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Proceedings of the Standing Senate Committee on
Legal and Constitutional Affairs

Issue 15 - Evidence

OTTAWA, Wednesday, June 5, 1996

The Standing Senate Committee on Legal and Constitutional Affairs met this day at 4:30 p.m. to consider Bill C-28, respecting certain agreements concerning the redevelopment and operation of Terminals 1 and 2 at Lester B. Pearson International Airport.

Senator Sharon Carstairs (Chair) in the Chair.


The Chair: Good afternoon, senators. We are continuing our consideration of Bill C-28. Appearing before us today are Mr. Konrad von Finckenstein, Q.C. from the Department of Justice; Mr. James McIlroy; and Mr. Gerald Chipeur.

Please proceed.

Mr. Konrad von Finckenstein, Q.C, Assistant Deputy Minister, Business Law, Counsel to Industry Canada, Department of Justice: Honourable senators, I have provided a hand-out update similar to the one I gave you last year except that the cross-references have been updated.

The Government of Canada contends, essentially, that Bill C-28 does not conflict with either the FTA or NAFTA. By using the hand-out, I will explain why we have come to that conclusion.

First, the termination of the airport contracts, in our view, is not an expropriation. While there is no definition of "expropriation" in international law, the international arbitral jurisprudence relating to cases of appropriation or expropriation, always talks about a "taking." Something is taken away from a person, an investor, a company or something.

In this instance, there was no taking away. According to domestic Canadian law, a contract was repudiated and the repudiation was accepted. This is not only my contention; it is the finding of Mr. Justice Borins in T1T2 Limited Partnership et al. v. The Queen, wherein he stated:

With respect to the main issue, the plaintiffs have provided evidence which satisfies me that the defendant committed a breach of the Airport Contracts on December 3, 1993 and that it has repudiated the Airport Contracts and that the repudiation was accepted by the plaintiffs. Indeed, the defendant has provided no evidence which could lead to a different conclusion and has, through counsel, admitted that it repudiated the Airport Contracts and that the repudiation was accepted by the plaintiffs on December 13, 1993.

There was also a second action regarding the leases. The leases had actually been registered against the Toronto airport lands in the registry office of Toronto. There was a motion to expunge and delete that registration, and the court declared that the plaintiffs retained no registrable interest in the lands and premises referred to in Schedules "A", "B", and "C" and ordered the expungement and deletion of the leases from the record because there was no registrable interest.

Clearly, there is no taking here. Nothing was taken away, and the court has so found. The court has found that there was a repudiation and an acceptance of the repudiation. To put the icing on the cake, it actually found that there was no registrable interest and said that the leases which had been registered should be deleted from the record.

My friend Mr. McIlroy argued last time, and presumably will argue today, that the FTA applied because it was in force on December 13 and 15, 1993 when these actions took place. That is correct; it was in force on those dates. However, on January 1, 1994, the NAFTA came into force. Prior to NAFTA coming into force, the United States government and the Canadian government agreed, through an exchange of letters, that the FTA would be suspended during the life of the NAFTA.

That agreement provided as follows:

Noting the entry into force of the NAFTA on January 1, 1994, the Embassy proposes that the operation of the Free Trade Agreement between Canada and the United States (FTA) signed at Palm Springs and Ottawa January 2, 1988, be suspended for such time as the two governments are parties to the NAFTA, subject to an Exchange of Letters between representatives of the United States and Canada identifying the transition arrangement with respect to dispute settlement proceedings under Chapter Eighteen and Nineteen of the FTA.

The exchange relating to the transition matter listed eight separate matters, and none of them had anything to do with the airport in Toronto.

As a result, as of January 1, 1994, the FTA was suspended; the NAFTA was in place; therefore, the FTA did not apply and no claim can be made under the FTA.

In our view, the NAFTA does not apply to the issues here. There is no violation in our view of NAFTA because there was no taking. There was no expropriation. A contract was repudiated and the repudiation was accepted. This took place in December before the NAFTA entered into force. Therefore, there is nothing to which the NAFTA can apply because the events in question took place before the NAFTA came into force. There was no longer an interest. Mr. Justice Borins said that the leases should be deleted because there was no registrable interest. He found there was a repudiation. Consequently, there was no longer any subject matter and no action by the Government of Canada which could be subject to NAFTA discipline pursuant to chapter 11 or to chapter 20.

On the assumption that the government is wrong and that an international panel should find that the NAFTA does apply, then what would be the compensation under NAFTA? The compensation would be for breach of contract which is exactly what this bill provides.

What it would not allow is compensation for loss of future profits. Under international jurisprudence, a plaintiff is entitled to compensation for loss of profits only if there is a going concern that is up and running. In this case, the airport was not up and running. In fact, possession had not even been taken. There was a lease, but no one had entered into possession. No renovations had been started. No contractors were on the premises. There is no way one could say that this was a going concern that was up and running.

Therefore, even if the NAFTA applies, which we contend it does not, the damages that would be awarded under NAFTA would be exactly the same as those that can be obtained under domestic law in Canada, i.e. damages for breach of contract. In our view, this legislation does not cause any problems with NAFTA.

The plaintiff, of course, has the option of going the domestic route or the Chapter 11 of NAFTA route. It has chosen to go the domestic route. As you know, court proceedings are now in progress.

In summary, senators, it is our contention, first, that there was no expropriation; second, that the FTA does not apply; third, that the NAFTA does not apply; and, fourth, that, even if the NAFTA did apply, this legislation would not constitute a violation of the NAFTA and would not allow the plaintiffs any greater rights under NAFTA than they have under domestic law.

Those are my submissions, Madam Chair.

The Chair: Honourable senators, would you like to question the witness now or would you like to hear the other presentation and then question them together?

Senator Jessiman: I have just a couple questions, Madam Chair.

Sir, I ask you to assume that the government had not committed a breach of this contract, and they had taken possession. Would there have been property in the form of these contracts that would have been taken away if they were cancelled after that?

Senator Gigantès: That is a hypothetical question.

Senator Jessiman: It has a lot to do with this particular case.

I am assuming there has been no breach by the government. Both sides had signed the contracts. They took possession. Did they have property at that point?

Mr. von Finckenstein: Yes.

Senator Jessiman: If this legislation had been passed, had it not been for the breach of the government, they would have had property that was expropriated. What you are saying here, as I understand it, is that, because the government commits a breach, it gets out of the expropriation. I do not think any court would hold that. I think if you took it back to the same judge and asked him the question we are being asked here, you would not get the same answer.

Mr. von Finckenstein: Just to clarify, senator, what I said was that the contract was repudiated and the repudiation was accepted. That is what the court found. Therefore, there is no interest.

Senator Lewis: I understand that Lockheed was one of the partners herein. You mentioned at about page 6 of your presentation Lockheed's compensation. Has Lockheed made any claim for compensation?

Mr. von Finckenstein: Lockheed has not made a claim under Chapter 11 of the NAFTA, as we speak.

Senator Bosa: Did anyone contend that this particular matter came under the FTA?

Mr. von Finckenstein: When Mr. McIlroy appeared before you last time, he suggested that it would come under the FTA -- and I do not want to put words in his mouth.

The Chair: I think it is now appropriate to hear from Mr. McIlroy, after which the two witnesses may get into debate and discussion.

Mr. James McIlroy, Lawyer: Honourable senators, it is a pleasure to be back before your committee again. I was here last June; I guess this is becoming an annual affair.

When I last came before you on June 22, 1995, I provided the committee with a preliminary analysis of the international trade implications of Bill C-22. At that time, I raised several questions, and I indicated that further study was required before any final conclusions could be drawn.

To answer your question regarding the FTA, Senator Bosa, at that point I raised it as an issue that should be considered. However, I do not think it is the applicable treaty, as we will see later on. I believe that it is the NAFTA.

The minutes regarding my presentation last June are contained in Issue 44 of the committee proceedings. I do not intend to repeat what I said then, nor will I dwell on the 13-page submission I filed at that time. However, I should like to comment today on the presentation of my friend Mr. Von Finckenstein to your committee on June 27, 1995, as well as his comments to you this afternoon.

I have had the pleasure of working on other matters with Mr. von Finckenstein and his colleague, Mr. Fréchette, and I hold them in the utmost regard. However, I must say from the outset that I simply cannot agree with the position that he has put forward on behalf of the Government of Canada.

Madam Chair, to guide you through my presentation, I have provided you with a two-page summary of the key points I want to make today, as well as the French and English versions of Chapter 11 of the NAFTA which deals with investment.

Allow me to take committee members through this two-page document before I get into the details of my presentation. I think I can speed things along if I give you an idea of where I am going.

I understand also that you have the 14 pages of the NAFTA Chapter 11, which is entitled, "Investment". That should be available both in English and French. I will be referring to that as we go through the discussion.

Allow me to take you through this page-and-a-half summary just so you know where I am coming from. The first thing that is extremely important -- and it is dealt with at the top of the first page -- is that, in my opinion, Bill C-28 violates two key provisions of the NAFTA's investment provisions. They are the expropriation and compensation provisions of Article 1110 and -- and I stress this -- the minimum standard of treatment provisions of Article 1105.

Although this committee has spent some time discussing the issue of expropriation, I want to ensure that you are aware that Article 1110 is only one of the international trade problems you must address. Even if you take the view that Bill C-28 does not violate the NAFTA's expropriation provisions, I submit that you must also consider Article 1105 and its minimum standard of treatment requirement.

These minimum standards, Madam Chair, must be respected whether or not there has been an expropriation. Let us not get too hung up on expropriation -- and I will deal with it as my first point. I want you to be aware that there are two key international trade issues here.

Let us look at my three main points regarding the NAFTA's expropriation provisions. First, I believe that the NAFTA will apply to Bill C-28 when the legislation comes into force. This timing issue is very important.

The second point I want to stress is that, in my opinion, the relevant provisions of the NAFTA and international jurisprudence support the conclusion that the Government of Canada has directly or indirectly expropriated the investments of American investors; or it has taken a measure that is tantamount, and I stress the word "tantamount", to expropriation of such an investment.

My third point is this. I submit that clause 8 and its proposed amendments violate NAFTA because they deprive American investors of due process before an impartial tribunal.

The Chair: Mr. McIlroy, when you refer to clause 8, are you referring to clause 8 as it exists in the bill or clause 8 as amended?

Mr. McIlroy: I am referring to both. I am referring to Bill C-28 as passed by the House of Commons on April 19, 1996, and I am also referring to the proposed amendments regarding clause 8, which the clerk was kind enough to provide to me.

The Chair: I just wanted to clarify that before you proceeded.

Mr. McIlroy: The second NAFTA obligation that Bill C-28 violates is Article 1105. It provides that American investors in the Pearson project -- and I will just read the relevant words on the second page of my summary -- are entitled to "treatment in accordance with international law, including fair and equitable treatment and full protection and security." Again, the obligations outlined in Article 1105 apply whether or not an expropriation has occurred.

I submit that clause 8 and its proposed amendments would allow one party to a lawsuit -- and I refer to the Government of Canada -- to arbitrarily set limits on the damages that may be awarded by a judge to American investors who are currently pursuing a damages suit in the courts of Ontario.

Let me go back to the first page of my summary and discuss in more detail the issue of expropriation. Having given you an overview, I will now tell you why I think there is a violation of Article 1110.

Let us look at the wording of Article 1110. I have reproduced the first paragraph about a third of the way down the first page of my summary. The complete Article 1110 appears at page 11-4 of Chapter 11 of the NAFTA and at pages 11-4 and 11-5 in the French version. It is entitled, not surprisingly, "Expropriation and Compensation".

The first thing we should note about Article 1110 is that the NAFTA parties clearly intended it to be very broad in scope. Let us take a closer look at the wording in paragraph 1. It states:

No Party may directly or indirectly nationalize or expropriate an investment of another Party in its territory or take a measure tantamount to nationalization or expropriation of such an investment --

Both of those terms are defined as expropriation.

-- except...

All four of these conditions must be met. You will see the word "and" after subparagraph (c), which clearly indicates that you cannot pick and choose one out of four. You must meet all four. The expropriation must, first, be for a public purpose; second, it must be on a non-discriminatory basis; third, it must be in accordance with due process of law and Article 1105(1); and, fourth, pursuant to payment of compensation in accordance with paragraphs 2 through 6. I ask you to take particular note of the words "directly or indirectly" and also the words "tantamount to expropriation."

It is important to note that Article 1110 does not prevent NAFTA parties from directly or indirectly expropriating or taking measures tantamount to expropriating an investment. It merely requires that if they do so, the four conditions listed from (a) to (d) must all be met.

This brings me to my first main point which is that the NAFTA will apply to Bill C-28 when the legislation comes into force. As of today, the Government of Canada has not violated Article 1110. There has been an expropriation, but there is a damages lawsuit proceeding before an impartial tribunal in the courts of Ontario. However, on the day that Bill C-28 comes into force, the violation will occur because that is when the expropriation will fall outside the exceptions listed in Article 1110.

I believe, Madam Chair, that Bill C-28 violates at least two of Article 1110's exceptions. First, subparagraph (c) has a requirement that the expropriation be in accordance with due process of law and the minimum standards of treatment outlined in Article 1105(1). Second, subparagraph (d) requires that there be payment of compensation in accordance with paragraphs 2 through 6.

This is where Mr. von Finckenstein and I fundamentally disagree. He is taking the position at pages 5 and 6 of his submission that, because a summary judgment in the Ontario Court (General Division) held that the Pearson airport contracts were repudiated in December of 1993 and the NAFTA entered into force on January 1, 1994, the NAFTA was not in force at the relevant time and, therefore, does not apply. However, with all due respect, I think he is missing the point.

Madam Chair, the issue is not when the repudiation or the expropriation occurs. As I have mentioned, Article 1110 permits expropriations if the four conditions are met. The issue is this: When will the violation of any of the four requirements in paragraph 1 of Article 1110 occur? I submit that the treaty breach will occur when Bill C-28 is enacted and proclaimed into force on a day fixed by order of the Governor in Council. If and when that occurs, the NAFTA will govern.

My second point regarding expropriation is summarized about two-thirds of the way down the first page of my summary. Again, I cannot agree with the Government of Canada's position that no expropriation has taken place. I believe that the Government of Canada has directly or indirectly expropriated the investment of American investors or taken a measure tantamount to expropriation of such an investment.

The first point I want to clear up in this respect is that an expropriation need not involve the taking of land. My friend Mr. von Finckenstein takes great joy in discussing Mr. Justice Borins' decision and concludes that, because Mr. Justice Borins found that there was no interest in the land, there has been no expropriation.

Madam Chair, Article 1110 covers expropriations of "investments", not "land". The definition of "investment" is extremely broad. Let me show you what I mean.

Article 1139 of the NAFTA broadly defines the term "investment" in Chapter 22 at page 11-11 in the English version and at pages 11-4 and 11-5 in the French version.

We are talking about an expropriation of an investment, not an expropriation of land. "Investment" in the NAFTA is extremely broad. You can see that it includes eight elements, set out under paragraphs (a) to (h). In addition to land, which is included in subparagraph (g) where it talks about real estate, the definition includes seven other types of investment which go well beyond land or interests in land.

For example, subparagraph (e) states: interest in an enterprise that entitles the owner to share in income or profits of the enterprise.

Madam Chair, if Bill C-28 expropriates such an interest, there has been an expropriation and that expropriation must be in accordance with the four conditions set out in Article 1110.

Subparagraph (h) also describes the types of contracts and concessions, many of which were involved in the Pearson Airport project.

It states:

interests arising from the commitment of capital or other resources in the territory of a Party to economic activity in such territory, such as under

(i) contracts involving the presence of an investor's property in the territory of the Party, including turnkey or construction contracts, or concessions...

I stress the word "concessions." We will see that word later when we deal with the international jurisprudence in this area.

Senator Jessiman: Does it read "or concessions"?

Mr. McIlroy: That is correct. It is not the word "and" it is "or", Senator Jessiman. You will see the word "or" after the word "concessions" as well, because then we get into contracts where remuneration depends substantially on the production, revenues or profits of an enterprise.

We are talking about expropriation of investments, not expropriation of land. As a result, I was a little surprised when I read some of the discussion as recorded in Issue No. 45 of this committee's proceedings of June 27 last, when Mr. von Finckenstein appeared before the committee.

At page 14 of Issue No. 45, Mr. von Finckenstein responded to Senator Lynch-Staunton that there had been no expropriation because, in January 1995, a summary judgment of the Ontario Court (General Division) had found that there was no registrable interest in land.

I was further puzzled when, at page 17 of Issue No. 45, Senator Stanbury appeared to argue that a Federal Court of Canada decision in La Ferme Filiber Ltée v. the Queen somehow settled the question of expropriation. It held that an expropriation necessarily requires a transfer of property or rights from one party to another.

At the top of page 18, Senator Stanbury also discussed other land-related issues such as flood lines, changes in zoning, et cetera, all of which are totally and utterly irrelevant to the issue before you today.

Let me deal with Mr. von Finckenstein's heavy reliance on the decisions of Mr. Justice Borins of the Ontario Court (General Division) in January 1995 -- and let me be clear at the outset that Mr. Justice Borins did not deal with the issue of expropriation in his summary judgment. My friend Mr. von Finckenstein is attempting to argue that the actions of the Government of Canada can be construed as either a repudiation of a contract or as an expropriation, but that they cannot be both. I disagree, and I believe that my opinion finds support in the relevant international jurisprudence, which I will discuss with you shortly. It is not an either/or situation.

With all due respect to Mr. von Finckenstein and Senator Stanbury, if you are trying to determine whether an expropriation of an investment -- not of land but of an investment -- took place under NAFTA, you will not find the answer in Mr. Justice Borins' summary judgments in the Ontario Court (General Division), nor will you find it in the La Ferme Filiber case, a decision of the Federal Court of Canada. Neither of these cases is dispositive of the issue.

I submit that you must look at what a NAFTA arbitral panel would consider. That is spelled out in Article 1131, which is found at page 9 of Chapter 11 of the NAFTA, in both the English and French versions. It specifies the governing law for a NAFTA arbitral tribunal and it stipulates that:

1. A Tribunal established under this Section shall decide the issues in dispute in accordance with this Agreement and applicable rules of international law.

Madam Chair, a good summary of international investment law is contained in the second edition of a book entitled: International Trade and Investment Law in Canada. It is edited by Professor Robert Patterson, who teaches law at the University of British Columbia.

Part III of the 1995 edition deals with Canadian foreign investment law. I think you will find that the discussion of expropriation in Chapter 12, in the context of foreign investment insurance, provides insight into what constitutes an expropriation under international law.

For example, at the bottom of page 21 Professor Patterson states:

...the application of domestic concepts of expropriation would not seem functional in an international context.

This is important to Mr. von Finckenstein's reliance on Mr. Justice Borins' decision and Senator Stanbury's attempt to argue that an expropriation of land in La Ferme Filiber is somehow dispositive of this issue. At pages 22 to 23 of chapter 12, under the heading "The Meaning of Expropriation," Professor Patterson discusses the international arbitral jurisprudence regarding expropriation, including the Valentine Petroleum and Chemical Corporation v. Agency for International Development case reported at Volume 9 of the 1970 International Law Review, at page 88, in which an American corporation was granted oil exploration and production rights in Haiti. After reviewing the case, Professor Patterson concludes:

...the repudiation of the concession agreement by the Haitian government was held to constitute expropriation. The arbitration tribunal thought that action which deprived the investor of his ability to effectively exercise his rights regarding his investment was enough, without proof of an actual physical taking, to amount to an expropriatory action.

I want to stress the words "repudiation of the concession agreement." Without proof of an actual taking, it amounts to an expropriation.

The bottom line is that the Government of Canada's actions have deprived American investors of their investment rights, which is direct or indirect expropriation or is tantamount to an expropriation.

In the interests of saving time, I will deal with Bill C-28 on the assumption that the proposed amendments to clauses 3, 4, 5, 7 and 8 will be adopted and that clauses 9 and 10 will be deleted entirely.

Let me focus on the proposed amendments to clause 8. Proposed subclause 8(2) states that no award of damages shall be made in respect of, among others, loss of profit, loss of future revenue, loss of value of any share, partnership interest or investment.

Let us look at paragraph 8(2)(a) of the proposed amendment and compare it to the definition of "investment" at page 11 of NAFTA Chapter 11 under Article 1139, which we discussed earlier. I want to show that, even if you amend Bill C-28 by including this proposed amendment under the heading "Awards that may not be made," you will still run afoul of the treaty.

Let us look first at paragraph (h) of the definition of "investment" which uses the words "revenues or profits", which paragraph 8(2)(a) of Bill C-28 says cannot be awarded.

Senator Jessiman: Could you give me that again?

Mr. McIlroy: I am looking at (h), which says:

interests arising from the commitment of capital...such as under

(i) contracts...including turnkey or construction contracts, or concessions...

And then it is really (ii) which is important, which states:

(ii) contracts where remuneration depends substantially on the production, revenues or profits...

That magical word "profits" is front and centre in 8(2)(a) of the proposed amendment to Bill C-28. It says that those cannot be awarded.

Let us now turn to page 4 of chapter 11 and that contains the full definition of Article 1110, the expropriation provision. It says in paragraph 1(d) that Canada cannot expropriate unless it pays American investors in accordance with paragraphs 2 through 6. It is saying that, if Canada wants to expropriate, there must be payment of compensation in accordance with paragraphs 2 through 6. Paragraph 2 of Article 1110 states:

Compensation shall be equivalent to the fair market value of the expropriated investment immediately before the expropriation took place...

A little farther down it states:

Valuation criteria shall include going concern value, asset value including declared tax value...and other criteria, as appropriate, to determine fair market value.

However, let us go back to the proposed amendment to clause 8 of Bill C-28. If you look at 8(2)(d), what does it say? It says that Bill C-28 will deprive investors of their right to claim loss of value of an investment.

Based on the foregoing, Madam Chair, I conclude, as I do at the top of page 2 of my summary, that clause 8 and the proposed amendments to clause 8 of Bill C-28 violate Article 1110, paragraph 1 of the NAFTA because they deprive American investors of due process before an impartial tribunal.

I have gone on longer than I should have. I will be very brief regarding Bill C-28's violation of Article 1105's provisions regarding minimum standard of treatment. At page 2 of my summary, I have included paragraph 1 of Article 1105 and I will just repeat what it says. It is very short. Basically it says that Canada shall accord to the investments of the United States treatment in accordance with international law, including fair and equitable treatment and full protection and security.

For the same reasons I mentioned earlier, I believe that Bill C-28 violates Canada's obligations to treat American investors in accordance with international law, including fair and equitable treatment and full protection and security.

Again I stress that an American investor need not establish expropriation to invoke Article 1105. You should also be aware, Madam Chair, that Article 1105 has already been invoked by Mexican and American investors. The point I am making is not theoretical. It is real. There are actions on the street right now. For example, last March, a Mexican investor, Signa, invoked Article 1105. There had been no expropriation, but it argued that the minimum treatment provisions had been violated. I understand that just yesterday counsel for one of the parties in the Pearson airport project wrote to the Minister for International Trade and advised that an American investor, with a 25-per-cent interest in the T1T2 partnership, intends to submit a notice of intent to submit a claim of arbitration under NAFTA if Bill C-28 passes because the legislation violates both Articles 1110 and 1105. I understand that you have a copy of that letter, and I would urge that you and your colleagues consider it.

If you look at the second page of the letter, senators, you will see where he clearly states his intention to file under both Articles 1105 and 1110.

We are talking about 25 per cent of the Pearson project here. As you know, Lockheed has a 12.5-per-cent interest. If you add those two up, my arithmetic tells me that you have well over a third of this project violating NAFTA obligations.

I will conclude by making two points. Before you conclude your consideration of Bill C-28, I respectfully suggest that this committee consider the following two courses of action. First, I understand that the government intends to delete clauses 9 and 10 of Bill C-28. They should also delete all of clause 8 and its proposed amendments. That must go; it violates the NAFTA.

Second, I understand that, in addition to hearing from some constitutional law experts, you will hear from the Minister of Justice on the constitutional issues surrounding this legislation. I stress that this bill has problems both on the domestic constitutional front as well as on the international law front. Given the importance of the international trade issues raised by this legislation, I would submit that, in addition to hearing from Mr. von Finckenstein, Mr. Fréchette and myself, you should also hear from the minister who has primary responsibility for international trade matters, and that is the Minister for International Trade.

Madam Chair and honourable senators, it has been a long day. I thank you for your attention and I am ready to respond to your questions.


Senator Beaudoin: I have a specific question for you. You say that the word "investment" should be broadly construed. Clause 8 of the proposed amendments makes reference to the word «investment». What legal basis do you have for concluding that the word «investment» should be broadly construed? Is there a clause that provides for that or is it the context of this legislation that inclines you to believe or to conclude that it should be broadly construed?

Mr. McIlroy: Madam Chair, Senator Beaudoin will find in NAFTA two articles that provide an answer to his question. NAFTA includes an article that gives a very broad definition of the word "investment". First, article 1113.1 tells us how that word should be construed for the purpose of dispute settlement. It states that we should refer to NAFTA and to the rules of international law.

In my view, the NAFTA definitions contained in article 1139 include a definition of the word "investment" which is very clear and which includes eight elements outlined in subparagraphs (a) through (h).

According to section 1131, the tribunal must refer to NAFTA. If we refer to NAFTA, we find at page 11-1, Chapter 11, near the bottom of the page, that "investment means":

We then find the 8 elements of subparagraphs (a) to (h) of the definition. I am especially referring to subparagraph (e) and I quote:

An interest in an enterprise that entitles the owner share in income or profits of the enterprise;

That is the very language found in section 8 of Bill C-28 and particularly in subparagraph (h) which refers to concessions, contracts and profits.

Senator Beaudoin: That accounts for your first reason. Do you have a second?

Mr. McIllroy: In my view, that is very clear. That is what the parties to NAFTA mean when they speak of "investment".

Let me say again that we are not dealing with the expropriation of land but with the expropriation of an investment, the definition of "expropriation of an investment" being very broad. Section 8 and the proposed amendments clearly fall within that definition.


Senator Lewis: Are you suggesting that, if Bill C-28 were passed, there would be a breach of the NAFTA agreement? I do not want to be flippant, but I could say, "Well, so what?"

I take it that you are saying that it would be Bill C-28 which would be the act of expropriation.

Mr. McIlroy: Senator, it would be the violation of one of the four conditions that must be met in order for an expropriation to be in accordance with the NAFTA. In other words, there are two essential elements in this breach. One is the expropriation, which has already taken place. The other is the denial of one of the four conditions under Article 1110 which will not be triggered until this legislation is in force. It has not been crystallized yet.

Senator Lewis: I like your word "violation" rather than "expropriation".

Suppose, then, that Bill C-28 did not pass. Where are we then?

Mr. McIlroy: I take it that both American and Canadian investors can proceed with their damages action in the Ontario courts. That is an impartial tribunal, and they can claim damages. There is no problem there.

Senator Lewis: So there is a remedy there for them.

Mr. McIlroy: That is correct.

Senator Lewis: In your point of view, then, if Bill C-28 were enacted, the result would be a breach of the agreement, and then there would be a remedy for some parties to claim damages?

Mr. McIlroy: That is correct. There appear to be parties out there with about 37.5 per cent interest in the project, who are American investors. They can claim full damages before an arbitral tribunal. However, if you are a Canadian, in effect the Parliament of Canada is limiting your rights to claim a full award of damages.

I therefore submit that, if this committee is recommending that clauses 9 and 10 be deleted, you should also consider recommending that clause 8 be deleted and let the court action proceed and let damages be awarded by an impartial tribunal.

Senator Lewis: Is the result not the same either way?

Mr. McIlroy: It is for the Americans, but the poor Canadians, senator, get left out of the equation because they cannot invoke the NAFTA. Only an American investor can do that.

Senator Gigantès: The rich Canadians. You say the "poor" Canadians, and I say the "rich" Canadians.

Mr. McIlroy: I will not talk about the Bronfman trust, senator. I do not want to get into that one.

Senator Lewis: I am a little puzzled. If this bill were passed, Canada could save some money, under your thesis.

Mr. McIlroy: We will find ourselves in the bizarre situation of the elected representatives of the people of Canada being forced to treat American investors more favourably than they treat our own investors.

Senator Lewis: Subject to what the tribunal says.

Mr. McIlroy: That is correct. My friend Mr. von Finckenstein says that, even if it goes to an arbitration tribunal, they will not get these damages anyway. I say to him, "Then let's get rid of clause 8 and let the courts in Ontario run their course. Let the court decide."

To respond to your opening remark, Senator Lewis, of, "So what?", the "so what" is essentially that Canada will have breached the NAFTA and American investors will have the right to invoke it. There is already a letter on file from counsel representing 25 per cent. This thing will result in an arbitration tribunal.

Senator Lewis: Which it will anyway, so it will be up to the courts eventually.

Mr. McIlroy: Yes, but you will have 37.5 per cent of the interests going before an impartial tribunal and having all their damages awarded and the other 62.5 per cent having their damages awarded by a judge who is bound by 8(2), which basically says that they cannot really claim a whole lot of damages here. It is depriving them of their right to claim damages for loss of profit or loss of future revenue.

Senator Lewis: Perhaps that would be a good result and we would save some money.

I notice that in his letter Mr. Baker says that he is giving notice, but he does not say for whom he is acting. That is rather unusual from a lawyer. You would think he would say, "I am acting for so and so, and I give you notice that these parties intend to submit notice of intent to submit a claim." He does not say whom he represents.

Mr. McIlroy: I guess we will find that out if Bill C-28 is passed the way it now stands, senator.

Mr. von Finckenstein: On this last discussion between Mr. McIlroy and Senator Lewis, the point is, of course, that Mr. McIlroy makes two very heroic assumptions. He goes on the assumption that the American investors will discontinue their action in Canada and start an international tribunal action, which is what they have to do. They cannot proceed both in Canada and internationally. They must decide in which forum they want to proceed.

Second, he assumes that they will be successful and that they will gain greater awards than they would gain under the legislation once Bill C-28 is passed. Those are assumptions that he is making, and he has obviously given a lot of thought to them.

I do not question the fact that one can make those assumptions, but I do disagree with them. As I pointed out in my testimony, whether these American investors proceed by way of an international tribunal or Canadian domestic proceedings modified by Bill C-28, I do not think the award will be any different because of the vagueness of the enterprise at the time the repudiation of this contract took place. There was no operation and no going concern; therefore, any value you put on future profits is so vague that I do not think one could recover. We obviously differ on that point.

Senator Jessiman: I want to talk about Bill C-28 without any amendments. Does this bill, as it is presently drafted, comply with the Canadian Bill of Rights? If you are not competent to tell me whether it does not, that is all right. If you are, I would like your view on that.

Mr. von Finckenstein: The short answer is that I am not competent in terms of speaking to the Bill of Rights.

The Chair: Are we referring to the Charter or are we referring to the Bill of Rights?

Senator Jessiman: We are referring to the Bill of Rights.

Mr. von Finckenstein: In terms of process, this legislation was drafted by the Department of Justice. Our drafters have a list of standing instructions on when to draft bills, and they must ensure compliance with the Constitution, with the Charter and with the Bill of Rights. That process will have taken place. The people who are expert in this have obviously come to the conclusion that it is in compliance with the Bill of Rights; otherwise the bill would not be before you.

Senator Jessiman: Is it also in compliance with the Charter, in your view?

Mr. von Finckenstein: That is the process which takes place within the Department of Justice.

Senator Jessiman: Have you read the testimony of all the constitutional lawyers who have spoken about this bill?

Mr. von Finckenstein: No, senator. I am here to talk to you about the free trade aspect.

Senator Jessiman: I understand that. You said you are not competent in that area and that you depend on the competence of your colleagues, but you did not read the words of all the constitutional lawyers who told us in this committee that the bill, as drafted now, is noncompliant. There have been some suggestions as to how to amend it so that it will comply.

From what I have heard from all these experts, the bill, unamended, is non-compliant. The opinion of one witness differed, but he was engaged by the government and paid a fee by the government. He came forward and said --

Senator Gigantès: He was a professor. The professor was paid a fee also --

Senator Bryden: We do not need to determine whether lawyers get paid. Of course they get paid.

The Chair: Let us not get into a discussion of lawyers' fees.

Senator Gigantès: He makes it sound as if the one lawyer who disagrees with him has been paid a fee and that the fee has bought that lawyer's conscience; whereas, if a lawyer is paid a fat retainer to agree with him, then that lawyer is a man of good conscience.

Senator Jessiman: Mr. McIlroy, have you any views at all on this?

Mr. McIlroy: For the record, senator, I am not being paid for this. I guess I am an impartial bystander in this.

I prefer to defer to people like Professor Monahan who have far more expertise in this area than do I. I do note that, as the bill is presently worded, with headings such as "Agreements have no effect," "No liability," "No compensation" --

Senator Jessiman: It never came into effect.

Mr. McIlroy: Yes. I know that the Minister of Justice will be coming before you, as will Professor Monahan, and I would leave that in their capable hands.

Madam Chair, I will quickly respond to the remark made by my friend Mr. von Finckenstein. As to whether the American investors would drop a Canadian action and pursue the NAFTA tribunal, neither he nor I can speculate on that. However, you may wish to ask Lockheed or Mr. Baker's clients; they are the ones who will make that decision. I believe Mr. Baker has clearly indicated in his letter what his clients intend to do.

Senator Lewis: You made reference to the present litigation. Are the American investors involved in that? Are they partners to it, do you know?

Mr. McIlroy: I do not know. I am not involved, but my understanding is that T1T2 is suing and they are part of T1T2.

Mr. von Finckenstein: My understanding is the same.

Senator Lewis: There is reference to their being partners, so in that sense, I presume they are parties to the present litigation in Canada.

Mr. McIlroy: Yes. My understanding is that the style of cause is T1T2 Limited Partnership and that Lockheed and the 25 per cent interest discussed by Mr. Baker are included in that plaintiff.

Senator Lewis: So the American investors have made their choice as to where they want to seek their remedy.

Mr. McIlroy: No, they have made their choice, Senator Lewis, as long as they are before a tribunal that has full powers to award damages. You would have to ask them whether they would continue in that forum if they were faced with the severe restrictions that section 8 of Bill C-28 would place on the ability of a judge to award those damages.

Mr. von Finckenstein can correct me if I am wrong, but I understand that the plaintiffs are presently pursuing a claim for lost profits and for loss of future or expected profits. If they choose to stay in that tribunal once Bill C-28 comes into effect and deprives them of the right to claim those damages, that is their call. Mr. Baker appears to be signifying otherwise in his letter dated June 4 to the Minister for International Trade.

Senator Bryden: Mr. McIlroy, I had the opportunity to look at the submissions which both you and Mr. von Finckenstein have presented to the committee, and I noticed that you are the president of a company called McIlroy & McIlroy.

Mr. McIlroy: That is correct.

Senator Bryden: You are in the business of advising on international trade issues?

Mr. McIlroy: That is correct, senator.

Senator Bryden: You are located in Toronto?

Mr. McIlroy: That is correct.

Senator Bryden: How long have you been in that business, approximately?

Mr. McIlroy: How long have I been working in the area of international trade?

Senator Bryden: No, how long have you been president of McIlroy & McIlroy?

Mr. McIlroy: Since 1990, six years.

Senator Bryden: You indicated that, prior to that, you were associated with the law firm Fasken & Calvin.

Mr. McIlroy: That is correct. I had the opportunity, senator, of working with Mr. Rock between 1981 and 1983. I have to state my bias: I found he was one of the most outstanding civil litigators I have ever known.

Senator Bryden: We will pass that on to him tomorrow.

It also stated that you were a partner in another leading Canadian law firm. Which firm was that?

Mr. McIlroy: That was Aird & Berlis.

Senator Bryden: They are located in Toronto as well?

Mr. McIlroy: That is correct. Prior to that, I worked with a Washington law firm, O'Malveny & Myers. Prior to that, in between working in Washington and working for Fasken & Calvin, I worked with then Minister for International Trade in Canada, one of your colleagues in the Senate, Jim Kelleher.

Senator Bryden: You indicated that you are not representing anyone nor being retained by anyone. What, then, is your interest? I am not trying to be difficult. Is this strictly an academic interest? Is your appearance here a part of the promotional efforts of McIlroy & McIlroy? Or are you simply here as a thoughtful Canadian citizen trying to keep us out of trouble?

Mr. McIlroy: It is the latter, senator.

Senator Bryden: I believe that.

Mr. McIlroy: I can assure you that, since I was up here last year, I have not had a lot of retainers coming in over the transom as a result of my testimony. I think it is an important issue, and I welcome the opportunity to clash with my friend Konrad von Finckenstein. We disagree strongly on this.

I am here because I think Canada is a middle power and, as such, strongly believes in treaties and in the rule of law and in dispute resolution. It concerns me that, for whatever reason, Bill C-28 appears to be violating that treaty. As a result, it becomes more difficult for Canada to argue in world fora, particularly in Washington, that other countries should abide by their treaties.

I guess, Senator Lewis, this gets back to the comment you made earlier: So what?

Of course, Canada has the right to violate its treaties. Every country has the right to do that, but it must pay the price.

In this case, there will be two prices to pay. One is that we will treat American investors better than Canadian investors. Second, we will not have the same moral authority when we go down to Washington to argue that the Americans should abide by the NAFTA when we, for whatever reason, chose not to abide by it.

We agreed to pay the price, just as they will pay the price on other issues, such as Helms-Burton.

Senator Bryden: We have had evidence from all of the constitutional witnesses, including Professor Monahan, that whether or not this violates the FTA or the NAFTA does not affect the constitutionality or the legality of the bill. Do you have any reason to disagree with that? I know you are not constitutional lawyers.

Mr. McIlroy: Are they saying that these are two separate and distinct issues? Are they saying that the international trade issue is different?

Senator Bryden: They are saying that, if the bill is passed in its first form or as amended, whether or not it violates an international agreement does not affect the constitutionality of the bill or the legality of the bill in Canada.

Mr. McIlroy: Again, I am not a constitutional expert, but when Article 1110(1)(c) states "in accordance with due process of law," it may be picking up on some of the language in the Bill of Rights and in the Charter. Therefore, if there were a finding regarding due process of law in one form or the other, it could have an influence, I think, and it could cross over the line simply because the concept is the same -- that is, the idea of compensation being determined by an impartial tribunal as opposed to one of the parties in the disputes.

Senator Bryden: I disagreed with your first submission before the committee. Having read it, I understand why you have not had a lot of retainers come over the transom.

Senator Jessiman: Senator, that is a little rough. That is your usual stuff.

Senator Bryden: I want to deal with one other matter -- and we do not have access to a judge, so no one will be able to determine which one of us is right.

Article 1110 deals with expropriation and compensation. Without questioning whether the cancellation or repudiation of a contract is expropriation, it states:

No Party may directly or indirectly nationalize... an investment of an investor of another Party in its territory or take a measure tantamount to nationalization or expropriation of such an investment... except:

(a) for a public purpose.

I would argue that what is being done by Bill C-28 is being done for a public purpose.

With respect to subparagraph (b), I would argue that what is being done by Bill C-28 is being done on a non-discriminatory basis. It does not single out foreign investors. It treats Canadian investors and Canadian businesses exactly the same way as foreigners.

With respect to subparagraph (c), "in accordance with due process of law," I should like to read to you a judgment from R. v. Appleby. A similar question was asked with respect to the Bill of Rights, as to whether there was a violation of due process of law. The quotation is this:

"I do not see how the Bill of Rights can be interpreted as guaranteeing to an individual protection against loss of property without compensation if the loss is a consequence of legislation of the Parliament of Canada which has been validly passed."

In commenting on this, one of the witnesses who appeared before us stated:

In other words, section 1(a) creates a right to procedural due process, which is satisfied by, as here, the passing of valid legislation in Parliament.

I firmly believe that. It is British tradition and Canadian tradition that Parliament is supreme, and that has been modified a bit by the Charter. However, to have a bill go through Parliament, as this one is doing, to have followed the process of our parliamentary system and to have that bill apply to Canadians and Americans, I do not believe a Canadian court or an international tribunal would say that it was otherwise than in accordance with due process of law.

Finally, subparagraph (d) states:


(d) on payment of compensation in accordance with paragraph 2 through 6.

Paragraph 2 states:

2. Compensation shall be equivalent to the fair market value...Valuation criteria shall include going concern value, asset value including declared tax value of tangible property, and other criteria, as appropriate, to determine fair market value.

I read that as saying exactly what Mr. von Finckenstein has said to us -- that is, you must have a going concern that in fact can be appraised at fair market value.

I should like to make one other general comment. It is generally accepted by most lawyers and I think by most international lawyers that, if a country under a treaty -- and I think this is a principle that applies to the NAFTA and to the FTA -- treats its foreign investors in the same manner and with the same even handedness as they do their own citizens, then those foreign investors have been treated in a non-discriminatory manner. For the most part, international tribunals are of the view that, unless they can find some specific provision in an international agreement that would abrogate that principle, they will uphold the law.

Mr. McIlroy: I cannot agree with you, senator.

Senator Bryden: I did not expect you could.

Mr. McIlroy: We will have to part company. The concept you are talking about is national treatment -- that is, we will treat foreign investors in the same way that we treat our own investors. That is only one of the obligations in Chapter 11. There are others, such as most favoured nation and standard of treatment. They are all set out there. I cannot agree when you say that, as long as we satisfy Article 1102, we have not violated the terms of Chapter 11.

Regarding the second point you made with respect to the phrase "in accordance with due process of law," with all due respect, basically you are saying that the Helms-Burton Act enacted by the Congress of United States is in due process of law; therefore we, Canada, have nothing to complain about. I totally reject that argument.

As to payment of compensation in accordance with paragraphs 2 through 6, the proposed amendment to subclause 8(2) clearly violates that. In effect, it says that, once Bill C-28 is enacted, the judge who is considering damages cannot award a claim for loss of value of an investment. Article 1110(2) contemplates that compensation shall be equivalent to the fair market value of the expropriated investment.

If what you are saying is that Bill C-28 does not violate any rights, then why are we passing it? Why not just let the court run its course, and it will award damages?

What you have here, senator, is two parties. One of the parties breached the contract. One of the parties has to pay damages. However, rather than pay damages pursuant to the finding of an impartial tribunal conducted with due process of law, that party is enacting a piece of legislation saying "I will only pay you this much," which is contrary to due process.

Senator Bryden: You are wrong in the sense that the party which breached the contract was the Government of Canada. The Parliament of Canada, which includes the Senate, is passing Bill C-28.

Unless we say that Parliament and the government in every instance is one and the same, then surely the Parliament of Canada has the right to act on public policy and in the public interest. We could have a very long debate over that. Believe me, I do not want to do it; we did it for six months in times gone by.

Senator Jessiman: You have a majority. Push the legislation through. You do not need it amended.

Senator Bryden: Yes, we could do that.

Senator Jessiman: It would save a lot of time.

Senator Bryden: I should like to ask if Mr. von Finckenstein has any comment on what has been said.

Mr. von Finckenstein: As is obvious to you, I do not agree with Mr. McIlroy on most of his submissions and most of the points that he made, but I will not bore you by going through his testimony point by point to rebut it.

The key point we are talking about is: What happened? What happened is that in December there was repudiation and the repudiation was accepted. This all happened before the NAFTA came into effect. Therefore, there is nothing to litigate under NAFTA.

Mr. McIlroy is quite right that, once this bill is passed, the American investors could start an action against Canada under the NAFTA on the subject of Bill C-28 by saying that Bill C-28 is a violation of NAFTA. He has stated the reasons that he thinks it is a violation; I do not think those reasons are valid. I do not think there is any violation of Chapters 10, 11 or 5, as he pointed out. We are talking about an action that preceded the NAFTA.

You now have a bill which limits some of the rights that may have emerged from processes that were started before the NAFTA came into place. It does not violate either standard of compensation or the minimum standard of treatment. Obviously, we differ on that point. If Mr. McIlroy is right, undoubtedly someone -- either the United States government or Lockheed -- will test it. However, if the United States government were to do so, Canada would have to pay compensation if found at fault. On the other hand, the investor has a difficult choice to make. He must decide, "Do I continue the legal proceedings in Ontario and see what the Ontario courts give me, or do I discontinue those and start new proceedings before a Chapter 11 panel on the assumption that I will get a better award before an international tribunal?" That is a decision that only the investor can make.

We have no indication which way this will go. We have a letter pointing out that they have concern with clause 28, but I have not seen a notice invoking Chapter 11.

Senator Gigantès: There are provisions in these documents for claims by investors from one party if they feel that another party has treated them poorly under certain conditions.

Mr. McIlroy: That is correct.

Senator Gigantès: You said that, if we are seen to breach the law, we will not be able to uphold our rights under the NAFTA in the United States.

Mr. McIlroy: No, I do not think I said that. I think I said that Canada, being a middle power that must rely on the rule of law and rules, would be decreasing the moral authority of our arguments if we were to go to Washington and say, "You should not pass Helms-Burton because you are doing it for internal political reasons"; yet, we pass Bill C-28 for whatever reason, which clearly violates the NAFTA and we basically say, "We, the Parliament of Canada, have the power to do whatever we want." That is fine, but we will have to pay.

Senator Gigantès: You also said that we would find ourselves in a situation in which we would be giving better treatment to the American investors than to Canadian investors.

Mr. McIlroy: That is correct.

Senator Gigantès: How, then, can the Americans complain? There are provisions of the NAFTA under which, if American investors are not satisfied, they can seek redress. If they get redress through the NAFTA agreement, then we have complied with and are in full accordance with the agreement.

Mr. McIlroy: If the Parliament of Canada wants to pass legislation that violates a treaty that we have entered into, thereby forcing the investors in the other country to take the Government of Canada to task and to institute an arbitral proceeding, that is fine. However, we should not be complaining when our investors are treated a certain way by the Americans.

Senator Gigantès: They are treated that way all the time.

Mr. McIlroy: Perhaps they are.

Senator Gigantès: We have signed the NAFTA, and the NAFTA has certain provisions relating to how we should treat American investors in this instance. If they can prove to an arbitration board under Chapter 11 that they have not been treated that way, then they will be awarded compensation. However, Article 1110(2) states:

Valuation criteria shall include going concern value.

There is no going concern value. It also stipulates "asset value." There is no asset value for those American investors yet nor is there "declared tax value of tangible property and other criteria."

On the whole, it sounds as if we would be better off, from an international reputation point of view and certainly from the point of view of Canadian public policy, if we were to pass the bill unamended and let the Americans do what they must do.

I have no doubts at all about your motive to be here. I assume it to be intellectual interest in the case and nothing else.

Mr. McIlroy: I appreciate that comment.

In addition to the three factors that you pointed out under Article 1110(2), there are other criteria, as appropriate. In this case, loss of expectation of profit would be a factor.

I agree with Senator Gigantès and Senator Bryden that the Parliament of Canada is free to enact any legislation that it wishes to enact, just as the United States Congress is free to enact any legislation that it wishes to enact. If that legislation violates a treaty, then we will pay the price. If that is how we want to proceed, fine. I just want to make sure that you realize that, when this legislation is reported out of the Senate, there is a strong risk that it will be the subject of an international arbitration.

If that is how the Government of Canada and the Parliament of Canada want to be perceived in the investment community -- namely, as a nation that signs treaties that provide for protection of international investors and then does not abide by them and requires those investors to haul them before arbitral tribunals -- that is fine. We must be aware of that before we proceed.

Senator Gigantès: The reason the treaty makes provision for hauling people in front of an arbitration tribunal is that the reality is that one or another partner, for public reasons, will at some time or another do something that the foreign investors would prefer it had not done. It then says to these foreign investors: "Well, you can go before an arbitration tribunal." It was understood by the signatories that this would be occurring. Otherwise, they would not have put all these provisions in there and Chapter 11 would not have been written.

Mr. McIlroy: I agree. However, I find it ironic, as a Canadian citizen, that somehow we would treat foreign investors better than we treat our own.

Senator Gigantès: Is that not dandy for foreign investors whom we want to attract? We can say, "We treat foreign investors better than we treat Canadian investors. We are the best country in the world in which to invest."

Mr. McIlroy: It is all right if you are a foreign investor, but being a Canadian investor --

Senator Gigantès: I have no money to invest in anything except $200 worth of lottery tickets a year.

Mr. McIlroy: I hope you win.

Senator Doyle: I will try to be brief here and ask only one or two summing up questions, Mr. McIlroy.

You have been watching us for the better part of two years now, while we have been embroiled in this matter. We have had many suggestions put forward as to what we should or should not do. As you said, we are coming close to the time when we will be reporting the bill out to the Senate. For all the work we have done one way or the other, the government, according to its principal advocate on this matter, says that the preference of the ministry would be Bill C-28 without amendment That is their argument at this stage.

On the other hand, they say, "We might be willing to offer you some amendments, or you might want to make those amendments." How we will get them is still somewhat of a mystery, but they are out there.

My question is this: If you suddenly found yourself with a client who asked you for advice on this matter, what would you do? Would you stay with Bill C-28 as it is? Would you stay with these so-called amendments or suggested amendments? Or would you start all over again with this bill?

Mr. McIlroy: Senator, I do not know whether these amendments from the government will be passed or not, but getting rid of clauses 9 and 10 would be a big improvement. If clause 8 were deleted, it would allow a litigant who is now before the Ontario courts to have damages awarded as that court sees fit in accordance with law rather than in accordance with this proposed legislation --

Senator Gigantès: Which will be law if passed.

Mr. McIlroy: That is correct.

Senator Gigantès: You just said in accordance with law.

Mr. McIlroy: In accordance with existing law, sir.

Senator Gigantès: But law changes all the time.

Mr. McIlroy: That is correct, but this legislation only applies to one piece of litigation, sir. It will not apply across the board.

If the government were to withdraw clause 8 so that I could claim my full damages in a piece of litigation that I had already started, I would continue on with it. If I were in the midst of this litigation and found that one of the key claims of my damages -- and again I do not act for Lockheed and I do not act for this 25 per cent and I honestly do not know what their claim is because I have not reviewed the pleadings -- I would look very closely at proceeding in a tribunal where I can claim full damages rather than continuing on in a tribunal where Parliament has decided to limit the awards that may be made.

I honestly do not know what the status of these proposals are or whether there will be further amendments. Minister Rock will probably tell you that when he comes before you.

I first came before you a year ago and started raising these issues, and then Mr. von Finckenstein came later, and now you have had us here again. I am confident that honourable senators on this committee understand what the issues are. I think you are quite capable of determining whether you want to proceed with this legislation, given the risks. My friend does not think the risks are that great; I think they are greater. However, you as the Parliament of Canada can pass legislation any way you wish. If it violates the Charter or the NAFTA treaty, there are mechanisms to deal with that. I do not mean to say that you cannot do this. You can do as you please.

Let us look at a similar situation. Let us say that Konrad and I have a contract and that I want to breach it. I can breach it, but I have to pay the price. I am saying that Canada may have to pay the price -- but only to foreigners, not to Canadian investors.

The Chair: Thank you, Senator Doyle. I want to thank all three witnesses, although I must say we did not hear much from Mr. Fréchette, if anything. I thank him for being here along with Mr. von Finckenstein and Mr. McIlroy.

Senator Gigantès: I hope this is the last time.

The Chair: On this particular piece of legislation, I hope it is the last time as well.

Our next witness is Mr. Gerald Chipeur, who is a lawyer. He is here representing himself at the request of the steering committee. Since he has given testimony in the past on the legality and constitutionality of Bill C-22, I assume that is what he will be addressing specifically this evening.

Mr. Gerald Chipeur, Lawyer: Honourable senators, in previous testimony, I raised four concerns regarding the previous Bill C-22 which is now in the form of Bill C-28. Those four areas of concern under the Constitution and the Bill of Rights and international treaties were as follows:

First, denial of access to the courts. The issue there was the rule of law, Canada's international obligations, and the Bill of Rights.

Second, the ex post facto annulment of the contract. Again, that concern was raised with respect to the rule of law and the Bill of Rights.

Third, the conferral of a subjective discretion on the minister. Again, there were concerns under the rule of law and the Bill of Rights.

Fourth, the limit on compensation which deprived potential litigants or parties of full reimbursement in an action instituted in connection with these contracts. Again, the areas of concern were the rule of law and the Bill of Rights.

The proposed amendments that I have received and reviewed, as well as amendments that have been made over the past year and one-half now address all but the last issue. Three of the four areas of concern would no longer be of concern under the Constitution. The sole remaining issue is the question of compensation and the limits on compensation.

The two areas of constitutional concern, when one limits compensation as this legislation does, are the rule of law and the Bill of Rights. There are two issues that one can address under the rule of law.

The first issue under the rule of law is the general question of whether one can expropriate without a reason. In other words, must Parliament have a rational reason for expropriating?

The second issue under the rule of law, as I read it, is the limit placed on the ability to obtain non-compensatory damages for defamation. That relates to the issue raised in Roncarelli v. Duplessis, which is an action by a minister or other servant of the Crown which would defame an individual in bad faith, thereby leading the court to determine that more than just compensatory damages were appropriate, and the limit on the court's ability to enforce the rule of law by way of damages in addition to the compensatory damages allowed under the legislation.

That issue, as it relates to the Bill of Rights, has remained throughout these hearings. It has never been addressed in any of the legislation. I know that the position generally is that we are dealing with corporations and that corporations may not be in a position to rely upon the Bill of Rights. I will address that issue as well as the general question of whether we are talking about substantive due process and right to property or merely procedural due process and right to property.

I will deal with the question of the rule of law and whether the Parliament of Canada must have a rational reason to expropriate without compensation. I have addressed this issue before, so I will be brief.

In a nutshell, the Manitoba Languages case provides us with the principle that the rule of law is now, and always has been, a principle of constitutional law in Canada, and that government is subject to the rule of law. Legislation must comply with the rule of law. Simply because Parliament passes a piece of legislation does not mean that that legislation is consistent with the rule of law. The rule of law is outside Parliament; it is in the Constitution and above Parliament. Once one accepts that principle, if one does, then the question arises: In what way may property be expropriated consistent with that rule of law?

Almost a year ago, in a case known as Association of Canadian Distillers v. Canadian Radio Television and Telecommunications Commission, the court ruled that, in order to justify a limit on a constitutional right -- in that case freedom of expression -- Parliament must impose that limit in a rational way. In that case, Parliament had said, "You may not advertise liquor, but you may advertise beer." The court said, "It is possible for Parliament to come up with a good reason, a rational reason, for limiting advertising of alcoholic beverages. However, if it does so, it must do so rationally."

In the case of Bill C-28, if the reason for the legislation is rationally related to the effect of the legislation, then the legislation would be consistent with the rule of law. If the reason for the legislation is not rationally related to the effect of the legislation, then it may not be consistent with the rule of law. That is a question that only this committee is in a position to address at this point and, obviously, at a later date a court would have to ask that same question.

Someone voting on this piece of legislation would ask oneself: Why is this legislation being passed? If the legislation is being passed for a reason that is rationally related to the effect of the legislation, then one could justify a vote in favour of it.

Let me give you an example to illustrate reasons that might be rational and reasons that would not be. If the reason attributed to this legislation were that Canada had a large debt and could not afford to have a half-billion-dollar judgment rendered against it, it would be difficult to relate that reason to the effect of the legislation.

It would be just like the beer and liquor case. It was determined in that case to put the burden on liquor. The court asked why liquor was chosen, and the government had no reason. Similarly, why would you choose to place the burden of the national debt on this particular group of individuals? One would have to come up with a good reason for doing that rather than spreading it across the spectrum.

If there were a good reason, there would, of course, be no reason not to vote in favour of the legislation under the principle of the rule of law.

Another potential argument in favour of the legislation would be that this contract was signed during an election campaign and that, therefore, it should be vitiated, that it should be cancelled, because contracts of this magnitude which are signed during an election campaign should not be binding upon the new government. That argument would only make sense if the legislation were broadened to apply to all such contracts of this magnitude entered into by the government of the day during previous and future election campaigns. To choose to limit it to only this contract and this election would probably not be rationally related to that purpose.

However, there may be other reasons. If one had a specific good reason which related only to this particular set of contracts and which justified that expropriation in a rational way, I think the courts would say that there is no infringement of the rule of law.

Senator Jessiman: You are speaking now as though the amendments had been made.

Mr. Chipeur: Yes. You have my testimony relating to the bill without the amendments.

The other issue under the rule of law is the question raised by the decision of the Supreme Court of Canada in Roncarelli v. Duplessis. In that case, the Supreme Court of Canada was dealing with a decision by a premier to cancel a licence and to say that a particular defendant may not have a licence "forever". In that case, the court said that that particular decision by the premier was outside the rule of law. Damages were then awarded -- damages which were compensatory in nature -- to the individual who had been subjected to a decision of a premier which was contrary to the rule of law.

If this legislation were passed with a limit on non-compensatory damages, it is possible that a minister of the Crown, or a servant of the Crown, or someone else acting on behalf of the Crown, could be in a position to avoid paying non-compensatory damages in a case where they had maliciously defamed an individual and used the power or influence of their position to cause damage to someone by defaming them.

If that is the effect of this legislation, we are limiting the ability of the courts to enforce the rule of law and that, in and of itself, would be contrary to the rule of law because, again, the rule of law is a principle in both the Constitution Act, 1867 and the Constitution Act, 1982. In both cases, the rule of law is placed above Parliament. Even though Parliament may say that it is acceptable for a minister of the Crown to maliciously defame someone in bad faith and not pay damages for it, the courts could say, and in my view would say, that that particular limit is contrary to the rule of law; that it allows a minister of the Crown to act outside the rule of law and, therefore, it is contrary to the Constitution.

The final area of concern which has not been addressed is the question of the Bill of Rights. This is an issue which we have addressed each time, and I will not go into it in great detail. The Bill of Rights provides that one has the right to property and the right not to be deprived thereof except by due process of law. The fundamental question which one must ask is: What does "due process of law" mean?

There is a case involving the National Capital Commission here in Ottawa which clearly states exactly what due process of law means. It is the National Capital Commission v. Lapointe, 1972, Federal Court, 568. In that case, the judge said that due process of law must be carried out by a "reasonable procedure, for a purpose which may be regarded as the public interest, and the owner is to recover compensation, the amount of which must be fairly arrived at after a hearing."

There is clearly, in this particular quote, commentary on fair compensation but also an allusion to the issue that I raised under the rule of law argument; that is, there must be a purpose related to that expropriation which is in the public interest.

The question you must then ask yourselves is: Does the Bill of Rights apply to corporations with respect to section 1 of the Bill of Rights which guarantees the right to property? I will not go into detail, but the position which the Canadian Bar Association put forward at the original hearings on this bill was that section 1 does not apply to corporations. If it does not apply to corporations, because of the decision of Justice L'Heureux-Dubé in the case of National Bank of Canada v. Houle, then shareholders of a corporation who lose the value of their shares because of the actions of another person may, in their own right, sue for that particular breach of contract.

The conclusion would then be that section 1 does apply to corporations and individuals but, if it does not, the individual shareholders would be able to bring an action for the loss of value in their shares.

Those are the three concerns which remain, in my view, and I would be happy to answer any questions senators may have.

Senator Gigantès: You say that legislation must be consistent with the rule of law. We have had many long discussions on this. A definition of the rule of law is evanescent, a difficult thing to pin down. It clearly must comply with the Charter. It is, in my view, impossible to prove that this legislation does not comply with the Charter.

Mr. Chipeur: I agree that that is not an issue, that it is not on the table.

Senator Gigantès: Legislation must have a rationale and the public interest is one such rationale.

Stop me if you think I am getting off the rails. If a government determines that it is in the public interest to have the Toronto airport run by a local airport authority, as it is in Vancouver, Edmonton, Dorval and Mirabel, then those opposing it must prove that it is irrational for the government not to have sold all those airports to T1T2 or Paxport.

Mr. Chipeur: The first three issues we raised before have all been dealt with in the amendments. If the amendments were passed, what you have just said would no longer be in issue because the cancellation of the contract would not be the issue.

The sole issue remaining is compensation. Do they get compensated and in what way do they get compensated? That is the only issue on the table from a constitutional perspective.

Senator Gigantès: Recourse to the courts was never at any time denied, even before the amendment were proposed.

Mr. Chipeur: You could debate that.

Senator Gigantès: They always had the right to go to the courts and say that this is unconstitutional.

Mr. Chipeur: I agree with that.

Senator Gigantès: Recourse to the courts was never denied. Now, we are asking whether it is constitutional to limit compensation. There is jurisprudence before us, notably from cases in Saskatchewan, where compensation was limited and it stood up.

You come to the issue of signing a contract of such magnitude during an election period.

Mr. Chipeur: We are getting into the reason for it.

Senator Gigantès: You touched on that.

Mr. Chipeur: I agree. I am saying that there is case law which says that you can put limits on compensation. It is my view today that the rule of law has evolved, through the Supreme Court decisions and others, to the point that you must have a rational reason. Then the only exercise left for you is to determine whether there is a rational reason, in your view.

Senator Gigantès: The government said it felt it was against custom, convention and precedent for an outgoing government to sign a contract of such huge magnitude. There is no other contract of such magnitude staring us in the face from this pre-electoral period in 1993.

It was done in such a way, whatever my good friends opposite may say, that it looked bad. It looked as if it were done at the very last minute, signed at the very last minute, after a warning by the then Leader of the Opposition, to award a contract to a particular set of individuals. The government felt that this was a bad precedent and had to be quashed.

Does the Bill of Rights apply? It does not apply to corporations, but you did, quite correctly, cite jurisprudence which says that shareholders of a corporation can sue for loss in the value of their shares. That has never been demonstrated to us.

Senator Lewis: I do not think he said that.

Senator Gigantès: I believe he cited the case of National Capital Commission v. Lapointe.

Senator Lewis: It was the judge who said that he thought that was so. I do not think he decided that.

Am I right there, Mr. Chipeur?

Mr. Chipeur: What you have said, Senator Gigantès, is accurate. It is likely that the right to property only applies to corporations, but that, in the National Bank case, the shareholders may have a claim.

Senator Gigantès: It is the National Bank case.

Senator Lewis: They may have a claim. It was not actually decided that the shareholders could take an action, was it?

Mr. Chipeur: She said that there are circumstances where the breach of contract with a corporation may give rise to an action on the part of individual shareholders. That is all she said.

The question is whether, potentially, there might be a claim by the shareholders. If there is, they may be able to rely upon section 1(a).

Senator Gigantès: Even the unamended bill stated that out-of-pocket expenses and lawyers' fees to fight the case were to be reimbursed, but not lobbyist fees. The government obviously felt it was in the public interest to curb lobbying beyond a certain point.

Some lobbyists are my friends, but the public perception over the past decade has been that the word "lobbyist" is a synonym for someone you rent to buy your minister. That may have been a wrong perception, but it was there and it had to be corrected. Therefore, lobbyist fees were not to be compensated.

Admittedly, in my view -- and I am a supporter of this government -- all your criteria seem to be met. The courts are still open, according to the National Bank provision, to shareholders of these corporations even if the bill is passed. So what is the problem?

Mr. Chipeur: If, in your view, the legislation is contrary to the Bill of Rights and if, in your view, it does have an adverse effect on shareholders, then you may want to refuse to vote for it unless there is a clause which exempts it.

Senator Gigantès: In my view, the bill is not contrary to the interests of the shareholders because their interests had not been developed.

Mr. Chipeur: If that is your view, then it may well be that there is no violation of the Bill of Rights and then, certainly, you would be free to vote in favour of it.

Senator Gigantès: That will be settled eventually by the courts.

Mr. Chipeur: Getting back to the other question, which is the question of the rational reason, it is important to consider the effect of that decision relating to alcoholic beverages. It is fine to say, "We think lobbyist fees are a problem in our society," and, "We think large contracts like this during an election campaign are a problem in our society." However, if the legislation is drafted in a way which does not attack those two problems but, rather, attacks a particular group of individuals, then it resembles the scenario of the alcoholic beverages where you are only attacking one part of the problem, not the whole problem, and the rational basis for your action can be questioned.

This case is very much similar to the Roncarelli v. Duplessis case where Mr. Duplessis took action against a particular individual because he decided that a certain group was a problem in our society. He focused on the fact that the group might be acting in a seditious way and chose to come down on Mr. Roncarelli and take away his licence.

If he had passed legislation, as they have in Singapore, outlawing Jehovah's Witnesses because they are seditious, then one might say that he was addressing the whole problem. In this case, he took action against Mr. Roncarelli only.

Senator Gigantès: You said he removed his licence forever.

Mr. Chipeur: That is right.

Senator Gigantès: Nothing in this legislation says that the partners in T1T2 and Paxport cannot bid for another government contract, cannot conduct business or any such thing. The legislation simply says that the way in which this contract was signed is against the public interest and contrary to the image which the government should portray. We do not like it; we think the profits are exorbitant. We had discussions about profits in this committee. Some people said they were fine; others said they were exorbitant.

Mr. Chipeur: If the issue is exorbitant profits, again, one would expect that the legislation would address any contract where there were exorbitant profits, such as the legislation that says you cannot charge an interest rate that is above a certain level.

The question you must ask yourself is this: Is there good reason to attack directly this particular contract? If there is a reason to focus in on this contract and not deal with all the other instances of problems with lobbyists, problems with contracts during elections and problems with any of the other issues you have raised, then I think you can say, "In my view, the rule of law has been satisfied."

Senator Gigantès: There is the reason of a massive contract being signed in the last days of the mandate of a government that knew it would lose power.

Mr. Chipeur: That is what the courts will ask themselves. They will have to face that question directly. They will say: Is that good enough? If they agree with you that it is good enough, then they will uphold it under the rule of law.

Senator Gigantès: There are other precedents. We would not have any legislation if every piece of legislation had to address all the possible problems. Solon himself, the inventor of democracy, when asked if he had written the best possible laws, said, "No, I only write laws that Athenians are prepared to accept at this time."

Mr. Chipeur: I agree that the courts rely upon that principle. It is a well-accepted principle. You do not have to address all the problems at once. The question is balancing those two principles and coming up with the right balance. Is it rational? If it is not rational, I think it probably, by definition, would not meet your conditions.

Senator Gigantès: Solon also said that one should not pass legislation that cannot be enforced. I humbly suggest to you that the kind of legislation you seem to have in mind which can cure all problems similar to a particular case would be impossible legislation to enforce.

Mr. Chipeur: Then I think you would have to ask yourself this: Are we really concerned about lobbyist fees here?

Senator Gigantès: Among other things, yes. The government did not give a single reason; rather, it gave reasons -- lobbyists' fees; undue lobbying; the timing of the contract and when it was signed. Another was that, according to the analysis of the government, this would cost the taxpayers more money than a local airport authority. When it considered all these things together with the timing, the government felt it had a proper reason for acting.

Senator Beaudoin: My attitude is not the same at all as that of Senator Gigantès.

I had some objections to Bill C-22 from the beginning because of the question of constitutional law and the rule of law. In my view, access to the courts is fundamental in our system, and you cannot block access.

This bill was before this committee for a long time. After prorogation, the bill was resurrected or resuscitated. Now the government has tabled amendments.

I do not want to come back to the question of whether a Government of Canada, duly elected, may or may not enter into a contract during an electoral campaign or close to an electoral campaign, because I do not even consider this to be an issue in law. A government may govern until it is defeated in the house or defeated at the polls. All constitutional lawyers agree with that. The government had not been defeated in the house, but was defeated at the polls on October 30. I consider that question completely settled. The conventions of the Constitution apply only if a government is defeated in the house or at the polls. We have many precedents to support that view.

We have some interesting amendments. The government is proposing that the contract was in force until December 15, 1993. In the original bill, of course, it was deemed not to have existed. That is a major amendment, and I must agree with it.

In my view, a government may repudiate a contract -- I have no doubt about that -- providing that a government is ready to pay damages as a result of the repudiation. Again, in my view, that is no problem at all.

I will not enter into a discussion on clause 8 in respect of lobbyist fees and lost profits. My concern is this: Is this sufficient to comply with the principle of the rule of law? That is the question.

In this committee, we will attempt to find an agreement. Anything is possible. If it complies with the rule of law, that should be the end of it. It is one thing to say that we may go to court. We can spend millions of dollars going before the courts. However, as a legislator, I have always thought that, if we are convinced that a bill has weaknesses, we should try to repair them. We have been attempting to do this for many months.

What is your reaction to the amendments? I understand that you had a chance to look at them. Is the rule of law generally complied with in the proposed amendments?

Mr. Chipeur: I will go back to an analogy which I used before, and that is that the bridge across the chasm is not yet complete. In my view, if the committee were to report the bill at this time, with the amendments that have been proposed, and if this legislation were challenged in the courts, the courts would strike it down or, at least, would strike down portions of it which do not comply with the rule of law.

As to how we bridge the gap, three things must be done. First, you would have to agree on and identify a rational reason related to this particular set of contracts. I agree that if one were to identify just the fact that this contract was entered into during an election campaign, and if one did not apply that to all contracts entered into during an election campaign, it would probably fall under the analysis that I referred to earlier. If one did apply this kind of legislation to all contracts entered into during election campaigns, the government might be severely handicapped in the future if an important issue arose and they could not deal with it.

That illustrates some of the weakness in some of the arguments that have been put forward for the rational connection, not for the cancellation. Clearly one can come up with all kinds of rational reasons for the cancellation. However, the rational reason for not compensating is very difficult to identify if one looks at the concept in Roncarelli v. Duplessis. It becomes clear that you should not, as a government, take steps which penalize one particular individual. Even during time of war, the common law has compensated individuals whose property was destroyed by the government in the name of the war effort.

It takes a very significant public purpose to identify one individual and say that that individual will pay for the common good. That is one issue with which you must come to grips. What rational reason can we find, not a reason that could be applied in any case or a reason that only applies here and, if applied generally, would create some major problems?

Second, an amendment would have to be made to clause 8 relating to non-compensatory damages in the case of defamation. That gets you around the potential bad faith or malicious action of a servant or minister of the Crown relating to the issue of defamation.

Finally, one would have to insert a clause that said that individuals are not affected by this legislation, but that corporations are. That is pursuant to the Canadian Bill of Rights.

Senator Beaudoin: Of 1960?

Mr. Chipeur: That is right. There is no doubt in my mind that due process of law includes the concept of full and fair compensation, when government acts to take property. Obviously, the question of fair hearing and all those other issues that relate to the concept of due process of law have all been dealt with. The only remaining unaddressed issue is the question of full and fair compensation.

Senator Beaudoin: Obviously, the Bill of Rights of 1960 applies to this because nothing in the legislation before this committee states that this law will apply notwithstanding the Bill of Rights. I do not think there is any debate on that point.

I am sure that tomorrow some point of that nature will be raised before the Minister of Justice, especially the question of general damages, punitive damages and exemplary damages. At least one thing is accepted, and that is the principle of general damages which, obviously, is the first category of damages that comes to mind in this case.

If I follow you, you seem to conclude that, to comply with the rule of law, which, obviously, is at the basis of our system because we are a parliamentary democracy, we should not exclude some domain of damages. You then pinpointed exemplary damages and punitive damages. Am I quoting you adequately?

Mr. Chipeur: I think that is right. To put it as briefly as possible, the general damages or the compensatory damages question is not in issue. The only issue is: May the courts give a plaintiff damages, of whatever nature, for an unconstitutional action of a minister or servant of the Crown? It is my opinion that Parliament may not limit the damages that may be awarded for an unconstitutional action of the Crown. Clearly, when a minister of the Crown acts outside their authority -- that is, if they did, and there is no evidence that anyone has -- or if a servant of the Crown did act in bad faith to damage or defame individual in connection with these contracts, then that clearly is contrary to the principle of the rule of law and the Roncarelli v. Duplessis case. The courts would then be in a position to award damages.

Senator Gigantès: Would Senator Beaudoin allow me to ask a point of clarification?

Senator Beaudoin: Yes.

Senator Gigantès: Nothing a member of Parliament says within the precincts of Parliament is actionable defamation.

Mr. Chipeur: That is right.

Senator Gigantès: There was a particular case concerning me when a colleague opposite made a defamatory statement about me in the chamber and then walked outside and repeated it in front of the press. When I threatened to sue him within an inch of his life, he withdrew it publicly outside in front of the press.

If a minister is exempted from the charge of defamation for what he says within the precincts of Parliament, what defamation are we talking about?

Mr. Chipeur: I do not know of any defamation. I am talking in theory.

Senator Gigantès: But there can be litigation for harassment reasons. As a former journalist, I am very conscious --

Mr. Chipeur: Remember that you are already giving general damages here. If you are to have litigation for harassing, it will be there any way.

Senator Gigantès: For instance, there is the threat of a suit by an extremely wealthy individual against a publication, or a radio station, or a television station. Those media are forced to cease their activities through harassment legislation. Excluding certain forms of compensation may be a means of stopping certain particularly wealthy individuals from harassing agents of the Crown in tribunals.

Mr. Chipeur: Even if that was the purpose, I doubt that would pass constitutional scrutiny. For example, section 24 of the Charter states that a judge may in fact provide a remedy that is appropriate, including damages, as the court has decided. If Parliament were to pass legislation purporting to limit the right of a judge to award damages under section 24 of the Charter, the courts would clearly say that that was unconstitutional.

Senator Gigantès: Yes, unless the word "notwithstanding" is used.

Mr. Chipeur: That does not apply to section 24.

Senator Gigantès: I thought it did not apply to section 23.

Mr. Chipeur: It applies only to sections 2, 7 and 15.

Senator Beaudoin: Sections 2, 7, and 15?

Mr. Chipeur: That is right.

Senator Beaudoin: There has been a fascinating debate, but it does not worry me too much because in this case we are not really concerned with what has been said in the House of Commons or in the Senate. We have two laws that would apply. We have parliamentary law. A member of Parliament and a senator is much more protected inside the house than outside the house, I agree with you.

Senator Gigantès: That is true.

Senator Beaudoin: Obviously, we have many cases in jurisprudence on those two points. I do not think that there is any problem of that nature.

Senator Gigantès: Why do we keep having defamation thrown in our face, then? Why have we been told that there should not be any limits on compensation for defamation?

Senator Beaudoin: That is another point.

Senator Gigantès: That is the point our witness has raised. Which defamation? By whom and where? We have had some hot-headed statements by ministers, but within the precincts of Parliament.

Senator Doyle: Not always.

Senator Lewis: I think there was a suggestion that some were outside Parliament.

Mr. Chipeur: It is a theoretical issue because, by the time any group were to sue, I suspect they would be out of time under the Statute of Limitations. There is a principle here, the principle of Parliament's purporting to limit damages in a way that could limit the discretion of a judge in a case where the rule of law has been violated. That is the sole issue here.

Senator Beaudoin: In my opinion, there is only one point with which we have to deal. We have seen the amendments. The minister will appear before us tomorrow, and we will hear from two other experts on Monday. The only question is: Are those amendments an adequate answer to the question of whether the proposed legislation complies with the rule of law? I do not see any other major problem, although I see some little ones here and there.

Senator Gigantès: He has already said that, if somebody does not have the right to sue for defamation, then, in his opinion, it does not comply with the rule of law.

Senator Beaudoin: I have noted that. You said there are three points, and I think this answers my question.

The Chair: Thank you, Mr. Chipeur, for your appearance tonight.

Honourable senators, Senator Nolin, the deputy chair of this committee, will not be able to attend at the steering committee tomorrow due to the death of a family member. In consultation, I have been told that Senator Finlay MacDonald would be replacing him. I ask for a motion that the Honourable Senator Finlay MacDonald be elected as acting deputy chair of the committee from June 5 to 7, 1996.

Senator Doyle: I so move.

The Chair: Is it agreed, honourable senators?

Hon. Senators: Agreed.

The committee adjourned.