Canada: Court Rules SARA Emergency Orders Are Valid And Compensation May Be Available

In a recent ruling, the Federal Court of Canada (Court) confirmed the validity of an emergency order that impacts a private housing development in the suburbs of Montréal and the constitutional validity of the provision of the Species at Risk Act (SARA), which allows such emergency orders to be made. This is the first decision from a Canadian court that considers the constitutional validity of SARA. The Court also confirmed that compensation for losses associated with the order may be available under SARA even though the federal government has never adopted any regulations setting out the circumstances under which compensation will be available. This aspect of the decision may take on heightened significance if (or perhaps when) emergency or other "safety net" orders are made which create restrictions on the use of large areas of provincial Crown or private lands, or the resources that lie within them.

ARE ORDERS AFFECTING PRIVATE LAND CONSTITUTIONAL?

In an application for judicial review regarding the emergency order for the western chorus frog issued by the federal cabinet, one of the developers affected by the order asserted that the provision of SARA that allows emergency orders to impose restrictions on activities on private land is unconstitutional. The developer argued the provision went beyond Parliament's jurisdiction over criminal law because it is purely regulatory in nature and constitutes a colourable attempt, under the guise of the criminal law power, to invade the provinces' jurisdiction over wildlife. The developer also argued that it constitutes a form of "disguised expropriation" without compensation. For more information about the cabinet's western chorus frog emergency order, please see our July 2016 Blakes Bulletin: Federal Government Order to Protect Frog Habitat Stops Land Development in Suburban Montréal.

The Court referred to the emergency order power as part of the "safety net" under SARA, which would, in an emergency, fill in the gaps in existing provincial and territorial regimes. The Court ruled that the government can rely on the criminal law power under section 91(27) of the Constitution Act, 1867 to justify the provision because it aims to supress an evil accompanied by a sanction, and is for a legitimate public purpose, that is, to protect against an imminent threat, caused by human activity, to the survival or recovery of a species at risk. While the emergency order powers grant the cabinet discretion regarding the activities that are to be prohibited, which allows them to be adapted to the particularities of the species, its habitat and the circumstances creating the imminent threat to its survival or recovery, the Court concluded the power was nonetheless a valid exercise of Parliament's criminal law power.

The Court also concluded that the provision was safeguarded by the doctrine of ancillary powers, noting that overlap between federal and provincial powers when regulating the environment is inevitable. The Court also rejected the argument that the emergency order resulted in disguised expropriation.

CAN AFFECTED PARTIES BE COMPENSATED?

Part of the argument regarding "disguised expropriation" related to the compensation provisions in section 64 of SARA. Section 64 provides that fair and reasonable compensation may be paid for "extraordinary" losses arising from the application of the prohibitions on destroying critical habitat, or in respect of habitat necessary for the survival and recovery of a species that is identified in emergency orders. "Extraordinary" is not defined in the Act.

SARA requires the governor-in-council to make regulations that it considers necessary to establish the conditions for the payment of compensation. No compensation regulations have been made to date and as a result, there has been some confusion as to whether compensation is available if an order under SARA results in loss. In this case, when the western chorus frog emergency order was issued, the minister made a statement that the owners of the properties located in the areas affected by the order would not be compensated.

The developer argued that because there were no regulations, no compensation was available, and thus the order resulted in a de facto expropriation without compensation. Such an outcome is not permitted under Canadian law, but the threshold for establishing de facto expropriation is high. The Court held that the inability to obtain compensation from the minister was not relevant to the determination of whether an order made by the governor-in-council is valid. In doing so, it also addressed the underlying assertion that compensation was unavailable. The Court held that the absence of regulations does not prevent the minister from exercising the authority to issue compensation. The Court stated: "...an administrative decision-maker cannot invoke the absence of a regulation to not act when this inaction is equivalent to stripping a law or countering its application". The Court also suggested that the ministers' public statement that no compensation would be paid to property owners indicated that she had made a decision regarding compensation in this case.

IMPLICATIONS

The Court's determination that the provisions of SARA, which effectively allow the federal government to impose restrictions on activities on private or provincial Crown lands are within the authority of Parliament to make, while significant, is not particularly surprising given similar decisions of the courts regarding other federal environmental laws over the past 25 years. The comments suggesting that SARA's compensation provisions are available despite the absence of regulations may be the more significant aspect of this decision.

The Court has effectively said that individuals and entities adversely impacted by emergency or other orders under SARA, which establish protection of critical habitat, are able to seek compensation from the federal government. There is currently a strong likelihood of additional emergency or other "safety net" orders protecting the critical habitat of wide ranging species such as killer whales, and mountain or boreal caribou. There is a very real potential for these orders to result in significant adverse impacts on Indigenous people, private property owners and tenure holders.

What remains unanswered is what impacts will qualify as "extraordinary" in order for a party to be eligible for compensation, and under which circumstances the minister would exercise the discretion to pay it. However, this decision has confirmed that the federal government's failure to clarify such questions through regulation is not a bar to such compensation being sought.

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