The national securities regulator and judicial Stockholm Syndrome - Macleans.ca

The national securities regulator and judicial Stockholm Syndrome

Why the Court’s adherence to a 19th-century precedent is too rigid and cautious

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For much of its history, the Supreme Court of Canada was described as a “captive court” because it was bound by the rulings of Britain’s Judicial Committee of the Privy Council (JCPC), which served as Canada’s final court of appeal until 1949. Indeed, many scholars argue that the Court remained captive until the Charter of Rights came into effect in 1982, when its judges finally began to exercise real policy-making power and assert “judicial creativity” into their decisions.

If today’s unanimous reference opinion on the federal government’s proposed legislation to create a national securities regulator is any indication, the Court may still be suffering from judicial Stockholm Syndrome.

Such a critique may be harsh (and perhaps even unwarranted). For decades the provinces have been responsible for regulating the securities market under their constitutional powers relating to “property and civil rights,” and their ability to do so was not questioned in this case.

Accordingly, the judges ruled that the federal government cannot implement the “wholesale takeover” of regulation of the securities market as represented by its proposed legislation (though, notably, they left the door open for a scheme premised on intergovernmental cooperation that accomplishes similar goals, leaving it to the respective governments to decide what that might look like).

In one sense the decision should be applauded for maintaining consistency, predictability and clarity in the law. It preserves a long-established understanding of the scope of the federal trade and commerce powers and avoids the temptation of determining the constitutional validity of a law based on whether it represents good policy (a temptation the Court often fails to avoid in the Charter context).

On the other hand, adherence to an 1881 JCPC decision—a ruling by a group of English judges an ocean away well over a century ago—that took a questionable stance on the balance of powers between the provinces and federal government in the first place is certainly questionable.

As the Court acknowledged today, the JCPC decided that a literal interpretation of the words “the Regulation of Trade and Commerce” in our 1867 Constitution was “inappropriate.” Literally.

The belief was that federal powers over trade and commerce matters might be interpreted so broadly that it would threaten to override much of what should fall under the provincial powers regarding property and civil rights. And so the JCPC severely curtailed the former and broadened the latter—a decision the Supreme Court has been largely faithful to ever since.

This faithfulness to a 19th-century precedent seems all the more questionable when you consider that the Court has no problem overturning its own precedents in a Charter of Rights context mere years after they were first established.

In the Charter context, the “living tree” notion of constitutional interpretation thrives, such that changing societal contexts or changing “values” can result in new rights springing forth (usually emanating as much from the creative judicial mind as from society). If the “dead tree” approach adopted in today’s federalism opinion was applied to Charter rulings, the Court’s decision earlier this year to preserve Vancouver’s safe injection site—Insite—would never have occurred.

The living tree metaphor was never meant to be applied in as robust a manner in the division of powers context, given the belief that progressive interpretation would throw off the balance between the orders of government developed by the constitutional framers. But a case could be made (if you’ll pardon the pun) that the Court’s interpretation here is too rigid and cautious.

The judges write that “a long-standing exercise of power does not confer constitutional authority to legislate, nor does the historic presence of the provinces in securities regulation preclude a federal claim to regulatory jurisdiction,” but then demand evidence that the economic activity at issue has been so transformed that it now falls under federal authority. In effect, the Court treats the long-standing exercise of power and historic presence of provinces in securities market regulation as paramount while saying the exact opposite.

The Court is caught, as it often is, in the tension between the principle and virtues of legal clarity and consistency on the one hand, and the common sense of judicial flexibility on the other.

Recognizing that fact, perhaps, is why the Court throws the issue back to the federal government and provinces at the end of its opinion: “It is not for the Court to suggest to the governments of Canada and the provinces the way forward by, in effect, conferring in advance an opinion on the constitutionality on this or that alternative scheme. Yet we may appropriately note the growing practice of resolving the complex governance problems that arise in federations, not by the bare logic of either/or, but by seeking cooperative solutions that meet the needs of the country as a whole as well as its constituent parts.

“Cooperation is the animating force. The federalism principle upon which Canada’s constitutional framework rests demands nothing less.”

Whether the Harper government will pursue the type of cooperative federalism the Court holds in such high esteem is unclear. But one wonders whether the judges were trying to send a message to the various political actors at a time when intergovernmental tensions are running high over issues like this week’s health transfer announcement and the preservation of the long-gun registry data.

More likely, the Court was doing what it often does when confronted with big policy issues: speak with one voice (a unanimous opinion), keep the ruling narrow (limit the decision to the proposed law and not other possible schemes) and hand the issue back to the elected branches.

If the Court is not captive to the JCPC, it remains captive to its caution. Whether that’s a bad thing in this particular case is for each of us to decide.

Emmett Macfarlane is a political scientist and Senior Instructor at the University of Victoria. You can follow him on Twitter @EmmMacfarlane