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Eat Local, Shop Local, Invest Local?

Is Canada entering a new era of slow-growth? If so, what does this mean for how we think about economic development? It might mean implementing new ways to support small to medium-sized local businesses. Not just start-ups with the potential for exponential growth, but the “mom and pop” businesses which provide local employment and keep small town main streets vibrant. In recent years, it has become fashionable to “eat local”. Perhaps it’s time for more Canadians to “invest local” as well.

Like eating local, investing local has important limits, particularly in a northern country with a commodity-based economy. It makes sense for Canadians to invest a substantial portion of their savings in other economies because it diversifies their investment risk. But, as calculated by Momentum, a Calgary-based organization focused on community economic development, if Albertans invested 2% of their RRSP contributions locally that would be $114 million dollars to spread around to local businesses for expansion or upgrades. These investments can generate a modest financial return on investment, but, perhaps more importantly, are likely to generate a significant social return in the form of creating and maintaining local employment, and local access to goods and services.

Investing locally requires an appropriate investment vehicle. Crowdfunding is one way that small local businesses can try to access investment dollars. Although it seems likely that Alberta will adopt new crowdfunding rules recently implemented by other provincial securities regulators, I’m not sure crowdfunding will make sense for many small business owners.

A “community economic development investment fund” or CEDIF is a pool of capital, raised through the sale of shares in the fund, with a mandate to invest in a number of local active businesses. CEDIFs could be used in Alberta to facilitate local investment. CEDIFs have been used in Nova Scotia for over a decade, raising tens of millions of dollars for a variety of local businesses, from coffee roasters to wind farms. In Nova Scotia, investing in CEDIFs is facilitated through exemptions for CEDIFs from disclosure and other requirements that otherwise would apply to distributing shares in an investment fund under provincial securities regulations. This past summer, Courtney Hare, Public Policy Manager of Momentum, and I, with research help from UofA 2L Arooj Shah, made the case for a similar exemption in Alberta. You can access the full policy brief, “Enabling Local Investing in Alberta: The Role of Community Economic Development Investment Funds (CEDIFs)”, here.

If we are in a new era of slow growth, the road ahead for Alberta and the rest of Canada is unclear. It seems likely, however, that it will require more academic attention on community economic development initiatives like CEDIFs and making sure that the capital markets work for national, provincial and local economies.

Judging the Constitution: How Precedents Affect Powers

Dear Sir or Madam,

 

Yesterday, we wrote of constitutional conventions. There was some mention made of Re: Resolution to Amend the Constitution, in which the Supreme Court ruled on how conventions would determine how to amend the soon to be patriated Constitution.¹ This is an example of a reference case. A reference case is when a government goes to the Supreme Court and requests that they rule whether or not a certain policy that they wish to turn into law is constitutional.

 

One of the most important references cases was Re: Secession of Quebec. This case filled an important gap left in the British North America Act in 1867. Once Confederation was established there was no way to deconfederate and allow a province to split off. Given how hard it was to establish Confederation this is actually quite reasonable. However, this meant that as tensions rose between Quebec and the federal government there was no process in place to determine what was an acceptable method for Quebec to leave. The Supreme Court was asked whether unilateral secession was possible, and ruled that secession could only happen after negotiations with the federal government. This was ruled on the grounds that one province leaving Confederation would affect all other provinces, so it would be undemocratic to allow it to do so.²  More importantly, the RSQ highlighted four fundamental tenets of the constitution: Federalism, Democracy, Constitutionalism and the Rule of Law, and Protection of Minority Rights.  While the others are also enumerated in statute, much ink has been spilled with regards to the meaning and application of “Rule of Law”.  To put it succinctly, it establishes a hierarchy of laws, with constitutional law at the top, being supreme over all others.  Additionally, it requires adherence to principles such as predictability, in order to prevent arbitrary uses and abuses of power.

 

Highlighting the importance of federalism, the Supreme Court hears reference cases to decide jurisdiction. One example is  Reference re: Regulation & Control of Aeronautics in Canada, decided by the British Privy Council in 1931 (that was our highest court at the time. To find out when and why that practice ended, make sure you keep reading: Judiciary Week is coming up!). This case established federal, rather than provincial, control over the then-new field of commercial aviation. The Privy council gave two major reasons for their decision. First, section 132 of the British North America Act gives the federal government power over everything related to international treaties. Since 1919, aviation was affected by international treaties, so it made sense for the federal government to regulate it in accordance with those treaties. Secondly, the beginning of s. 91, the “POGG clause”, charges the federal government "to make Laws for the Peace, Order and good Government of Canada, in relation to all Matters not coming within the classes of Subjects by this Act assigned exclusively to the Legislatures of the provinces". This catch-all means that anything that does not fit into a s. 92 provincial power must fit under federal jurisdiction.³ The “POGG” Power refers to the “Peace, Order, and Good Governance” of Canada.

 

The POGG Power is one of the most contested areas in Constitutional law. Often this comes down to an analysis of the POGG Power, which has been defined in three distinct branches. The original use of the POGG was for emergencies such as war and natural disasters. However, economic crises were added to the definition of “emergency” by the Supreme Court in 1975.⁴ The second, covered by the Aeronautics Reference, is the gap branch. New issues, such as technological innovations which were not discussed in the original BNA Act, are given to the federal government.⁵ The third branch, national concern, applies to anything that the federal government can prove is an issue that affects all Canadians and therefore cannot be decided on a provincial level. A good example of this is environmental legislation. This was declared federal jurisdiction by the Supreme Court in R v Crown Zellerbach, in which a company accused of polluting a waterway disputed the federal law it was charged under.⁶ This case is also interesting because it shows how the Supreme Court can shape constitutional interpretation at any time, even when it is not an official reference case.

 

Even when the text of the Constitution is left unchanged, its interpretation can make a great deal of difference to what governments are or are not allowed to do. There are gaps to fill and vague clauses to define. When Parliament finds themselves unsure as to how to proceed, these roles are taken on by the Supreme Court.

 

Your Humble Servants,

The Dominion

 

 

 

¹Reference re: Resolution to Amend the Constitution, [1981] 1 SCR 753, 1 CRR 59 [Patriation Reference].

²Reference re: Secession of Quebec, [1998] 2 SCR 217, 51 CRR (2d) 1 [RSQ].

³Regulation and Control of Aeronautics, Re, [1932] AC 54, 39 CRC 108 [Aeronautics Reference].

⁴Reference re: Anti-Inflation Act, [1976] 2 SCR 373, 68 DLR (3d) 452.

⁵Aeronautics Reference, supra note 3.

⁶[1988] 1 SCR 401, 49 DLR (4th) 161.

Closing Remarks from the Strathcona Candidate Debate

On September 9, 2015, Strathcona candidates Linda Duncan (NDP MP) and Eleanor Olszewski (Liberal candidate) debated legal issues which are central to the upcoming federal election. Closing remarks were omitted from the debate, but the candidates were pleased to provide closing remarks for Ms. Magna Carta’s blog. Please see below, and check back tomorrow for a link to the debate video!

 

Linda Duncan

"We have witnessed a decade of Conservative regressive measures changing the face of Canada, marring our international reputation, diminishing our Charter rights, showing disregard for the rule of law and the judiciary, eviscerating our once strong environmental protection regime, and abrogating Treaty rights. It is time for a change in governance to restore our basic democratic rights beginning with an elections process that supports the right to vote and reflects all preferences through proportional representation.  Canadians are calling for a genuinely balanced and diversified economy, one that restores open transparent decision making and restores the balance between development and environment. My twice tabled Environmental Bill of Rights would enshrine those rights and duties. We need a government that honours the UNDRIP and delivers on a respectful nation to nation relationship with indigenous Canadians. We must restore our once lauded international reputation and uphold our obligations and commitments to human rights and environment, including missing and murdered indigenous women and the plight of refugees. This is your time and your choice. I encourage you to play your part in helping to deliver better governance.”

 

Eleanor Olszewski

“Thank you for inviting me to this debate in celebration of democracy's birth certificate – the Magna Carta. With the election a little over a month away, it is an optimum time to reflect upon the foundations of our government and the values that make us Canadian. I believe that Canadians' faith in government has never been lower – that unprecedented power has been concentrated in the hands of the Prime Minister and his office and that our government operates in a culture of secrecy, control, and hyper-partisanship. I also believe that a Liberal government, under Justin Trudeau, will bring about the sweeping changes that we need in order restore a sense of trust in our democracy.

This includes enhanced access to government information, restoring relevance to Question Period, electoral reform, and an end to the "first past the post" voting system, the unmuzzling of government scientists, return of the long form census, an equal number of men and women in Cabinet, and the formation of a Youth Advisory Counsel so that young people can provide advice to the PM on issues that concern them. These proposals form part of the Liberal plan for a fair and open government.

We have many challenges ahead of us – from the threat of climate change to the Syrian refugee crisis; from missing and murdered Aboriginal women to affordable housing. We can make better decisions with a fair and open government that reflects the values and expectations of Canadians. And in so doing, we can remain true to the living document that is the Magna Carta.”

Nortel: Another victim of Enron?

Yesterday, Ontario Superior Court Justice Frank Marrocco dismissed fraud charges against former Nortel CEO Frank Dunn, former CFO Douglas Beatty and former controller Michael Gollogly. It represents yet another high-profile not guilty verdict in a Canadian "white-collar" criminal trial.

National Post columnist Terence Corcoran has described the prosecution of the Nortel executives as a "corporate witch hunt" prompted in part by "post-Enron regulatory overkill". Whether or not this is a fair characterization, it seems likely that how Canadian regulators, investors and the general public reacted to Nortel's accounting...er..."irregularities" was coloured in part by the accounting scandals of what has come to be known as the Enron era.

The lesson that Canadian business executives might wish to take away from the Nortel example is the importance of trust. Specifically, the importance of having the trust of regulators, investors and the general public, so that when an event occurs that could be interpreted in two different ways, one benign and the other malignant, the company will be given the benefit of the doubt. How corporate executives are to win back this trust in our current post-Enron, post-financial crisis, post-Occupy age is unclear, but moving away from "aggressive" accounting practices might not be a bad place to start.

Walmart, fire safety and “corporate social responsibility”

In the aftermath of the Tazreen fire in Bangladesh, which killed 112 garment factory workers, reports have surfaced regarding Walmart’s refusal to cover the cost of improving electrical and fire safety in Bangladesh’s garment factories. According to Bloomberg, “a Walmart director of ethical sourcing” (of all titles) claimed that it was “not financially feasible” to invest in the proposed improvements. A Walmart spokesperson told the New York Times that the quote has been taken out of context, but the global retailer does not appear to have offered further clarification. The only statement regarding the fire on Walmart’s corporate website is dated from November 26 and claims that its supplier was not authorized to contract with the Tazreen factory and that Walmart’s relationship with the supplier has been terminated.

At the bottom of the news release is a link to information about Walmart’s fire safety initiatives in Bangladesh, as described on page 41 of its 2012 Global Responsibility Report (GRR). These initiatives apparently included fire safety training. In an article on the fire for the New York Times, Jim Yardley quotes a Tazreen factory worker describing the fire safety training she received, which involved being shown how to use a fire extinguisher, and what to do in the event of a fire occurring on the floors above. “They did not tell us what we would do if the fire started on the ground floor”, she said. A few days before the fire, managers were preparing for a buyer inspection of the factory by staging a fire drill, and “displaying photographs of the fire training session on bulletin boards.”

Corporate social responsibility (CSR) reports, such as Walmart’s GRR, have become ubiquitous in recent years. Incidents such as the Tazreen fire raise serious questions regarding the reality behind the reporting. “Fire safety training” might help to make Walmart sound like a caring, responsible corporation, but it’s also a lot cheaper than actually making factory structures safer. The business case for CSR is built on the premise that greater corporate responsibility increases, rather than diminishes, profitability by enhancing brand image and protecting against reputational risks. Walmart’s own slogan, “Save Money. Live Better”, could be read as reflecting this premise. But perhaps the premise is false. It may be that genuine corporate responsibility costs real money, that it may cut into profits – at least in the short-term – and raise prices for consumers. Surely most of us would agree, however, that when it comes to measures necessary to protect the lives of workers, corporations ought to Spend Money to Save Lives, no matter the effect on profits?

SCC says: no more common law fundamental breach of contract

Or, you can't get there from here that way any more, but if you go this way, you can: Tercon v British Columbia (Transportation and Highways) 2010 SCC 4

Addendum - I've added some excerpts from the reasons.