Torys in 10: Is cooperative federalism for losers?

Our podcast, Torys in 10, features quick, candid conversations with our lawyers on issues affecting your business: critical changes in the law, deal trends, market and industry developments and more.

In this episode, Andrew Bernstein and Yael Bienenstock dig into the trending issue of cooperative federalism. With the Supreme Court preparing to hear two politically charged cases set to test the limits of cooperative federalism this winter—the references from Saskatchewan and Ontario testing the constitutionality of the federal carbon tax legislation—Andrew and Yael talk through how and why cooperative federalism is being argued in this context, how the idea has evolved over time and the challenges it presents from a legal perspective.

A full episode transcript follows.

Andrew Bernstein: Hello there everybody. I’m Andrew Bernstein and I’m with my colleague, Yael Bienenstock.

Yael Bienenstock: Hello.

AB: Both of us are litigation lawyers at Torys who do some constitutional law and we’re happy to be here to do the next Torys in 10 podcast. Yael, sometime in 2019 you were quietly sitting at your desk, reading over some materials and you had a legal revelation. Paint the picture for us.

YB (00:33): Well, I think revelation might be putting it a bit high, but I was working on a federalism case and in that context, I was reading the party’s factums for the carbon references.

AB (00:43): Wow. You lead a really exciting life.

YB (00:46): And that’s probably more than a bit high. But, I was interested in the arguments that the provinces were making to try to invalidate the federal carbon tax on federalism grounds. And I noticed that Saskatchewan was relying heavily on arguments about cooperative federalism and I thought to myself, I think they’re going to lose.

AB (01:03): So that’s a bold reaction, but one that turned out to be absolutely correct. Why did you have this reaction when you saw the arguments about cooperative federalism?

YB (01:12): Well, in a nutshell, my gut reaction was that questions about federalism are all about who gets the last word or who gets to decide, and cooperative federalism is based on the assumption of cooperation, that there’s going to be sharing going on. So, on a fundamental level, cooperative federalism is incapable of answering the question “who gets to decide?” In the context of a dispute where there is no actual cooperation, the party that’s saying we need to cooperate probably doesn’t have a good argument for why it should be in charge. Because if it did, it would be saying, “I should be in charge and this is why”. So instead they say to the court, “please be nice and make the other level of government share”.

AB (01:54): Okay, so that was your gut reaction. But let’s talk for a minute about this whole idea of cooperative federalism. So historically, federal and provincial powers were thought to be very distinct. The governing analogy until the ‘50s was so-called watertight compartments. There was not supposed to be any leakage between federal and provincial areas of authority. Now, as the problems facing governments became more complex, it was clear that these watertight compartments were often making governing the country difficult and concerns began to arise that this system would hinders hinder Canada’s progress. So, in the 1950s and ‘60s the notion of cooperative federalism began to describe efforts by both levels of government to jointly enact legislative schemes for the benefit of the country. So Yael, as far as I understand it, cooperative federalism is a good thing. What’s wrong with it from a legal perspective?

YB (02:48): Well, cooperative federalism is used in two distinct ways. One of the ways is what you were just talking about, which is where there is actual federal-provincial cooperation, which is when the federal government and the provincial government work together on things like the Pan Canadian Securities Regulation or the CPP. And that’s obviously a good thing. But the other place it gets thrown around is as an argument where there is no actual cooperation happening, where each of the provincial and the federal governments are trying to assert their exclusive jurisdiction over something where they’re trying to say, “I should be in charge”. And I can’t say it’s a bad thing in that context, but as an argument, it’s just not that helpful.

AB (03:28): So why not? If two people are having a spat but who gets to decide, isn’t “you should decide together” a useful outcome? It works on my kids, at least sometimes.

YB (03:37): Well, you’re very lucky and obviously you don’t have multiple kids with driver’s licenses and only one car, and it might change.

At the end of the day, in a federalism dispute, what you’re saying to the court is “here’s a law that the other level of government enacted, and they’ve gone too far, they’re in my territory, a place where I have control, tell them to get out by invalidating the law”. And so there’s lots of room for cooperation before you get into the courtroom. But like any other court case, once you get into court, there’s going to be a winner and there’s going to be a loser and saying, if the court were to say, “you two need to work together”, and once you’re both agreed that the law is valid, once there’s cooperation, you know, saying “you two go to your room and don’t come out until you’ve decided, and then I’ll say the law is valid”. That’s basically giving the government, who’s resisting the law, a veto power. And so if we think about the carbon tax case, if you give Saskatchewan an effective veto over the carbon tax, there won’t be one.

AB (04:33): Great. So how does this work in cases where both the provinces and the feds have the right to legislate, but there’s some kind of conflict? The paramountcy and interjurisdictional immunity cases.

YB (04:44): So I think it works more in the background than in the foreground. The arguments that will really do the work in those cases are paramountcy and interjurisdictional immunity. And fundamentally each of these doctrines favor the federal government. Paramountcy says where there’s a conflict, the federal government wins and interjurisdictional immunity has in practice only ever applied to insulate areas of federal power from provincial intrusion. So, where we see cooperative federalism being used successfully is where provinces appeal to it to limit these doctrines and limit federal power. They might appeal to cooperative federalism in the background to say to the court, if you characterize this law really precisely, there isn’t going to be any conflict and you don’t need to look at paramountcy. Or in an IJI argument—interjurisdictional immunity—they might say the provincial law at issue doesn’t actually interfere with the core of the federal power. And therefore, interjurisdictional immunity doesn’t really immunize the federal undertaking from its application. And perhaps a good example of this, where it was done most successfully, I think is probably the height of cooperative federalism, was in the Canadian Western Bank case where the court relied pretty expressly on cooperative federalism to limit the application of interjurisdictional immunity and really walk it back. And so the court held that where federally chartered banks were involved in promoting insurance products, they were subject to and they were not immune from, Alberta’s Insurance Act.

AB (06:10): But what about the long gun registry case?

YB (06:13): So that’s a case that I would characterize as more typical where our cooperative federalism arguments failed. In that case, the federal government had passed legislation to abolish the gun registry and destroy the data and Québec wanted the data for its own registry and so it challenged the part of the law that required the data to be destroyed, citing cooperative federalism. And, as they often do, the court rejected that argument and it upheld the federal law.

AB (06:40): So, Québec lost?

YB (06:40): Yes.

AB (06:41): So cooperative federalism is for losers, and the Alberta Insurance Act. Is that your fundamental thesis?

YB (06:48): It is. And we’ll see if it is upheld.

AB (06:51): Right, because the carbon taxes are going to the Supreme Court, do you have any predictions?

YB (06:56): Well if my theory is right, then the tax is going to be here to stay.

AB (06:59): Okay Yael, thanks very much for sharing your theory with us and doing the dirty work of reading all of those factums so that everybody else won’t have to. And thanks to our audience for listening. If you’re interested in our thoughts on what’s coming out of the Supreme Court, we put on quarterly Breakfast with Appeals and you can find all the details of when those are going to be at, At Breakfast with Appeal, Yael, myself and some of our colleagues discuss hot topics in public law and private law coming out of the Supreme Court and the appellate courts more generally.

Now, my producer tells us that we actually have three minutes left, so I wondered, Yael, would you be interested in singing a song?

YB (07:38): Definitely not.

AB (07:40): Okay, so that’s the end of this podcast everyone, thanks very much.

Music: Stratosphere -

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