Canada: Supreme Court Confirms In R. v. Comeau That Provinces Can Restrict Interprovincial Trade In Beer And Other Goods

On April 19, 2018, the Supreme Court of Canada, in R. v. Comeau ("Comeau"), confirmed the constitutional validity of a New Brunswick law restricting the importation of liquor from other provinces.

Background

On October 6, 2012, New Brunswick resident Gerard Comeau, after doing "what many Canadians who live tantalizingly close to cheaper alcohol prices"1 do, was stopped by the RCMP at the Québec/New Brunswick border with 354 bottles or cans of beer and two bottles of whiskey.  Mr. Comeau stood accused, under section 134(b) of the Liquor Control Act (New Brunswick), of having in his possession an excessive amount of liquor not purchased from the New Brunswick Liquor Corporation (the "Corporation").

Mr. Comeau challenged the constitutionality of this statutory provision by invoking section 121 of the Constitution Act, 1867, which provides that "All Articles of the Growth, Produce, or Manufacture of any one of the Provinces shall, from and after the Union, be admitted free into each of the Provinces". When first introduced, section 121 and related provisions "transferred from the former colonies to the new Dominion"2 the power to levy tariffs in order to create a uniform customs regime for Canada. The current scope of section 121 regarding interprovincial trade, however, remained uncertain.

Mr. Comeau was initially acquitted in April 2016 by the trial judge of the New Brunswick Provincial Court, who concluded that section 134(b) was unconstitutional.3 The New Brunswick Court of Appeal dismissed the application for leave to appeal,4 which prompted this appeal to the Supreme Court by the Attorney General of New Brunswick, joined by interventions by all other provinces and the federal government.

Ruling

In Comeau, the Supreme Court decided in a unanimous decision to uphold section 134(b) and to confirm the provinces' relatively broad authority in enacting trade-restricting legislation. The Court also states that section 121 does not impose "absolute free trade across Canada"5 which would otherwise render any law restricting free trade and free movement of goods throughout Canada unconstitutional. Instead, in order to be struck down under section 121, a statute must meet two conditions.

First, there has to be a tariff-like effect on cross-border trade. The Court refers to the General Agreement on Tariffs and Trade for the definition of a tariff ("customs duties and charges of any kind imposed on or in connection with importation or exportation"), but does not explicitly consider the broader framework of international trade law against non-tariff barriers. The Court does, however, provide hypothetical examples (rum and rye) to demonstrate that a complete prohibition or burdensome import licenses would have the same effect as a tariff. The second condition is that "impeding trade must be [the law's] primary purpose to engage section 121."6 The Court notes that traditional purposes of tariffs are "to collect funds, protecting local industry or punishing another province"7 (the Court does not elaborate on examples of punishment).

Applying those two conditions, the Court finds, with respect to the first condition, that section 134(b) "functions like a tariff,"8 because the fines for illegally bringing liquor back to New Brunswick both increase the cost of the cheaper beer in Quebec (if one gets caught), and act "as a general disincentive for New Brunswickers who would otherwise seek lower-priced liquor than that available through the Corporation."9 The Court also notes that the prohibition has the effect of a tariff with respect to cross-border trade, even though it also targets the black market within New Brunswick.

On the second condition, the Court concludes that the primary purpose of the prohibition is "to restrict access to any non-Corporation liquor"10 in the framework of a broader liquor management scheme establishing a provincial monopoly on the sale of liquor within the provincial boundaries of New Brunswick. Thus, the effect of section 134(b) on interprovincial trade is "only incidental in light of the objective."11 The Court therefore upheld the prohibition on Quebec beer – and Mr. Comeau's acquittal was quashed.

Implications

Comeau maintains the status quo with respect to the constitutional limits on the provinces' powers to restrict imports within their borders, in that ambiguity continues to reign in this area of constitutional law. Given the flexibility provided by the second part of the test, however, it is now somewhat more clear that provinces may restrict imports from other provinces so long as the restriction fits within a broader legislative objective. Future cases will thus have to be decided by taking into account their particular regulatory framework and legislative history. The Court has not applied a proportionality or necessity analysis, unlike, for instance, in matters relating to the Canadian Charter of Rights and Freedoms or international trade law. This may guide the argument and decisions regarding section 121 in any future challenges to provincial monopolies over the sale of liquor (and soon marijuana) and certain supply management systems.

Finally, both sides presented arguments grounded in the constitutional principle of federalism, which "recognizes the autonomy of provincial governments to develop their societies within their respective spheres of jurisdiction."12 Mr. Comeau submitted that federalism supported full economic integration of the provinces. On the other hand, the provinces countered that the principle of federalism afforded them sufficient legislative authority to enact laws within their borders. Despite recognizing that "the federalism principle is vital"13 to this case, the Court declined to rely upon it in its ruling, preferring instead to "maintain balance"14 in their interpretation.

Over at the Canadian Appeals Monitor blog, our colleague Adam Goldenberg has written about how Comeau will limit lower courts' ability to depart from binding precedent in future cases. You can read his analysis here.

Footnotes

1 R. v. Comeau, 2018 SCC 15, para. 9.

2 Ibid., para. 47.

3 R. v. Comeau, 2016 NBPC 3.

4 R. v. Comeau, 2016 NBJ No 232 (QL).

5 R. v. Comeau, 2018 SCC 15, para. 55.

6 Ibid., para. 111.

7 Ibid.

8 Ibid., para. 120.

9 Ibid., para. 119.

10 Ibid., para. 122.

11 Ibid., para. 125.

12 Ibid., para. 78.

13 Ibid., para. 77.

14 Ibid., para. 88.

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