Francis Savage Reilly (1825-1883)

7 12 2017

Today was the second day of the Supreme Court of Canada hearings into the Comeau case. I’ve been following some of the hearings on Twitter thanks to the live tweeting by Paul Braunovan, a partner at Perley-Robertson, Hill & McDougall., who is in the Court Room. He is also President @brownvanbrewing, an Ottawa’s craft beer company.

A few minutes ago, Paul noted that one of the lawyers  (Brown) disputed my interpretation of the historical origins of s. 121 of the Canadian constitution. I gather that there was a request from someone in the courtroom for more information about the actual individual who drafted the British North America bill before it went through the UK parliament. Well it was Francis Savage Reilly (1825-1883).

You can read more about his individual, his role in drafting s. 121, and his probable reasons for phrasing it in the way he did in right here.

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Section 121 and Canada’s Marijuana Monopolies

28 11 2017

I was quoted in a recent Toronto Star story on marijuana and the constitutionality of interprovincial trade barriers.  The reporter asked me whether a victory for  the advocates of interprovincial free trade in the Comeau case (see here) would destabilize the plans for provincial government monopolies on the sale of marijuana.  I answered that whether Canada ends up with a single national market for marijuana or a system whereby each province creates its own walled-garden system could indeed be influenced by the Supreme Court’s decision in the case of R v Comeau. If the Supreme Court agrees with the view that interprovincial trade barriers that impedes the trade in alcohol and other legitimate products are unconstitutional, then the existing restrictions on bringing beer, dairy products, etc between provinces would become unenforceable. In that scenario, clever lawyers for companies that want to be able to sell marijuana across interprovincial borders might then be able to use this precedent to argue that a provincial law banning mail-order sales from another province are also unconstitutional.

 

However, I also told the reporter don’t that I didn’t think that such arguments would be persuasive or that the courts would greenlight a free-for-all in marijuana, as opposed to commodities that have been legal for a long time (e.g., beer).  I arrived at this conclusion based on comparative constitutional history. Many federal unions have a provision in their constitution that mandates that there should be free trade between the members unit. For instance, the Australian constitution has a section (Section 92) very similar to the Canadian constitution’s section 121 that mandates that there should be free trade between the Australian states. The founding documents of the European Union enshrine a similar sort of principle called the single market, which means that EU courts have declared that citizens in one EU country can drive to another, fill their car with alcohol or any other legitimate product, and then return home. The key court case that helped to create the single market was the famous 1979 Cassis de Dijon ruling. Without this ruling, the EU Single Market as we know it would not have come into existence. One of the many consequences of the creation of the EU Single Market is that you routinely see heavily-laden cars stuffed with wine bottles returning to the UK from Calais, a French town that has a suspiciously large number of liquor stores.  In 2007, the European Court of Justice, which is effectively the EU’s Supreme Court, issued a ruling in a case that has many parallels with the Comeau case. In Sweden, alcohol sales are a state monopoly—you must buy your alcohol from Systembolaget. In Denmark, the sales regime is more liberal. Thanks to the famous bridge between the two countries, it is quite easy for people in western Sweden to circumvent the Swedish state monopoly. In 2007, the  European Court of Justice, ruled that some of the Swedish laws that support Systembolaget,  in particular the provisions prohibiting the importation of alcoholic beverages by private individuals, violate the principle of free trade within the EU.

 

As I explained to the reporter, the courts in federations that mandate interal free trade generally frown on internal trade barriers,  they seem to draw the line at things like recreational drugs or prostitution. For instance, people in EU countries cannot drive to Amsterdam or some other Dutch city where marijuana is openly sold in cafes, and then drive back to say, Germany, with the marijuana. The principle of the single market doesn’t extend to such controversial products. If it did, EU member nations would no longer be able to have drug laws that deviate from those of the most liberal EU member state.  In a 2010 test case brought by the owner of the Easy Going cafe, a Dutch marijuana establishment in the town of Maastricht, the European Court of Justice, ruled that the principle of free trade between EU countries just didn’t apply here. [Maastricht, it should be noted, is located conveniently close to the border and a German autobahn.]

Similarly, the Australian courts have been quite vigorous in using Section 92 of Australia’s constitution to strike down barriers to inter-stateat  trade in the goods and services in that country, particularly since the precedent-setting ruling in the 1988 case of Cole v. Whitfield. However, the principle of inter-state free trade is not taken so far as to  mean that brothel companies that operate in the Australian state where prostitution is legal (e.g., New South Wales) can open up branches in states that have banned brothels!

I suggested to the reporter that in interpreting section 121, the Canadian Supreme Court would likely adopt a similar approach to that taken by courts in other industrial democracies (the EU and Australia). Since the Gold Seal Case, Canadian judges have interpreted section 121 it very narrowly to mean that only restrictions on interprovincial trade that take the form of actual tariffs are prohibited. I suppose the Canadian courts could go to the other extreme and declare that anything that restricts interprovincial trade, such as federally-imposed fines for people who send marijuana through Canada Post, are unconstitutional under the  Section 121. After looking at how courts in other democratic federations have interpreted the constitutional protections for internal free trade in marijuana cases, I would predict that the Canadian courts would likely adopt a middle ground position is that some non-tariff restrictions on interprovincial trade are acceptable, particularly in the case of substances that have only just become legal and which are still illegal in most other democratic countries.  Such an interpretation of Section 121 would be analogous to the one that the European Court of Justice adopted in its 2010 ruling on marijuana.





The Comeau Case: a Compendium of Resources

28 11 2017

fathers

As long-time readers of this blog will know, I was the expert witness at a 2015 court case (Comeau) about the constitutionality of internal trade barriers in Canada. (I wrote a number of blog posts about this case at the time– see here and here). This test case involved a New Brunswick man who was charged with driving into Quebec, buying some beer, and then bringing it back to New Brunswick, which has a government monopoly on liquor sales. In Quebec, of course, you can buy beer in convenience stores and it is cheaper. The Comeau case has important ramifications for a number of industries, not just beer, since there are many interprovincial trade barriers in Canada that go against the constitution’s provision that there should be free trade between Canada’s provinces. For instance, there are restrictions on interprovincial free trade created by marketing boards. These restrictions serve to increase the price of milk and other commodities.

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Canada’s subnational governments, the provinces, impose many restrictions on interprovincial trade that are protectionist in intent and effect. (Canada isn’t the only country to have such internal trade barrier—see here for a gateway into the academic literature on this subject).  Canada’s internal trade barriers appear to conflict with section 121 of the 1867 Canadian constitution, which explicitly provides for free trade between Canadian provinces. This constitution is the British North America Act, 1867 (UK), which was retroactively renamed the Constitution Act, 1867 by the Constitution Act, 1982 . [Most academic historians continue to refer to the text by its historical name]. Since I wrote a PhD thesis and book on the political economy of the 1867 constitution, I am considered to be well qualified to speak about the motivations of the creators of section 121. You can read the expert witness report I wrote for the Comeau case here.

I believe that section 121 was included in the Canadian constitution because the framers of this document wanted the new Dominion of Canada to be a single market without fetters on interprovincial trade. These framers included the Fathers of Confederation- a group of British North American politicians- as well some senior British politicians (especially the Earl of Carnarvon but also Adderley, Watkin, and others), and a handful of very accomplished civil servants and lawyers in London.

150 years later, trade barriers are still in place. For those who don’t wish to read my entire expert witness report, this 2015 CBC article gives a summary of the views I presented in “The Historical Origins of Section 121 of the British North America Act: a Study of Confederation’s Political, Social, and Economic Context

In April 2016, the judge in the Comeau case made his ruling, which found that New Brunswick’s restrictions on the importation of beer from Quebec were incompatible with section 121. (You can download Justice Leblanc’s ruling, which was 194 paragraphs in length, here or here).

The Comeau case has now made its way to the Supreme Court of Canada, which will hear it on 6 and 7 December. In the last few weeks, the Canadian media have begun to carry a range of stories about the case and associated issues, such as the constitutionality of the provincial government monopolies on marijuana that will be created in 2018, when recreational marijuana becomes legal in Canada. There are literally dozens of stories on this topic, so I will content myself with linking to just a few (see-here, here, here, and here).  I was quoted in a recent Toronto Star story on marijuana and the constitutionality of interprovincial trade barriers.

I thought I would take this opportunity to share links to a series of online resources for people who are interested in this case and the various issues it raises.

The Supreme Court of Canada’s website has a section with a range of documents related to the Comeau case. For convenience, I have put links to them here.

As you can see, the Comeau case has attracted the attention of a wide range of interest groups!

Think tanks have published some interesting pieces about the case. For a perspective from the C.D. Howe Institute, see here. Also check out this 2013 report by the C.D. Howe institute,  “Beer, Butter, and Barristers: How Canadian Governments Put Cartels before Consumers”. (That report wins the prize for best title!)

In the wake of the lower court’s ruling in the Comeau case, the Canadian Senate Standing Committee on Banking Trade and Commerce has published a data-rich report on interprovincial trade barriers.

In the academic and legal blogosphere, the case has attracted some attention, particularly from those who are interested in whether “originalism” is the right way to the interpret constitutional documents (see here, here, and here). (I blogged some thoughts about originalism some time ago). Bradley Miller, a legal and constitutional historian at the University of British Columbia, published a much more eloquent piece about originalism in January that has recently been brought to my attention.

The implications of the Comeau case for the Canadian drinks industry have been discussed on Alcohol and Advocacy, a specialized legal blog maintained by Dan Coles, a litigation lawyer at Owen Bird Law Corporation in Vancouver, British Columbia.

In October 2017, Christopher Moore, a Toronto-based historian, published a paper that offers an interpretation of Section 121 that is very different from that which I offered in my 2015 report. You can read his paper Federalism, Free Trade within Canada, and the British North America Act, S.121 here.  Moore argues that Section 121 was not intended to eliminate non-tariff trade barriers between Canadian provinces, only tariff barriers.

There are many statements with which I disagree that appear in Christopher Moore’s paper. His paper motivated me to write a report that focuses on those of these statements that appeared in parts II and III of his paper. The most important of these points is his claim was that the creators of the British North America Act would not have been thinking about non-tariff barriers when section 121 was composed since nineteenth century people had not yet started to worry about non-tariff trade barriers. His argument is that paying attention to non-tariff trade barriers is a very comparatively recent development and one that dates from after 1970.  It is likely that Chris Moore has been misled by secondary sources that date from around the time of the GATT’s Tokyo and Uruguay rounds that declare that the focus on non-tariff barriers is totally new and without precedent.

Now it is certainly true that non-tariff trade barriers became a more important issue in trade diplomacy in the 1970s and 1980s than they had been in the 1950s. However, there is abundant evidence that the creators of the British North America Act and nineteenth-century people in general were indeed interested in non-tariff Western tariff barriers. The 1860 trade agreement between the UK and France, the famous Chevalier-Cobden agreement,  included sections that dealt with what we would today call non-tariff trade barriers.  (The WTO website has a good explainer that can act as an introduction to the academic literature on this agreemen and there is an equally good discussion of this treaty on the University of Exeter’s Imperial and Global Forum blog. Unfortunately, I can’t share an electronic copy of the text of this treaty here for copyright reasons).

Why is the Chevalier-Cobden agreement relevant here? The British parliamentarians who passed the British North America Act, Section 121 and all, were doubtless familiar with the provisions of the 1860 treaty, which they also debatedthey also debated. Most importantly, Francis Savage Reilly (1825-1883), the individual who actually wrote the British North America bill, also would have been familiar with the 1860 Anglo-French treaty, even though I haven’t been able to find out whether he actually read this document in his capacity as a lawyer who took on lots of British government work in the 1860s.   Reilly was the real architect of section 121 and my sense was that his drafting of it was informed by his knowledge of European commercial diplomacy.  Reilly literally wrote books on diplomacy and arbitration, as his WorldCat author entry shows! Moreover, we know from nineteenth-century US Supreme Court rulings that contemporaries in North America were aware of the potential to non-tariff barriers to impede trade between jurisdictions even in the absence of tariffs (i.e., fiscal levies imposed at ports of entry).

I discuss all of the problems with Moore’s interpretation in a new paper called A Critical Response to Christopher Moore’s “Federalism, Free Trade within Canada, and the British North America Act, S.121. Those who wish to read this as-yet unpublished paper can do so by emailing me on my University of Liverpool email address.





Thoughts on the Case of the Queen v. Comeau

27 08 2015

For the last few days, I’ve been testifying as an expert witness in a Canadian constitutional court case that has captured the imagination of the country and which has serious implications for a number of key economic sectors. The court case is about the section of the Canadian constitution that declares that there should be free trade among Canada’s ten provinces. It’s rare for a business historian to be called as an expert witness in a court case. However, since my PhD thesis was on the role of business in the creation of the Canadian constitution, I’m qualified to speak to what the framers of the Canadian constitution intended when they inserted this section (s.121) into the 1867 constitution. My view is that since the creators of the Canadian constitution wanted to create a comprehensive economic union of the various British colonies in North America, the various laws that restrict “imports” of goods from one Canadian province to another should be considered unconstitutional. (This particular “test case” centres on the conviction in 2012 of a man who purchased some beer in Quebec, a Canadian province, and then drove this beer into New Brunswick, another Canadian province, where he was arrested by the RCMP).

I’ve been astonished by the extent to which the Canadian media is discussing this case (see here, here, and here). Last evening, Canada’s 24 hour news channels were abuzz with discussion of the case. For part of yesterday, our case was the most discussed issue in Canadian social media, ahead of the ongoing federal general election. Moreover, the topic has gone viral in ordinary conversations. As I write this I am sitting in a roadhouse in between the location of the trial, the tiny border town of Campbellton, and the nearest international airport, which is in Moncton. The other diners, who don’t know that I am involved in the case, are energetically debating its merit. One of the people I just overheard has speculated that if free trade in beer among Canadian provinces is established, the brewing companies will no longer be required to operate small breweries in each province. This individual, who appears to be of university-student age, is predicting consolidation and rationalization in the industry should the defence win in this trial. (The defence wants the court to declare inter—provincial trade barriers to be unconstitutional). His friend is talking about the implication for dairy products and the other goods that are currently fettered by internal trade barriers. The implication is that if inter-provincial free trade and a Canadian common market is established, a wide range of industries will have to be restructured. I expect that regardless of the decision by the judge, the case will ultimately make its way to the Supreme Court of Canada.

I’ve listened to a number of radio stations, French-language and English-language, during my drive today. Interspersed among the music and weather reports is discussion of the ongoing trial.  The DJs are also reference discussion of the trial on Facebook and other social media. A DJ at a radio station said “For anyone who is at the trial today, here is this song”. He proceeded to play a catchy pop song by Mark Ronson and Bruno Mars called “Uptown Funk.” I don’t know how much meaning should be read into the DJ’s decision to play this song in honour of the ongoing trial.  It would probably be a mistake to ascribe any political significance into the verbal machine-gun fire that is commercial radio DJ blather.  However, I do know that the people in the local community I spoke to are uniformly in favour of being able to purchase beer in Quebec dépanneur.

As I prepare to fly back to Europe, I reflect that I am honoured that my academic research has been used in this way in a court case that has important implications for many companies, and individuals, in an important G-20 economy. My guess is that future economic historians may regard this case as the Canadian analogue of the Cassis de Dijon case in EU law. (That court case helped to create the European Common Market).

If you would like to read the Expert Witness Report that was submitted to the court,it will soon be available online.

P.S. I would like to thank the staff of the trial hotel, Campbellton’s Quality Inn, and Brasserie 1026, the adjacent restaurant, for all of their help during my stay in their community.