Economic Action Plan 2014 Bill, No. 1—Third ReadingPublished on 18 June 2014 Hansard and Statements by Senator Catherine Callbeck (retired), Céline Hervieux-Payette (retired), Joseph Day, Maria Chaput (retired)
Hon. Joseph A. Day:
Your Honour, thank you for reminding us that the question before the house is with respect to Item No. 2, Bill C-31 at third reading and whether it should or should not be given third reading at this time.
I will refrain from talking about what transpired prior to Bill C-31 being received by this chamber and referred to our committee for consideration. It’s now back as a result of the consideration that took place.
Honourable senators, the report is the twelfth report of the Standing Senate Committee on National Finance. There were two observations attached to this particular report. This report was filed yesterday, and I’ll refer honourable senators to the two observations that were developed by the committee. This was a drafting exercise by the committee, so they’re Finance Committee observations.
The first is on Part 6, Division 14 — Insurance Companies Act. I’ll read the observation so everybody understands what the observation is:
The Minister of Finance should, after consulting the parties involved, consider establishing principles concerning property rights on accumulated surpluses before establishing the rules for the demutualization of Economical or of any mutual property and casualty insurance company because property rights on accumulated surpluses are not clearly defined at this time. If the courts are asked to intervene, they should make sure that all stakeholders (among others, mutual property and casualty insurance companies, cooperatives, insurance brokers and their associations) are able to present their case on the divisibility or indivisibility of these surpluses since the community as a whole could be impacted by any such rulings.
Honourable senators, we referred to this as “demutualization.” There has been some discussion by mutual companies of transforming themselves into for-profit, share companies. The concept of a mutual company, like a cooperative, is that the owners of the policies are the owners of the company as long as they remain a stakeholder by virtue of being an owner of a policy in the company.
Over the years, these mutual companies have accumulated a lot of extra funds that they haven’t needed to pay out to insurance claims and for operations. It’s a very significant amount of money. The question is: To whom should that surplus go if they move over to become shareholding-type companies? That has been the debate. We’ll go into that a little more later.
Division 14 authorizes demutualization to a degree, but says that the rules will come later. It’s the rules coming later that concerned a number of honourable senators, and we tried to outline in this observation what the parameters should be of the rules.
That’s the first one, honourable senators. I can go into more detail on that, but time probably doesn’t permit to deal with each of these to the extent that it would be helpful to do so.
The second observation — and there are only two — is on Part 6, Division 25 — Amendments Relating to International Treaties on Trademarks.
We want to underline the quality and quantity of concerns expressed by the business community and intellectual property rights experts on the withdrawal of the written declaration of use when registering a trademark in Canada. In the absence of any outside positive testimony on this matter, it is difficult to evaluate the overall benefit for Canada of the withdrawal of the written declaration of use.
The fundamental rule with respect to property rights from a registration is that the person who is the registrant in Canada must use the trademark, or must have used it. You can file on proposed use but, before it’s registered, it must be used, or you can file based on prior use and then you get registration based on use. There is a great concern that use is being taken away from one of the fundamental principles, and that is our observation on this, based on the testimony that we had heard.
That, honourable senators, is the report. Apart from that, there were no amendments made in committee or proposed in committee. There was discussion on many issues, but that is the result of our deliberations at committee.
I have referred to two areas, demutualization, and the Trademarks Act and the use issue. I will come back to those items in due course as I go through the bill to try to explain to you what is here. Time will, I’m sure, pass quickly, because there’s a significant amount of information to try to communicate to you. I’ll just try to hit some of the highlights. Other honourable senators have participated in their committees and their reports. At page 2, there are six of them. All the committees have studied different portions of this bill. I hope that any member of any other committee that studied this will participate in debate, and certainly any comments would be very much appreciated from honourable members from the Finance Committee, the committee that I’m pleased to chair.
We have a bill with six parts, Bill C-31. Part 1 is amendments to the Income Tax Act and to related legislation. Part 2 is amendments to the Excise Tax Act (GST/HST measures). Part 3 is amendments to the Excise Tax Act, 2001, the Excise Tax Act, (other GST/HST measures) and Air Travellers Security Charge Act. That’s all part of Part 3. Part 4 is Customs Tariff. There are four out of the six that relate to fiscal matters. You understand that they flow somewhat from the budget, but they’re certainly very important items from the government’s point of view and the fiscal situation that the government wishes to put forward.
Then we get into Part 5, the Canada-United States Enhanced Tax Information Exchange Agreement Implementation Act. It’s questionable, in my view. That should well have stood as a separate piece of legislation.
Then there is Part 6. Part 6 is various other measures. There are 30 various other measures. What makes this bill turn out to be 370 pages is Part 6 and all the items we have to try to deal with.
An Hon. Senator: Here we go again.
Senator Day: It’s impossible for us to deal with those. We would be well into a study now if we had waited for the bill to come to us, because it just passed in the House of Commons last week on June 12.
My focus will be almost exclusively on Part 6, which has 30 divisions to it. I think in the time that I have available to me I can best communicate to you what we found here by dealing with Part 6, which really should have been a separate piece of legislation.
I looked through all of these initiatives, and you can come up with some general themes. One of them is the issue of privacy, the question of privacy versus information sharing between government agencies. You start to see it in little pieces of legislation here and pieces of legislation there. I will come back to that. I’ll go over the general, overall themes first.
A lack of consultation: I can give you some examples of that, and some stakeholders and people who are impacted who say there was a lack of consultation that leaves them very uncomfortable as to what might happen next. If they had been consulted, they might well be supportive of some of this legislation, but not having had the opportunity to suggest how it will impact them makes it very difficult for them.
Items that should not be included in a budget implementation act: I can talk about all of the 30 divisions of Part 6. Acts within an act. I think if something is substantial enough that it deserves of a piece of legislation, to borrow from Shakespeare, these are acts within acts. They could be separate, stand-alone pieces of legislation. There are three of them in this budget implementation act, three acts within acts. That’s another general theme worth talking about.
The final general theme is the corrections. We find there is legislation here correcting something that was probably done in haste, probably part of another budget implementation act previously and therefore not thoroughly enough canvassed and dealt with. Now we’re coming back with amendments to legislation that we were asked to pass in another budget implementation act previously.
Those are just some of the general themes I wanted to bring to your attention.
With respect to the exchange of information, the privacy or the sharing of information between government agencies, we’re seeing more and more of this. You’ve seen it with Bill S-4 and the digital privacy act that we passed reluctantly on division in this chamber recently. We saw it in Bill C-13 in the other chamber, and all the other articles on cyberbullying, and the ability for government agencies to acquire information, either from Internet service providers or from other sources, without the traditional warrant protection.
In the past, if the government or the police needed information on behalf of reviewing government legislation and determining whether there had been a violation, unless the crime was in the act of being committed, typically to get the information they would go and explain their case to a judge. The judge would say, “Yes, okay, this is a warrant and these are the limits on what you can do with that warrant.”
A lot of what we’re seeing — Bill S-4, Bill C-13, and now here in this legislation, first under FINTRAC — is getting away from that protection the public has had through the warrant process and the oversight by the judge.
In this particular legislation, Division 19 of Part 6 concerns FINTRAC, the Financial Transaction and Reports Analysis Centre. FINTRAC gets information from all financial institutions. It analyzes that and then typically would pass that information on from the financial institution, in terms of information collected globally as opposed to about individuals. The concern is the movement towards more individuals’ information being passed on.
In the FINTRAC case, we have some interesting information for honourable senators under Division 19. This legislation you’re being asked to vote on expands the circumstances that authorize the Border Services people to disclose information collected under this part and forward it to FINTRAC for analysis. Border Services is getting more authority to pass information between government agencies. The amendment clarifies the intent of the existing information-sharing provisions in the current act between FINTRAC and the Minister of Finance, and to streamline the process, FINTRAC is being given more authority. The explanation of the legislation says it expands the list of disclosure recipients to whom FINTRAC can disclose intelligence on suspected threats to security.
It’s all under the rubric of security. They can pass on more and more information.
The amendments also enhance the type of information that FINTRAC can disclose in these cases. There are more places they can send it, and it’s a wider base of what can be disclosed.
In addition to that, other amendments allow FINTRAC to share, with the Canada Revenue Agency, compliance-related information that would be relevant to the implementation of international electronic fund transfer reporting requirements.
Honourable senators, you can see what’s happening. More and more of this information that’s being collected by one agency is being shared with another agency, and that could pose some very serious problems in the future.
There’s another piece of legislation, still in Bill C-31, still under the rubric of privacy versus disclosure between agencies, and that relates to the Canada-U.S. agreement in Part 5 of this bill. Part 5 is what we talked about earlier on. Part 5, the Canada-United States Enhanced Tax Information Exchange Agreement, was an attempt by the government to avoid, to a degree, the oppression of earlier legislation that the United States had. We have all received many emails about having to make available — the banks have to go through a due process, and for any potential U.S. taxpayer, the information of all the accounts they have must be sent to the U.S.
Canada has entered into an agreement with the United States, and Part 5 deals exclusively with that, but this is one of those acts within an act. What really bothered me is that they want us to pass the act, at clause 99, that includes the words “as amended from time to time.” So we adopt a piece of legislation that adopts an agreement between Canada and the United States, and that agreement between Canada and the United States may, from time to time, be amended by the executive branch. We will not see that as legislators. We will not say, “That is far too oppressive on the people of Canada and Canadian citizens who might be doing business in the U.S. and therefore might become subject to U.S. tax payment requirements.”
“As amended from time to time” is the wording that appears there. It would be very nice if that were struck out, but it is there for the time being, honourable senators, until we decide otherwise.
Bill S-4 and Bill C-13 all go to this general theme of more and more private information being made available.
There’s yet another case of the Supreme Court of Canada called Spencer, which came out two days ago, that talks about the importance of private information. The Privacy Commissioner has also come out and suggested that there is a serious need to look at changes to the legislation, including Bill S-4 and Bill C-31, with respect to the provisions I’ve just brought to your attention.
Let me discuss a lack of consultation. All we have to do is look at Division 14 of this bill, demutualization, and Division 25, Trademarks Act, the lack-of-use issue. In neither one of those was there the kind of consultation that there should have been prior to bringing out the legislation, making the stakeholders nervous.
Items that should not be included in the budget implementation: As I mentioned, all of Part 6 and probably Part 5 as well, because that’s the Canada-U.S. agreement that should have been dealt with and studied separately from the point of view of legislation.
I talked about Part 5, and I don’t think I need to talk further about that, but Division 29 is another one that is an act within an act. It purports to create an administrative tribunals support service of Canada act. There are 11 administrative tribunals that are getting the same support services.
We got a note from the Canadian Bar Association in that regard, and they were very nervous about this particular matter. They indicated that this should never be passed without being separate legislation so that there could be a separate discussion. Their concern was that administrative tribunals are very specialized in a lot of different fields. International trade is one; one could be for immigration. They deal with a lot of different people who appear before them. The supports needed are different. You can’t say one administrative tribunal and the support system will support all of them.
They’re very worried about that particular aspect of combining all of these. But they said one of the most important things is that there has been no consultation. There was no consultation to consider the confidentiality aspects of different administrative tribunals. There was no consultation to consider the expertise of the tribunals that develops. From the point of view of “should it be in this legislation?” that’s another example of legislation, under Part 6, that should be separate.
Regarding corrections to legislation made in haste, I’ll refer you to Divisions 20 and 21. One of them is immigration legislation. I won’t go to it, but we have it here: Bill C-4, immigration. We passed it last year. They’re back now to make some changes with respect to designating essential services.
Senator Mercer: Should have done that before.
Senator Day: We did it last year, but we didn’t do it properly.
The other is the essential services aspect, which in itself is quite controversial — and the agreements that are being entered into — but that, honourable senators, is an amendment that is being made already.
Other items that are in this Part 6: One was increasing the number of judges in Alberta and in Quebec. These are undoubtedly very important, but does it have to be in a fiscal ominous bill that has to be passed quickly so the government can get on with its running of the country? Can we not deal with some of these items separately?
There’s a hazardous products bit. There is also a Members of Parliament Retiring Allowances Act for those members of Parliament who are suspended. This makes provision that they can’t collect or pay into their retirement for the time that they are — but it’s here; it’s in this omnibus bill.
The Customs Act extends the period of time during which the minister may cancel a seizure or reduce a penalty. Do we really need that in a budget implementation bill? It certainly wasn’t in the budget itself.
We have dissolving the ACOA the board of directors and dissolving the Enterprise Cape Breton Corporation. We have a provision where the Virtual Museum program is transferred from one department to another. All here — budget implementation.
Nordion — now you get into some serious, important work. Nordion is a company that spun off from Atomic Energy of Canada Limited a number of years ago. Nordion sold isotopes — molybdenum — all over the world. They had a huge chunk of the international market. Because it dealt with the nuclear industry, Nordion had a restriction on who could hold the shares, and there couldn’t be a major shareholder more than a certain percentage; it was right in the legislation that created Nordion.
The day the budget implementation bill, Bill C-31, was tabled on March 28, an announcement was made by a company by the name of Sterigenics, which is from the United States. It announced a takeover of Nordion, which obviously it could not do under the existing legislation. Is it coincidental that they might have seen Bill C-31 filed, and they made a bid to do what Bill C-31 is going to allow them to do but which they couldn’t do on March 27? They still can’t do it on March 28; they still have to wait for it to be passed. But they got that out there, and there it is.
So what’s going on behind the scenes, honourable senators?
I talked about demutualization.
Regulatory cooperation — this one bothered me: Remove requirements under the Railway Safety Act and the Transportation of Dangerous Goods Act to publish notices of regulations in the Canada Gazette. So the public won’t have an opportunity under the Railway Safety Act and the Dangerous Goods Act to review the “gazetting,” which is a publication so you can take a look at what’s going on and what’s being intended.
We’re advised that the sickness benefits provision under Division 17 will impact approximately 380 Canadians. But here it is, and it’s a huge section in the budget implementation bill.
The Canadian Food Inspection Agency is going to be exempted from the User Fees Act. The User Fees Act was put in there to make sure that government agencies don’t charge a user fee more than is necessary to cover the expense of the service the user is using.
It makes good sense to have some limit when you say to an agency, “You can start charging your users.” There have to be some limits on what they can charge, and it should be the expense that’s being incurred to provide the service that is being used. But the Canadian Food Inspection Agency, which is doing more and more of the user fee side of things, is being exempted from the user fee. They say, “We have our own rules, and we would prefer to use those.” Not a good way to go.
I mentioned a number of concerns I have with FINTRAC. There are over 40 measures here in the FINTRAC application alone.
I mention temporary foreign workers only, Senator Ringuette, because this is one of the areas where we correct some provisions that were passed under Bill C-4 last year. So here we are making amendments already, and it’s in relation to what Senator L. Smith had to say about expressions of interest and how that’s going to make things so much better. We passed it last year. We’re making amendments to the legislation this year. It would have been nice to spend a little more time studying that.
For the Public Service Labour Relations Act, that’s the essential services aspect, and, again, we’re changing the legislation.
I know, honourable senators, that I’m using up a lot of your time and attention, but I’m trying to point out to you that there is a huge amount of diverse information here, any of which is deserving of an awful lot more insight and examination than we can give it.
Taxpayer-backed insurance on mortgages would be CMHC. Those mortgages were being bought up before the economic downturn of 2008. They were bought up, and then a company was raising money selling shares based on what the asset was. The asset was a bunch of mortgages. It was great if you had a mortgage guaranteed by CMHC. CMHC is taking that away. Good idea. It should have been done long ago, but does it need to be in Bill C-31? Could we not have dealt with that otherwise?
On the reduction of Old Age Security, if a person is sponsored to come to Canada, we have a provision that for the first 10 years the sponsor has to pay for that person’s Old Age Security. They don’t get it from the government. The government has decided that 10 years wasn’t enough. We’re being asked to extend that to 20 years that the sponsor will be required to pay.
Then we have the new bridge for the St. Lawrence act, a new act to create that activity and a new administrative tribunal. All of these items are there, honourable senators.
I could talk further and at length about the demutualization, but I will leave that to other honourable senators to try to deal with.
I would like, just for the time that I have remaining, to deal with Part 6, Division 25, the trademarks section. It’s here, allegedly, because there are three international conventions that the government would like to enter into, and they say that we have to have these amendments in order to do that, although there was much evidence to the contrary saying that that’s not necessary.
There really wasn’t anybody who thought it was a good idea to remove the fundamental principle we have had since the 1850s. I think it was in 1868 that the first trademarks act had use as the basis for having an exclusive right. Trademark and name on a product or on a service is yours exclusively if you obtain a registration of that mark in Canada. Then you have to go and register in the U.S. and other places if you want to carry on business in those places. Virtually all of the countries that we have dealt with would have a use requirement. The United States requires an affidavit of use after a period of time. Are you using the mark? Get it off the register if you’re not.
The concerns here are very strong reservations with respect to these changes that are being proposed in Division 25. Every witness, with the exception of government witnesses, had reservations, including about this provision. Let me go over some that sent us letters or appeared and indicated reservations: the Canadian Bar Association; the American Bar Association; the trademarks counsel for Tim Hortons Inc.; the chief legal counsel for Irving Oil Ltd.; Bereskin & Parr. A good friend of many of us here, Dan Bereskin has been practising in this field for many, many years. Gordon Henderson of Gowling Lafleur Henderson, if he’d been still living, would have been here and of the same stature as Dan Bereskin. Dan Bereskin appeared before the committee.
We also had a letter, signed by over 230 country-wide intellectual property lawyers, practitioners, recommending the removal of this division and calling for further consultation in relation to the declaration of use provisions. Some of them would be members of the Canadian bar, the American bar, the trademark council et cetera. The International Federation of Intellectual Property Attorneys was against this. The Canadian Chamber of Commerce was against it. Canadian Manufacturers and Exporters were against this change, as was the Intellectual Property Institute of Canada. As you know, they are hosted here on an annual basis. They are based here in Ottawa. There were many, many others, honourable senators, who came before us.
Let me just tell you what some people had to say. Daniel Bereskin, of Bereskin & Parr, said:
Canadian IP lawyers from across Canada overwhelmingly oppose the conversion of our use-based statute into a registration-based statute.
They are overwhelmingly opposed to it, because it will be so easy — You heard the term “trolls” here a couple of days ago. These are non-users, people who want to get in the business of getting a registration and then forcing somebody else. If you want to start a business, you have to search the register, see what marks are registered and then see if there is an opening for your particular trademark. With no requirement for use, you get all of these people or companies registering marks to create a business for themselves, and then it’s put on the businesses to go to court. So the courts will be loaded down with cases to remove a registration that shouldn’t be there, that’s not a bona fide registration for use purposes.
The Canadian Bar Association, in their brief submitted to the committee, stated:
The fundamental requirement that a trademark be used before its owner will be granted exclusive rights has been a cornerstone of Canadian trademark law since the first statute was enacted in 1868.
I had the year right.
They also said:
An abrupt change from a use-based system, without consultation and analysis by stakeholders, serves only to disrupt the economic relationship between Canada and the US.
. . . Division 25 should be removed from Bill C-31 and be the subject of detailed consideration and consultations with all interested parties.
That was the Canadian Bar Association.
The American Bar Association, in a brief submitted just last week, said:
No rationale has been presented in favor of the amendments other than the administrative efficiency of the governmental body responsible for the operation of the Trade-marks Office.
They were saying that everyone was holding up well. The United States has signed these international treaties and is saying that in order to sign these international treaties you need to make this change; but the American Bar Association is saying “No, you don’t. We didn’t.” In the U.S. they still have a use-based system; and they are members of the international treaties.
Honourable senators, in a nutshell those are the concerns expressed to us by the Canadian Bar Association, the Intellectual Property Institute of Canada, the American Bar Association and many others.
A number of other points were raised in relation to this matter before the Banking Committee that heard evidence on Division 29 of Part 4. One interesting point arose that I hadn’t heard or seen before in the many letters and documents sent to me that outlined concerns. One was from the Fédération Internationale des Conseils en Propriété Intellectuelle, another well-known and highly respected group. The work done by the Banking Committee brought out another point, which is in their report, one of six at page 2 of our Order Paper today. If Canada abandons use in its trademark legislation, then it will abandon its constitutional basis for having federal legislation. Trade and commerce requires use and if they don’t have use, they don’t have a basis for the legislation under trade and commerce. I thought that was a very interesting argument.
All of this could easily have been studied and looked into at length if this hadn’t been part of a budget implementation bill. Because it’s budget implementation, there was no pre-consultation. It’s being rushed through, and there is extreme unease throughout all of Canada on this particular matter.
Motion in Amendment
Hon. Joseph A. Day: For that reason, honourable senators, I move:
That Bill C-31 be not now read a third time, but that it be amended, on pages 207 to 259, by deleting Division 25 of Part 6.
Hon. Catherine S. Callbeck:
Honourable senators, I too want to say a few words on Bill C-31, the budget implementation bill. This is yet another omnibus bill in a long line of Conservative budget bills. I think it’s rather fitting that what could very well be my last speech on a piece of legislation in this chamber is on a topic I have spoken about time and time again.
In my opinion, these omnibus bills, once the exception but now the norm, are no way to present legislation. Quite frankly, I think it’s an abuse of power to cram so many unrelated items into one massive bill. Bill C-31 contains 486 clauses that propose changes to dozens upon dozens of different pieces of legislation. It also, much like the previous omnibus budget bills we have had to deal with, is full of items that are nowhere to be found in the budget. I simply can’t understand how it is acceptable to present a budget bill with anything but items directly laid out in the budget itself; yet we see it time and time again.
Today, however, I want to focus my comments on one specific division of the 30 divisions in Part 6 that I’m worried about because it could have a serious impact on my province of Prince Edward Island and rural communities all across the country. I’m speaking about Division 14, which deals with the demutualization of mutual insurance companies.
Currently, there are 100 mutual insurance companies operating all across Canada with a combined $5.3 billion in premiums. The majority of these companies were formed between 100 and 175 years ago by farmers in small rural communities out of need in the farming sector as well as for rural property owners to provide insurance not adequately serviced by stock companies. To this day, most mutual companies are based in small Canadian towns and have boards that consist of farmers, business people and community leaders. They serve local residents and make decisions locally to suit the needs of many Canadians. Mutuals are well-known for giving back to their local communities through donations as well as providing jobs to local residents.
Over the 100 plus years that many of these companies have been operating, they have built up strong surpluses to help provide financial security for the next generation. Built on the premise of mutuality and sharing, these companies have always operated with the greater good and long-term prosperity of their policyholders as their driving force. It is these surpluses that are at the very heart of demutualization found in Bill C-31. If a company decides it wants to demutualize, what happens to the surplus? How is it divided up? Who benefits from it? There isn’t a clear answer, and that is a major problem for the industry.
Currently, the Economical Mutual Insurance Company is trying to demutualize. This is a massive company with close to $2 billion in surplus and 1 million policyholders. However, Economical is claiming that they have only 985 mutual policyholders that are actually entitled to a piece of that surplus. Not surprisingly, many of those 985 policyholders have a direct connection to Economical, including ties to the board and high-ranking positions within the company. To the rest of the industry, the thought of only 985 out of 1 million policyholders getting a piece of that surplus is unthinkable. It goes against the core beliefs of the mutual industry and is effectively stealing from previous generations who, through prudent fiscal management, have built up such a large surplus to ensure stability for the next generation.
The Prince Edward Island Mutual Insurance Company, which has been Island owned and operated since 1885, has spoken loud and clear about their concerns with this section of the bill. In speaking with them, it becomes very obvious that they do not believe demutualization should be an option.
Blair Campbell, in his capacity as General Counsel and Corporate Secretary for Prince Edward Island Mutual Insurance Company, told the other place while testifying at a committee on this matter:
It is preferred that no enabling rules be established and that mutuals remain mutuals as they began. Individuals have the option of buying shares in stock insurance companies or buying insurance from a stock company if that is their wish. A mutual should not be converted to a stock company for reasons of greed or self-interest of the generation of the day. It is repugnant that a current generation can be unjustly enriched in this way when there will be no option of turning back over 100-175 years of history of these significant companies.
It’s important to note that Mr. Campbell is also on the Executive Committee of the Canadian Association of Mutual Insurance Companies.
However, if enabling rules are to be established, P.E.I. Mutual has laid out what I believe are a number of fair and reasonable requirements that should be implemented.
The first is that a decision to demutualize should receive the highest level of scrutiny within the company. There should be super-majority quorum and approval thresholds for votes taken on the matter. In Ontario, by example, present legislation requires 90 per cent approval.
When it comes to who actually gets to vote on that matter, they proposed that:
All policyholders, not just purported mutual policyholders, must vote on a demutualization proposal. All Policyholders, not just purported mutual policyholders, must be the recipients of equal shareholding. Government should pass a law requiring that all policyholders of a Mutual are considered Mutual or Voting members of the company.
This would prevent a situation like we see right now with Economical, where you have 1 million policyholders but claims of only 985 mutual policyholders who have a so-called legitimate claim to that surplus.
Finally, when it comes to the surplus, P.E.I. Mutual recommended that:
If a Mutual chooses to convert to a stock company the Surplus of the company being an indivisible asset and a common good should remain in the Mutual Insurance System. The policyholders on a demutualization proposal can decide at the same time where, within the Mutual Industry, the Surplus would be directed.
For example, that surplus could be passed along to another mutual insurance company. The key is to keep it within the mutual insurance system.
Honourable senators, I think that the enabling rules laid out above are more than reasonable. However, since this is all being done through regulations, we have no idea what these rules are going to look like. I, personally, believe it’s a very complex issue that deserves its own bill and not to be crammed through in a budget bill with hundreds of other changes.
Motion in Amendment
Hon. Catherine S. Callbeck: Therefore, honourable senators, I move:
That Bill C-31 be not now read a third time, but that it be amended, on pages 145 and 146, by deleting Division 14 of Part 6.
Some Hon. Senators: Hear, hear.
Hon. Pierrette Ringuette:
Honourable senators, at second reading of the bill, we debated trade marks and demutualization. However, today, I want to talk about clause 5 of the bill, which concerns the Canada-U.S. tax information exchange agreement.
On Monday, we discussed the very important matter of people’s privacy. Unfortunately, a few days later, the new Privacy Commissioner said the following which, I believe, is at the heart of what I will share with you later.
In an interview before MacKay’s comments, privacy commissioner Daniel Therrien said the government treated basic customer data as relatively benign, which may have been reasonable at the time.
But now that the Supreme Court has ruled that this information deserves a high level of privacy, the government needs to take C-13 and S-4 back to the drawing board, he said.
“The premise under which this legislation was constructed has been held to be invalid,” said Therrien.
Privacy is a very important issue. Colleagues, for three years now I’ve taken a very keen interest in the issue of taxation for dual citizens in Canada. Living in a border community with the U.S., as many of us do, I know that many Canadian citizens were born in the U.S. and vice versa. We have a major issue all along border communities, and I have been working on this for three years now. I have my file here. I’ve been in discussion with the U.S. embassy here that seems to have quite a revolving door in regard to this issue and getting answers for Canadians.
I think one of the things that is kind of funny in this situation is that the U.S. is a country that bases personal income tax on citizenship and not residency like the rest of the world. Their tax policy has always been that way. It’s funny that a country that had a revolution started by the Boston Tea Party based on taxation without services would have legislation to tax citizen non-residents who are not getting services from their government, but I guess that’s it.
The issue is that their income tax law has always been that way. However, a few years back they noticed that a lot of Canadian citizens and residents were not complying with their income tax act. Therefore, they said that what they will do is say to all foreign banks with a banking institution within their territory that they will have to comply in their home country subsidiary to the taxation information and law in the U.S. with regard to information for citizens — not residents, citizens.
That has sparked a lot of discussion throughout the country, and I’ve had a lot of discussions with the U.S. embassy here on the issue. Honestly, how can a Canadian government enforce, directly or indirectly, foreign legislation?
Second, how can this country sign an agreement to give private Canadian citizens’ information via Canada Revenue Agency to the U.S.? From my perspective, that’s a clear breach of our Canadian citizen, whether they are dual or not.
Some Hon. Senators: Hear, hear.
Senator Ringuette: That is a clear breach of their privacy.
I also believe it is a clear breach of our Canadian Charter of Rights of Freedoms, section 8, which says, “Everyone has the right to be secure against unreasonable search or seizure” and section 15(1), which says, “Every individual is equal before and under the law and has the right to the equal protection and equal benefit of the law without discrimination” —
The Hon. the Speaker pro tempore: Allow me to interrupt you a few seconds, Senator Ringuette. Is there agreement that we do not see the clock?
Hon. Senators: Agreed.
The Hon. the Speaker pro tempore: Agreed.
Senator Ringuette, I’m sorry. I used up one of your minutes, so you can have one more.
Senator Ringuette: If you want to give me more time, Mr. Speaker, I will take it.
The Hon. the Speaker pro tempore: We will start with one minute.
Senator Ringuette: I will repeat section 15(1) of the Charter of Rights and Freedoms:
Every individual is equal before and under the law and has the right to the equal protection and equal benefit of the law without discrimination and, in particular, without discrimination based on race, national or ethnic origin, colour, religion, sex, age or mental or physical disability.
In my opinion, Part 5 of Bill C-31 is a clear violation of the Canadian Charter of Rights and Freedoms. It is also, from my perspective, a clear violation of our Canadian citizens’ right to privacy.
Senator Moore: Sure it is.
Senator Ringuette: The Canadian government has not signed such an agreement with the Chinese government, the Russian government, with France or with the U.K. This is done particularly for Canadian citizens who also are U.S. citizens, and this has all been done in order to help the Canadian banks that have branches in the U.S. That is the basis of this agreement. It’s to save Canadian banks from this U.S. legislation.
By the way, the way the act is written, it removes any kind of court challenge for that information within the Canadian banks. It puts all the onus on the Canada Revenue Agency. That’s phenomenal. As a government, you say that you pride yourselves with regard to private business and competition and so forth, and you would remove that onus of responsibility from these banking institutions.
I will tell you again that many of the citizens from my area of the country are very upset with the U.S. legislation, and they are doubly upset with the fact that the Canadian government is acting against the fact that they reside in Canada. They are Canadian citizens, just like anyone else, and they are being targeted by this agreement and the current bill we have in front of us, and it is not right. If the Americans want to collect personal income tax, that is their responsibility. They are not given facts that someone might be corrupt or there must be money laundering or something else. There’s no criminal intent here, none whatsoever. It’s not like talking about the FINTRAC issue. That is not the purpose. The purpose of this bill is to give personal financial information about Canadian citizens to a foreign country. I have been through that issue before in the case of Tepper in New Brunswick. I know what can happen when that kind of misleading information is provided to a foreign nation.
Motion in Amendment
Hon. Pierrette Ringuette: Therefore, honourable senators, I move:
THAT Bill C-31 be not now read a third time, but that it be amended,
(a) on pages 72 to 83, by deleting Part 5; and
(b) on pages 316 to 357, by deleting Schedule 3.
Some Hon. Senators: Hear, hear.
Senator Ringuette: I’m willing to answer questions.
Senator Cordy: They don’t want questions. They don’t want the answers.
Hon. Céline Hervieux-Payette:
Honourable senators, for those who need more details, I would like to add a few comments as a member of the Standing Senate Committee on National Finance and vice-chair of the Banking, Trade and Commerce Committee.
To begin, clause 99 refers us to a section in the agreement signed with the United States earlier this year that must be enacted through legislation. It should be noted that Canadian banks will be charged a 30 per cent penalty for undeclared funds. That is a major penalty.
Canadians who have been living here for 20, 30 or 40 years, who have not renounced their American citizenship and who have a bank account worth less than $50,000 — I’m talking about general bank accounts — with various terms and conditions or an insurance contract under $250,000 will not be affected. Everyone else is.
We have received letters from distressed Canadians who have been here since the 1970s and 1980s. They retired in Canada and are worried about losing their home because of these retroactive contributions that go back decades.
Canadians who have accounts in the United States are also targeted. Many Canadians, including a large number of Quebecers, spend a good part of the winter in Florida. Usually they do some shopping, have some fun and have a bank account. These people are required to declare their bank account. In this case, Revenue Canada deals with the files of Canadians in the United States. They have to fill out a form. There is a process in place for that. They don’t have a choice because they won’t be able to return to the United States if they don’t complete the required documents.
I must say that the government has a lot of nerve taking money out of Canadians’ pockets in this way, given the wrongdoing that occurred on Wall Street and the impact of the financial collapse in the United States. It is therefore obvious that I support my colleague’s motion regarding clause 99.
My colleague spoke very eloquently about clause 211, but there is one problem. I don’t know whether the legislative drafters in the House of Commons know how to draft a bill, but usually the minister’s powers are included in the text of the bill, not in the regulations, because the regulations do not include any guiding principles or standards on how to deal with the matter of the reserve.
In general, insurance companies have a reserve of $1.6 billion to cover risk. We know how hard it is for farmers to be in business. I am thinking about serious droughts and floods, like the one in Alberta. We are being told that the cost is currently at $5 billion, so $1.6 billion will certainly not cover all risks. I am also thinking about how mad cow disease could resurface.
The reserve is there for a reason, and it should not be used to make people with insurance policies richer. The purpose is to be insured. It is great if the reserve was well administered over the years and no disasters occurred, but I find it absolutely unthinkable for the government to make regulations to tell us how those amounts will be allocated among the million members.
Clause 211 even talks about the courts. In other words, rules have not yet been established, but the legislation already stipulates that regulations may provide for court intervention. For a government that generally doesn’t like the judiciary, I find that this is an odd way of approaching things and including in legislation that the court may intervene. This is unnecessary. I support the amendment simply because clause 211 is invalid.
As far as Nordion is concerned, I just want to say that in a court of law, the witnesses would have been considered hostile. In committee they were rather vague. In short, there is no way of knowing when the production of isotopes will end. There is no way of knowing whether the company, which coincidentally filed a request to buy the company, had heard rumours about the changes made in the budget.
The fact remains that at the end of the day — and as legislators this is something we should be aware of — given the major crisis we went through with the isotopes and how very important they are for treating certain types of cancer, we are again passing on the burden on to the provinces.
Isotopes are a tool used by our hospitals and doctors for treating patients. We do not eat them at a restaurant. If the day comes that we need them, then that means we are not well. The only place they are used is in hospitals. What is more, it will likely be a foreign-owned company, an American company. There is practically no competition, which means the bill will be passed on to the provinces.
I would now like to talk about clause 317, which deals with trademarks. At first there were extensive discussions about the failure to remove a measure that had existed for years, namely the commitment to using trademark.
When a trademark was not being used, the Department of Industry would take measures to remove the name that was not being used. It was an administrative procedure. We are being told that this is an improvement, but it would mean that businesses will now have to go to court instead of following a minor administrative process.
The lawyers we heard from kindly told us that this measure made no sense. They said that the costs could be upwards of $1 million to solve a minor problem. Companies will have to go to court in order to remove or repurchase the name they registered and did not use. It’s easy to see why that makes no sense. It doesn’t take much judgment to see that.
This is an important issue because it affects all kinds of companies. Innovative companies are generally the ones registering trademarks. A witnesses who appeared before the committee told us about his Ottawa restaurant, the Backyard Door. This person had not registered his trademark because there was already a garden furniture company in France registered under the name Backyard Door. As a result, our Ottawa restaurant owner will have to change his restaurant’s name because that name has already been registered, even though his business has existed in Canada for 20 years. This is just a little practical example. We’re not talking about multinational companies here.
I am also thinking of companies with revenues of over a billion a year that certainly have all the funding they need but still told us they oppose this measure. I think that we have no choice but to propose that this section be withdrawn from the bill, since it does not make any sense, it will be challenged, and it will generate needless costs and delays.
I don’t know what the Department of Justice and its legal people are thinking when they come up with legislation that is illegal. It’s obvious to me that this will end up in court and there will be delays as it goes from the Superior Court to the Court of Appeal to the Supreme Court.
First there is the demutualization part that is absolutely illegal, and then there is the part about trademarks. I would like to wind this up with a look at clause 313, which is about the $150 million fund that the government is asking for to buy out securities regulators in small provinces. The federal government, guided by its lofty principles, is going to cut cheques to the small provinces so that it can create its national securities regulator.
First of all, that is a useless expense. A government that spends its time cutting costs doesn’t need to do that. Don’t tell me our system isn’t working. This system has protected us. We probably have better protection with the provincial securities regulators. Plus, there’s only one process for securities issuers to get approval, and the others confirm through the passport system.
It is a useless expenditure. As a Quebecer, I find this clause insulting.
I would like to talk about clauses 254 to 298. I know, the sheer number of them seems intimidating. A little over a year ago, the Banking Committee tabled a report on the proceeds of crime and money laundering. It included recommendations for the government. I had high hopes that this bill would include some of those measures. That is not the case. One of the most important measures in the bill is “timing,” namely the proposal of 30 days to conclude a transaction exceeding $10,000. However, after 30 days, the money is spent and gone forever. The requirement should be in real time. All financial transactions are electronic. I feel that this entire section is another attack on privacy because information zips here and there throughout the government, unrestricted. I have the impression that we are living in a glass bubble, or under a less-than-democratic regime, where no restrictions are put in place concerning personal information.
Hon. Maria Chaput:
Honourable senators, I would also like to say a few words about Bill C-31. I would like to speak about a few divisions of the bill specifically. I have studied these divisions closely, as a member of two Senate committees — namely national finance and social affairs, science and technology — which both did a pre-study of Bill C-31. I will be talking about Division 11 of Part 6, which deals with amendments to the Museums Act, and Division 29 of Part 5, which is designed to create the Administrative Tribunals Support Service of Canada Act.
These are some examples of measures that should not be included in a bill called Economic Action Plan 2014. Bill C-31would make amendments to the Museums Act, which would authorize Canadian Heritage to transfer the administration of the Virtual Museum of Canada and online reference materials to the Canadian Museum of History. It is a good thing that a museum, not a department, is responsible for managing this virtual museum. This responsibility is also very well aligned with the mandate of the new Canadian Museum of History. This measure makes sense and is well thought out, if, of course, two principles are respected. The first is that the government must honour its commitment to continue funding these virtual programs. Canadian Heritage is no longer directly responsible for the program and might well be tempted to look at this as an opportunity to save money. I am not saying that there is such a plan. However, we must remain vigilant.
What about consultation and accountability? The Hon. Senator Nancy Ruth asked several questions about the representation of invisible groups in Canada’s history. The President and CEO of the museum provided assurances that he was consulting with those groups. Did Canadian Heritage include clauses to that effect in the transfer agreement? Will MPs and senators be able to question the Museum about that in a parliamentary committee? Those are a few questions that we did not even have time to ask.
I would like to draw your attention to another measure that we studied: Division 29, Part 6 of Bill C-31. There was absolutely no consultation about the creation of the Administrative Tribunals Support Service. With the creation of this service, the employees and resources of 11 courts will be transferred to a single integrated organization, including the employees and resources located in the regional offices of these tribunals. The tribunals affected have very different missions. They include the Canada Agricultural Review Tribunal, the Canada Industrial Relations Board, the Canadian Human Rights Tribunal, the Competition Tribunal and the Social Security Tribunal.
The Canadian Bar Association is concerned that this merger of services will compromise the expertise of the tribunals. In fact, employees from all of the tribunals will be transferred to a single agency. Every employee will have to deal with cases from 11 different tribunals, which all have different mandates. The Canadian Bar Association also expressed concerns about the independence of these tribunals, since the new agency will fall under the direction of the Department of Justice.
The Interim Privacy Commissioner expressed her concerns about this merger because, by bringing together the resources of a number of small tribunals, the new agency could expose complainants to media attention that would have been unheard of decades ago.
The Canadian Bar Association also expressed concerns — and this is not surprising — about the consultations held with the interested parties before the decision was made. We learned that an information session was held only after the bill was introduced. That is a far cry from a proper consultation process. Given that the concerns pertain to the independence of the tribunals and the protection of personal information, we have the right to expect better.
Honourable senators, there are measures in this bill that are good and others that raise many questions that we do not have time to ask. This is not an approach that I can support. Although we may be used to seeing omnibus bills under this government, we still need to oppose this way of doing things. We need to speak out against this attitude so that this government’s tactics do not serve as a precedent for future governments. My concern is that this bad habit will become a tradition. We must therefore always express our disagreement.
We do not have one bill before us, but dozens of bills packaged together. As a senator, I can’t really say that this compressed schedule has allowed me to fulfill my duty to properly study legislation. The different parts of this bill are so disparate and so numerous that study in committee was often limited to a succession of witnesses, often public servants, who came to explain the desired effects of implementing certain provisions.
As you know, we had to divide the immense task of this pre-study among different committees. I understand this was done to make the study easier. However, I ended up having to choose between two committees, both charged with studying the same bill at the same time, quite often while the Senate was sitting as well.
Can we honestly say that we gave this bill the serious consideration it deserves? In my opinion, that is nonsense.
The only thing I will say about the other parts and divisions of Bill C-31 is that I support the honourable senators who presented amendments today. The thing that bothers me, honourable senators, is the flagrant lack of consultation, the potential for constitutional consequences, the threat to privacy and the fact that the onus seems to be on the individual, to name but a few of my concerns.
In conclusion, I invite all of you to go back in time by approximately 20 years, when Stephen Harper, an opposition MP, got up in the other place to say:
Mr. Speaker, I would argue that the subject matter of the bill is so diverse that a single vote on the content would put members in conflict with their own principles.
I quote again:
Second, in the interest of democracy I ask: How can members represent their constituents on these various areas when they are forced to vote in a block on such legislation and on such concerns?
We can agree with some of the measures but oppose others. How do we express our views and the views of our constituents when the matters are so diverse? Dividing the bill into several components would allow members to represent views of their constituents on each of the different components in the bill.
This was Mr. Harper’s reaction to a 21-page budget bill. The one he has submitted to us today is 380 pages long. We have certainly come a long way from 1994.
I, for one, cannot stand in conflict with my own principles. Bill C-31 is not a good thing for our country. We should not be forced to vote in a block when we agree on some of the measures but are opposed to others.