Canada: Island Timberlands LP v. The Minister Of Foreign Affairs: Federal Government Forced To Explain Its Policy Rationale

Due process and the duty of fairness require the federal government to articulate the rationale behind policies and provide those affected with an opportunity to be heard in advocating for change to such policies. That was the key message recently delivered by the Federal Court in Island Timberlands LP v. Canada (Foreign Affairs), 2008 FC 1380 (CanLII).

The decision resulted from an application for judicial review brought by Island Timberlands against a decision by the Minister of Foreign Affairs that rejected Island Timberland's applications to advertise standing timber for sale located on its private timberlands located on Vancouver Island. The export of timber from B.C. is restricted by federal and provincial export control regimes that impose a "surplus test" under which timber may only be exported if it is found to be surplus to domestic needs. Private timberlands, such as those held by Island Timberlands, are subject to the federal regime imposed under the authority of the Export and Import Permits Act. The first step of the federal process requires proposed exporters to apply to the Department of Foreign Affairs and International Trade (DFAIT) in order to advertise timber on a bi-weekly list so that domestic saw mills may make offers. If no fair offers are received, the timber is considered surplus to domestic needs and an export permit may be granted. The refusal to accept Island Timberlands' application to advertise precluded it from getting beyond the first step in this export approval process.

The federal regime is set out in official written guideline entitled "Notice 102," which has been and continues to be the target of a series of federal court cases. It is also currently the target of a challenge brought by a US investor under NAFTA's Chapter 11. One of the stated policies under Notice 102 is that only harvested timber (logs) may be considered for the export approval process. Nevertheless, an unwritten policy has developed whereby applications for standing timber located in the interior region of B.C., but not on the coast, are permitted. Island Timberlands' applications to advertise standing timber located on the coast were refused outright by DFAIT, which stated its reliance on this unwritten policy without providing for any underlying rationale.

During the course of the first session of the hearing of the application, in the hope of resolving the dispute, the court suspended the session and invited the Minister to explain the rationale behind its policy and to provide an opportunity for Island Timberlands to provide a justification for a change to the policy. The Minister declined the invitation, thereby necessitating a second session. Lead counsel for Island Timberlands, Geoff R. Hall of McCarthy Tétrault LLP, took advantage of the scheduling of the second session to accommodate a request made by Professor Audrey Macklin of the University of Toronto Law School for the hearing of the second session to be held in front of her Administrative Law class in the mock courtroom at U of T. Recognizing the benefit of the novel administrative law issues at stake and the obvious educational benefit of such an exercise, the court and counsel agreed to hear the second session at the law school. The event was an overwhelming success for all involved.

In its decision issued shortly after the second session, the court held that the Minister had committed a breach of due process by failing to state the rationale behind its policy, thereby failing to administer a transparent and meaningful process by effectively precluding Island Timberlands from making an argument to deviate from the policy. The Minister's decision to refuse the applications to advertise was set aside with directions to the Minister to state the policy rationale and then provide Island Timberlands with an opportunity to argue for a change to the policy. The Minister was further directed to consider those arguments and provide written reasons for any decision to accept or reject Island Timberlands' applications to advertise.

McCarthy Tétrault Notes:

This decision is significant in that the court intervened in a case that involved federal government policy, an area where it has traditionally been reluctant to interfere. It provides critical support for counsel who wish to challenge government decisions that affect their clients when the decisions are based on a policy with an unarticulated rationale.

The case was also interesting as it involved not only issues of administrative law, but issues under Canada's export control laws. McCarthy Tétrault was able to draw on the firm's expertise in this area by including Orlando Silva of the firm's International Trade and Investment Law Group as counsel.

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.

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