Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce

Issue 20 - Evidence - June 7, 2012

OTTAWA, Thursday, June 7, 2012

The Standing Senate Committee on Banking, Trade and Commerce met this day at 10:30 a.m. to examine the subject matter of those elements contained in Divisions 2, 10, 11, 22, 28, and 36 of Part 4 of Bill C-38, An Act to implement certain provisions of the budget tabled in Parliament on March 29, 2012 and other measures.

Senator Céline Hervieux-Payette (Deputy Chair) in the chair.


The Deputy Chair: Honourable senators, this morning we will continue our pre-study of certain divisions of Part 4 of Bill C-38, the jobs, growth and long-term prosperity act.

We have already heard from the minister and his officials, as well as two organizations affected by the legislation. Last week, we started hearing from witnesses outside the government and that is what we will do this morning as well.

We have the honour of welcoming Willie Gagnon, who represents the Mouvement d'éducation et de défense des actionnaires (MEDAC). Mr. Gagnon, the floor is yours but let me just say that, although your movement MEDAC is well known in Quebec, it is not known to my colleagues, so I hope that you will be able to say a few words about MEDAC and the role it plays in Quebec society in particular.

Willie Gagnon, Le Mouvement d'éducation et de défense des actionnaires: Good morning, everyone. My name is Willie Gagnon and I am representing MEDAC, the Mouvement d'éducation et de défense des actionnaires.

It is a national movement in Canada. We do not only operate in Quebec. Formerly, the organization was called the Association de protection des épargnants et investisseurs du Québec. We changed our name in 2005 or in 2007.

As material for this presentation, I encourage you to take a look at the notes on the proceedings of the Standing Senate Committee on Banking, Trade and Commerce from June 4, 1998. That is when our founder Yves Michaud was here and proposed 15 amendments to the Bank Act and the Canada Business Corporations Act.

Mr. Michaud used to say that  "one need not hope in order to undertake, nor succeed in order to persevere. " That is a quotation that René Lévesque attributed to Marcus Aurelius, but that Mr. Michaud attributed to William of Orange. Despite that quotation, we have still managed to implement almost half of the proposals that Mr. Michaud made in 1998, including the proposal to separate the positions of the chair of the board of directors and the chief executive officer of publicly traded corporations, and the right of a minority shareholder to submit proposals for debate at shareholder meetings, which was not the case in the past. Although it was enshrined in legislation, companies would refuse to allow it, along with all sorts of other things. A number of companies, all the banks in fact, now hold a voluntary consultative vote on the company's compensation policy, which was not the case before.

I would also like to refer to our former president Claude Béland's appearance before another Senate committee, the Standing Senate Committee on National Finance, on June 29, 2010. He was invited to comment on a provision in Bill C-9, which was also a budget bill dealing with federal credit unions.

He criticized the fact that, at that time, the bill was not really for those cooperatives, given the hybrid concept of banks in which people could act as trustees.

You have invited us to speak on a host of issues. We have selected only one given our limited time and the amount of things we have to do to be able to comment on all those issues. We have decided to focus on Division 36 of Part 4 of the Bank Act. Nothing else.

I am going to read some parts from an article in the Canadian Press written by Lia Lévesque, called Loi sur les banques: Option consommateurs inquiète. We have relied on this article to form our opinion on the issue at hand. We basically agree with the positions taken by Option consommateurs. I will try to describe our position in detail. The article reads as follows:

Following Quebec Minister of Justice Jean-Marc Fournier, it is now Option consommateurs' turn to worry about an amendment to the Bank Act that the government is about to pass.

The consumers' advocacy group's criticism is that Quebec consumers are running the risk of being less well protected if this measure on banking products and services is passed.

In the massive budget implementation bill, . . .

I am going to make a comment here. That seems to be something commonly shared by all consumers, not just in Quebec, but also across Canada. This bill is huge. On a number of occasions, I even heard and read in press reviews that this was a  "mammoth " piece of legislation:

. . . a number of unrelated measures were added, including some on employment insurance, environmental assessments and banks.

Option consommateurs specifically condemns the preamble that the federal government wants to add to the Bank Act, . . .

The preamble is in Division 36, the division we are interested in:

. . . that states that it is in the national interest that the federal government have  "exclusive . . . standards applicable to banking products and banking services ".

Let me emphasize the word  "exclusive " right away. I am going to point to this word every time it comes up in my study:

Stéphanie Poulin, the head of legal services of Option consommateurs, stresses that Quebeckers now enjoy additional protections because of the Civil Code and the Consumer Protection Act.

For example, in Quebec, there are restrictions on a number of fees that financial institutions can charge, including fees on credit cards and other operations, the lawyer says.

 "In Quebec, consumers enjoy protections and remedies that are enshrined in both the Civil Code and the Consumer Protection Act. But in a scenario where only the federal system applies to banks, consumers will no longer be able to enjoy a whole range of protections. And that is completely detrimental ". . . .

That is the idea behind the word  "exclusive " in Division 36:

She is afraid that, if the preamble is added to the Bank Act, courts that up until now have recognized that banks were also subject to Quebec legislation will now start interpreting the situation differently.

She thinks this change will likely allow courts to interpret things differently than they have until now:

 "This is on the assumption that courts would use that preamble to recognize an exclusively — once again — federal jurisdiction ", which will be a game-changer for Quebec, she points out.

A few weeks ago, the Quebec Minister of Justice, Jean-Marc Fournier, sent a letter to federal Minister of Finance Jim Flaherty and said he was also concerned about this preamble. The Quebec minister had criticized the fact that, by taking this approach, the federal minister will deprive Quebec of its consumer protection power.

I have the letter Mr. Fournier wrote to Mr. Flaherty with me today. I am going to read the relevant parts:

We have read with great interest the budget plan that you presented on March 29 on your government's behalf. Among the many issues that are addressed therein, you suggest sharpening the competitive edge of Canada's financial sector by introducing a preamble into the Bank Act to clarify the intent that all banking activities throughout Canada be governed exclusively — once again the word  "exclusive " — by the same federal standards.

I will skip a paragraph:

Your approach to implementing the budget plan raises a number of questions for the Government of Quebec, particularly on the potential ensuing impact on the application of Quebec legislation and the ability to exercise our respective powers.

Honourable senators, ladies and gentlemen, you see how this can have far-reaching ramifications for all the provinces, much more so than for Quebec.

As a result, we wish to inform you of our concerns with respect to your proposal. The federal government cannot decide in a peremptory manner that provincial laws do not apply to a given sector.

That is the Minister of Justice, and he is not someone who is particularly in favour of Quebec's independence. You can see that Option consommateurs is worried, the minister is worried, and so are we.

Let me now read Division 36. All in all, it is rather short.

Bank Act, clause 525 of Bill C-38:

The Bank Act is amended by adding the following before the enacting clause:

Whereas a strong and efficient banking sector is essential to economic growth and prosperity; Whereas a legislative framework that enables banks to compete effectively and be resilient in a rapidly evolving marketplace, taking into account the rights and interests of depositors and other consumers of banking services, contributes to stability and public confidence in the financial system and is important to the strength and security of the national economy.

I hope that this is not too difficult for the interpreters, given that it is a pretty obscure text.

And the last paragraph is the one that we are most interested in:

And whereas it is desirable and is in the national interest to provide for clear, comprehensive, exclusive — the word  "exclusive " once again — national standards applicable to banking products and banking services offered by banks.

The pertinent law focuses on this concept of exclusivity.

To give you a little background, I will read some parts from the preamble of the reference concerning the Securities Act. The reference holds the Conservative government's plan — to create national securities standards and to establish a federal securities commission — to be unconstitutional.

I am not able to give you the exact paragraph numbers, given that the paragraphs are in the preamble and they are not numbered. It is the seventh paragraph.

The document obviously refers to that bill specifically. But this is just to give you an idea of the legal context for these issues.

Parliament's power over the regulation of trade and commerce under s. 91(2) of the Constitution Act, 1867 has two branches — the power over interprovincial commerce and the general trade and commerce power.

Skipping a sentence:

This power, while on its face broad, is necessarily circumscribed.

That is what the Supreme Court is saying.

It cannot be used in a way that denies the provincial legislatures the power to regulate local matters and industries within their boundaries. Nor can the power of the provinces to regulate property and civil rights within the provinces deprive the federal Parliament of its powers under s. 91(2) to legislate on matters of genuine national importance and scope—matters that transcend the local and concern Canada as a whole.

When the time comes to rule on or settle an issue related to the division of powers under the Constitution, courts use two doctrines: the doctrine of interjurisdictional immunity and the doctrine of federal paramountcy.

On April 22, 2009, a paper was presented by Alain Gingras, a lawyer in the public law branch of the Quebec justice department and counsel for Quebec's Attorney General, intervener before the Supreme Court of Canada in the Canadian Western Bank and Lafarge appeals, for which rulings were made at the same time. The views expressed in this article are the sole responsibility of the author.

The translated title of the conference paper that Mr. Gingras presented was The impact of the Canadian Western Bank and Lafarge decisions on the division of powers.

This ruling by the Supreme Court has established the framework within which courts can interpret the two doctrines: the doctrine of interjurisdictional immunity and the doctrine of federal paramountcy.

I am going to read you a long excerpt. Mr. Gingras summarizes the two rulings and then contrasts the two doctrines. First, the doctrine of interjurisdictional immunity.

Reform of the doctrine of interjurisdictional immunity — it is a reform because this doctrine was reformed in the Canadian Western Bank case. The ruling by the Supreme Court has changed the way the doctrine is used.

Reform of the doctrine of interjurisdictional immunity.

Case law prior to the Canadian Western Bank case, mainly Bell Canada, had previously determined that Parliament's exclusive jurisdiction on federal undertakings under ss. 92(10) and 91(29) of the Constitution Act, 1867, or on other issues related to exclusive federal jurisdiction, prevented the application of provincial laws related to the federal specificity of those issues or undertakings. That is the doctrine of interjurisdictional immunity.

The majority judgment of the Court in the Canadian Western Bank case has reformed this doctrine of interjurisdictional immunity in two ways: first, the way this doctrine is applied, and, second, the scope of this doctrine:

[The Court] restricted the scope of application in two ways: first, the number of immunity cases is practically frozen.

That means that, after Canadian Western Bank, there cannot be any new cases, where the doctrine of interjurisdictional immunity can be applied. The doctrine has to be applied with restraint to the cases already established by case law. And second:

. . . the seriousness of the intrusion needed to cause inapplicability is increased.

So the intrusion of one legislative level into the competence of another must be greater in order for the doctrine to be available.

Now, the second doctrine, which is the heart of our analysis: the doctrine of federal paramountcy. Because the doctrine of interjurisdictional immunity has been frozen, we have much more frequent recourse to the doctrine of federal paramountcy.

Mr. Gingras continues as follows:

The majority judges in the Canadian Western Bank decision reviewed the principles surrounding the doctrine of federal paramountcy established in previous case law. The doctrine means that, in the case of a conflict between a federal law and a provincial law, the federal law prevails, and the provincial law must be considered inoperative, and this is my emphasis, to the extent of the inconsistency. So it is not a question of getting rid of legislation completely, it is seen in terms of the inconsistency.

Inconsistency would occur when both laws cannot be complied with or when the provincial law is incompatible with the purpose of the federal law. Division 36 amends the purpose of the act. It does not amend one provision of that act. It introduces a preamble that applies to the act in its entirety and not to any clause in particular.

The occupied field test is rejected. The fact that federal lawmakers have legislated on a matter does not imply the assumption that the intention was to exclude. There is that word again, exclude. If lawmakers in a particular area act without saying that they want to exclude other lawmakers, it cannot be inferred that the intention was to exclude any and all application of provincial laws in the matter.

We cannot impute to the Parliament of Canada the intention of wanting to occupy the entire field of jurisdiction without clear statutory language to that effect.

That is Mr. Gingras' opinion on a paragraph in the Canadian Western Bank decision. I will read it to you in a moment.

I would first like to read you a paragraph from a more recent decision based on the Canadian Western Bank decision; it describes the recourse to the first doctrine I mentioned to you, interjurisdictional immunity. This is the 2009 Marcotte case in the Superior Court of Quebec. It deals with credit cards and the scope that Quebec legislation has on banking practices. It is presently under appeal to the Appeal Court of Quebec. I have the prosecutors' arguments with me.

This is one paragraph, number 659, of the decision in question. It is very well considered and still deals with the first doctrine, interjurisdictional immunity.

The court came to the following conclusions on this constitutional notion of banking operations. Federal jurisdiction in section 91.15 does not give the banks immunity to provincial law. That is a 2009 decision. The purpose of the federal jurisdiction is to establish a uniform and national financial system, and any interpretation on the scope of the jurisdiction must take that into account. The essential nature of banking operations involves collecting sums of money, receiving deposits against loans and using the sums thereby received to make new loans.

The legal concept of pith and substance is about jurisdiction. For example, banks come under federal jurisdiction by virtue of a section in the Constitution. But what is a bank? It is defined there. A bank is deposits, loans and, incidentally, guarantees on the loans.

In the constitutional sense of the term, banking operations do not necessarily correspond with what banks do every day, nor with what they can do under the Bank Act. So there are bank activities that do not come under federal jurisdiction, such as credit cards, for example.

In its application, its definition, of the jurisdiction, the Supreme Court limits the notion of the vital and essential minimum to the banking guarantee created by the Bank Act, the notion of receiving deposits and giving credit. This is not unlimited; the context is important, given the historical reality of the way the activity has been conducted, in fact. The Marcotte case is certainly about how it is applied.

In this instance, any analysis of the essential characteristics, starting from the vital and essential minimum of the jurisdiction, remains secondary to the exclusionary nature of the doctrine of interjurisdictional immunity with regard to the true nature of the Consumer Protection Act, a valid piece of provincial jurisdiction. There is no question of excluding provincial legislatures and their laws.

The pith and substance doctrine must receive the benefit of any doubt because the burden of showing that something is part of the vital and essential minimum falls on the shoulders of the banks.

Now I am going to jump to the passage from Canadian Western Bank that deals with the other doctrine, the doctrine of federal paramountcy, in paragraph 69. I warn you, there are about 10 paragraphs but I feel it is absolutely vital to read them to you. I understand that it may be a little tedious, but I really I hope I can have the time to do so. About 10 paragraphs in the decision deal with the doctrine of federal paramountcy.

According to the doctrine of federal paramountcy, when the operational effects of provincial legislation are incompatible with federal legislation, the federal legislation must prevail and the provincial legislation is rendered inoperative to the extent of the incompatibility. The doctrine applies not only to cases in which the provincial legislature has legislated pursuant to its ancillary power to trench on an area of federal jurisdiction, but also to situations in which the provincial legislature acts within its primary powers, and Parliament according to its ancillary powers. . . Of course, the main difficulty consists in determining the degree of incompatibility needed to trigger the application of the doctrine of federal paramountcy. The answer that the courts give to this question has become one of capital importance for the development of Canadian federalism. . .

Actually, a broad interpretation of the notion of incompatibility extends the powers of the federal government. Conversely, a more restrictive interpretation tends to provide provincial governments with more room to manoeuvre:

In developing its approach, this court — the Supreme Court, that is — despite the problems occasionally caused by certain relevant aspects of its case law, has shown a prudent measure of restraint in proposing strict tests: . . .

. . . the court defined the fundamental test for determining whether there is sufficient incompatibility to trigger the application of the doctrine of federal paramountcy.

This is a key point.

The doctrine of federal paramountcy does not give the same result as the other doctrine precisely because the doctrine is one of federal paramountcy. When the doctrine is applied, the federal level automatically comes out winning the battle, when there is one.

Dixon J. stated:

In principle, there would seem to be no good reasons to speak of paramountcy and preclusion except when there is actual conflict . . .

At some stage, we are going to have to ask ourselves: what is an actual conflict? Is the preamble that we are dealing with today going to lead to an actual conflict?

. . . as where one enactment says  "yes " and the other says  "no ";  "the same citizens are being told to do inconsistent things "; compliance with one is defiance of the other.

Thus, according to this test, the mere existence of the duplication of norms at the federal and provincial levels does not in itself constitute a degree of incompatibility capable of triggering the application of the doctrine.

In cases where laws are at odds with each other, but where compliance with one does not prevent compliance with other, there are no conflicting interests, at least in legal terms, according to the Supreme Court.

Moreover, a provincial law may in principle add requirements that supplement the requirements of federal legislation (Spraytech).

That is precisely what the Consumer Protection Act, for example, does. In Quebec, it adds a number of requirements to the relationships that businesses and banks have with members of the public, with natural persons. It adds requirements. It does not stand in the way of federal jurisdiction:

Nevertheless, there will be cases in which imposing an obligation to comply with provincial legislation would in effect frustrate the purpose of a federal law even though it did not entail a direct violation of the federal law's provisions. . .

Here, once again, is the idea of the purpose, the idea that the federal level establishes an explicit purpose, but without causing provisions to be directly violated. This is now the crux of the matter, the fact that, with this doctrine rather than the other, it is possible to apply it when there is a conflict with the purpose, but not with a provision:

The Court recognized this in Bank of Montreal v. Hall [1990] 1 S.C.R. 121, in noting that Parliament's  "intent " must also be taken into account in the analysis of incompatibility. The Court thus acknowledged that the impossibility of complying with two enactments is not the sole sign of incompatibility. The fact that a provincial law is incompatible with the purpose of federal law will also be sufficient to trigger the application of the doctrine of federal paramountcy.

Since this judgement, therefore, it is no longer enough to impede a provision in a law. If the purpose of the law is impeded, the process of paramountcy can be triggered under the doctrine. This is the doctrine that is now most widely used when applied in cases not recognized in the case law.

The Deputy Chair: What stage of your argument are you at?

Mr. Gagnon: I have a few paragraphs left.

The Deputy Chair: Then we would like to hear your conclusion. We have eight documents in French only and they will be available to committee members in their preferred language because they will be translated.

Mr. Gagnon: They are judgments that are in English too.

The Deputy Chair: Given that this is a very serious constitutional matter, we would like to finish the legal criteria on which this amendment has to be based and to ask you to wrap up so that we can ask you questions.

Mr. Gagnon: The fact that Parliament has legislated in respect to a matter does not lead to the presumption that in so doing it intended to rule out any possible provincial action in respect of that subject.

I remind you again that the word  "exclude " is used in the proposed preamble. They want to exclude, to operate exclusively. You cannot impute to Parliament the intention to occupy a field completely in the absence of clear statutory language to that effect.

Now there is going to be clear statutory language to that effect:

. . . you cannot impute to Parliament the intention to  "occupy the entire field " . . .

But if this is passed, it will be possible.

I am coming to my conclusion. The Conservatives hew to the doctrine of federal paramountcy as the court does, in fact, by opposing it with the doctrine of immunity. Explicitly writing the Parliament's intention in the text of the act is intended to allow the courts to invoke it more easily, we might even say to force them to do so. That is a grave concern for us, when we consider it in the light of the Securities Act reference to the Supreme Court.

We are very concerned about this, given that we feel that provincial governments are in place for a reason. In the areas in which they legislate, they have been doing so for a long time and they have been doing so very well under the constitutional areas of jurisdiction that have been given to them since the beginning of the Constitution. The result is that people who deal with banks can be better protected.

MEDAC's mandate is to educate and protect shareholders, not to educate and protect consumers. Bank shareholders have an advantage in that the banks can do business and make profits. The banks are already doing very well under the present system, which is set up to protect Canadians under the Constitution.

The Deputy Chair: Thank you. Now we will move to questions.


Senator Tkachuk: Is your opposition to the preamble and the national securities regulator opposition to the idea of a national securities regulator or only the idea because constitutionally you believe it prevents the national government from doing that?


Mr. Gagnon: No, no; it is not just a constitutional position. We agree with the conditions written into the reference under which it was judged — not  "judged " in the legal sense — that the closer lawmakers are to the public and the smaller the region they occupy, the more effective the situation. This is because people have easier access to them. The laws they make are closer to the people who vote. It is not just a constitutional matter.

The organizations that presently oversee activities in banking and in securities — the buying and selling of shares — have been in place for a long time and they work very well. There is no reason to merge them into one. They already work with each other all across Canada. Just in terms of what happened during the 2008 crisis, Canada was one of the countries that came out of it best, with our provincial system. The provinces look after securities trading. In Quebec, it is the Autorité des marchés financiers, and in Ontario, it is the Ontario Securities Commission. It has worked very well.


Senator Tkachuk: What about a system where the federal government sets it up and people voluntarily buy into the system? In Saskatchewan we have a million people. We have our own securities regulator, and Manitoba is the same. These are small provinces. People who want to seek investment often bypass these provinces because of their smaller population and consequently seek investors from Quebec, Ontario and maybe British Columbia and Alberta. They perhaps bypass Saskatchewan and Manitoba because it is just too expensive to get permission from everyone. Do you see any solution? If Quebec does not want to participate, they do not have to participate, but I think many of the smaller provinces would want to participate with a national regulator.


Mr. Gagnon: Of course, we are not opposed to the smaller provinces participating. A passport system already exists. There is cooperation between the various provincial securities regulators in Canada. It is possible to issue shares all over Canada at one time. I am not an expert in it. I am working on MEDAC's behalf today and I am MEDAC's employee. I am not legally trained, I am not an economist. MEDAC only has one employee and I am certainly not an expert in that area.

We have people who could answer these questions much better than I can. There are people on the board of directors who are well up on this, including Mr. Michaud who has been interested in it for a long time, even though he is not an expert; Mr. Parizeau; Mr. Daoust; Ms. Louise Champagne. We can very easily answer these questions.

But I, personally, cannot here. However, I do know MEDAC's position on the matter. We decided that the current system works very well. The regulatory authorities are working with each other. The Supreme Court has said that, since it works, there is no need to invoke the doctrine of federal paramountcy here. The reference judges it unconstitutional, and that is the end of it.

I do not know what is going on with the bill, but I do not think it is on the table anymore.


Senator Tkachuk: Mr. Gagnon, I am a decentralist at heart, so I have a lot of sympathy for you. I am of the view that the federal government or a national government is not necessarily the correct way to do things. I believe that the governments closest to the people are the best governments. I want you to understand that I am sympathetic to your point of view.

On the question of consumer legislation and your seeming mistrust of the preamble as far as it would concern the banks' and the provincial governments' intrusion into what would normally be considered a federal right, are you opposed to that? Do you think that will have a large influence on, say, consumer protection? Why do you think the feds would be any less interested in consumer protection than the provinces?


Mr. Gagnon: It is basically a question of civil law and there have been 400 years of it in Quebec. For a long time, Quebec — and before that, New France — has operated under civil law. This is something that works very well.

The fact is that, if something happens like what we fear will happen, the federal government might be able to remove the banks from the application of the Quebec act.

For a long time in Quebec, clauses of all kinds have been voted for in civil law. The Civil Code and the Consumer Protection Act are broad. The Consumer Protection Act is new and dates from the 1970s. It is a civil matter.

These are things that we have been doing for a very long time. I do not see how removing banks from the application of this law would make things work any better.

Removing banks from this law would create a legal vacuum that will have to be filled. With what? With federal legislation in civil law.

We are in the process of destroying the Constitution. This is not good for business. It does not allow banks to make a profit. Shareholders are concerned. That is not what we want. I do not know what your position is, but ours is basically focused on that point. Civil law is not a federal matter; it is a Quebec matter.


Senator Tkachuk: We have not had the provincial government of Quebec come to testify on this.


Mr. Gagnon: Here? I do not know. Have you had them appear?

The Deputy Chair: The provinces do not usually appear. Only in exceptional circumstances do the provinces testify. We have a letter from the minister that was sent to Mr. Flaherty about his position on that section. That letter was sent to us. Yes, the Government of Quebec does have a formal position.

Mr. Gagnon: That gives you a very clear idea of what he thinks.


The Deputy Chair: We will send you the English version of the letter of Mr. Fournier.


Senator Harb: Thank you very much, Mr. Gagnon. Your presentation was very interesting. You talked about issues with the preamble. You say that it is important that nothing we do affects the jurisdiction of any of the provinces. There is nothing in the act, save for in the preamble, that deals with provincial authority. Do you agree?

Mr. Gagnon: I do not know; I have not read the entire act. I know that the preamble applies to the whole entire act.

Senator Harb: A preamble, if there is nothing in the act, a preamble is a preamble; it is not the act. Rather it is something we say, a belief.

The Deputy Chair: No, it is more than that. It is an interpretation criterion for judges when there is a challenge before the courts; judges are always going to refer to the preamble, which gives the spirit of the act.

Mr. Gagnon: Which describes the intention of the legislator. I must have repeated it at least 10 times during my presentation. That is the basis for the interpretation of the doctrine of federal paramountcy, the intention of the legislator, the purpose of the act.

Senator Harb: What if, for instance, in this amendment we were to say that there is nothing in this act that affects the provincial authority?

Mr. Gagnon: In this amendment, there is something that affects it, the word  "exclusive. "

Senator Harb: Which one?

Mr. Gagnon: The word  "exclusive. " We will read it together, the last paragraph of Division 36:

And whereas it is desirable and is in the national interest . . .

Not national. I do not mean the same thing as the Quebec legislature here; it means  "federal ",

. . . to provide clear, comprehensive, exclusive national standards . . .

I did not emphasize that; it was the Minister of Justice of Quebec and Option consommateurs, with Stéphanie Poulin and Mr. Gingras speaking about the idea of exclusivity.

Everyone spoke about it at least five times and said that we cannot infer what the federal government intends if it is silent. But if it says it, it says it.

Senator Harb: You agree that this is not exclusive for the provinces either?

Mr. Gagnon: No, I do not agree, perhaps it is exclusive.

Senator Harb: We do not know.

Mr. Gagnon: We do not know but  "the exclusive national standard " of what, if it is not the provinces.

Senator Harb: I read the letter and it is not really exactly what you are telling us.

Mr. Gagnon: Which letter?

Senator Harb: The letter from the Minister of Justice.

Mr. Gagnon: Shall we go back to the excerpt where he talks about exclusivity?

Senator Harb: He says that we are cooperating.

Mr. Gagnon: Among the many issues addressed in the letter, you suggest further developing Canada's financial sector advantage by introducing a preamble to the Bank Act that would set out your government's objective to ensure that all banking activities throughout Canada are governed exclusively by federal standards.

Senator Harb: If you read the whole letter, the gist of it is that clarification is needed.

Mr. Gagnon: We want to remove the word  "exclusive. "

Senator Harb: I want to talk to you about the issue of governance, if you have had the chance to look at the issue of governance. The government is proposing a new governance method for what we call CMHC.

Mr. Gagnon: You are talking about another division of the bill. We have not studied the other issues. We did not have time, but we certainly have an opinion. This bill is too big, as many other people believe. We studied this issue, not the others. We certainly have opinions on the issues of good corporate governance, but we did not get our teeth into all of that.

Senator Harb: Would you be satisfied if there had been something in the amendment that said that nothing in this act affects provincial jurisdictions?

Mr. Gagnon: Personally, I would be satisfied if the word  "exclusive " were to disappear, nothing more, but that is a personal opinion, not the opinion of MEDAC. I am here to tell you what MEDAC's analysis was. I could tell you once I have consulted them. Personally, I would be satisfied with having the word  "exclusive " removed.

The Deputy Chair: To come back to the issue of CMHC, knowing that your expertise is corporate governance, how boards of directors should operate, how MEDAC's activities should be represented, I want to suggest to you that we would be pleased to have a document on that division.

Mr. Gagnon: What division? Could you please tell me which one?

The Deputy Chair: The division on CMHC, Division 11 of the bill.

Mr. Gagnon: Okay.

The Deputy Chair: We are very interested in this issue, when a new type of company is created, when a new board of directors is appointed and when that company is going to be governed differently, meaning that the Office of the Superintendent of Financial Institutions is now going to have oversight over CMHC. So that office is an organization that yours knows quite well, and you know that it ensures that financial companies under federal jurisdiction need to meet all the standards.

So, from now on, CMHC will be governed by that organization, will be accountable to that organization, but a corporation was established where two government representatives will be on the board of directors. It is that issue that remains unresolved, namely, the people who thought about the need for the members of a board of directors to be independent, namely, how do we get to the point that deputy ministers are on the board of directors.

Mr. Gagnon: We will look into that.


Senator Stewart Olsen: Mr. Gagnon, you have some very interesting arguments that piqued my interest. I thank you for that.

Because you raised the national securities regulator and your doubts about what the preamble would do with that, I make no secret that our government is in favour of a national securities regulator. We feel it would provide more improved protection to Canadian investigators. I would cite the cases of Vincent Lacroix and Earl Jones. In fact, the Earl Jones Victims Organizing Committee agrees with the call for a Canadian securities regulator. A Canadian securities regulator holds the best potential to make a difference in preventing and deterring white collar crime.

Has your group studied that and what would your comment be?


Mr. Gagnon: The preamble of Division 36 is a preamble added to the Bank Act. It is not directly about regulatory authority or a national securities regulator.

I know that MEDAC submitted a brief as part of the public consultations that were held for the reference on the Securities Act. We submitted a brief. Our position is set out clearly in it. I know we opposed it. I do not know offhand what all the arguments are, but the document was submitted to the Supreme Court.

The Deputy Chair: We can get access to that.

Mr. Gagnon: Yes, yes. We clearly established our position.

The Deputy Chair: I think that is the best way.

Mr. Gagnon: Our arguments were used by the Supreme Court. They did not name us in the reference, but the main thing is that what we presented there was used. The reference to the Supreme Court is along the same lines as what we wanted.

As for Vincent Lacroix: I do not know. I have no comment about that.


Senator Stewart Olsen: You brought up the national securities regulator, but the reason I am supportive of this is I am supportive of improved protection for shareholders and consumers, which is what your group would advocate. I would be interested in your arguments as to why a national securities regulator would not provide improved protection. Not anything to do with provincial rights, but hive right down to the actual question as to why you do not think there would be any benefit.


Mr. Gagnon: I, too, would like to be able to give you a clear answer, but I am not going to, at the risk of being at odds with the brief that has already been drafted. I do not recall the details on all of that. Most certainly, we have sensible and consistent arguments, but I am not the expert in this matter. You need to refer to the brief we presented. I am sorry. I spoke about it to give you the context of the current legal atmosphere and what the Supreme Court thinks about what is going on in Canada. Things are happening in Canada, and it seems to me that it is much broader than a simple amendment to the Bank Act. There is something much much bigger going on, and I think it is directly related to the issue of the national securities regulator. Once again, I would refer you to the brief.


Senator Stewart Olsen: The preamble says, and forgive me, I will read, as you have:

. . . throughout Canada be governed exclusively by the same . . . federal standards . . . to avoid the creation of local and potentially inconsistent rules that threaten the uniform application of the federal banking regulatory framework.

My read of this is different from yours, although I respect what you have said. My read of this is that, in the ongoing effort to protect Canadians, this is added here as a good thing and more protection for Canadian consumers.

I am sorry, it is more of a statement because I know you are opposed to that. I would ask that you consider that and perhaps think about that a bit, that we are striving to protect Canadians. I think that is what the preamble means.


Mr. Gagnon: We are most certainly not against the idea of better protection for Canadians; most definitely not against that. But, we are wondering how removing banks from the application of provincial legislation can move in that direction. We will create a legal vacuum, which will not protect Canadians. We are not just talking about Quebec; there will be a legal vacuum in all provinces if this happens. Civil law is under provincial jurisdiction, so if we remove banks from that, Canadians will be less protected and not better protected. For a while, or at least while the vacuum is in place.


The Deputy Chair: I should add that yesterday I asked the Canadian Bankers Association to provide us with examples. They said they lobbied for this amendment. Also I said if there is some confusion or it is difficult to apply or whatever, give us some examples of the inconvenience that you could have. We were not given one example at the committee. I asked them to send them later on, asking the banks, their members, to provide us with some examples. We do not have any case that would say that this is really a big inconvenience that would not serve the people of Canada well.

Senator Stewart Olsen: I am assuming Quebec banks are part of the Canadian Bankers Association.

The Deputy Chair: Yes, Caisse populaire as well.

Senator Stewart Olsen: They lobbied, that is my point. I would be interested in seeing that, but if they are part of the lobby, then I am not sure that your argument stands up. I hear it and I respect it. Thank you very much.


Senator Ringuette: Thank you, Mr. Gagnon, for your presentation. You gave us a copy of the letter dated April 19, so from two months ago, that Mr. Fournier, the Minister of Justice of Quebec, sent to Mr. Flaherty, the Minister of Finance of Canada.

Mr. Gagnon: Yes. I do not know what has happened since then.

Senator Ringuette: You cannot tell us whether Minister Fournier received a reply from the Minister of Finance?

Mr. Gagnon: The press release indicates that the letter is dated April 23, so it was right afterwards, but the article in question by Ms. Lévesque that I read to you at the beginning is dated May 23. We found out that the letter existed the day the article appeared. It was not very long ago.

Senator Ringuette: But the Minister of Finance, who is responsible for both the 425-page budget document and Division 36, which we just spoke about, when he receives a letter from a minister of a provincial government, surely the correspondence is a priority?

Mr. Gagnon: Yes, of course.

Senator Ringuette: I wonder if our clerk could perhaps contact the minister's office to find out whether there was a reply to the letter.

If a response was sent, I think that our committee has an obligation to get a copy of it in order to see the point of view of the Minister of Finance, who basically has to defend his bill.

Mr. Gagnon: He should normally respond. When I tried to get Mr. Fournier's letter, I did not get it right away. I contacted the individuals responsible for the Quebec access to information act. I was told that if I made the request, they would be required to respond within 30 days, which was too late. I obtained it through other means because the minister decided to make it public. It was in a press release with a link to an Internet site that led to the letter in question. If it takes you that long, the bill will be adopted before you have received a copy.

Senator Ringuette: So, I am wondering whether the Quebec minister got a reply from Minister Flaherty because this budget bill is being used to impose restrictions that are being imposed on the House of Commons with respect to the time allowed to discuss and analyze this budget bill. Furthermore, if the Minister of Finance is not even able to reply within two months to correspondence that I think is a priority, we have even more serious problems with respect to transparency and accountability.

I am looking at the wording of the preamble, and I understand your concern about the word  "exclusive. " It has been four years that I, personally, have been lobbying to have the Minister of Finance legislate credit cards for the well- being of all Canadians. I see this and tell myself that the Minister of Finance is saying that he has the jurisdiction to do so, and if he does not do it, it is because —

Mr. Gagnon: He has the jurisdiction to do what?

Senator Ringuette: To legislate, regulate the whole credit card situation, both for consumers and for merchants.

Mr. Gagnon: Yes. The Canadian Western Bank decision and the Marcotte ruling refer to that, and the banks want to get away from the obligations that the provinces impose on them. With this preamble, they could do that. So consumers would no longer have the protection they currently do. That would not be good.

Senator Ringuette: Obviously, the provinces were not consulted about the preamble because, if they had been, there would have been some discussions and, surely, a minimum of cooperation with respect to the division of the tasks and respective jurisdictions.

This is certainly one of the primary concerns that our committee should be analyzing. We should be asking the minister to give us more information about it. When you try to stumble your way into provincial jurisdictions and give yourself exclusive powers, I think it is important to seriously question why it was done.

In any case, Madam Deputy Chair, if we could first get Minister Flaherty's reply to the Quebec Minister of Justice, that would be the first step in understanding how Minister Flaherty wants to interpret his bill.

Mr. Gagnon: I do not know whether the Senate has any more clout for obtaining these kinds of documents than ordinary citizens or even ordinary organizations like ours do not, but if you do, I would also like to have the letter.

Senator Ringuette: Yes. Thank you, Mr. Gagnon, because you have certainly raised some concerns that the members of this committee should have with respect to this taking-over of authority by the minister.

Mr. Gagnon: Thank you, but I absolutely want to take care to emphasize that these are pre-existing concerns. The minister and Options consommateurs were already interested in these issues. All I did was to repeat what they said by going and finding the points that I felt were the most relevant. It is basically a fairly simple issue. It may just be a small preamble, and it is one word, but I think the implications are serious.

Senator Ringuette: Yes, thank you very much.

The Deputy Chair: The documents we receive are rarely confidential. Our work is done in public; the discussions on the bill are done in public.

Mr. Gagnon: Yes, but the minister's actual letter.

The Deputy Chair: And the documents submitted to the committee are also available. So if we have a reply, we will share it; otherwise, we will tell you that there was no reply.

Senator Maltais: I have a few quick little questions. I will leave aside the preamble of clause 36, since everyone has spoken about it. We are not a court of justice, so we will not be able to make a decision about it. How many people are in MEDAC?

Mr. Gagnon: That is the age-old question. We do not have very many people; I would say between 1,400 and 2,000, depending on the time of year. Never more than 2,000; never less than 1,400.

Senator Maltais: You said in your comments that you learned about this preamble for Division 36 from an article in the press by Lia Lévesque?

Mr. Gagnon: It was a Canadian Press article that was used by almost all the newspapers.

Senator Maltais: What would have happened if Ms. Lévesque had not written her article?

Mr. Gagnon: I do not know. There was a press release from the minister that I might have found. A press release stating that he had written a letter to Minister Flaherty, so it would come down to the reference to the minister.

Lia Lévesque wrote an article on Option consommateurs, and I called them to find out their opinion about it. The woman mentioned in the article, Stéphanie Poulin, was a lot of help to me. She gave me some documents, referred me to articles to read. I must thank her for her cooperation, which she did voluntarily.

Senator Maltais: You also mentioned that banks should not issue credit cards?

Mr. Gagnon: I did not say that.

Senator Maltais: Or, did you speak about regulating. . .

Mr. Gagnon: I quoted two judgments on matters relating to credit cards.

Senator Maltais: Okay. You also said that everyone experienced the financial crisis in 2008, and that Quebec did very well. How did Quebec do very well?

Mr. Gagnon: That was not part of my main presentation; it was in response to a question. How did it fare better than the United States?

Senator Maltais: Yes.

Mr. Gagnon: Generally, I cannot give you details, but I know that we fared better than elsewhere. None of our banks have failed here, have they?

Senator Maltais: No.

Mr. Gagnon: I think that it is our banking system that made it that way.

Senator Maltais: Can you give us some examples of what will happen to Quebec consumers if Division 36 is adopted with its preamble?

Mr. Gagnon: Our fear is that the banks would be removed from the application of the act in Quebec and elsewhere in Canada. It is a nightmare.

Senator Maltais: Explain why. Because if the banks are not subject to civil laws, they are in Superior Court.

Mr. Gagnon: What the minister and Option consommateurs fear, and I am not even talking about us, is that the Consumer Protection Act would no longer apply. So the protection of the act could no longer apply to the civil relationship between a bank and a consumer living in Quebec or a resident of any other province with similar legislation. It is a nightmare. Everything would be up in flames.

Senator Maltais: I understand that this is a concern.

Mr. Gagnon: It is our concern because it will create a legal hole. There will be a vacuum.

Senator Maltais: I am not a lawyer. I will not talk to you about law. There are a bunch of them around the table.

Mr. Gagnon: I am not a lawyer, either.

Senator Maltais: How will consumers be deprived of their rights?

Mr. Gagnon: The Consumer Protection Act ensures that consumers are guaranteed certain protections.

Senator Maltais: What are these protections?

Mr. Gagnon: The protections will be eliminated. It is important to read the act. There are plenty of protections.

Senator Maltais: I do not doubt that.

Mr. Gagnon: I am not the one saying it.

Senator Maltais: If you say that this will deprive people of protections, you should know what the protections are.

Mr. Gagnon: They are in the act.

The Deputy Chair: Any other questions? Thank you, Mr. Gagnon.

Mr. Gagnon: Thank you, Madam Chair.

The Deputy Chair: You have certainly done a comprehensive survey of the complexity of the matter. When we get into constitutional questions, they are rarely as simple as two words:  "paramountcy " and  "exclusivity. " When nine Supreme Court judges take the time to render a decision on it, it is probably something important that we will have to look at. And I am telling my colleagues again that the documents are available and, if they want them in English, we have a translation service. As for the minister's letter, that is what we are going to send to everyone. For the rest of the documentation, we will give you the summary of the content and you can tell us which ones you would like to have in full. I thank you and your organization.

(The committee adjourned.)