Teresa Scassa - Blog

A recent decision of the Supreme Court of Canada on the constitutionality of the proposed federal Securities Act raises interesting questions regarding the constitutionality of the Personal Information Protection and Electronic Documents Act (PIPEDA). PIPEDA was enacted by the federal government in 2000, and sets rules for private sector data protection that apply to all organizations engaged in commercial activity across the country. The authority of the federal government to enact such a law has generally been believed to be the general trade and commerce power under s. 91(2) of the Constitution Act, 1867. It is precisely the scope of this power that is considered by the Supreme Court of Canada in Re Securities Act, 2011 SCC 66.

The constitutionality of PIPEDA has been like a low-level background noise in the history of the statute. A reference case challenging its constitutionality was initiated and then shelved by the Quebec government in the early 2000’s. The issue rippled briefly to the surface in the recent decision in State Farm v. Privacy Commissioner of Canada, but the court avoided dealing with the question there. It remains to be seen whether the decision in Re Securities Act will be used to bolster challenges to PIPEDA at some point in the future.

The proposed Securities Act evolved from a history of proposals and recommendations for the development of a national securities regulator that dated back to 1935. All parties accepted that in general terms, the regulation of securities within provincial borders falls under provincial legislative competence over property and civil rights under s. 92(13) of the Constitution Act, 1867 and matters of a merely local or private nature under s. 92(16). This is borne out by the long-standing practice of provincial regulation of the securities trade in Canada.

The call for a national regulatory body that led to the proposed Securities Act (which was supported by the province of Ontario, but opposed by other provinces) arose out of concerns that there were certain national dimensions to the trade in securities that could only effectively be dealt with by national legislation. The provinces which opposed the proposed Securities Act disagreed, arguing that the Act was a thinly disguised attempt by the federal government to take over a matter that fell within provincial legislative competence. Those provinces which saw a role for a national securities regulator, nonetheless argued that any statute that established such a scheme would have to respect the division of powers and would have to evolve through federal-provincial co-operation, rather than by the unilateral imposition of a federal legislative scheme.

The Supreme Court observed that although the Constitution gives legislative competence over specific subject matter to one level of government or another, some issues may have dimensions that touch on matters that are within both federal and provincial jurisdiction. The “double aspect doctrine” allows each level of government to take jurisdiction over that aspect of the issue that falls within its legislative competence. The Court referred to this as an area where there is concurrent application of both federal and provincial laws, but not concurrent jurisdiction over the subject matter. Where such overlaps occur, the modern trend is towards “accommodating cooperative intergovernmental efforts.” The Court noted “an underlying constitutional principle that demands respect for the constitutional division of powers and the maintenance of a constitutional balance between federal and provincial powers.” (at para. 61)

The federal government argued that the proposed Securities Act fell within its power over trade and commerce under s. 91(2) of the Constitution Act, 1867. While normally this jurisdiction is limited to interprovincial and international commerce, courts have recognized a “general trade and commerce power” that is available in limited circumstances. The availability of this power is limited because, as the Court observed, it is “so broad that it has the potential to permit federal duplication (and, in cases of conflict, evisceration) of the provincial powers over large aspects of property and civil rights and local matters.” (at para 70) Thus, if not carefully constrained by the courts, this power might “upset the constitutional balance envisaged by ss. 91 and 92 and undermine the federalism principle.” (at para 70) According to the Court, laws enacted pursuant to the general trade and commerce power must be “qualitatively different from anything that could practically or constitutionally be enacted by the individual provinces either separately or in combination.”(at para 79) The power has been used to support federal constitutional jurisdiction over trademark law and competition law.

The Court distilled the following principle to govern the application of the general trade and commerce power: “Provided the law is part of a general regulatory scheme aimed at trade and commerce under oversight of a regulatory agency, it will fall under the general federal trade and commerce power if the matter regulated is genuinely national in importance and scope.” (at para 83) According to the Court”“To be genuinely national in importance and scope, it is not enough that the matter be replicated in all jurisdictions throughout the country. It must [....] be something that the provinces, acting either individually or in concert, could not effectively achieve.” (at para 83) For example, competition law, which is regulated by the federal government is not limited to a single industry or a single region of Canada. The effects of anti-competitive behaviour transcend provincial boundaries. Uneven regulation across the provinces, or even the failure of one province to regulate “would render the market vulnerable”. (at para 87)

The test for the general trade and commerce power applied by the Court was developed in General Motors of Canada v. City National Leasing, [1989] 1 S.C.R. 641. Once the pith and substance of the legislation is determined, the court must evaluate the following critieria:

(1) whether the impugned law is part of a general regulatory scheme; (2) whether the scheme is under the oversight of a regulatory agency; (3) whether the legislation is concerned with trade as a whole rather than with a particular industry; (4) whether it is of such a nature that provinces, acting alone or in concert, would be constitutionally incapable of enacting it; and (5) whether the legislative scheme is such that the failure to include one or more provinces or localities in the scheme would jeopardize its successful operation in other parts of the country. (General Motors, at pp. 661-662)

The Court characterized the proposed Securities Act as being in pith and substance “to implement a comprehensive Canadian regime for the regulation of securities with a view to investor protection, the promotion of fair, efficient and competitive capital markets and ensuring the integrity and stability of the financial system.” (at para 106) In doing so, the Act would “duplicate and displace the existing provincial and territorial securities regimes, replacing them with a new federal regulatory scheme.” (at para 106)

The Court found that the first two General Motors criteria were easily met. The law established a general regulatory scheme for securities and placed it under the oversight of a regulatory body. As to the third factor, the Court found that the Act was chiefly directed to “the day-to-day regulation of securities within the provinces.” (at para 116) Although some aspects of the Act might be directed towards broader national goals, the Court found that these elements “do not, on the record before us, justify a complete takeover of provincial regulation.” (at para 117) The Court rejected arguments that the “securities market has been so transformed as to make the day-to-day regulation of all aspects of trading in securities a matter of national concern.” (at para 117)

The fourth General Motors factor requires a consideration of whether the provinces could, acting in concert, enact a similar scheme. The Court noted that the provinces could certainly choose to work together to harmonize their statutes, and they also could choose, in concert, to delegate oversight functions to a single pan-Canadian regulator. Yet nothing required them to do so. Because of this, the fourth consideration weighed partly in favour of federal jurisdiction. Nevertheless, the Court noted that the proposed Act did not focus on only those elements which were beyond the reach of the provinces; rather it “reaches down into the detailed regulation of all aspects of securities”. (at para 122) The Court contrasted this with the constitutionally legitimate Competition Act, which does not regulate all commercial contracts, but rather only those which are anti-competitive. It found that the proposed securities legislation “overreaches the legislative interest of the federal government.” (at para 122)

The fifth consideration is whether the decision by a province not to participate in a collaborative scheme would prevent its effective operation. The Court noted that the Act contained an opt-in scheme for provincial participation. The possibility that the scheme could operate even with incomplete uptake by the provinces undermined any argument that it was necessary to avoid a situation where one or more provinces chose not to act.

The court ultimately concluded that the proposed Act could not be justified as falling within the general trade and commerce power. Essentially, the legislation strayed beyond matters of truly national concern and sought to regulate subject matter that has long been recognized as falling within provincial jurisdiction. The court concluded:

The need to prevent and respond to systemic risk may support federal legislation pertaining to the national problem raised by this phenomenon, but it does not alter the basic nature of securities regulation which, as shown, remains primarily focused on local concerns of protecting investors and ensuring the fairness of the markets through regulation of participants. Viewing the Act as a whole, as we must, these local concerns remain the main thrust of the legislation — its pith and substance. (at para 128)

The Court suggested that cooperation between federal and provincial governments could lead to a scheme that respects provincial jurisdiction while at the same time addressing matters of national concern.

The decision will clearly be relevant to any consideration of the constitutionality of PIPEDA. The protection of privacy and data protection in areas of provincial competence have long been considered matters falling within provincial jurisdiction under either s. 92(13) or 92(16) of the Constitution Act, 1867. Indeed, Quebec’s own private sector data protection legislation pre-dates PIPEDA, and there has never been any doubt that that statute was squarely within the province’s legislative authority. The fact that the Quebec statute has been declared “substantially similar” to PIPEDA does little to reinforce the constitutionality of the federal scheme, since it supports the view that the law goes beyond what is required to address matters of national importance and strays into those matters that the provinces, acting independently, could address. While the federal government clearly has the power to enact data protection laws that apply to federal works and undertakings, or that apply to interprovincial or international commercial activity, it is more difficult to justify the extension of the legislation to purely intraprovincial commercial activity. The constitutionality of PIPEDA in light of the decision in the Reference re Securities Act deserves (and will likely receive) much consideration.

Picture the small university town which holds its convocation ceremonies every spring. Proud parents and siblings, aunts, uncles and grandparents flock to the town to see junior graduate. This is the single biggest annual event in the community, and it creates a boon for local businesses of all kinds, including hotels, restaurants, bars, gift shops, florists, and convenience stores. Many of these local businesses will hang signs or banners in their windows celebrating the graduating class. In doing so, they recognize the importance of the event to the community, and they celebrate a significant occasion in the lives of residents and visitors to the community. Many of the businesses also recognize the important economic benefit brought to the community by the students, and feel it appropriate to signal this appreciation. Graduating students have likely worked as part-time employees in many of these businesses. In some cases, business owners are alumni of the schools, or have children who have attended the school. Of course, it is also true that the businesses recognize that they may benefit financially by tapping into the enthusiasm and pride of visitors to the community.

Now picture the university deciding that it “owns” convocation. After all, the event only happens because of the operations of the university. It is a major, recurring event that requires organization and preparation. The University, which is in part publicly funded, has no doubt experienced budget cuts and dislikes raising tuition to meet its needs. It might have a few key private sector donors that it would like to reward and encourage as much as possible. These donors, it reasons, have supported the university, and so should receive some sort of exclusivity when it comes to major university events. The donors think this is a good idea too. So, the university decides that it is entitled to control the goodwill associated with convocation; it wants to prevent local businesses from trading on that goodwill without paying for the right to do so. Alternatively, it might decide that rights to associate commercially with convocation should be available only to a few select corporations – those who are able to pay premium prices for an exclusive opportunity. It decides to take legal action against any company that puts up signs or banners that make any direct or indirect reference to its major event.

Does this scenario sound absurd and far-fetched? Perhaps it is an extreme example, but it is clear that we are beginning to head in the direction of recognizing some form of property right in the goodwill associated with major events. And there are good reasons why we should be concerned.

We are now only months away from the 2012 summer Olympic Games that will take place in London, England. To call this a major event is an understatement. Along with the fanfare, pomp and ceremony of the Games, we will be bombarded with advertising and merchandising campaigns. These campaigns, for the most part will be engineered by Olympic sponsors – those mega corporations that have shelled out enormous sums of money for the privileges that come with sponsorship.

There are other voices in the story of marketing and the Olympic Games, however. For years, non-sponsors have sought to associate themselves with the Olympic Games (or with other major sporting events, for that matter) without paying the exorbitant sponsorship fees. Such campaigns are called “ambush marketing”, and they are often cleverly designed so as to create associations without actually using the protected intellectual property of the International Olympic Committee (IOC) (which includes all manner of trademarks such as the name Olympics and the famous rings). For example, in 1992, Mastercard, a commercial rival of credit card company and Olympic sponsor VISA, ran an advertising campaign that stated: “And remember, to visit Spain, you don't need a visa”. (Get it?)

In frustration at the persistence of companies seeking to reference a mega international event in their marketing campaigns without having paid through the nose for the right to do so, the IOC has, for a number of years now, made a commitment to enact strong anti-ambush marketing legislation a condition of a successful Olympic bid. You might not have noticed that Canada did so for the 2010 Winter Olympics in Vancouver. This is because (as Dana Ellis, Benoit Séguin and I argue elsewhere), Canada’s constitutional division of powers made the drafting of such a law a tricky business, and the legal departments of major corporate non-sponsors quickly found the obvious loopholes and drove their marketing trucks right through them. (Does anyone remember the Lululemon ambush?)

Being a unitary state, these division of powers issues are not shared by Great Britain, and their anti-ambush marketing laws are among the most stringent ever seen. Former British Minister of Sport, Richard Caborn, explained to Parliament that the laws were drafted in extremely broad and open-ended terms because “we must have flexibility in our approach, to allow us to respond appropriately to any changing demands by the IOC – and there will be some – and to enable us to react to any new or innovative ambush marketing techniques that might arise between now and 2012.” (House of Commons Debates (U.K.), 2005). If that makes you feel even a little bit queasy, consider the draft regulations that have just been proposed in the U.K. The regulations give an extraordinarily broad definition of advertising. It includes just about any kind of message placed in any location that is “wholly or partly for the purpose of promotion, advertisement, announcement or direction.” It expressly captures the display of messages on a human or animal body, having a human or animal carry anything on which an advertisement is displayed, wearing advertising attire, or displaying an advertisement on an individual’s body (which includes using body paint). The regulations go so far as to target human and animal bodies because these were among the last uncontrolled communicative spaces left around the Games.

You may recall that during the 2010 FIFA World Cup of Soccer in South Africa, a group of Dutch women were arrested and charged with ambush-marketing offences (yes, FIFA now insists on such legislation too) after they attended a football match together wearing unbranded orange dresses that had been supplied by a Dutch brewery. The charges were only dropped after the story received an embarrassing amount of media coverage that made the laws seem rather difficult to justify. It is safe to assume that the Dutch women in orange dresses would not be welcome at the London Games either. We all know that the female body is considered by marketers a powerful advertising medium; what is interesting in this example is that the women themselves were criminalized for being the vehicle by which a banned message was communicated.

It is also interesting that instead of letting major corporations and event organizers duke it out in the business arena, these pillars of the free market economy have insisted upon government intervention to silence all possible distracting messaging during substantial periods before, during and after the event. And although the most problematic ambush marketing campaigns are ones that come from major corporate rivals of event sponsors, these are also the players that have the most resources to hire teams of clever lawyers to find the legal loopholes for them. Yet ambush marketing laws are applied to all businesses, large or small, with the result that small local businesses in the communities which host such major events, are allowed only to carry on their normal marketing practices and may not even mention that big event taking place on their doorstep. The mom and pop diner offering gold, silver or bronze breakfast specials during the Olympics is among those least able to respond to or fight the cease and desist letter they would inevitably receive.

By creating property-like rights in major events, governments have acted to further shrink the already embattled public domain and have contributed once again to the creeping propertization of just about anything. In this case, the IP-like right is given to event organizers, notwithstanding the fact that a major public event is a multi-stakeholder enterprise. These events do not take place without national and local government involvement, without taxpayer support, without citizens making sacrifices related to local disruptions, without athletes training and preparing for years in advance, and without the support of thousands of local volunteers – to name just a few of the stakeholders. Event organizers are being given rights in something that is not solely theirs, and in doing so, they have the power to shut down the very natural ways in which communities respond and interact to events taking place in their midst.

Universities are not next in the queue for protection under this sort of legislation. Expect it to reach all major international sporting events first (look for it again in Canada, for example, when Canada hosts the Pan-Am Games in 2016). Then look for it in relation to major sporting events such as the Stanley Cup or the Superbowl. Once it gets that far, then universities can get into what will likely be a very long line up to claim legally enforceable rights in the public domain.

Teresa Scassa and Anca Sattler, “Location-Based Services and Privacy”, forthcoming in (2011) Canadian Journal of Law and Technology

The last decade has seen a rapid growth in the number and variety of location-based services that are available to consumers. These include applications that permit users to call up a variety of different information about their current locations. Location-based services (LBS) also allow individuals to share their location with friends in a wide range of social networking contexts. Location-based services also permit information to be pushed automatically to users based on their location.

Many location-based services offer real benefits to users. Yet LBS raises inevitable user privacy concerns. In some applications, privacy issues will arise between individual users, where, for example, applications permit the tracking of movements of family members, co-workers or “friends”. Location-based services may also result in the collection of a new layer of personal information about consumers by private sector companies. Information about individuals and their movements has meaningful commercial value, and the potential for the collection, use and disclosure of this information is significant. Location-based services also raise the spectre of state surveillance of individual activity – either concurrent with an individual’s movements (tracking), or retrospectively, through searching records of individual patterns of movement.

In this paper we begin by describing location-based services, their evolution and their future directions. We then outline privacy issues raised by such services. We consider how current Canadian data protection laws apply to location-based services, and indicate where such laws fall short of addressing the full range of issues such services raise. We also explore some technological methods to address the privacy challenges raised by location-based services. The paper concludes with a series of recommendations.

In 2004, Michael Deturbide and I published our book Electronic Commerce and Internet Law in Canada (CCH Canadian).  Since that time, so much has changed (and continues to change).  We are currently working on a second edition of this book, which we hope to see in print sometime in 2012.

A new paper, co-authored with Dana Ellis and Benoit Séguin, and forthcoming soon will be exploring some of the consequences of converting ambush marketing from a business problem to a legal issue.  This is the case in those jurisdictions which have enacted laws to curtail ambush marketing.  This is an exciting new direction for my research in this area, and I hope to build upon it.

Most of my recent work has looked at the relationship of data protection laws to personal information linked to geographical location. An article, co-authored with Anca Sattler, on Location-Based Services and privacy is forthcoming in the Canadian Journal of Law and Technology. Current projects include a study of the exception for publicly available information in PIPEDA. My work on geospatial privacy is ongoing as well. This research work is described in greater detail under the heading "geospatial data".

My recent work in the area of trademark law culminated in the publication of Canadian Trademark Law (LexisNexis) in 2010. I am currently working on a new chapter on trademarks and the internet for the second edition of my co-authored book on Electronic Commerce and Internet Law. Other ongoing projects include an exploration of the relationship of the freedom of expression to trademark law.

Both globalization and the rapid development of communications technology have created an environment in which a very wide range of human activity can no longer be exclusively confined within the boundaries of any one state. Transborder commerce, communications, and crime are ubiquitous. The global movement of labour and capital, combined with widespread attempts to harmonize national laws to international standards also contribute to an environment in which the role of the nation state is greatly altered. As a result, the extent to which states can exercise jurisdiction over matters that take place outside their borders has become increasingly dynamic and controversial under international law. The goal of the project is to critically examine the use of extra-territorial jurisdiction by states and to formulate an analytical framework to help Canadian law and policy makers in making principled decisions on the issue.

My own work on this project has focussed on internet and privacy issues. A new paper exploring extraterritoriality in the context of the internet, co-authored with Robert Currie will be forthcoming shortly in the Georgetown Journal of International Law.

This SSHRC funded research project is being carried out with Stephen Coughlan, Robert Currie and Hugh Kindred of Dalhousie University.

Geospatial information (GI) has become widely used by government, the private sector and by ordinary individuals for an increasingly diverse range of purposes.  GI forms the basis for GPS systems and maps; these in turn are used in a broad range of applications which include navigation tools, land use planning, resource management, mobile marketing, tracking and surveillance.

This project, which is funded by the GEOIDE network, brings together researchers from law, geography, engineering and geomatics to explore some of the legal and ethical issues raised by this near ubiquitous use of geospatial information.  For example, work has been done on issues around the quality of geospatial data, and its suitability for use in various contexts.

As one of the legal experts involved in the project, my work has explored issues along two main axes.  First, I have looked at questions surrounding the ownership and licensing of geospatial data. Second, I have explored issues around geospatial data and privacy, including those raised location-based services, intelligent transportation systems, and information maps.

Publications related to my work on this project can be found in my publications list under the heading geospatial/digital cartography.

Public Protection and Ethical Dissemination of Geospatial Data – Social and Legal Aspects