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BANC - Standing Committee

Banking, Commerce and the Economy

 

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 business).

Senator David Tkachuk (Chair) in the chair.

[English]

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.

[Translation]

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 without subordination.

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 infrastructures.

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 losses incurred.

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 mission.

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 otherwise —

. . . 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 laws.

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 Crown.

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 somewhat tendentious.

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 presentation.

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 and immunities.

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 point.

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 federal jurisdiction.

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 in Canada.

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.

[English]

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.

[Translation]

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.

[English]

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?

[Translation]

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.

[English]

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.

[Translation]

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 interests?

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 answered yes.

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.

[English]

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?

[Translation]

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 losses deprivatized.

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.

[English]

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?

[Translation]

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 we'll achieve.

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 federation operate.

[English]

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 concerns?

[Translation]

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 discretion.

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 slope.

[English]

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.''

[Translation]

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.

[English]

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.)

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