Recently I posted Arrow’s article at the Vancouver Sun concerning Peter Hogg’s letter to Finance Canada on LinkedIn. I just read a very interesting response from Jeff Mukadi, a Toronto tax law and compliance professional. (All emphases are mine).
He has published an article, ““FATCA Getting Rid of U.S. Clients Will Not Get You Off the Grid,” Journal of International Taxation, November 2012. He argues that foreign citizens affected by FATCA should bring their governments to court through class action suits to invalidate FATCA/IGA’s for unconstitutionality. He discussed some excerpts of the article; and makes a very strong case for the absence of reciprocity and true quid pro quo. “Reciprocity is not simply an exchange of one thing for anything, but one right for the same right and one obligation for the same obligation.” As we all know, this is simply not what the US is “offering.”
What is most interesting is his suggestion that FATCA cannot be implemented in Canada not only because of our privacy laws but more importantly, because of the Foreign Extraterritorial Measures Act (R.S.C., 1985, c.F-29). This Act was designed specifically to “deny effect to extraterritorial Acts of foreign governments violating Canadian sovereignty.” The US National Defense Authorization Act (“Cuban Assets Control Regulations,” July 8, 1963) was such a measure and prompted the issue of the Foreign Extraterritorial Measures Act (United States) Order of October 9, 1992 (SOR-92-584). By authority of the Canadian Attorney General jointly with the Secretary of State for External Affairs, SOR-92-584 prohibited a Canadian corporation, or director, officer, manager, or employee in a position of authority of a Canadian corporation, from complying with this U.S. law. So in addition to not joining the “Coalition of the Willing” in 2003, we have another instance of Canada standing up to the US. Mr. Mukadi emphasizes the fact that since FATCA is even more agressive than the US National Defense Authorization Act, “it is certain that SOR-92-584 will always be invoked as a precedent against any attempt to implement or enforce FATCA in Canada.” Since governments are not taking care of their primary duty, that of defending their sovereignty and protecting citizens, it might be easier to fight FATCA in the courts. And until this happens, we cannot know if we can be safe from FATCA.
He indicated he would send me the article so I hope I can pass on more. I also contacted Allison Christians to see if we could get her take on it. In any regard, this sounds like another specific “weapon” we can use in this fight and I believe we should let our government know we are aware of it.
UPDATE: Mr. Mukadi has kindly provided a copy of his article: FATCA JOIT Article November 2012 – Final Galleys Mukadi FATCA
You are absolutely correct. The biggest loser in this will be the U.S. In fact, with the advent of the drones which include:
A. The physical drones;
B. The FATCA assault
The U.S. has declared war on the world. The world will respond by simply avoiding the US and everything American. Over a period of time a new Financial World order will come to be which will exclude the U.S. (or at best they will be a minor participant).
On the most basic level the debtors do NOT set the terms of trade with their creditors.
Answer the multiple choice question here:
We should be hugely grateful to Jeff Mukadi for his article and in particular for calling our attention to Canada’s Foreign Extraterritorial Measures Act (“FEMA”, Statutes of Canada 1984, c. 49). Canada’s use of this Act in response to Cuban Assets Control Regulations of 1992 and the Helms-Burton Act of 1996 are important precedents for standing up to the extraterritorial extension of US law.
Something confuses me, however, and if he is tuned into this website (is he “The Author” I see in earlier comments?) I hope he might respond.
He claims that a Canada-US IGA could be unconstitutional because it would give up Canadian sovereignty, getting nothing of value in return:
“…if it can be proved in court that the agreement is per se unconstitutional because it obviously infringes the country’s sovereignty where it compels the local administration to implement and enforce a foreign public law without equal reciprocity, FATCA would be invalidated in many countries notwithstanding FATCA IGAs.” (p. 7)
But I see nothing strictly unconstitutional in a country giving away its sovereignty, if it is so foolish to do so. It is indeed the responsibility of a government to protect its citizens and its sovereignty, but I don’t see how this is grounded in constitutional law.
Can anyone, including Mr. Mukadi, address this question?
Thank you Jeff Mukadi for your valuable article.
Probably a very dumb question: Does Kevin Shoom at the Department of Finance have a copy of it?
UScitizenabroad wrote: “On the most basic level the debtors do NOT set the terms of trade with their creditors.” Exactly.
Thank you for your article.
I was wondering if you’d seen this video with speaker Prof. Allison Christians?
or her blog (where she raises related issues)?
Maybe some of you in the Toronto area would like to show up at the Roots factory with some placards for the MINISTER OF FINANCE PRE-BUDGET PHOTO OPPORTUNITY:
@nobledreamer My thought train is that, although at some level one thinks of both the Mulroney and Harper Tories as being pro-US and in their pockets on some issues, in this particular Act Mulroney (if it was on his watch this was passed, that isn’t clear to me) exhibited some clear independence of the US and assertion of Canadian sovereignty, and to some extent so far at least Flaherty has done likewise on FATCA (I can’t remember any other Canadian Finance Minister writing an open letter to NY Times & Wall Street Journal critical of a US law, even if the letter never actually got published in the US as far as I know). Which absent any further news gives me cautious optimism that our government will not roll over and cave in on this FATCA stuff, especially as it might contravene Canadian law and particularly the rights of Canadian citizens and residents.
Not sure how productive it might be to point this out to Flaherty, Schoom or Harper, given there isn’t a great deal of love lost between Mulroney and Harper from what I’ve heard … but even so …
I did send Mr Muktadi the links to the FATCA Fact-Finding Forum & Allison’s blog. Allison has just received the PDF and she will weigh in on it.
Understood. I do believe the letter did indeed, get published. I will see if I can find where I saw it, but I am sure it made it to the LA Times and the NYT.
On investigating further the Foreign Extraterritorial Measures Act, I learn (non-lawyer that I am) that this is “blocking legislation”, one strategy a country can use for countering the extraterritorial extension of another country’s law. I found an article, published in Australia, that lays out a lot of the context:
Deborah Senz and Hilary Charlesworth, “Building blocks: Australia’s response to foreign extraterritorial legislation”. Melbourne journal of international law, 2001.
The issue of extraterritorial extension of law seems to have its origins in anti-trust law.
Here is the Green party’s page on the Hogg argument: http://www.greenparty.ca/fr/media-release/2013-03-14/la-mise-en-uvre-du-fatca-est-probablement-anticonstitutionnelle-pr-vient-un
Canada’s Geographic Challenge from the US geopolitical perspective.
At the 1.47 mark the narrator says, “because of its location, Canada is well within the US sphere of influence and the country’s freedom to act is constrained by US interests.”
The fight must go on, but its not going to be an easy one.