Supreme Court upholds provincial liquor law

By Yves Faguy April 19, 201819 April 2018

Supreme Court upholds provincial liquor law

Canada’s Constitution does not guarantee interprovincial free trade, at least not how the term is broadly understood. That’s the key takeaway from the Supreme Court of Canada’s unanimous decision today in R. v. Comeau – commonly referred to as the free-the-beer case.

The case involved a constitutional challenge brought by Gerard Comeau, who had been arrested and fined for bringing beer he purchased in Quebec into New Brunswick, in violation of limits imposed under section 134 of that province’s Liquor Control Act. The trial judge declared the contested provision unconstitutional. In his view that amounted to a trade barrier in violation of section 121 of the Constitution Act, 1867, which stipulates that goods must “be admitted free into each of the other provinces”. The Court of Appeal of New Brunswick dismissed the application for leave to appeal, before the Supreme Court granted leave last year.

How the court decided

“Reading s. 121 to require full economic integration would significantly undermine the shape of Canadian federalism, which is built upon regional diversity within a single nation,” the Court wrote.

Essentially it found that evidence presented by an expert historian on the motivations of the drafters of s. 121 did not meet the threshold required to overturn binding precedent – that it must “fundamentally shift how jurists understand the legal question at issue.”  In that sense the decision is important in that it brings some clarity, according to Carissima Mathen, to the "changed evidence" exception to following precedent outlined in some of the top court’s recent high–profile cases.

As for the meaning of “admitted free,” the Supreme Court noted that ‘the framers of the Constitution were familiar with tariffs and charges on goods crossing borders”:

But, in drafting s. 121 , they chose the broad phrase “admitted free” rather than a narrower phrase like “free from tariffs”. We do not know why they chose this broader, and arguably ambiguous, phrase. We do know there were debates on the issue, and those that wanted a more expansive term than “tariffs” or “customs duties” won the day.

(…)

We conclude that the historical context supports the view that, at a minimum, s. 121 prohibits the imposition of charges on goods crossing provincial boundaries — tariffs and tariff-like measures. At the same time, the historical evidence nowhere suggests that provinces, for example, would lose their power to legislate under s. 92  of the Constitution Act, 1867  for the benefit of their constituents even if that might have impacts on interprovincial trade. The historical evidence, at best, provides only limited support for the view that “admitted free” in s. 121  was meant as an absolute guarantee of trade free of all barriers.

Why it’s a big deal

The case could have had major implications on other provincial trade barriers – think of soon-to-be-legalized cannabis – and spelled trouble for Canada’s supply management system.

“The Supreme Court recognized the importance of the issues raised by the case and the significant impact that the position advanced by Mr. Comeau would have on commerce in Canada,” says Lynne Watt, a partner at Gowling WLG in Ottawa who leads the firm’s Supreme Court of Canada Services Group. “As the court noted:  ‘Agricultural supply management schemes, public health-driven prohibitions, environmental controls and innumerable comparable regulatory measure that incidentally impede the passage of good crossing provincial borders’ could have been invalidated if Mr. Comeau's position was upheld.”

Still, the fact that the court reaffirmed that laws with only “incidental effect of restricting trade” between provinces (and territories) are fine if part of broader schemes not aimed at impeding trade, could serve as a warning to provincial legislatures.  As University of Alberta’s Malcolm Lavoie notes, “… the Court's proposed test would seem to invalidate "tariff-like" measures that are aimed primarily at impeding interprovincial trade. This might include some of the measures that have been in the news recently.”

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