Supreme Court upholds law restricting interprovincial alcohol transport

The Supreme Court of Canada today allowed the appeal of the Crown against a New Brunswicker who, in October 2012, had purchased lower-priced alcohol in Quebec and brought it back home to New Brunswick.

Supreme Court upholds law restricting interprovincial alcohol transport
Ian Blue, who represented respondent Gerard Comeau, called the SCC’s decision in the case 'political.'

The Supreme Court of Canada today allowed the appeal of the Crown against a New Brunswicker who, in October 2012, had purchased lower-priced alcohol in Quebec and brought it back home to New Brunswick.

It was a case closely watched not only by the respondent — Gerard Comeau, a retired steelworker from Tracadie, N.B. — but, on the one side, by the provinces and their agricultural marketing boards that favour regulation of interprovincial sales and importation of goods and, on the other, by independent business, vintners and others that want direct-to-consumer sales and an open market.

The case hinged on the interpretation of s. 121 of the Constitution Act, 1867, which provides that all articles of manufacture from any province shall be “admitted free” into each of the other provinces, thereby rendering s. 134(b) New Brunswick’s Liquor Control Act — which forbids residents from having or keeping liquor not purchased from the New Brunswick Liquor Corporation — as unconstitutional.

In R. v. Comeau, 2018 SCC 15, a unanimous Supreme Court found that while s. 121 prohibits laws whose main purpose is to prevent the movement of goods across provincial borders, it does not prohibit legislation that has incidental effects on trade. While the New Brunswick law that Comeau challenged restricted the movement of alcohol across the provincial border, this was not its main purpose, which was to manage the supply and demand of liquor in New Brunswick.

Therefore, the court decided, the law is constitutional.

On Oct. 6, 2012, Comeau drove to Quebec from his home in New Brunswick to buy cheaper alcohol. When he returned to New Brunswick, he was stopped by the RCMP with 12 cases of beer and some spirits in his car, which he had purchased across the border. He was fined $292.50, including fees.

Comeau fought the fine, arguing at trial that s. 121 of the Constitution Act, 1867 guarantees free trade across provincial borders. The Crown argued that s. 121 was meant to prevent provinces from charging tariffs or similar costs at the border, which did not apply in Comeau’s situation. The trial judge agreed with Comeau and dismissed the charge, and the New Brunswick Court of Appeal dismissed the Crown’s request for permission to appeal.

“The modern approach to statutory interpretation provides a guide for determining how ‘admitted free’ in s. 121 should be interpreted,” the court wrote in its decision. “Constitutional texts must be interpreted in a broad and purposive manner . . . that is sensitive to evolving circumstances.” Underlying constitutional principles “do not support the contention that s. 121should be interpreted as prohibiting any and all burdens on the passage of goods over provincial boundaries, essentially imposing an absolute free trade regime within Canada. Rather, these considerations support a flexible, purposive view of s. 121 — one that respects an appropriate balance between federal and provincial powers.”

 “With respect to the text of s. 121, the phrase ‘admitted free’ is ambiguous, and falls to be interpreted on the basis of the historical, legislative and constitutional contexts,” the court wrote.

The SCC referred to its decision in Gold Seal Ltd. v. Attorney‑General for the Province of Alberta (1921), 62 S.C.R. 424, a constitutional case that likewise dealt with liquor and liquor export acts, and interpreted s. 21 to mean that products had only to be free from tariffs and not from other barriers such as limits on quantity that could be imported.

William Richards, Crown prosecutor for the Attorney General of New Brunswick in Fredericton, who represented the Crown in the case, told Legal Feeds that, of all cases like the Comeau case, “the one that most directly dealt with interprovincial trade issues is the Gold Seal case. In the other cases, s. 121 was more tangentially as opposed to directly involved. But the way the court has evolved its understanding of s. 121 in relation to provincial powers has now reached the point where the court has set on a definitive test: the purpose and essence of the legislation. If it incidentally affects cross-border trade, but is in deference to a higher order of traditional powers, the legislation will succeed.”

Ian Blue, a senior counsel at Gardiner Roberts LLP in Toronto, who led the team representing Comeau, called the Supreme Court’s decision “political” and pointed to the court’s description of s. 121’s term “admitted freely” as “ambiguous.”

“No one had ever said that before,” Blue told Legal Feeds. The SCC’s decision preserves the ability of provincial governments to impose any trade barriers “unless the trade barrier is a tariff at the provincial boundary or a law like it, expressly intended to restrict interprovincial trade.” He and his team had “hoped to open the door more to interprovincial trade, but the court opted to maintain the status quo, and that is disappointing,” he says.

Rob Staley, a partner at Bennett Jones LLP in Toronto, who represented the intervener Canadian Vintners Association, which opposed the Crown’s appeal, said the decision “very broadly validates provincial regulatory decisions that might have an impact on trade, as long as the purpose is not to impose tariffs.” With the Comeau decision, alcohol importation and distribution fall within these provincial regulatory powers, he says.

“So, you’re going to have to get provinces and the federal government to work collaboratively to get alcohol to move across borders freely, as contemplated by the [Alcoholic Beverages] Working Group” that was formed by federal, provincial and territorial officials following the enactment of the Canadian Free Trade Agreement in 2017.

“When the provinces say, ‘The world as we know it will end if you change [interprovincial trade barriers],’ that’s not accurate,” says Christopher Bredt, a partner at Borden Ladner Gervais LLP in Toronto, who, with co-counsel Ewa Krajewska, represented the interveners Canadian Chamber of Commerce and Canadian Federation of Independent Business.

“All federations have to grapple with these issues,” Bredt says. The essence of a federation is to balance local interests with those of the common market, he adds, and “direct purposive restrictions on interstate trade are difficult to justify. . . . The court has picked up on the fact and says that laws that in their purpose and essence restrict trade across interprovincial boundaries are going to be caught by s. 121.”

Within the United States, “there’s virtual free trade,” says Blue, citing a Statistics Canada study that found Canada’s trade barriers to be “much higher” than in the U.S. or European Union.

In his opinion, “the implications are very dark for free trade. The [SCC] decision is completely contrary to what the prime minister is trying to do for Canada, in the international sphere, negotiating international trade agreements.”

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