Shaun Brown

Federal Court of Appeal declares Canada’s Anti-spam Legislation constitutionally valid

June 9, 2020 by Shaun Brown Leave a Comment

On Friday the Federal Court of Appeal (FCA) published a long-awaited decision in 3510395 Canada Inc. v. Canada. 3510395 Canada Inc. is “CompuFinder”, the Quebec-based company that earned the first administrative monetary penalty under CASL when it was penalized by CRTC staff for $1.1 million in March 2015. The company made representations to the Commission on the substance of the violations, as well as arguing that CASL is unconstitutional. On the substance, the Commission found that CompuFinder did commit most of the violations alleged, while reducing the penalty from $1.1 million to $200,000. The CRTC issued a separate decision finding that CASL is constitutional. CompuFinder appealed both decisions to the FCA.

The Court addressed both appeals in a single, 112 page decision. CompuFinder lost on every claim, with all three justices in agreement. The following summarises the issues addressed by the Court.

Constitutional issues

Jurisdiction: The Court found that CASL is within the federal government’s constitutional authority under the general branch of the trade and commerce power.
Freedom of expression: Although CASL infringes on freedom of expression protected under section 2(b) of the Charter of Rights and Freedoms (Charter), it is saved by section 1, which states that Charter rights and freedoms are subject to reasonable limits prescribed by law as can be demonstrably justified in a free and democratic society.
Section 11 of the Charter: CASL does not violate section 11 of the Charter, which guarantees certain the protections to any person charged with an offence. Contrary to the claims CompuFinder, CASL does not allow for the imposition of “true penal consequences”.
Section 7 of the Charter: CompuFinder attempted to argue that CASL violates a person’s right against self-incrimination under 7. The Court quickly dismissed this claim as section 7 can only be used by a corporation to challenge a law if there are “penal consequences” (and the Court found that there are none).
Section 8 of the Charter: The Court found that the investigatory powers exercised by the CRTC were well within the limits of section 8, which protects against unreasonable search or seizure.

Substantive Issues

Business-to-business exemption: None of the commercial electronic messages (“CEMs”) sent by CompuFinder qualify for the exemption for messages sent between businesses with a “relationship” in para. 3(a)(ii) of the Electronic Commerce Protection Regulations.
Implied consent: CompuFinder did not have implied consent to send CEMs based on the conspicuous publication of email addresses, pursuant to para. 10(9)(b) of CASL.
Non-compliant unsubscribe mechanism: CompuFinder violated CASL by sending CEMs that contained non-functioning unsubscribe mechanisms.

The overall outcome is not surprising, and it’s hard not to wonder why CompuFinder decided to throw so many different claims into the appeal instead of focussing on those that might stand the greatest likelihood of success. On the substance of the violations, CompuFinder’s actions were hard to defend. The facts in this case, combined with what was revealed through the detailed report of findings from the Office of the Privacy Commissioner (OPC) in 2016, suggest that CompuFinder engaged in very “aggressive” marketing practices that resulted in a lot of unwanted email (i.e., the type of thing that CASL was intended to prevent).

Outside of section 2(b), the Charter claims were also a long shot.

However, it was not clear or obvious whether the Court would determine that the federal government has the constitutional authority to implement CASL. There is still not a lot of case law applying the general branch of the trade and commerce power, and the limited cases from the Supreme Court have set a fairly high bar for its use. The Court’s analysis on this issue is probably the most important (if unsatisfying) aspect of this case.

The bottom line is that while there are many problems with CASL, it is, according to the FCA, constitutionally valid legislation, so unless CompuFinder is willing and able to appeal to the Supreme Court (the Supreme Court would have to agree to even hear an appeal), CASL is not going anywhere.

This post only considers the jurisdictional claims. Another post by Dustin Moores provides an analysis of the substantive claims, while a subsequent post will consider the section 2(b) freedom of expression claims.

The general trade and commerce power

Sections 91 and 92 of The Constitution Act, 1867 allocate responsibility to legislate on various matters between the federal and provincial governments. The federal government has jurisdiction over things like criminal law, banking, railways, patents, and the military. The provincial governments have authority over the delivery of health care, schools, property and civil rights, among other areas of a more local nature.

Being written so long ago, the Constitution doesn’t make reference to matters like “spam”, “email”, or “internet”. In fact, the Constitution doesn’t refer specifically to many of the things that governments do, meaning that it’s often unclear exactly where jurisdiction lies for a given matter.

The federal government relies on subsection 91(2) of the Constitution as the basis for CASL, which provides the federal government with authority over the general regulation of trade affecting Canada as a whole. This is why CASL applies only to activities, like sending commercial electronic messages (CEMs) and installing computer programs, that occur “in the course of commercial activity”; any purported application to non-commercial activity would fall outside the trade and commerce power.

Given the breadth of its wording, the general branch of the trade and commerce power has been carefully construed by the courts over the years to prevent its application from effectively “eviscerating” all provincial powers. The Supreme Court set a high bar for its application in General Motors of Canada Ltd. v. City National Leasing, 1989 CanLII 133 (SCC), that was arguably pushed even higher in Reference re Securities Act, 2011 SCC 66 (CanLII), in which that court rejected the federal government’s plan for a national securities regulator (a more narrow approach was approved by the Supreme Court in 2018).

The purposes and effects of CASL are not overbroad

The first step in assessing the constitutionality of a law is to determine its true purpose. The Court was only concerned with the legislative “regime” established by section 6 (the CEM requirements), and not the regimes established under sections 7 (alteration of transmission data) or 8 (installation of computer programs).

CompuFinder argued that section 6 goes beyond trade and commerce, capturing “all messages that might have a minor commercial purpose, regulate purely local messaging and interfere with contractual terms”, meaning that the true purpose of CASL is to “regulate unsolicited messages generally” (para. 52). In other words, CASL goes beyond merely regulating “commercial” electronic messaging, delving into purposes that would fall under provincial jurisdiction over municipalities, local matters and property and civil rights, rendering the general trade and commerce power inapplicable.

The Court rejected this characterization, accepting the purposes for CASL as stated in the legislation itself and by the government during the creation of the law. The Court observed that

Section 3 thus reveals that Parliament’s intention in legislating the impugned provisions was to create a scheme regulating the sending of CEMs in order to prevent impairment of the e-economy and costs to businesses and consumers, as well as to protect confidential information and Canadians’ confidence in e-commerce
…..
Parliamentary debates consistently support the conclusion that the purpose of CASL’s CEM scheme is to regulate unsolicited CEMs in order to combat spam and associated online threats in the interests of privacy and security in order to promote a healthy e-economy.
paras. 94 – 95

The Court also found that the direct and follow-through effects of CASL “do not appear to diverge substantially from its stated aim” (para. 99), regulating “only a narrow aspect” of commercial electronic messaging (para. 100). The Court considered the following factors in coming to this conclusion:

CASL only applies to messages that encourage participation in commercial activity;
CASL does not in any way affect the terms of any contract of sale, or otherwise interfere with contractual relations, as alleged by CompuFinder;
CASL does not regulate the content of CEMs other than requiring an unsubscribe mechanism and certain identification information, and senders are otherwise free to include any content they see fit; and
CASL does not displace or substantially duplicate any provincial legislation.

Provinces cannot replicate CASL

Having established the purpose of CASL, the next step is to assign the law to a “head of power”, either federal or provincial. CompuFinder attempted but failed to convince the Court that CASL falls within provincial jurisdiction under the Constitution over property and civil rights (s. 92(13)), and matters of a merely local or private nature in the province (s. 92(16)). The government relied on the general branch of the trade and commerce power under s. 91(2).

There is a five-part test for determining whether a federal law properly fits within the general trade and commerce power.

The law must be part of a regulatory scheme;
The scheme must be monitored by the continuing oversight of a regulatory agency;
The law must be concerned with trade as a whole rather than with a particular industry;
The legislation should be of a nature that provinces jointly or severally would be constitutionally incapable of enacting; and
The failure to include one or more provinces or localities in a legislative scheme would jeopardize the successful operation of the scheme in other parts of the country.

Parts 1-3, straightforward and easily met in this case, are not worth discussing.

But the Court also found that CASL meets parts 4 and 5, which are always the most difficult.

On part 4, the Court concluded that although the provinces “possess the constitutional capacity to enact uniform legislation regulating unsolicited CEMs… there can be no assurance that the provinces could address these issues on a sustained basis because the provinces retain the unfettered ability of resiling from any interprovincial scheme” (para. 124). In other words, as long as one of the provinces is able to back out, the provinces are “constitutionally incapable” of acting.

The focus of part 5 is not whether the federal government is best positioned to legislate on a given matter (i.e., the optimal policy outcome), but whether the regulated matters “are essential in the national interest, transcend provincial interests and are truly national in importance and scope” (para. 125). The Court accepted the government’s arguments that federal legislation is “essential”, largely because spammers could “easily” move their operations to the most lenient province and send spam across borders.

Sensible result from an imperfect test

The Court’s analysis of the general trade and commerce power is not very satisfying.

On part 4, it seems like a big leap – even contradictory and illogical – to conclude that provinces are constitutionally incapable of implementing a regime just because one province may decide not to do so.

The part 5 conclusions aren’t any stronger. Even if several provinces failed to enact anti-spam legislation, therefore becoming havens for companies to spam the rest of Canada, laws in other jurisdictions would be enforceable against those companies. Provincial laws are enforced against out of province companies all of the time. So it’s hard to say that the absence of one or more provinces would not undermine the whole regime.

At the same time, it would be ludicrous to argue that Canadians would be better served by a patchwork of provincial anti-spam laws. Although the purpose of the appeal was to effectively “kill” CASL because provinces are unlikely to act, the implications of hypothetical provincial regulation are a nightmare. That would only make the problems associated with CASL (lack of clarity, over-regulation, legal risk, high compliance costs) even worse. So if we have to deal with anti-spam legislation, it is unquestionably preferable to have a single, federal law. This is the lens the FCA is looking through in this aspect of the case: whether anti-spam legislation fits within federal or provincial jurisdiction (not whether there should be a law at all).

But taken to its extreme, the five-part test sets a bar that is arguably impossible to meet. So the FCA is stuck with a flawed test, and some compromise (creative legal maneuvering) is necessary if the federal government is ever going to be able to rely on the general trade and commerce power.

Federal Court of Appeal to rule on the constitutionality of CASL

December 23, 2019 by Shaun Brown Leave a Comment

An appeal currently before the Federal Court of Appeal is testing the constitutionality of Canada’s Anti-Spam Legislation (CASL), and, by implication, the Personal Information Protection and Electronic Documents Act (PIPEDA). The appellant in 3510395 Canada Inc. v. The Attorney General of Canada claims that CASL falls outside the federal government’s legislative powers under the Constitution Act, 1867.

3510395 Canada Inc. is “CompuFinder”, the Quebec-based company that earned the first administrative monetary penalty under CASL with the use of “aggressive” email practices. After being penalized by CRTC staff for $1.1 million in March 2014, the company made representations to the Commission on the substance of the violations, as well as arguing that CASL is unconstitutional. On the substance, the Commission found that CompuFinder did commit most of the violations alleged, while reducing the penalty from $1.1 million to $200,000. The CRTC issued a separate decision finding that CASL is constitutional. CompuFinder appealed both decisions to the Federal Court of Appeal.

This post is only concerned with the constitutional aspect of the appeal, and, more specifically, whether it properly falls within the federal government’s constitutional authority (CompuFinder also argues that CASL violates the Charter, which raises entirely separate questions). CompuFinder has asked the Federal Court of Appeal to declare all of CASL unconstitutional and therefore of no force or effect.

The constitutional challenge

Sections 91 and 92 of The Constitution Act, 1867 distribute authority to legislate on various matters between the federal and provincial governments. The federal government has jurisdiction over things like criminal law, banking, railways, patents, and the military. The provincial governments have authority over the delivery of health care, schools, property and civil rights, among other areas of a more local nature.

Not surprisingly, the Constitution doesn’t make reference to things like “spam”, “email”, “internet”, or even “privacy”. In fact, the Constitution doesn’t refer specifically to many of the things that governments do, meaning that it’s often unclear exactly where jurisdiction lies for a given matter.

The federal government relies on subsection 91(2) of the Constitution as the constitutional basis for CASL, which provides the federal government with authority over the general regulation of trade affecting Canada as a whole. This is why CASL applies only to activities, like sending commercial electronic messages (CEMs) and installing computer programs, that occur “in the course of commercial activity“; any purported application to non-commercial activity would clearly fall outside the trade and commerce power.

When a dispute arises over the constitutionality of a law, a court must determine the true purpose of the law before assigning it to a head of power. The stated purpose of CASL, found in section 3, is “to promote the efficiency and adaptability of the Canadian economy by regulating commercial conduct that discourages the use of electronic means to carry out commercial activities“. CompuFinder argues in its Notice of Appeal that CASL goes beyond that purpose by regulating “the routine day-to-day sending of commercial information within a province“, and that it “prescribes detailed, rigorous and inflexible contracting formalities that fall under the provincial power over property and civil rights“. CompuFinder also argues that CASL is really about “consumer protection”, which falls to the provinces as a matter of property and civil rights. This is not a far-fetched position.

Given the breadth of its wording, the general branch of the trade and commerce power has been carefully construed by the courts over the years to prevent its application from effectively “eviscerating” all provincial powers. The Supreme Court set a high bar for its application in General Motors of Canada Ltd. v. City National Leasing, 1989 CanLII 133 (SCC), that was arguably pushed even higher in Reference re Securities Act, 2011 SCC 66 (CanLII), in which the court rejected the federal government’s plan for a national securities regulator.

The Supreme Court has established a five-part test for determining whether a federal law properly fits within the general trade and commerce power, the most difficult requirement being that the provinces, acting alone or together, are incapable of achieving the legislative objective. It’s not about the optimal policy outcome (i.e., it doesn’t matter if the federal government could to it better), or even allowing the federal government to legislate because provinces refuse to act; it’s about whether the provinces are incapable of acting. This is a difficult test to pass.

PIPEDA remains untested

The Personal Information Protection and Electronic Documents Act (PIPEDA) is also based on the federal trade and commerce power. It applies to the collection, use and disclosure of personal information by organizations in the course of commercial activity, including federally-regulated organizations, as well as provincially-related organizations, except those in provinces that have privacy legislation deemed by the federal government to be “substantially similar”. To date this includes Alberta, B.C. and Quebec.

The application of PIPEDA to federally-regulated organizations is straightforward and uncontroversial. The constitutionality of PIPEDA’s application within the provinces, however, has been in question and remains untested since it was passed almost 20 years ago. It has avoided scrutiny only because, unlike CASL, it lacks penalties, and companies therefore do not have the same financial motivation to see it struck down.

After the Securities Reference in 2011, Michel Bastarache, a former Supreme Court Justice, published a paper in which he concluded that PIPEDA is “in fact and in form, the unilateral federal regulation of all private sector privacy matters in most provinces“, that is likely not a constitutional exercise of the trade and commerce power.

Decision due any day now

As the hearing in 3510395 Canada Inc. took place back in April 2019, a decision from the Federal Court of appeal should be published any day now. It’s impossible to predict what the court will decide, but either way it’s likely to be appealed to the Supreme Court. This case could be the beginning of a significant change in the Canadian privacy landscape, because, if CASL is not constitutional at the end of all this, then neither is PIPEDA.

OPC guidance on data transfers: status quo (for now)

September 27, 2019 by Shaun Brown Leave a Comment

Following a consultation process that has seen lots of twists and turns, the Office of the Privacy Commissioner of Canada (OPC) has now decided to stick with its 2009 position that organizations do not require consent to transfer personal information to third-parties for processing.

Here’s a brief recap of how we ended up at this point.

In 2009, following an investigation into a complaint about transfers of personal information to third-party processors located in the U.S., the OPC published a policy position that transfers to third-party processors are not “disclosures” under the Personal Information Protection and Electronic Documents Act, regardless of the processor’s location. Rather, the OPC concluded that such a transfer is a “use” (a point that I strongly disagree with, more on this here), and, specifically, a type of use for which consent is not required. The OPC advised that, among other things, organizations transferring personal information across borders must ensure an adequate level of protection and notify individuals of the transfer and that their information could be accessed by law enforcement agencies in the foreign jurisdiction.

In 2017, Equifax experienced a massive data breach, affecting more than 143 million individuals, including approximately 19,000 Canadians. The OPC’s investigation (the report was published in April of this year) found that Equifax Canada had failed to demonstrate adequate accountability over personal information transferred to its parent company, Equifax Inc., located in the U.S., which the OPC characterized as a “third party” to Equifax Canada. The OPC found that Equifax Canada should have obtained consent to transfer the personal information of Canadians to Equifax Inc.

At the same time the Equifax report of findings was published, the OPC also published a consultation document revisiting its 2009 policy position, stating that “that transfers for processing, including cross border transfers, require consent as they involve the disclosure of personal information from one organization to another.”

This, understandably, caused a near meltdown in the privacy community.

Then, speaking at the International Association of Privacy Professionals Canada Privacy Symposium May 22, Privacy Commissioner Daniel Therrien announced that the consultation would be suspended to allow the OPC to retool in light of the “Digital Charter,” which had been published by the Department of Innovation, Science and Economic Development the day before. Among other things, the Digital Charter provides a high-level outline of the federal government’s plan for amending PIPEDA.

While this announcement seemed like a potential end to the consultations, they came back to life with the OPC’s reframed discussion document, published June 11. The document requested feedback on a number of questions about how transborder data flows and transfers for processing should be addressed in the shorter and longer terms.

On Sept. 24, less than two months after the deadline for making submissions, the OPC announced that its 2009 policy position “will remain unchanged under the current law.” The OPC received a lot of submissions – 87 – the “vast majority” of which, according to the OPC, “took the view there was no requirement under [PIPEDA] to seek consent for transfers for processing and that doing so would create enormous challenges for their business processes.”

So the OPC continues to hold the position that PIPEDA does not require consent to transfer personal information to third parties for processing. This is a very good thing, because a consent requirement would be disastrous for Canadian businesses. And the OPC should be commended for conducting a real consultation, actually listening to stakeholders, and doing it all relatively quickly.

This process has made it clear that the OPC thinks that consent should be required for transfers that occur across borders. Fortunately, however, given the nearly universal rejection of this idea, it seems very unlikely the government would choose to go this route.

Our submission to the OPC consultation on transfers for processing

August 8, 2019 by Shaun Brown Leave a Comment

Between busy work schedules and attempts to squeeze some enjoyment out of the great summer weather, it’s not easy to find the time to write a submission to the Office of the Privacy Commissioner of Canada (OPC) consultation on transfers for processing. But we did it; not because we wanted to spend even more time indoors, but because this is a really important issue, and we wanted to be sure that our perspective was heard (our submission is here).

Until recently, the notion that a transfer of personal information for processing (regardless of the location of the processor) is not a disclosure, and does not require consent, seemed like a simple fact under PIPEDA that everyone acknowledged and accepted. It was also, in our view, intentional, reflecting one of the finer examples of foresight and wisdom demonstrated by the drafters of PIPEDA.

While we still believe this to be true, that the OPC may be trying to change this is concerning, and shows that you can never really take anything for granted in law. Here’s hoping that our submission (and, we assume, the many others with a similar perspective) is effective.

Data Localization: An Exercise in Futility?

May 27, 2019 by Shaun Brown Leave a Comment

Last week I presented on data localization at the IAPP Canada Privacy Symposium 2019 (my slides are here).

There are a mix of laws (BC and Nova Scotia), formal policies (federal, New Brunswick and Manitoba), in addition to other, less formal policies and practices among public bodies that restrict the flows of personal information beyond the borders of Canada. Although there are a few reasons for data localization requirements around the world, Canadian restrictions arose largely because of concerns about exposure to U.S. law enforcement agencies due to the changes to the Foreign Intelligence Surveillance Act (FISA) by the USA Patriot Act. This, of course, limits the ability of public bodies to use cloud-based and other service providers.

My view is that these restrictions are based on a few fundamental misconceptions: 1) FISA poses a meaningful threat to the privacy of Canadians (it does not); and 2) keeping data physically located in Canada eliminates this threat (it does not). For the most part, keeping the data physically located in Canada does nothing to insulate it from foreign demands for disclosure if the service provider is based in a foreign jurisdiction. However, in most cases, most of the time, personal information is still more secure if it is processed by a competent cloud-based service provider, regardless of its location.

The session generated quite a bit of discussion, although I expected more people to disagree with my position (a good portion of the room was filled with government employees and service providers who were frustrated by the restrictions). Interestingly, during another Symposium session, former Information and Privacy Commissioner for British Columbia David Loukidelis stated that the proliferation of data localization requirements throughout Canada is a concerning policy development. This is notable because Loukidelis conducted a seminal study on the Patriot Act in 2004 which contributed to the first legal data localization requirement being passed in B.C.

Why the Privacy Commissioner’s New Position on Transborder Dataflows Doesn’t Work

May 9, 2019 by Shaun Brown Leave a Comment

The Office of the Privacy Commissioner (OPC) has, at least tentatively, revised its position on transborder data flows (TBDF). In a consultation published last month, the OPC claims that consent is now required for TBDF (consent must even be “express” in some cases). It also appears that the OPC is attempting to rewrite the Personal Information Protection and Electronic Documents Act (PIPEDA) by claiming that a “transfer” of personal information by an organization to a third-party service provider for processing is a “disclosure”.

Stakeholders are concerned; in fact, the TBDF Consultation has had the rare distinction of aligning privacy advocates and industry stakeholders on the same side of an issue (Michael Geist describes the OPC’s approach as “a dramatic reinterpretation of the law”).

Although there are practical reasons why the OPC’s new position will cause big challenges – it’s a prime example of a solution in search of a problem – I take a more conceptual approach here to explain why the new guidance doesn’t make sense from a legal perspective.

A transfer is not a disclosure

A transfer of personal information to a third-party service provider for processing under PIPEDA has, since at least 2009, been considered a “use” by the OPC under PIPEDA, not a disclosure. This is the case regardless of where the service provider is located.

Leaving aside for the moment whether a transfer is even a use, there’s a good reason why a transfer is not a disclosure. Principle 4.1.3 of Schedule 1 to PIPEDA states that “An organization is responsible for personal information in its possession or custody, including information that has been transferred to a third party for processing.” In The Personal Information Protection and Electronic Documents Act: An Annotated Guide, the authors provide the following commentary on Principle 4.1.3:

Clause 4.1.3 is important because it is the only area in the Act where transborder dataflow issues are addressed….The concept of custody and transfer is an important one, as opposed to disclosure, because when an organization discloses information, it must assure itself that it has the right to disclose, and once that is fulfilled and the disclosure has taken place securely, its responsibility is at an end.
However, if the information has been transferred for processing of any kind, and the organization expects to maintain an interest in the data, it retains responsibility and must use contractual or other means to provide a comparable level of protection[emphasis added].

This clearly explains why it doesn’t make sense to call a transfer a disclosure, as it misconstrues the meaning of a disclosure under PIPEDA. Once an organization discloses personal information, it is no longer accountable for the personal information that has been transferred. In other words, you can’t say that an organization has disclosed personal information, while at the same time claim that it is still has an interest in and remains accountable for that information.

The Annotated Guide, which was published in 2001 just after PIPEDA began coming into effect, carries considerable weight given that two of its four authors were directly involved in drafting and developing PIPEDA (Heather Black and Stephanie Perrin were at Justice Canada and Industry Canada, respectively). In the early years of PIPEDA this book was one of very few meaningful resources available.

If the OPC insists on calling a transfer a disclosure, it suggests that organizations somehow remain accountable for personal information post-disclosure in some cases, but not in others. To attempt to distinguish these cases based merely on the fact that a transfer occurs across borders is an arbitrary legal fiction.

But a transfer is a use, right? (No, it’s not)

While the authors of the Annotated Guide were clear that a transfer is not a disclosure under PIPEDA, they also did not state that a transfer is a use. This interpretation appears to come from the OPC. Guidelines on TBDF published back in 2009 state the following: “A “Transfer” is a use by the organization. It is not to be confused with a disclosure.”

Referring to a transfer as a use avoids the issue of trying to create post-disclosure accountability for personal information, but it is also a strained interpretation that comes with its own conceptual problems.

In defining authority for the collection, use and disclosure of personal information, privacy legislation in Canada (in all sectors) focusses on “purposes”. The default rule under PIPEDA is that consent is required for the collection, use, or disclosure of personal information for most purposes, with narrowly defined exceptions for others. When obtaining consent, organizations must explain the purposes for which personal information is collected, used or disclosed, and limit collection, use and disclosure to personal information reasonably required for those purposes.

Public sector (and, to a slightly lesser extent, health information) privacy laws focus less on consent, and more on defining in legislation the specific purposes for which personal information can be collected, used and disclosed.

A transfer, as that concept is understood in Principle 4.1.3, is not a use in and of itself. Organizations do not collect personal information for the purpose of transferring it. They collect and use personal information for things like processing payments, delivering products and services, email marketing, profiling and tailoring ads and marketing campaigns to consumers, paying employees, etc. A transfer to a service provider is merely a product of decision by an organization about how to process personal information for those purposes. In other words, as a process to carry out a purpose, a transfer is a means to an end.

The Federal Court of Appeal acknowledged this distinction between process and purpose in 2017 in Toronto Real Estate Board (TREB) v. Commissioner of Competition. In determining the rights of brokerages to publish information about property listings on “Virtual Office Websites”, or “VOWs”, the court considered language in Ontario real estate listing agreements that provides real estate boards and brokerages with consent to “make….use of the information as the Brokerage and/or real estate board(s) deem appropriate, in connection with the listing, marketing and selling of real estate during the term of the listing and thereafter.” TREB attempted to argue that this did not allow for the distribution of listing information through VOWs, because it was a new method of distribution not explicitly mentioned in the listing agreement. The court rejected this argument, stating that

PIPEDA only requires new consent where information is used for a new purpose, not where it is distributed via new methods. The introduction of VOWs is not a new purpose–the purpose remains to provide residential real estate services and the Use and Distribution of Information clause contemplates the uses in question. The argument that the consents were insufficient−because they did not contemplate use of the internet….does not accord with the unequivocal language of the consent [para. 165].

Thus, the Federal Court of Appeal recognized that if an organization has consent to use personal information for a given purpose, it does not also require consent for the particular process(es) of how that purpose is carried out.

The OPC had it right the first time

In the well-known 2005 CIBC case summary, the OPC found that CIBC did not require consent to use foreign-based third party service providers, but that organizations should notify consumers that outsourcing arrangements could make personal information vulnerable to foreign demands for disclosure. It also reminded organizations of the requirement under the Accountability Principle to have appropriate measures in place to ensure the protection of personal information when outsourcing, regardless of the location of service providers. The OPC got it right in this case because it did not refer to the transfer as a use (or a disclosure).

The OPC’s new position, for the time being, would appear to only target transfers across borders. However, while some people may be uncomfortable about having their personal information processed in another country, according to the law, a transfer remains a transfer regardless of where the processing takes place. In other words, there is nothing substantively different about a transfer across borders that turns the transfer into a use, or disclosure, therefore triggering consent requirements.

It may be tempting to cede the point that a transfer is either a use or disclosure, so long as the OPC agrees that implied consent is acceptable (and surely it would need to be, especially given the Supreme Court’s broad interpretation of implied consent in RBC. v. Trang). However, for the many privacy professionals who need to interpret, understand and explain the meaning of privacy legislation to their clients on a daily basis, precision matters. Agreeing to twist legal concepts to settle the matter of the day will only cause bigger headaches down the road. If the OPC really wants to be able to tell organizations that they need consent for transfers of personal information, under any circumstance, it needs to convince the government to change the law.

(Edit: The Commissioner announced on May 22 that the OPC’s TBDF consultation “in its current form” has been “paused” following the announcement of the Digital Charter by Innovation, Science and Economic Development Canada).