Canada: Cross-Border Investigations: B.C. Court Affirms Broad Power To Issue Legal Process Against Foreign Companies

Law enforcement authorities in Canada have always had broad search and seizure powers to obtain records located in Canada that are relevant to an ongoing criminal or white-collar investigation. In 2004, law enforcement authorities acquired yet another powerful investigative tool when Parliament adopted amendments to the Criminal Code. This new tool allows the Crown to seek an order from the court that compels a third-party custodian of data or records to produce information that is relevant to an ongoing investigation.[1] In recent years, law enforcement authorities have sought to test whether they can invoke these relatively new powers to compel the production and disclosure of private email communications, messages and other information that is held outside Canada in the cloud or on foreign-based data services.[2] This year, these efforts met with notable success in Attorney-General (B.C.) v. Brecknell (Brecknell), a decision of the B.C. Court of Appeal with potentially serious implications for foreign companies that have a "virtual presence" in Canada.

The significance of the Brecknell case

Before Brecknell, decisions in criminal and white-collar cases were mixed as to whether production orders could be obtained against foreign companies that host data of Canadians on servers outside Canada. Some courts refused to grant such orders, taking the view that the court's compulsive powers under the Criminal Code do not extend outside Canada. In other instances, courts granted such orders on the basis that a foreign company that contracts with users in Canada and that hosts the private data of Canadians must be subject to the jurisdiction of the Canadian courts.

The Court's decision in Brecknell signals that foreign companies that hold data relating to Canadians may now be exposed to legal process issued by Canadian courts.

In Brecknell, which was released in January 2018, the B.C. Court of Appeal issued the first appellate decision in Canada that considered the territorial and international scope of the Court's production order powers under the Criminal Code. In Brecknell, the Court unanimously held that a British Columbia court has jurisdiction to issue a production order against a foreign company that has a "virtual presence" in British Columbia (i.e., the company contracts with users in Canada over the internet, even if it has no physical presence or subsidiary in Canada). On its face, the Court's decision represents a broad assertion of judicial authority over foreign-based companies that hold or possess data or information relating to Canadians.

The Brecknell case raises a host of constitutional, international law and privacy questions that likely have to await a future case to resolve. But in the immediate future, the Court's decision in Brecknell signals that foreign companies that hold data relating to Canadians may now be exposed to legal process issued by Canadian courts.

The basis for the exercise of jurisdiction under Canadian law

Under Canadian law, a court may generally exercise personal jurisdiction over a foreign defendant if there is a "real and substantial connection" between the defendant, Canada and the conduct or activity in question. On that basis, the courts in Canada have previously held that they may exercise jurisdiction over a foreign defendant in a proceeding where the foreign defendant sells goods or services to Canadians, or contracts with Canadian users. In addition, the courts have held that they may issue civil injunctions and other relief as against foreign defendants, even as against non-parties to a proceeding in Canada. For instance, in the Supreme Court of Canada's recent decision in Google, Inc. v. Equustek Solutions, Inc., the Court upheld a worldwide injunction against Google that required Google to remove and delist certain links from its search engine.[3]

However, a Canadian court's ability to exercise its broad compulsive production powers under the Criminal Code and under other regulatory statutes against a foreign defendant that has no physical presence in Canada raises serious issues of international comity. The production order powers under the Criminal Code do not, on their face, suggest that Parliament intended such orders to have extraterritorial effect. There is also an existing mutual legal assistance treaty between Canada and the United States that is applicable to criminal matters. This treaty (and others like it) provides mechanisms for the two countries to request assistance in obtaining evidence and executing requests for searches and seizures (among other things). In the past, law enforcement authorities have generally relied on these international instruments when they are seeking to obtain evidence outside Canada, particularly out of respect for the sovereignty of a foreign state.[4]

Effect of the Brecknell case

In Brecknell, as part of an ongoing criminal prosecution, the Crown applied to the B.C. Provincial Court for a production order against Craigslist. Craigslist is based in California, where it operates a popular internet classified advertisement site. The Crown sought disclosure regarding a posting on the site that was advertised and targeted to certain residents of B.C. In particular, the Crown sought the user's name and address, the user's email and IP address, the user's phone number used to verify the account, and the records of the user's advertisement postings. However, Craigslist had no physical presence in Canada – Craigslist had no subsidiaries in Canada, no facilities in Canada and no data servers in Canada. It was not even clear whether the underlying data was stored in the United States or in other countries. To further complicate matters, Craigslist did not acknowledge service of the application and did not participate in the proceedings.

The B.C. Provincial Court refused to grant the order. The Court found that Craigslist conducted business in B.C. and had a real and substantial connection to the province through its advertisements to B.C. residents. However, the court concluded it could not issue a production order against a U.S. company that had only a "virtual presence" in B.C. The court concluded that Parliament intended that a production order could only be issued against a company that had some custodial or record-keeping presence within Canada's territorial borders. Moreover, from a practical perspective, the court noted that Craigslist has no office in Canada for service of enforcement proceedings in the event the order was not complied with. In other words, there was considerable doubt as to how to enforce a court order against a company that is not present in Canada.

On appeal, the B.C. Court of Appeal issued the order against Craigslist to produce the relevant information. The Court found that it had personal jurisdiction over Craigslist and that Craigslist was a "person within the jurisdiction" given its "virtual presence" in B.C. The Court also held that it had sufficient authority to issue the order despite Craigslist's lack of physical presence in B.C. and despite the physical location of the data. The court held that distinguishing between "physical presence" and "virtual presence" for the purposes of the Criminal Code "would defeat the purpose of the legislation and ignore the realities of modern day commerce."[5] The Court further found that its interpretation of the provision did not raise issues relating to the extraterritorial effect of Canadian laws, and generally accorded with Parliament's intention to modernize police powers to investigate criminal conduct that is increasingly occurring over the internet.

Implications

Since the decision, numerous law enforcement authorities have obtained production orders against other U.S. companies, and have sought to extend the decision to provinces outside B.C. And while Brecknell was rendered under the Criminal Code, it has potential implications for the Crown's ability to seize foreign-based documents under other federal and provincial statutes, including in the competition, securities and tax fields.

The Court's reasoning also raises distinct privacy issues, particularly as more and more individuals store confidential documents and communications in the cloud. In the past, law enforcement authorities would have had to obtain a warrant to seize paper documents stored (for example) at the individual's home, with notice to the individual as the search is occurring. However, under the production order provisions to the Code, law enforcement authorities may surreptitiously seize private communications that are held by third parties, often without notice to the individual.

Craiglist avoided any participation in the Brecknell case, and as a result, there was no application for leave to appeal to the Supreme Court of Canada. Nonetheless, there are good arguments that the Court's decision was wrongly decided. On its face, the Court's decision appears to give extra-territorial effect to production orders. In addition to the issues it raises regarding the limits on the ability of Parliament to pass laws with extraterritorial effect, parliamentary intent to limit the effect of production orders to within Canada is arguably reflected in the Criminal Code, including the provision dealing with conditions that may be included in production orders which specifically provides that "[t]he order has effect throughout Canada..."[6]

Moreover, it is not clear how any such orders could be realistically enforced outside Canada. The issuance of an order against a foreign company in a foreign state arguably offends principles of international comity. One court in Newfoundland and Labrador agrees and it refused to issue a production order against a social media company in California. As the court held: "This provision cannot be enforced extraterritorially. ... Thus, Brecknell creates a situation in which a Canadian court can issue an order, but without any authority to enforce it. The order becomes meaningless."[7]

Given the existence of an established multilateral instrument of co-operation under the MLAT Treaty, there is a compelling argument that representatives of the government of Canada should be precluded from serving legal process on foreign companies in the United States outside the mechanisms of the treaty.

It is also important to keep in mind the specific circumstances of Brecknell and the issues that the Court of Appeal did not address. The data sought in the production order was essentially Craigslist's business records relating to a particular posting. Notably, it did not seek private communications such as emails. As a result, the Court did not consider whether compliance with the production order would potentially violate U.S. federal law such as the Stored Communications Act. In that regard, the Court specifically noted that "if a person is subject to other legal obligations that prevent compliance ... then there is an opportunity to canvass those issues before compliance."[8]

It remains to be seen whether the B.C. Court of Appeal's reasoning in Brecknell will stand the test of time and whether it will be applied to private communications. In the interim, prosecutors and other law enforcement officials in Canada will likely seek to take advantage of their powerful new tool to seek to compel the production of private information and data of Canadians that is held outside Canada.


Footnotes

[1] On March 29, 2004, Parliament passed Bill C-13 to amend certain offences and to grant new investigative powers to combat capital markets fraud and other crimes. See Bill C-13, An Act to Amend the Criminal Code (capital markets fraud and evidence-gathering), 3rd Sess., 37th Parl. Section 487.014 of the Criminal Code was amended by s. 7 of Bill C-13 (SC 2004 c. 3). This section came into force by proclamation on September 15, 2004.

[2] The current language of the provision of the Criminal Code that provides for the issuance of a production order reads as follows: "487.014 (1) Subject to sections 487.015 to 487.018 [which target specific types of information], on ex parte application made by a peace officer or public officer, a justice or judge may order a person to produce a document that is a copy of a document that is in their possession or control when they receive the order, or to prepare and produce a document containing data that is in their possession or control at that time."

[3] Google Inc. v. Equustek Solutions Inc., 2017 SCC 34 (CanLII).

[4] Treaty Between Canada and the United States on Mutual Legal Assistance in Criminal Matters, 18 March 1985, Can. T.S. 1990 No. 19 (entered into force 24 January 1990)(the "MLAT Treaty").

[5] Brecknell, ibid., at paras. 39-40

[6] Criminal Code, section 487.019(2).

[7] In the Matter of an application to obtain a Production Order pursuant to section 487.014 of the Criminal Code of Canada, 2018 CanLII 2369, at paras 27-28 (NL PC).

[8] Brecknell, ibid., at para. 27.

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 Mondaq.com.

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

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Sign Up
Gain free access to lawyers expertise from more than 250 countries.
 
Email Address
Company Name
Password
Confirm Password
Position
Industry
Mondaq Newsalert
Select Topics
Select Regions
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

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