney simplified this structure somewhat.

Prime Minister Jean Chrétien, incorporating some of the attributes of both models, maintained some of Trudeau’s centralized control, but also exerted his power as Prime Minister by using the power of his personality to manage issues and people within the Cabinet process, much as Prime Minister Mulroney had done. Prime Minister Chrétien maintained a lower number of cabinet committees, eliminating the P&P Committee. Under Prime Minister Paul Martin, the highly centralized and inter-agency model was somewhat revived. During his Liberal Party leadership campaign, Martin was critical of concentrating power too narrowly with the Prime Minister. Instead of creating a central committee that would act as a clearing house for government priorities, such as P&P, Prime Minister Martin encouraged greater inter-agency liaising and created nine Cabinet committees focused on substantive policy areas.

Prime Minister Harper’s greater interest in direct control of the ship of state is reflected in the Cabinet Committee Structure he has implemented. The P&P and Operations Committees are designed to act as a "one stop shop" from which much of the government’s priorities are developed and implemented. It is an elegant model that not only reflects the style of the Prime Minister but also the precarious nature of a minority government.

National security concerns are increasingly prominent in both law and the practice of international trade. In the United States, the activities of the Committee on Foreign Investments in the United States (CFIUS), an inter-agency office with a mandate to review foreign investments with the aim of restricting investments which threaten national security, have taken on a new prominence. In Canada, the Federal government is contemplating re-invigorating the investment review mechanisms which empower governments to block foreign investments judged not to be in the "national interest"¹. In many countries, export control lists are growing and customs authorities are devoting increased resources to developing – and enforcing – policies aimed at protecting national security, even where such policies add additional layers of bureaucracy and impose increased costs for business. In certain other areas, industries that traditionally have been borderless are having to reconsider some of the core aspects of their business structures as governments develop new – and more restrictive – policies on issues such as data security.

Most, if not all, international trade agreements currently in force contain broad national security exceptions. The enormous scope of these national security can be explained, in part, by the fact that national security concerns lie at the core of the sovereign interests of the negotiating parties. However, most of these international trade agreements (and the national security exceptions contained therein) were negotiated prior to the horrific events of September 11, 2001, at a time when war and national security concerns were more remote, at least for the industrialized countries that have historically been the key instigators of trade agreements. As national security has become a key priority, the likelihood of these exceptions being invoked and broadly construed has increased.

In this new era of heightened security concerns, a legitimate question to ask is whether the existing national security exceptions strike an appropriate balance between the promotion of fair and legitimate trade and a sovereign’s authority to protect its territory and population. Jurisprudence and other instruments interpreting the scope and application of the national security exceptions are essentially non-existent.² Consequently, one must resort to first principles and examine the text and structure of the national security exceptions and their interaction with other provisions in order to assess how these exceptions are likely to be interpreted.

The General Agreement on Tariffs and Trade 1947 (GATT 1947) and the North American Free Trade Agreement (NAFTA) exceptions for national security are essentially identical in both structure and text.³ Three of the more notable similarities are outlined below.

First, neither the GATT 1947 nor NAFTA national security exceptions contain the caveat that is found in the preamble to the other general exceptions contained in either agreement. The missing caveat requires that the measure in question not be "applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade".⁴ Arguably, the omission implies that a national security measure need not be the least trade restrictive means of addressing the threat to national threat or non-discriminatory in application and effect, provided that the measure satisfies the other requirements of the GATT 1947 an NAFTA exceptions.

Second, both the GATT 1947 and NAFTA exceptions for national security are framed in discretionary terms which allow the government in question to refuse to furnish information or take action "which it considers necessary for the protection of its essential security interests". While there is a dearth of either WTO or NAFTA guidance as to the scope of this sovereign discretion, at least one domestic body has interpreted a similarly worded national security exceptions found in the WTO Agreement on Government Procurement and the analogous procurement chapter in NAFTA.

In Lotus Development Canada Limited, Novell Canada, Ltd. And Netscape Communications Canada Inc., the Canadian International Trade Tribunal concluded that "…the Tribunal does not have any jurisdiction with respect to the government’s determination that a particular matter relates to national security".⁵ This is a somewhat troubling precedent given that, even for the most absolute of discretionary powers, Anglo-American courts generally have the right to review and issue remands with respect to decisions that are issued in bad faith or that are completely divorced from relevant considerations.⁶

Finally, both the GATT 1947 and the NAFTA exceptions limit the discretion of a party to take actions which it deems necessary for the protection of its national security interest. Any such action must either relate to one of a number of specific security concerns (e.g., fissionable materials and traffic in arms) or be "taken in the time of war or other emergency in international relations". A key question that has yet to be resolved by a WTO, NAFTA or other dispute resolution panel is whether the potentially interminable War on Terror constitutes a "time of war or other emergency in international relations". If the answer to that question is "yes", then the potential for use – and abuse – of national security exceptions is limitless.

It remains to be seen whether or not the national security exceptions contained in GATT 1947, the NAFTA and other trade agreements will disputed. However, given the security-driven era in which we live and the self-interest of all countries to preserve their own jurisdiction to declare measures as pertaining to national security, businesses should expect to encounter significant difficulties – potentially even in convincing their home governments to advance their issues – any time that their commercial interests come into conflict with purported national security concerns.

New Organic Product Regulations
by John F. Blakney, Olivia Wright

On December 22, 2006, the Minister of Agriculture and Agri-Food and the Minister of the Canadian Wheat Board announced the final publication of the Organic Products Regulations, SOR/2006-338, to come into force two years after enactment. The Regulations are intended to protect consumers against false organic claims by regulating the marketing of organic products and governing the use of a new Canada Organic logo.

Pursuant to the Regulations, only those food products which have been certified to contain at least 95% organic products can be marketed as organic and bear the "Canada Organic" logo established by the Regulations. The Canadian Food Inspection Agency (CFIA) will be responsible for supervising accreditation bodies which in turn will supervise certification bodies.

Pursuant to the Regulations, only those food products which have been certified to contain at least 95% organic products can be marketed as organic and bear the "Canada Organic" logo established by the Regulations. The Canadian Food Inspection Agency (CFIA) will be responsible for supervising accreditation bodies which in turn will supervise certification bodies.

The product and control methods specified in the current official Canadian Standard, Organic Production Systems – General Principles and Management Standards, will continue to apply in product certification decisions.

These regulations will codify a voluntary organic labelling framework that has been in place for several years, and will catch up with similar mandatory legislated requirements for products traded as organic in the EU, the United States and the Provinces of British Columbia and Quebec.

Currently multiple organic standards are employed by a number of accredited certification bodies in Canada. Canadian food importers and producers are, as a result, often faced with multiple certificate fees.

The intention of the Regulations is to reduce certification costs and to improve Canadian exports through the use of a single "Canadian" organic certification mark and certification standard.

Following a lengthy public proceeding, the CRTC released a much-anticipated determination on April 6, 2006 setting out a framework for the deregulation of Canada’s local exchange services market. In Forbearance from the regulation of retail local exchange services, Telecom Decision CRTC 2006-15, the CRTC established a five-part test that it would apply in deciding to deregulate or "forbear" from regulating an incumbent telephone company’s local telephone services in particular markets:

• the incumbent has experienced a 25 per cent market share loss in the relevant market for which forbearance is sought;

• the incumbent has met certain specified competitor quality of service indicators for the six-month period prior to the filing of its forbearance application;

• for forbearance applications relating to the residential market, the incumbent has an approved competitor services tariff for wholesale ADSL access service, and for forbearance applications relating to the business market, the incumbent has an approved competitor service tariff for wholesale ADSL and Ethernet access and transport service tariffs;

• the incumbent has implemented competitor access to its operational support systems; and

• the incumbent has demonstrated that rivalrous behaviour exists within the relevant market.

Reaction to the CRTC’s decision was mixed. Consumer groups and new entrants generally appeared to be satisfied with the Decision.

In contrast, four large incumbent telephone companies, including Bell Canada and Telus Communications Co., filed a petition with the Federal Cabinet, pursuant to section 12 of the Telecommunications Act, requesting that the decisions be referred back to the CRTC for reconsideration. They argued, among other things, that the CRTC’s decision is inconsistent with the recommendations contained in a recently published Telecommunications Policy Review Panel Report, which stresses the need for greater reliance on market forces and which had been endorsed by the Minister of Industry.

Instead of referring the matter back to the CRTC, on December 16, 2006, the Federal Cabinet, on the recommendation of the Minister of Industry issued a proposed Order to vary the CRTC’s decision. This Order would replace the above-noted market share test with a competitor presence test, which considers whether other facilities-based telecommunications service providers offer service in a given geographic region. The proposed order would further remove a consideration of whether rivalrous behaviour exists in the relevant market and eliminate existing competitive safeguards designed to prevent incumbents from targeting competitors’ customers for a defined period of time. The public was invited to submit comments on the government’s proposed order by January 15, 2007.

A number of parties have raised significant legal and policy issues concerning the relationship between the government and an independent statutory tribunal. The Federal Cabinet has until the first week of April 2007 to make the proposed Order to vary the Decision.

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