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.