Reference re Pan‑Canadian Securities Regulation

The MOU expressly contemplated that the objective was "to establish a unified and cooperative system for the regulation of capital markets in Canada in a manner that accords with the constitutional division of powers":[15]

In entering into this [Memorandum] and participating in the Cooperative System, each of the Participating Jurisdictions is addressing matters within its constitutional jurisdiction and is neither surrendering nor impairing any of its jurisdiction, with respect to which it remains sovereign.[16]

The Court held that this was an important point to be made:

This is key: nowhere does the Memorandum imply that the legislatures of the participating provinces are required to implement the amendments made to the Model Provincial Act that have been approved by the Council of Ministers, or that they are precluded from making any other amendments to their securities laws.[17]

Therefore, the proposition that this framework fettered the participating provinces' law-making powers was rejected.[18]

The Court also noted that the majority in the Court of Appeal misunderstood the nature of parliamentary sovereignty, pointing out that, since Hodge v The Queen, "the sovereignty of Parliament and of the provincial legislatures has been limited in Canada since Confederation."[19] An important corollary, as noted in the Reference re Anti-Inflation Act, is that "the executive cannot unilaterally fetter the legislature's law-making power."[20] That was also noted to be the case for treaties entered into by the Government of Canada, which cannot bind the provinces without them passing implementing legislation (as noted by the Judicial Committee of the Privy Council in the Labour Conventions Reference).[21] Because of this jurisprudence:

[62] When an action of the executive branch appears to clash with the legislature's law-making powers, parliamentary sovereignty can be invoked for the purpose of determining the legal effect of the impugned executive action, but not its underlying validity. For example, the executive of one province may act within the confines of its constitutional authority when entering into an intergovernmental agreement with that of another province. If a term in such an agreement purports to bind the province's legislature, the result is not that the agreement itself is constitutionally invalid; the principle of parliamentary sovereignty simply means that the legislature's hands cannot be tied, and therefore that the impugned term is ineffective. In other words, because the legislature's law-making powers are supreme over the executive, the latter cannot bind the former. The result is that any executive agreement that purports to fetter the legislature is not inherently unconstitutional, but will quite simply not have the desired effect.

Therefore, "the principle of parliamentary sovereignty is precisely what preserves the provincial legislatures' right to enact, amend and repeal their securities legislation independently of the Council of Ministers' approval,"[22] and "legislatures in Canada are constrained only by the Constitution — and are otherwise free to enact laws that they consider desirable and politically appropriate."[23]

While Parliament and the legislatures may delegate subordinate law-making powers to a person or administrative body,[lower-alpha 3] they have no power to transfer to another legislature the primary power to legislate[25] As "[n]either the Memorandum nor the Model Provincial Act empowers the Council of Ministers to unilaterally amend the provinces' securities legislation," and "no part of the Cooperative System imposes any legal limit on the participating provinces' legislative authority to enact, amend and repeal their respective securities laws as they see fit," the proposed Council of Ministers will not possess primary legislative authority, and is thus considered constitutional.[26]

Citing their previous concerns raised in Reference re Securities Act, and employing the criteria first employed in General Motors of Canada Ltd v City National Leasing to determine whether a federal law is a valid exercise of the "general" trade and commerce power, the Court observed:

The proposed framework therefore falls within the scope of the trade and commerce power.

In addition, the ability of the proposed Council of Ministers to make subordinate legislation is not an issue, and the Court endorsed Schrager JA's views in the matter:

Parliament is free to delegate ... and such regard to constitute the body ... to whom it delegates regulatory functions. Parliament may determine the internal workings of such body and the process of approval of the regulations it proposes. The fact that the body approving the regulations (i.e. the Council [of Ministers]) is populated with ministers of provincial governments does not invalidate the delegation. Parliament can choose to structure the internal mechanics and approval process of the regulatory body in such manner deemed appropriate to the task.[31]

Therefore, the Draft Federal Act would be constitutionally valid when passed.

The Court warned that its ruling was not exhaustive on the subject:

[130] Again, however, we note that our advisory opinion is limited to the constitutionality of the Cooperative System. It is up to the provinces to determine whether participation is in their best interests. This advisory opinion does not take into consideration many of the political and practical complexities relating to this Cooperative System, and in particular those that may arise if a Participating Jurisdiction decides to withdraw at some later date. Moreover, with respect to the content of the Authority's enabling statute (which has not yet been published), we note that it will have to be carefully drafted so as to respect the limits on overlapping, yet distinct federal and provincial authority.

[131] When and whether to relinquish a degree of autonomy over the regulation of securities for the purpose of achieving national uniformity is entirely a matter of political choice. This too is a valid exercise of parliamentary sovereignty. The various jurisdictions have an unquestioned and equally sovereign right to join or to reject the Cooperative System.