Posted on

British Columbia powerless to stop Trans Mountain”. Not so fast.

“The Program”

Alberta Premier Rachel Notley supports twinning the Trans Mountain pipeline to deliver that land-locked Albertan bitumen to the British Columbia coast—to tankers eager to ship it to markets across the vast Pacific.

British Columbia Green Party leader Andrew Weaver and British ColumbiaN.D.P. leader John Horgan promise to stop it. And their governing accord potentially  gives them access to the levers of provincial power.

Can they?

Section 35

Weaver asked Notley to look at section 35 of the Canadian Constitution (see video link at end of this post).

What is it?

It constitutionally protects Aboriginal treaty rights. For projects that affects the lands that are or may be covered by a treaty, it means there must be meaningful consultation by the government.

Not just consultation—showing the affected group the plan and answering their questions is not enough. It must be meaningful. The government must give the affected group a robust chance to participate in the decision-making process. This is especially potent where the Aboriginal group have a treaty or a strong claim to the land. And where the potential effect to the land is profound.

Like a pipeline transporting oil across it.

Aboriginal groups can challenge the project in the courts under a claim that the consultation was not meaningful. Some of the affected ones have done just that, filing in the Federal Court in 2016.

Such actions could delay the pipeline pending the outcome of the action, which in turn could run for years.

Add to this the high hurdle the pipeline faces, one the British Columbia government can exploit.

National Energy Board Guidelines

The federal government has jurisdictions over pipelines that cross provincial borders. The National Energy Board is the administrative body that exercises this power.

The Board preliminarily approved the pipeline in May, 2016, subject to 157 conditions that pipeline builder Kinder Morgan Canada must meet.

Yes: 157 conditions.

Fulfilling these is daunting, and embedded in some of them is the chance for the provincial government to strike.

Certain conditions require Kinder Morgan to consult with the B.C. government on a range of issues—an avenue for the provincial government to claim otherwise to the Board.

Some conditions require permits/licenses from the provincial government. Yet another way for the provincial government to flex their anti-pipeline muscle.

The conditions gives British Columbia the ability to frustrate the pipeline within the existing guideline under the federal law.

And they still have other powers to exercise.

Levers of Power          

Perhaps legally stopping the pipeline is not feasible. But the Greens and N.D.P. will have control of the legislature, and with it the power to institute laws and regulations.

This is where Kinder Morgan could be frustrated.

The new government could potentially legislate laws that will slow the construction. The how or when is an exercise in speculation at this point. But a twinned pipeline that’s expected to cross a vast boundary, on a path dotted by mountains, waterways and habitats, leaves much room for such action.

This in turn leads to the practical consequences for Kinder Morgan. Actions against provincial laws must be initiated in the courts—a costly and potentially lengthy process.

The pipeline will cross mountain ranges. The harsh winter offers only a small window each year for construction. Not starting or continuing construction during this window potentially leads to delays of many, many months. Any actions in the courts or delays from provincial laws could capitalize on this.

Politics is also a factor. How far will the federal government go in countering an aggressive B.C. government? The next federal elections are scheduled for 2019. 15 Members of Parliament from the Liberal Party of Canada, the governing party, currently hold seats in the Lower Mainland. This is the Vancouver-and-surrounds area dominated by the B.C. N.D.P. and their anti-pipeline platform in the recent elections. Will the Liberal Party of Canada risk these seats for the pipeline?

Another question is the reaction of the other provinces to a federal government pushing a contentious project over the will of a provincial government, and a majority of the electorate. How will Quebec, a traditional battleground province in federal elections—with a deep current of provincial rights and skepticism of federal government control—react? Quebec was central to the Liberal Party of Canada’s election victory in 2015, and it too is facing the potential entrance of an oil pipeline that polls show is deeply unpopular. Will they continue to support a federal government that’s countering B.C.’s will?

Timing can prove to be the ally of the new B.C. government with these factors.

Parting Words

Claiming that the incoming B.C. government is nearly powerless to stop the pipeline is hyperbolic.

The law may be on the pipeline’s side, ultimately. But practical considerations loom.

And the incoming British Columbia government will control the tools to weaponize it.

Assuming the new British Columbia government assumes power, it is an interesting  time ahead for those with an eye for the constitution and politics.

Posted on

Thoughts on British Columbia’s foreign buyers tax and the Charter

Vancouver’s housing market has now reached the courts. A constitutional challenge under the Charter of Rights of Freedoms against British Columbia’s 15% tax on foreign property purchasers is underway.

There is deep interest in how this will unfold in a province whose housing market is integral to the economy. But vague constitutional issues like this invites so many different views. But in my opinion it usually boils down to common-sense considerations.

Narrowing the issue is helpful.

Some discussions of the case center on whether foreign buyers should be able to purchase properties in British Columbia

That’s not quite accurate.

The tax is just that: a tax. It does not ban foreign purchasers. It is a one-time charge per property. A foreign buyer can still purchase properties affected by the tax—multiple ones if they feel the compulsion to.

And this segues to the next point: the tax operates only in a specified area of Metro Vancouver. It is not province-wide.

A pending amendment will exempt foreign residents (and I use the term “foreign” to mean those without Canadian citizenship or permanent resident status) who reside in British Columbia with a work permit and pay taxes.

So, this tax applies when:

  • Someone who is not a Canadian citizen or permanent resident,
  • Who is not working under a visa and paying taxes in B.C.,
  • Wants to buy a residential property;
  • In the affected areas of Metro Vancouver.

Does this violate the Charter?

Section 15

The main argument likely to be advanced is that the tax discriminates under section 15 of the Charter. This section, the equality provision, is just that: governments cannot discriminate between people because of the reasons in the section or similar ones.

It seems like a wide and broad section at first glance because there are many reasons and ways to be treated differently by the government. An example is, say, a disability. Perhaps a certain condition receives much more government funding than another. It’s a section whose many, many cases could clog the justice system.

And the courts recognize this. Previous cases on section 15 have limited its reach. This quote from the Supreme Court of Canada about discrimination under section 15 is an example:

“The relevant inquiry is whether the differential treatment imposes a burden upon or withholds a benefit from the claimant in a manner that reflects the application of presumed group or presumed characteristics, or which otherwise has the effect of perpetuating or promoting the view that the individual is less capable or worthy of recognition or value as a human being or as a member of Canadian society, equally deserving of concern, respect, and consideration.”

A key question facing the courts is whether  having to pay the additional tax reduce a foreign buyer’s worth, dignity and value as a person?

That is one barrier for this challenge to hurdle.

If it does, then section 1 of the Charter kicks in.

Section 1

Section 1. I call it the Charter’s ‘grey area’ provision. It recognizes that sometimes it is necessary to infringe on Charter Rights. It lets the court uphold a law despite violating the Charter if it is reasonable and justified (the section 1 test is complex and a fruitful discussion of it is beyond the purview of this humble post).

This will be the next hurdle for this challenge.

I would expect the government to present evidence on the detrimental economic effects of the high housing prices to justify the tax. The warnings from the Canada Mortgage and Housing Corporation, Vancouver Board of Trade and economic experts will likely be presented, along with the government’s data showing the percentage of foreign purchasers. The government will attempt to show a link between foreign buyers, high house prices and the economic risks.

The government will also likely argue that the tax is needed to slow the dizzying growth in prices.

Key to the section 1 analysis is that the government doesn’t have to target the main cause. If speculation is the primary reason for the prices, the government can still target foreign buyers, as long as it is justified, reasonable and connected to the goal of managing the prices. The courts are hesitant to interfere in the government’s decision and their reasons for it.

Other Issues

An oft-read point is that Charter rights apply regardless of one’s citizenship. Yes. And no. Charter rights are immutable and based on universal principles of human rights. But section 6 of the Charter gives citizens greater mobility rights than permanent residents. This provision is limited to mobility, but as to the question of whether the Charter contemplates scenarios where citizens and residents have different degrees of rights, section 6 is illustrative.

Another is property rights. The Canadian constitution gives provinces the jurisdiction over property rights. It’s why the sale of real estate must be registered with the provinces, like the Land Titles Office in British Columbia.

The Charter does not protect property rights because the provinces did not want it included during the Charter’s negotiations. It is not surprising that the provinces want to keep this power as fully as possible. Saskatchewan was, interestingly, the main driver of this because they wanted control of foreign and absentee ownership of their farmlands.

This case will test the intersection of the powers of taxation and property. It will likely be a seminal decision which will further define the Canadian constitutional law. That’s why it will probably reach the Supreme Court of Canada. And if it does, then expect the other provinces to support the tax. The provinces want to protect their taxation powers on properties and this will be their chance to have their say.

Constitutional law cuts to the heart of the Canadian federal structure. Its decisions have far-reaching and long-lasting consequences politically and socially. The recent decision permitting legalized suicide is an example. The courts are attuned to the effects of their decision. They closely consider the individual circumstances of each case. A foreign buyer’s tax to cool rapid house price appreciations is seen differently than a foreign buyer’s tax for populist appeal.

The court will grapple with these questions: is an additional tax on foreign purchasers of residential properties in a small region, not a ban on those purchasers, discriminatory? If so, should it be extinguished, with the risk of re-igniting the conditions for an economic crisis? What is the scope of the rights, if any, of foreign purchasers of residential properties in Canada? Do the exemptions for those who hold work visas and pay taxes in British Columbia enough to overcome any potential discrimination? And, maybe implicitly: are residential properties a commodity for international buyers?

Even if that tax is ruled to be discriminatory and is not saved by section 1, the court has options rather than eliminating it. They can modify the law, remove offending provisions, or communicate to the province on how to change it, even giving the province time to do this before the law is ruled unconstitutional. The court has options to maintain the government’s aim of tempering price gains while addressing any potential discrimination.

I don’t purport to predict how this case will unfold or what the decision will be. Rather, I am expressing the novelty of this action; its hurdles; and the court’s likely consideration. It is not a simple matter, and that is constitutional law.

It promises to be interesting.