Missing Blueprints

Last week, in a series of decisions headlined by Bank of Montreal v. Marcotte, 2014 SCC 55, the Supreme Court confirmed the commitment to making provincial and federal laws operate side by side, in the name of co-operative federalism, which has been a staple of its federalism jurisprudence in recent years. When the Court had last addressed the issues of interjurisdictional immunity and federal paramountcy, in  Marine Services International Ltd. v. Ryan Estate, 2013 SCC 44, I wrote that, in something of a departure from Lord Atkin’s famous dictum in the Labour Conventions Reference, “the Supreme Court now believes that ‘watertight compartments’ are not enough. Their operation must be complemented by allowing water ballast to flow from one side of the hull to another to keep the ship [of Canadian federalism] aright.” Yet the Court, I said, provided little if any guidance on the way this structure operated. Marcotte is of no assistance in this respect, however important it may prove in other ways.

The federalism issue in Marcotte was whether Québec’s Consumer Protection Act (CPA) applied to banks and, specifically, to the their credit-card operations. The plaintiffs argued that the respondent banks had failed to disclose certain fees and charges in their credit card contracts as the Act required them to do; the banks countered by claiming, among other things, that they either enjoyed an interjurisdictional immunity from the obligations imposed by the CPA, or that the CPA was inoperative with respect to their credit-card operations, because they were regulated by inconsistent federal legislation. In a unanimous judgment by Justices Rothstein and Wagner, the Supreme Court rejected these arguments. (There were other issues too, which I will not consider here, concerning standing in class actions, as well as the interpretation and the effects of the CPA.)

Interjurisdictional immunity prevents provincial laws from “impairing” federal regulation of the “protected core” of a federal jurisdiction. Banking is a federal jurisdiction pursuant to s. 92(15) of the Constitution Act, 1867, so the banks contended that the CPA’s disclosure requirements and provisions sanctioning non-compliance with these requirements could not apply to their credit-card issuing activities. The Court, however, pointed out that

[a] broad application of the doctrine is in tension with the modern cooperative approach to federalism which favours, where possible, the application of statutes enacted by both levels of government. (Par. 63)

Outside the areas covered by precedents concluding that inter-jurisdictional immunity exists, courts must be wary of finding that it applies. Here, without deciding whether credit card activities fall within the “core” of the federal power over “banking,” the Court concludes that, even if they do, the CPA does not “impair” federal regulation:

it cannot plausibly be said that a disclosure requirement for certain charges ancillary to one type of consumer credit “impairs” or “significantly trammels” the manner in which Parliament’s legislative jurisdiction over bank lending can be exercised. (Par. 66)

The banks still retain the ability “to dictate the terms” (par. 66) of their relationship with their customers, and Parliament will not need to legislate to counter the effects of the provincial law.

For its part, the federal paramountcy renders an otherwise valid provincial law inoperative when and to the extent that it conflicts with a valid federal law ― either because it is impossible to comply with both laws or because the provincial law “frustrates” a “federal purpose.” Here, there is no question of impossibility of complying with both federal and provincial law. But the banks invoked two federal purposes which the CPA’s disclosure requirements and sanctions, in their view, frustrated: setting out uniform national standards, and “to ensure that bank contracts are not nullified even if a bank breaches its disclosure obligations” (par. 73). The Court finds that, even assuming these to be the purposes of the federal regulatory framework applicable to banks, neither is frustrated by the CPA. Disclosure requirements are not “standards” for banking products or services, “but rather articulate a contractual norm in Quebec” (par. 79), in the same way as do other general rules of contract law, which the banks accept are applicable to them. Indeed, “the federal scheme is dependent on fundamental provincial rules such as the basic rules of contract” (par. 79). As for the non-nullification purpose, the Court finds that since the plaintiffs are not asking to be released from their contracts with the banks, but only for a restitution of undisclosed fees and damages, it is not engaged. More broadly,

[t]here are many provincial laws providing for a variety of civil causes of action that can potentially be raised against banks.  The silence of the [federal] Bank Act on civil remedies cannot be taken to mean that civil remedies are inconsistent with the Bank Act. (Par. 84)

As I said above, this is very much in keeping with the Supreme Court’s federalism jurisprudence. Yet I cannot get rid of a feeling that that the Court’s decision-making remains very impressionistic, especially on the question of interjurisdictional immunity.

I’m inclined to agree with the court’s assertion that provincial disclosure requirements do not impair the exercise of federal jurisdiction ― but it still is an assertion, not a demonstration. Would a demonstration be possible? I’m not sure, but the Court hardly even tries. The only argument it musters is that Parliament would not need to legislate to oust provincial law, but I don’t think that’s right. Rather, it’s difficult to imagine Parliament wanting to legislate to remove disclosure requirements ― though even that is doubtful, since Parliament might, in theory anyway, replace the somewhat different provincial requirements by a uniform framework of its own. But if, for whatever reason, Parliament decides that provincial disclosure requirements are a problem, it seems to me that it will, in fact, have to legislate to solve it.

The Court is on more solid ground, I think, when it comes to paramountcy. In effect, it seems to suggest that complementary provincial requirements will not conflict with or frustrate the purpose of federal regulations, although parallel (and non-identical) provincial rules might do so. I think that this makes sense, and it is also a more easily applicable standard than what the Court has come up with on interjurisdictional immunity. Still, the Court doesn’t quite articulate this test. Its reasons do not openly go beyond the case before it. So even here, we can only infer the general rules.

Perhaps this is actually sound common law adjudication. We know the general values the law (as developed by the Supreme Court) serves in this area; we know ruling in specific cases; and it is up to us to figure out the general rules that mediate between general values and specific cases. But it’s not how the Court operates in other areas of constitutional law, so it cannot help but feel frustrating. We know what our constitutional structure looks like, but we’re missing the blueprints for it.

UPDATE: At the CBA National Magazine’s blog, Yves Faguy has compiled other posts on Marcotte.

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