Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce
Issue No. 21 - Evidence - June 1, 2017
OTTAWA, Thursday, June 1, 2017
The Standing Senate Committee on Banking, Trade and Commerce met this day at
10:31 a.m. to examine the subject matter of those elements contained in
Divisions 3, 8, 18 and 20 of Part 4 of Bill C-44, An Act to implement certain
provisions of the budget tabled in Parliament on March 22, 2017 and other
measures; and in camera, for the consideration of draft agenda (future
Senator David Tkachuk (Chair) in the chair.
The Chair: Good morning and welcome, invited guests and members of the
general public who are following today's proceedings of the Standing Senate
Committee on Banking, Trade and Commerce, either here in the room or listening
via the Web.
My name is David Tkachuk. I'm chair of the committee. We are continuing the
subject matter examination of Bill C-44, An Act to implement certain provisions
of the budget tabled in Parliament on March 22, 2017 and other measures, and in
particular Divisions 3, 8, 18 and 20 of Part 4 of the bill.
Honourable senators will know that our committee must report our findings to
the Senate by Wednesday, June 7, 2017.
During the first portion of our meeting we welcome, as an individual, Patrick
Taillon, Associate Professor, Faculty of Law, Laval University.
Thank you for appearing before us today. Please proceed with your opening
remarks, after which we will have a question-and-answer period.
Patrick Taillon, Associate Professor, Faculty of Law, Laval University, as
an individual: Thank you, Mr. Chair and members of the committee, for this
invitation. I will make a short presentation on the impact of the new
infrastructure bank on federalism and the distribution of jurisdictions between
the members of the federation.
Federalism implies the autonomy of all of its members — both the federal and
the provincial — an autonomy that can be experienced through cooperation and
It is important to remember that infrastructures do not fall under provincial
or federal jurisdiction as such. They are attached to existing jurisdictions.
That is why the vast majority of infrastructures in Canada are in fact under
provincial jurisdiction. They are considered local in the sense of subsection
92(16) of the Constitution Act, 1867, or as municipal pursuant to subsection
92(8). The federal government has authority over certain infrastructures that
fall under its jurisdiction, such as airports and military bases.
However, this division of jurisdictions is not mentioned anywhere in the
bill. Some will claim that the infrastructure bank is a matter of federal
jurisdiction, since it is a bank. However, it is not sufficient to put the label
of "bank'' on an organization for it to necessarily become a part of the
Canadian banking system within the meaning of subsection 91(15) of the
Constitution Act, 1867.
The infrastructure bank is certainly going to be an actor that will invest in
the Canadian economy, but it is not there to manage the savings of Canadians.
Beyond the words chosen to refer to it, this bank is in fact a federal agency
specialized in public investments. The true nature of that bank, its objective
and its effects reside in the will to channel, structure and institutionalize
the federal spending power in infrastructure projects within an autonomous
organization distinct from government, entrusted with creating, funding and
executing PPPs, that is to say public-private partnerships, in the area of
This is inspired to some degree by the electric train project of the Caisse
de dépôt et placement du Québec. It may certainly give rise to some animated and
serious debates regarding, on the one hand, the risks posed by the privatization
of public infrastructures, and on the other hand, the risk of privatizing the
profits generated by the use of those infrastructures, or nationalizing the
It is a very important debate, but it is not the focus of my presentation
today. The problem I would like to direct your attention to resides in the way
this bank will transform the nature of federal interventions in infrastructures.
Why? I would say that we are witnessing the transformation of the federal
spending power. Traditionally, in Canada we recognize the creation of laws and
regulations by the different jurisdictions, and their application; but as soon
as one level of government — be it federal or provincial — spends money, we tend
to consider that that government can spend outside of its fields of
jurisdiction. So, traditionally, the federal level gets involved in provincial
fields of jurisdiction by supporting municipal and provincial projects, although
the projects continue to fall under the jurisdiction of cities and provinces.
That is the traditional structure we have seen for decades with regard to the
federal spending power on infrastructure.
With the infrastructure bank, the federal government's involvement may
change. I would like to direct your attention to three provisions of omnibus
Bill C-44. First, on page 237 of the bill, in subsection 5(4) of the Canada
Infrastructure Bank Act, after this somewhat strange title: "Not a Crown
agent,'' it says, and I quote:
The Bank is not an agent of Her Majesty in Right of Canada, except when [.
So, it is an agent of Her Majesty in the following situations, and four of
them are mentioned: paragraphs (a), (b) and (c) may be debated, but they seem
less egregious to me. I would like to focus my comments on the situation
described in paragraph (d).
The Canada Infrastructure Bank is a Crown agent when it is:
(d) carrying out any activity conducive to the carrying out of its purpose.
The carrying out of its purpose is the achievement of infrastructure
projects. I will continue.
. . . that the Governor-in-Council may, by order, specify.
So in paragraph 5(4)(d), the Parliament of Canada is giving a blank cheque to
the Government of Canada, and entrusting to it the power to subdelegate, on a
case-by-case basis, the situations in which the infrastructure bank will be
considered an agent of the Crown for all of the projects concerning its purpose.
I won't quote them, but afterwards you may look at paragraph 7(1)(h), on pages
238 and 239, where the bill states that the bank, in addition to all of the
powers previously set out, may:
(h) perform any other function conducive to the carrying out of its purpose
that the Governor-in-Council may by order specify.
This means that the government has extraordinary leeway to broaden the bank's
You will also find, on pages 242 and 243, subsection 18(c), where the bank's
powers are specified, indicating that the bank may, for instance:
(c) acquire and deal with as its own any investment made by another person;
So even in the context of projects that are essentially private, the bank may
take part in these projects and deal with them as its own. If the government
decides that for one of these projects the bank is an agent of the Crown, the
project in question becomes a project of the federal Crown. If the
infrastructure bank is carrying out a project and if the government designates
the bank as an agent of the Crown — which will, as the bill stands now, not be
submitted to Parliament, because it will be up to the government to decide that
on a case-by-case basis — the project in question would benefit from all of the
privileges and immunities of the federal Crown in carrying out its mission. I
remind you that its purpose is to complete infrastructure projects.
What do I mean by "privileges and immunities of the Crown''? It means
immunity with regard to tax matters, preferred creditors, and the applicability
of statutory limitations — prescription cannot be invoked against the Crown, and
it cannot be subject either to forced execution should problems arise on its
infrastructure sites — and immunity from seizure.
There are also consequences regarding expropriation. It is considered that
agents of the Crown have the same powers as the government when it comes to
expropriation. However, the most important immunity I want to draw to your
attention before I conclude is a type of general immunity to be found in section
17 of the Canada Interpretation Act. I will quote the excerpt quickly:
17. No enactment is binding on Her Majesty or affects Her Majesty or Her
Majesty's rights or prerogatives. . .
— that is to say unless the legislator on a case-by-case basis decides
. . . in any manner except as mentioned or referred to in the enactment.
This section 17 means that agents of the Crown are immune to the application
of federal laws, provincial laws, and municipal regulations, unless the
legislator decides otherwise on a case-by-case basis.
Of course, it does happen that the courts deduce, by necessary implication,
that the real intention of the legislator was that the law would apply.
Generally speaking, laws do not apply to agents of the Crown unless the
legislator decided otherwise, or unless a court came to the opposite conclusion.
Thus, most of the doctrine and jurisprudence upholds the belief that the laws
do not apply to agents of the Crown, and that provincial legislatures do not
have the ability to subject agents of the federal Crown to their laws. Only the
federal Parliament may make such exceptions.
So, to recapitulate, if the bill is passed as is, the Government of Canada
may decree, in connection with any project, that the bank is an agent of the
Crown. In this way, it would not be subject to the application of provincial
laws and municipal regulations, which could have serious consequences in terms
of environmental assessment processes, or many other considerations. In
addition, these projects carried out by private partners will be able to enjoy
all of the privileges and immunities, and the only possible exemptions will be
those Parliament may decide on, on a case-by-case basis, regarding specific
You have only to remember, for example, the controversy surrounding the
installation of community mailboxes in Quebec municipalities in the past years.
Canada Post, a Crown agent — which fact is provided for in an act of Parliament
— wanted to install mailboxes for the distribution of mail, and the mayors of
all of these cities had no say in choosing their location, because their
regulations did not apply. Why? Because they were dealing with an agent of the
You may also compare the construction of the recent Champlain Bridge in
Montreal to the construction of the Turcot interchange. The Turcot interchange
is a project under provincial jurisdiction, subject to the environmental
assessment process, and must comply with all provincial laws and regulations,
whereas the Champlain Bridge, through another process — they used declaratory
power, but the result was the same — is considered to be a project of Her
Majesty, of the federal Crown, and consequently a certain number of steps
related to environmental assessment were avoided. Obviously, public interest was
at stake in the case of the Champlain Bridge and it was urgent to proceed, but
you see the consequences this can have.
In conclusion, I would like to share with you some potential solutions.
Normally, a body becomes an agent of the Crown through the will of the
legislator or the interpretation of the courts. What is unprecedented in this
bill is that Parliament is giving up that power. It delegates it to the
government, and the government is urged to determine case- by-case the projects
for which the bank should be an agent of the Crown. It seems to me that the
first potential solution is to repeal paragraph 5(4)(d) and allow
parliamentarians to maintain their right to determine the cases where the bank
shall be considered an agent of the Crown, and the extent of its immunities. So
the first potential solution is to revoke this subdelegation, which seems
The second potential solution is to expressly specify that provincial laws
will apply to the projects of the infrastructure bank. In other words,
Parliament is sovereign; privileges and immunities are based in common law, but
if Parliament wishes to go against what is prescribed in common law, the will of
Parliament will have precedence, and, very frequently, Parliament may specify,
confirm and correct the extent of the rights, privileges and immunities
involved. You could for instance decide that the bank will be an agent of the
Crown, but that the scope of its immunities will be limited. Among those limits
would be the application of provincial laws and municipal regulations.
Thus, you must carefully specify when the status of agent of the Crown will
be invoked, and limit the extent of the immunities. That seems like a relevant
solution to minimize the risk of causing a lack of balance between
jurisdictions. In the past, there were infrastructure projects that were
provincial or municipal projects, managed and organized by the cities and
provinces according to their applicable rights. Suddenly, because these projects
would be carried out by a bank that would be an agent of the Crown, they would
not be subject to provincial law. There is something somewhat excessive in that,
as it compares to cooperative federalism as we understand it in Canada.
It is the Senate's duty to cast an attentive, sober second look on
legislation. In the case of an omnibus budget bill, there will no doubt be
strong pressure not to delay the adoption of the bill, but it is often in the
public interest to divide this type of bill. I think I recall that the Senate
did so recently, last fall, for a similar budget bill that contained provisions
that applied to banks, and measures to protect consumers. In that case the
government agreed to review its text. It is the Senate's role to force the
government to do better, in the interest of Canadians. I think that the Senate
can cast this second attentive look on the bank bill, and produce a bill that
will be more respectful of the type of federalism we are attached to, more
respectful of provincial laws and municipal regulations, but also perhaps more
democratic, to the extent that it would be removed from this omnibus bill that
complicates parliamentary debate. Parliament could preserve its right to
designate agents of the Crown without delegating that power to the executive,
and preserve that power as it does in the vast majority of other laws that
create and frame organizations that are agents of the Crown.
I thank you for your attention, and I am ready to answer your questions to
the best of my ability.
Senator Carignan: Thank you, Professor Taillon, for that crystal clear
I want to make sure I understand. Perhaps we need to emphasize the
interaction of the provisions, because that is what creates that effect.
When I was mayor, part of my frustration was due to having to manage files
with government organizations that came and settled in and did not respect the
rules nor the PIIAs. This was the case with the AMT — the metropolitan transport
agency — Canada Post, telecommunications companies that installed cell towers,
and small private airports, with the nuisances that that generated.
When you deal with a government organization, there is a certain
accountability. You can exercise a certain amount of political influence to try
to change their point of view. We saw that with Canada Post, when Denis Coderre
went and destroyed mailboxes. However, in the case of infrastructure bank
projects, we would be dealing with an unaccountable private organization that
might not be subject to provincial or municipal laws, or even to environmental
consultations. For instance, that organization would not be subject to
environmental protection standards, in the context of a private project
conducted by private promoters. That is what I believe I understood.
Mr. Taillon: Yes. Thank you for your question. With the bill as it
stands, for that to happen the government has to decree that for a given project
the bank is an agent of the Crown, and if the order is made — and that is not
very complicated — the bank can then treat the project as its own. It invests a
major or minority portion in the project. We don't know. It is in the very DNA
of that bank to play on or review the border between what is public and what is
private. That is to some degree the very essence of public-private partnerships.
We may be for them or against them. The point is precisely to have a private
operator who works hand in hand with a public organization. In the end, is the
consortium that is created a semi-public organization, or a private one? We
could debate that for a long time, but yes, in each public-private partnership,
there is a private organization whose mission is to generate profits, one which
will exploit the asset using rates that will allow it to make a profit. Since it
is supported by the bank, if an order is made indicating that this project has
the status of an agent of the Crown, it will benefit from all of the privileges
For mayors, this will obviously cause frustrations, as you mentioned. I would
add that if the Parliament of Canada decides to amend the bill in order to make
provincial laws and municipal regulations apply, even if the bank is considered
a Crown agency, it would be possible to limit the scope of the immunity. It does
not mean that provinces and municipalities could then abuse the application of
these provincial laws, as there would still be a type of interjurisdictional
immunity, given the jurisdictions' dynamics. Let me explain: if a provincial act
has a substantive adverse effect on federal jurisdiction, it could not apply.
It is not very risky for the federal Parliament to say that provincial laws
would apply, because they would apply in provincial fields of jurisdiction, and
if they do not intrude on federal jurisdiction. Let's take the example of an oil
pipeline that crosses the territory of a province. Currently, if Ottawa
legislates in this area, that pipeline falls under its jurisdiction. If the
provinces want to apply their legislation, their laws rapidly become
inapplicable, as they come up against federal jurisdiction over energy.
Conversely, if Ottawa, through its bank, invests in the field of education,
for instance, and builds colleges, given its federal spending power, it would
not be acting in its own field of jurisdiction, and it is normal that provincial
laws would then apply. So there is no risk that the provincial law would become
an obstacle to federal jurisdiction. The fact that the legislator would indicate
that provincial laws apply would not disrupt the distribution of jurisdictions.
That distribution would continue to apply.
Senator Carignan: You referred to a pipeline. The fact that the
pipeline crosses different provinces triggers federal jurisdiction. However, in
the case of a local pipeline between a drilling well and a location that could
be ten miles away, over rivers, where the oil could be exported, or transported
by truck, can the federal government declare that that project has the status of
Crown agency, so that the project would not be subject to Quebec or the
province's environmental assessments?
Mr. Taillon: Yes. If the infrastructure bank is a partner in the
project and is considered an agent of the Crown, provincial rules or laws would
not apply. That is the consequence of the bill. Of course there is a step that
must be taken. But by adopting the bill, you're giving the government the power
to implement a scenario such as the one you've just described. Of course, the
government would have to decide to do that. It is not surprising that in the
newspapers we read reassuring comments from the government stating that that is
not its intention. When you adopt laws, you create frameworks and limits. You
allow the government to do certain things. I understand that things may be
somewhat different in practice, and that things can be modulated, but I think it
is the work of the legislator to consider the scope of the powers delegated to
the government in such a case. The fact that the government says that it does
not intend to do that does not mean that it will not, if it feels a need to
adopt that course of action.
Senator Ringuette: Thank you, Mr. Taillon. I have several questions
for you. To your knowledge, among infrastructure projects that received federal
funds over the past 20 years, were there any projects that required immunity in
the course of their execution? I have worked on the Hill for a long time, and I
never heard of any. Do you know of any?
Mr. Taillon: Thank you for your question. I'm going to have to
speculate, since I don't have all the statutes and scenarios with me.
I think we need to differentiate between two hypothetical situations. Say the
Government of Canada decides to invest in a federal infrastructure project to
build a Canadian culture museum. It therefore establishes the Canadian Museum of
Culture, a federally regulated public body. In the statute establishing the
organization, the government may make the museum an agent of the Crown. I cannot
list a slew of examples, but a bit of research could easily demonstrate my
Conversely, what does not exist, as far as I know, and this represents the
vast majority of cases, is the situation where the Government of Canada gives
the provinces funding under infrastructure programs. Under such programs, funds
are transferred to support projects. Municipalities and provinces are
responsible for project completion. These projects were never considered to be
under the jurisdiction of the Crown. Because of the federal government's
spending authority, these projects were supported by the federal government
through a cooperative relationship. It is not unusual for levels of government
to pool their resources in order to realize shared objectives.
I'm not sure whether that answers your question. My examples may not be
specific enough. It's important to distinguish projects under federal
jurisdiction from those that are funded by Ottawa but that do not fall under
Senator Ringuette: I fully understand the distinction you're making. I
also fully understand the speculative nature of your answer. Potential
investors, business people and groups have basically told us that even a hint of
jurisdictional or other concerns would deter private investors. The choice of
projects that do not entail potential problems is endless, not just in Canada,
but also internationally, so investors will not look to infrastructure bank
projects if they involve speculation or potential jurisdictional disputes.
However, from everything we have heard, it is clear that the infrastructure
project applications addressed to the bank will, for the most part, be municipal
projects that will receive provincial approval.
I accept your speculation. I also accept that the legislation provides for a
review of the mechanism every five years. With all of this speculation, I can't
see why private investors would be interested in an infrastructure project where
jurisdictional issues were even a slim possibility.
I appreciate your comments, but I take them with a grain of salt.
Mr. Taillon: Given what was just said, my fear is that federalism and
jurisdictional squabbling could hinder economic development in Canada. I hope
that's not what was meant.
I thought I heard that jurisdictional issues would deter private investors
from investing. I don't agree with that. On the contrary, I think federalism
relies on two levels of government, which will sometimes work together and
sometimes work against one another. That dynamic can open up a number of
opportunities for private stakeholders, the public and businesses. Respect for
the division of powers and federalism is at the heart of what must be preserved
I do not think this gives rise to any jurisdictional issues, in fact. I said
earlier that the division of powers comes into play when a government endeavours
to regulate or legislate in an area of responsibility. Here, money is being
spent. When the federal government exercises its spending authority, it can do
so at the provincial level as well, and the courts usually do not consider
spending to be legislating. Therefore, the federal government can — and does —
interfere, so to speak, in provincial projects through financial support. That
is not a jurisdictional problem. It was that way before the infrastructure bank
and will stay that way after the infrastructure bank.
The problem merely resides in the designation of these projects, of the
bank's activities, as activities carried out by an agent of the Crown. Not all
public bodies have that status. It's up to Parliament to decide, normally on a
case-by- case basis, which organizations should be designated as agents of the
Crown. The problem in this case is twofold, in my opinion. First, the
organization should not be designated an agent of the Crown; otherwise, the
extent of its immunity should be limited.
Second, this approach goes against the practice of Parliament deciding
whether to designate an organization an agent of the Crown; here, Parliament is
giving the government carte blanche by allowing it to determine, on a case-by-
case basis, the circumstances in which the organization will be designated an
agent of the Crown. That is the troubling aspect, in my view, not jurisdictional
disputes or the division of powers. The bank is there to spend federal money.
The federal government made such expenditures before the bank, so nothing is
changing in that regard. The real issue is that these projects will be deemed to
have been carried out by an agent of the Crown, and that profoundly disrupts the
balance of powers, because once immunity has been granted, provincial laws will
no longer apply.
Senator Wallin: I'm a little confused about what exactly it is you're
suggesting. If you were questioning the right of the federal government through
its delegates to spend in areas of infrastructure, in the first place we have
heard repeatedly that all, perhaps most, infrastructure projects would never go
ahead without federal money. I realize you're making a distinction between a
financial contribution and delegating spending authority. I get that, but these
projects wouldn't exist.
What is your concern? Are you actually arguing that this bank is
unconstitutional or contravenes provincial authority? Is that the nub of your
argument? No? Okay, good.
Mr. Taillon: Whether or not the bill is constitutional is not an issue
I focused on at this stage in the process. The federal government does indeed
have the ability to invest in infrastructure projects, even if those projects
are completely outside its areas of jurisdiction. That isn't the issue. The
problem is that these types of investments used to be merely transfers of funds.
Now, a federal agency is going to participate in the project, and, in some
cases, that will transform a municipal project into a federal one, in other
words, into a project of Her Majesty. Henceforth deemed a project of an agent of
the Crown, the project will be exempt from provincial rules and regulations.
That is my concern.
A few simple amendments could easily rectify that. A number of options are
available. For instance, paragraph 5(4) (d) of the Canada Infrastructure Bank
Act could be removed, or a provision could be added for clarification. I can't
imagine these amendments would be hard to pass given that the government is
trying to do something good and provide reassurance. The government does not
appear to favour the worrisome path I was describing. If everyone is in
agreement that that is not the desired direction, then, it is simply a matter of
making sure that the bill does not allow for that possibility, which would
completely alter a municipal project.
Let's consider a highway construction project to build a bypass in a large
urban centre, be it Toronto, Vancouver or Montreal. It's decided that the
project will be a toll highway that will use a P3 model and have a private
operator. The infrastructure bank invests in the project, making a meaningful
contribution. For a variety of reasons, the project is deemed a priority; it may
be during an election period, for example. The government determines that the
bank will act as an agent of the Crown, and what happens is precisely the
worrisome scenario I laid out today. The highway project would be exempt from
provincial regulations. That is what concerns me, plain and simple.
Senator Wallin: It seems so hypothetical to me; I guess that is the
issue. Any number of projects could have any number of formations where a
private partner might have the lead. The feds have to keep some control over
this. It's tax dollars. It's federal money that's in there.
You were talking about the delegation of authority to the bank, and we see
this in many other cases, whether it's BDC or EDC, or even the CRA has delegated
authorities to collect money.
What is difference about the spending power being delegated through this
structure that troubles you?
Mr. Taillon: Yes, powers are being delegated to the bank. They are
listed in the bill, and I didn't take the time to read through them with you. I
have no problem with that delegation of authority. The bank needs to have the
necessary authority to fulfill its mandate. The problem is its status as an
agent of the Crown.
In terms of that status, paragraphs 5(4)(a), (b) and (c) set out specific
circumstances in which the bank may act as an agent of the Crown. I have no
problem with those situations. I have no problem with the bank advising
ministers, negotiating agreements with other levels of government, or collecting
and disseminating data. It is paragraph 5(4)(d) that I have an issue with; it
says that projects specified by the minister will benefit from the excessive
status that flows from the bank's designation as an agent of the Crown, a status
that is limited to certain organizations that carry out specific activities.
For-profit projects carried out in cooperation with the private sector would be
exempt from provincial environmental assessment requirements, and that strikes
me as going too far.
The Chair: Just so that I'm clear, which I think I am, your concern is
that let's say the bank decides — the infrastructure bank — and they build a
water works in Saskatoon, of which they have 51 per cent ownership and 49 per
cent private. They now become a federally regulated Crown. So they're like the
banks, right? That's your concern.
Mr. Taillon: Exactly, sir.
The Chair: That is a problem.
Mr. Taillon: Yes.
The Chair: They're absent of provincial jurisdiction. So the province
says you have to do this or this, and they say, "Take a hike. We get our orders
from the feds.'' That's a problem.
Mr. Taillon: Yes.
The Chair: That's a good point. I'm not sure I agree with you, but
that's the point you're trying to make.
We have about 15 or 20 minutes because we have to discuss how we're going to
present the report, colleagues, which has to be in by next Wednesday. Today is
Thursday, so it's the last day for us to talk about it. I want to try and have
this meeting done by 11:30.
Senator Massicotte: Thank you, Professor Taillon, for being with us
this morning. Your comments are quite informative and relevant, but I would like
to steer the discussion in a much more realistic and practical direction.
According to the input we received from the minister and his colleagues, the
bank's business plan would clearly be to invest the minimum level of equity
necessary to realize certain projects. Although nothing in life is 100 per cent
certain, I would say that, from my experience, it is virtually certain that the
federal government would have a minority stake and rely on a corporate entity or
partnership. Everything would suggest that. I see the federal government having
a minority position, exercising a common share or silent partnership, or, very
likely, granting a loan convertible to shareholder equity.
Let's say, hypothetically, that this entity or group was building the
Champlain Bridge. I am trying to understand the reality and concerns you
outlined. How would the people of Montreal be affected, if this federal minority
entity, which might only be a lender, were to participate in the construction of
this bridge? Concretely speaking, what aspects would impact the population's
Mr. Taillon: If paragraph 5(4)(d) didn't exist, everything would be
fine. The federal government would be investing in a project and the project
would be carried out.
Senator Massicotte: Let's assume it does exist.
Mr. Taillon: It depends on whether the Government of Canada designated
the bank to act as an agent of the Crown. If so, the problem is that the bridge
could be built without regard for the regulatory regimes, labour standards or
environmental requirements of the municipalities and provinces, as the chair
summarized so eloquently a few moments ago.
Senator Massicotte: Just a moment. Do you mean even in a case where
the bank had a minority stake of 15 per cent to 20 per cent?
Mr. Taillon: According to paragraph 18(h), the bank can deal with as
its own projects being carried out by others. It could therefore acquire as its
own a project in which it had a minority stake. My scenario hinges on a lot of
"ifs.'' The bank would have to acquire and deal with the project as its own, and
that would have to be specified by the government. That is the legal framework
currently set out in the bill. The government would have the authority to pursue
the scenario I described, but would it? That is another matter. The possibility
is, however, there.
Senator Maltais: Yesterday, the Minister of Finance, Mr. Morneau, was
here. I asked him the following question. If Hydro-Québec were to build a new
dam in my home town on the North Shore, at an approximate cost of $10 billion,
could the Canada infrastructure bank fund the project? To my great surprise, he
Mr. Taillon: Of course.
Senator Maltais: If the federal bank were to fund Hydro-Québec's dam,
however, federal environmental protection laws would be the ones that applied.
Isn't that correct?
Mr. Taillon: If the bank were acting as the agent of the Crown,
provincial legislation governing the project would no longer apply.
Senator Maltais: Provincial legislation is subordinate to federal
legislation. Is that correct?
Mr. Taillon: Yes, but if the bank invested in the project and were not
designated the agent of the Crown, provincial legislation would then apply. This
is what worries me, because we are basically talking about municipal or
provincial projects. The division of powers is not at issue, and the federal
government is not legislating in an area outside its jurisdiction. All it is
doing is establishing a bank, but it is giving the bank the special status of
agent of the Crown and not limiting the extent of its immunity. Section 17 of
the Interpretation Act, which I read you earlier, applies, meaning that the
Crown is not bound by any enactment, unless stated — and the "unless'' in this
case is determined by the federal government. Only the federal government can
set out an exception. Provinces are powerless to enforce their legislation.
Senator Maltais: I will wrap up with this next question. In the North,
negotiations with Aboriginal peoples are ongoing. In that case, does federal or
provincial legislation apply, in Quebec?
Mr. Taillon: In this case, the rights of Aboriginals are ancestral
rights protected by the Constitution. It's an enactment above other enactments;
it is neither provincial nor federal. The Constitution applies to the entire
Confederation. I will say, though, that the impact of negotiations with
Aboriginal peoples does complicate things in a project like the one you are
proposing, but does not alter the situation dramatically. In other words, if the
bank were designated an agent of the Crown for the project, provincial
legislation would not apply to the Aboriginal relations. Given that this
relationship is already under federal jurisdiction, some laws of general
application do apply to Aboriginal peoples but are already outside provincial
jurisdiction. It's a bit like if the federal government were to invest in an
infrastructure project that was already under federal jurisdiction; provincial
legislation would have less of an impact.
Senator Wetston: Thank you for coming today. I'm not going to pursue
this Crown agency issue with you, as I don't think we can have a productive
discussion about Crown immunities, privileges and prerogatives of the Crown in
this context. Maybe we'll take it up as a side bar discussion.
These projects, should they go ahead, are expected to be revenue-generating
projects. If the revenues don't materialize, the private sector will expect
risk-adjusted returns to make it viable.
Tell me a little bit about the revenue guarantees. Do you have a point of
view with respect to that?
Mr. Taillon: You know I'm a professor of constitutional law, so I do
have an opinion, but it may not be supported by a vast body of evidence. Yes,
the infrastructure bank is endeavouring to somewhat redefine the boundaries
between the private and public sectors, and yes, every project is expected to
generate revenue. Some might say that the point of the bank's involvement to
make a project that would not be profitable without the bank's assistance
profitable, giving the impression that the revenues are being privatized and the
That said, others would argue that the approach is advantageous to the
government in terms of project financing and risk management. I am not the best
person to wade into that debate, which hinges more on the level of confidence in
public and private institutions to carry out projects of this nature. I'm not
trying to evade the question, but I will limit myself to those comments.
Senator Enverga: I want to make it clear — or correct me if I am wrong
— are you concerned that all those infrastructure projects could become
privatized? Was that your statement earlier today?
Mr. Taillon: The bank's investments may increase the private sector's
role in managing municipal, provincial and federal infrastructure. However, my
statement didn't focus on this. Basically, it's a matter of striking a balance
and seeing how much we invest in these projects. Is the bank a laboratory to
verify whether things work, or is it a major transformation of our way of
managing infrastructure? It all depends on how much we invest and the results
My statement focused more on how the bank could be an instrument of
cooperation and harmony between the provincial members of the federation and the
federal government, rather than a source of tension, conflict and
dissatisfaction with regard to the federal agency's involvement.
For example, in my home province of Quebec, obviously thousands of citizens
will be angry to see that Quebec legislation doesn't apply to a project
designated as an agent of the Crown. In the eyes of the public, the legislation
seeks to assess the environmental process, guarantee certain labour relations
laws, and ensure that all sorts of legal rights are legitimate. The public will
have a hard time understanding why a local and municipal project that focuses on
communities is suddenly exempt from the legislation. This will generate
discontent and dissatisfaction with regard to the federal government's
involvement. It will also lead to criticism of federalism, which won't help the
Senator Enverga: This is a short question. I know that you're
concerned with private enterprises handling infrastructure projects. However,
what could you say about the user fees? Would that be a detriment to public
Mr. Taillon: As a citizen, in many situations, I prefer to pay taxes
and access public infrastructure without being charged to do so. It's a personal
preference and not a rule. It depends on the service and situation concerned.
However, in general, I like to access public infrastructure as easily as
possible. Clearly, when public-private partnerships with user fees are created,
sometimes the services may be less accessible and more difficult to manage,
since all the small costs must be handled.
Senator Bellemare: Senator Massicotte already asked one of my
questions, and you answered it. However, I have another question to follow up on
the one asked by Senator Maltais about the fact that we may surrender our
legislative sovereignty as a result of this section. Do you really think, for a
project that's 10 per cent funded by the bank and that involves a municipality
or even a province, the federal government could designate the project as an
agent of the Crown, without the agreement of the municipality or province?
Mr. Taillon: The government will have the power, and the
parliamentarians will have given it the unbridled power to use at its
Senator Bellemare: So, the government would have the power to sign an
agreement with a municipality, and the project would suddenly become an agent of
the Crown. The government could carry out the project without complying with the
laws of the municipality.
Mr. Taillon: The municipality wants the project. Therefore, the
municipality agrees and negotiates everything. When it comes time to carry out
the project, expropriations are needed. The government realizes that, if it
designates the project as an agent of the Crown, the expropriations may be
simplified. For example, in the case of Champlain Bridge, the government used an
old power known as declaratory power, which people had thought was obsolete.
However, it had the same effect. An urgent situation arose, because people
thought the old bridge could become unsafe. Therefore, the government wanted to
circumvent provincial legislation, and used this declaratory power. Yes, I think
in certain situations, the power exists and will be used. Will these situations
cause a high or reasonable level of discontent? Only time will tell. However, it
seems much simpler to limit the agent of the Crown status to cases covered by
paragraphs (a), (b) and (c), and to avoid this type of case-by-case management.
This is especially true if the management involves relations with private,
profit-based organizations that suddenly end up operating in a consortium
designated as an agent of the Crown. It would be better to avoid this slippery
Senator Unger: Mr. Taillon, I think you've just answered the question
I had. It was: Could the bank/Crown agency appropriate provincial land for, say,
a pipeline or a utility corridor? I think your answer was "yes.''
Mr. Taillon: Yes. However, in the case of a pipeline, given the
federal jurisdiction over energy, I would say that it's not the only way to
achieve the objective. With this provision, it could be a way of circumventing
provincial legislation. I would answer yes to the question. I would add that,
even without this energy provision, a similar result could be achieved.
The Chair: Thank you very much, Mr. Taillon. I appreciate your being a
witness today, and coming here and joining us on this very interesting subject
matter, as we have noted over the last couple of weeks.
(The committee continued in camera.)