[We now have a NEW POST taking us up to February 1, 2015. This post will be retired from service.]
THE AUTUMN 2014 UPDATE
Dear Donors,
Together, we reached our goal of $100,000 to pay the November 1 legal bill 11 days ahead of schedule!
Thank you Canadian donors from coast to coast and our friends from around the world for your generosity, support and determination — and especially for not being afraid.
The name of our non-profit corporation is the “Alliance for the Defence of Canadian Sovereignty.”
We were very deliberate in including in our name the word “sovereignty”, which forms a cornerstone of our Claims against the Government of Canada.
Canada and dozens of other countries throughout the world gave into a bully because their “leaders” were afraid of harm caused by a trading “partner” — and they gave their sovereignties away.
Help us convince by example the Leaders and Governments of all countries worldwide that they should return their sovereignties back to their Peoples.
Please continue to support our lawsuit.
“Alone we can do so little. Together we can do so much.” (Helen Keller)
— Plaintiffs Ginny and Gwen, and the ADCS-ADSC team
Chers donateurs,
Ensemble, nous avons atteint notre but d’amasser 100 000 $ pour payer notre facture légale du 1er novembre 11 jours d’avance !
Un gros merci à vous, donateurs canadiens, et à nos amis de tous les coins du monde pour votre grande générosité, soutien et détermination. Et surtout pour votre courage.
Le nom de notre organisme sans but lucratif est « l’Alliance pour la défense de la souveraineté canadienne ».
Nous avons choisi délibérément le mot « souveraineté » puisqu’il constitue la base fondamentale de nos revendications envers le gouvernement du Canada.
Le Canada et des dizaines d’autres pays se sont pliés devant l’intimidation des États-Unis parce que leurs « leaders » ont eu peur des menaces de notre « partenaire » commercial. Ils ont donc vendu leur souveraineté à rabais.
Aidez-nous à convaincre les dirigeants et les gouvernements de tous ces pays qu’ils se doivent de remettre leur souveraineté à leurs peuples.
S’il vous plaît, continuez à soutenir notre cause.
« Seuls, nous pouvons faire si peu. Ensemble, nous pouvons faire beaucoup. » (Helen Keller)
— Ginny, Gwen et toute l’équipe de l’ADCS-ADSC
DONATE to www.adcs-adsc.ca (ADSC en français).
Show of acknowledgement and support from Alex Atamanenko, MP:
http://alexatamanenko.ndp.ca/fatca-lawsuit-filed-in-federal-court-of-canada
“My colleagues Nathan Cullen, NDP Finance critic, and Murray Rankin, NDP National Revenue critic, strongly recommended to the Finance Committee that the government delay implementation to allow time for further study,” said Alex Atamanenko, MP for BC Southern Interior. “For me it’s simple – no Canadian should have personal banking information on their Canadian earnings in their Canadian accounts given to the US government,” added Atamanenko.
Roy Berg and many others like to talk about how the hammer will fall if Canada defaults on their FATCA obligations because they are forced by heroes like Gwen and Ginny insisting that the Canadian government uphold Canadian law for all Canadians, but does he or any one feel completely certain that the US is devoid of all diplomacy and hell-bent on turning their staunchest allies into mortal enemies? C’mon Roy, stop thinking with your wallet and more with your brain.
How the USG deals with Serbia, which seems to have made FATCA-reporting voluntary, will be very instructive. Will they allow Serbia to assert its sovereignty or will Serbia´s FI s not be certified compliant? It would be interesting to know if Serbia has signed an IGA and, if so, what it says about reporting procedures. In any case, good for Serbia!
Although the grotesqueries of FATCA theory leave my brain addled, and I skim the flood more than process it, I appreciate bdwight big time for trying to look more than one move ahead. That is the kind of questioning that needs to persist in taking head-on herd enthusiasm to task — and might even lead to playing a better game. For JC to slur bdwight as a compliancer is reprehensible. If any verbality at Brock ever deserved a slapdown, that ugly move did.
@bdwight pardon for that question I will not repeat. @usxcanada got after me. Yes we need to consider future possibilities. I am hopeful that the US will see a challenge out of ADCS legal success as well as the Canadian government. All guns pointed outward, mine included!
One thing to consider as the court case slowly winds it’s way to the Supreme Court- there may very well be a regime change in Canada. in another year or so. To what extent will a Liberal or an NDP government ( or a coalition- oops, bad word) of the two, pursue the case through appeals. Will the present opposition parties that spoke out against the IGA later be defending it? Or will they seek to reopen negotiations with the USG to apply the local FI rules to all Canadian FIs?
@bdwright,
@usxcanada is correct. The plaintiffs’ statement of claim and argumentation must be rigorously tested by every conceivable argument the defendants may muster. A sharp plaintiff team will also prepare witnesses for aggressive examination. All possible counter arguments should be discussed.
The unmitigated harm to Canadian financial institutions outside of the IGA will probably be part of the government’s argument.
There is legal precedent in Canada that the effects of foreign laws are a BUSINESS RISK that Canadian banks take on voluntarily.
In Van deMark vs. Toronto Dominion Bank [1989], a Canadian court decision established two important principles:
– in a conflict of laws, Canadian law has primacy over the law of a foreign jurisdiction where the bank also does business; and
– Canadian banks may not act as foreign revenue collectors or enforcers.
That judgement stated:
“There is no dispute between the bank and Kenneth Van deMark and the dispute, if any, is between the bank and the Internal Revenue Service of the United States. The effect of what has occurred is that a Canadian citizen has placed assets in a branch in Canada of a Canadian chartered bank. The bank also does business in the United States and is being threatened by a United States authority.”
“One must sympathize with the position of the bank but that position is the result of its election to carry on business in more than one country and that cannot influence the application of Canadian law.”
“In any event, while acceptance by the bank of a penalty imposed in the United States might seem to be a hardship, the effect of permitting the Ontario branches to defend the applicants’ claim on the basis of the bank’s liability in New York State would be to enforce indirectly a claim for taxes by a foreign state… and one that has, so far as the evidence discloses, not even given rise to a New York or Federal Court judgment.”
@Wondering
But what happens when the Canadian government plays middleman?
jc over 400 pages of info i obtained through access 2 information from finance showed alex atamenenko was the first 2 raise alarm bells about fatca while we were all blissfully unaware. finance told con mps that atamenko was confused about fatca. in fact, he was the first 2 truly understand the implications.
hazy my prediction fwiww is the liberals would not change the iga or law but would not fight us hard in the courts and would accept whatever ruling we get in federal court. . the ndp would probably amend the act 2 carve out canadian citizens and possibly residents–but the possibility of an ndp gov is very remote. of course, most of us thought the same in ontario in 1990, so it is always possible.
Hazy, Please ask the Leaders of the opposition parties for a clear statement whether they promise to kill ANY or ALL of the FATCA agreement between Canada and the U.S. if they form the next government, and then post the response.
Wondering and All, I do pass on to Joe Arvay the legal arguments like yours that are posted on Brock or sent directly to ADCS. I also save these in a file to be passed on again. Joe welcomes these suggestions.
Please try to keep the legal arguments on this post or send directly to the ADCS website. Our legal team is expanding…
Thanks for posting Alex Atamenko’s notice re the NDP position on FATCA.
He and the rest of the NDP BC caucus were among the first to come out with a statement against FATCA in Canada. http://usxcanada.wordpress.com/2011/10/14/2011-oct-14-ndp-bc/ (THANKS usxcanada for your orderly document archive!).
http://findonnelly.ndp.ca/ndps-bc-caucus-pushes-for-government-action-on-irs-2011-11-03
‘NDP’s BC Caucus Pushes for Government Action on IRS’
November 3rd, 2011 – 2:42pm
http://renounceuscitizenship.wordpress.com/2011/11/03/news-release-ndp-mp-on-irs/
@bdwright – I think people tend to get a little hysterical about the impact of the famous 30% FATCA sanctions. I don’t underestimate the threat, but Armageddon is a long way off. Make no mistake, it is serious but the impact is entirely other than what you might expect.
Under the IGA, the US must give notice (I believe it is one year) if they want out. We can all speculate as much as we like as to whether they WOULD give that notice if a Canadian court were to hold that the IGA (if applied to Canadian citizens and lawful permanent residents) is a breach of fundamental Charter rights, particularly where those Canadian Charter rights are nearly identical to similar US constitutional rights and the US will by then have long since given up on any idea of reciprocity. I am in the camp of those who believe that the prospect of the US imposing trade sanctions on its closest neighbour and ally for failing to amend its CONSTITUTION at Congress’ behest is utterly preposterous. Even a skeptic’s darkest view of US tone-deafness would not suppose the US will demand the impossible of its allies and then threaten to lay waste to their economy at significant cost to the US economy when the tide refuses to turn back. However, as they say, we shall see.
IF the US were to cancel the IGA, then and only then could they begin to consider cancelling registrations of Canadian banks for failing to do the impossible and illegal outside of the United States. Let’s assume – to enter fantasyland – that that is precisely what occurs.
I leave aside, for the moment, the whole question of what reciprocal sanctions Canada easily could and indeed would impose in the face of such an outright act of naked financial aggression. FATCA was not appreciated and was indeed resented when all it cost was a couple of billion dollars in compliance costs and the (for Finance) token cost of pretending to comply via C-31 (which, I continue to maintain, will ACTUALLY deliver little to no data to the US and given Finance implementation guidelines is clearly intended to be applied with a nod and a wink to the point of outright evasion). There are all kinds of things Canada COULD do, including imposing similar taxes on US banks in Canada and, failing that, other US investments in Canada. Make any transfers from US subsidiaries in Canada subject to a 30% withholding tax, for example. Obviously that would not be a pleasant world and neither side is so stupid as to fail to appreciate the consequences. With a projected “gain” of $800mm worldwide over a decade (or whatever it was) the numbercrunchers at Treasury are not going to put hundreds of billions in bilateral relationships at risk.
So now what ACTUALLY happens if Scotia is de-registered (along with all the others)? With something like a year’s notice, they get frozen out of direct US dollar transactions. Not having direct access to US capital markets is a pain. It will effectively cause them all to have to liquidate their US branches and withdraw from the US marketplace pretty much entirely. I’m sure TD and BMO would find a way to firewall their US retail businesses over the short run, but they’d have to sell them ultimately. They’d be lining up in NAFTA court suing the US government for billions in compensation payments (yes, that would take many, many years to be heard and settled, but it would not go unnoticed). The US would have a tough time DOMESTICALLY explaining why they are acting like Fidel Castro vis a vis their neighbour and former ally because they wouldn’t suspend the Bill of Rights at the request of the US (I am using US language here, obviously). Even myopic Homelanders will eventually begin to sit up and take notice. They LIKE their Bill of Rights and think everyone should have the same constitution as the US after all.
When the dust settles though, two things will occur:
a) cross-border trade will get conducted increasingly in Canadian dollars since Canadian banks will effectively lose their most of their ability to settle and clear US dollars. Will that throttle trade to the detriment of both? You bet.
b) a market will arise for an intermediary to settle at least the larger transactions at the price of a few basis points of fees. That will obviously raise prices for everyone and impact trade.
I think people need to understand the latter point. ANYONE can print US dollars if they want to, and perfectly legally. Almost none of the US dollars in circulation are actually real, printed greenbacks emanating from the US Mint. Dollars are created – and destroyed – electronically all day long. If a bank agrees to lend you a million dollars, it has “created” that money. The law limits them somewhat in their ability to do this by reference to their deposit base and capital base, but that is the fundamental nature of fiat currency. BNS (unregistered) could enter into a swap with DB (registered) to pay for the issuance of a billion dollar letter of credit payable in US dollars to GE (for the sake of argument). Under the swap transaction, BNS would agree to pay DB the US dollar equivalent of a billion dollars in Euros, C$ or any other currency they choose. DB would only trade with Scotia in that NON-US currency. As the hitherto unnecessary middleman in that transaction, DB would charge credit-worthy customers a few basis points for the service. BNS gets shut out of NY, DB makes a few extra on the side. The bigger the volume, the lower the costs.
The point is that the 30% withholding would virtually NEVER come into play except for the slow witted or careless. A basis point is a tenth of a percent. The cost of using an intermediary as between large institutions will be fractions of a percent, not 30%. Indeed, the Canadian government could easily establish a FATCA-exempt Crown agency (perhaps a subsidiary of the Bank of Canada) to offer swift and low-cost US dollar clearance facilities for Canadian banks. I repeat, the cost worst case scenario for Canada would be a) lost profits due to banks being frozen out of the US; and b) a few BASIS points of additional cost to cross-border trade.
Bottom line – trade is more expensive (therefore reduced), US investments in Canada are harassed or threatened with tit for tat sanctions and US interests in its largest trading relationship are undermined for no net gain in American interests and in defense of a principle that (with a Canadian Charter judgment at our backs) not even a slick-tongued US politician could convincingly defend to its own public. Not a dollar in withholding tax is collected and the US faces decades of potentially VERY expensive NAFTA litigation that it would very likely lose. State Department people start wondering how safe their border is and virulent anti-Americanism becomes mainstream in Canadian politics. Along the way, there will be dozens of ways in which the US will be able to declare victory and make a tactical retreat. I think that the alarmists have not thought through the problem very far. Who knows, perhaps being shut out of the increasingly erratic US casino will save the Canadian banks from being crushed by the next sub-prime meltdown?
There are principles worth defending and this is, in my view, one of them. I don’t cease to defend it because there is a speculative chance that the aggressor might act like a Blazing Saddles sheriff and threaten to shoot himself. Anything is possible, but not anything is probable.
Unfortunately the IGA’s make it impossible to call the extortionist’s bluff, and we have to rely on spending our after-tax and taxpayer’s dollars on doing what our government should have done in the first place – by just saying NO!
@Anne Frank – always a voice of reason. You should be on the legal team!
By way of short “PS”, let me outline just one simple way in which the US could pretend to get compliance and accept half a loaf.
Remember, today (or two months ago), no Canadian bank had any business asking you where you were born or what nationality/nationalities you may have. If you were a lawful resident of Canada with sufficient id to satisfy Canadian money laundering rules, you got your account opened. US Personhood is not part of any due diligence that any Canadian bank has ever had any reason to carry out for Canadian law purposes. If we are correct, the Charter Challenge will uphold that principle.
The deal Justice has made with the Swiss permits the banks in the first instance to group together all the US person they know about. In Canada’s case, that would be almost exclusively non-resident accounts (a very small portion of our overall banking industry). That might also be the handful of Canadians who accidentally identified themselves as US persons if a US passport happened to be the handiest piece of photo id when they opened their bank account. Again, a small number. The Charter would bar production of their data but, under the Swiss precedent, the Bank could file a report that says: “we have 250 accounts with an aggregate balance of $15 million of US Persons or people with indicia who may be US Persons who have not consented to the disclosure of their data”. Where the number is insignificant – as it CERTAINLY would be in Canada – the US does not need to press for the next level (account closure) particularly where that action is illegal in Canada. They could be satisfied that the number is immaterial and move on. That is exactly what they do in Switzerland (the number is only small for the small private banks though, the rest are simply firing their American clients until it becomes small. Canada might have to ban banks from asking people if they are US Persons in which case the due diligence reports would be permanently immaterial. FATCA honour satisfied, FATCA disclosure of Canadians: zero.
That is just one simple model. The other is that they leave the IGA in place and turn a blind eye. I could come up with twenty more.
@GWEVIL – would that I could help the legal team directly but I have compelling reasons not to be. I have contributed and you have my gratitude for your courage. I sort of assume that anything I contribute that Stephen or others on the committee instructing Joseph feels may help get clipped and forwarded to Joseph in due course. Much of what I do write is with that in mind and I do try to steer clear of venting anger or rage (as much as I understand both!).
@Anne, your comments are clipped and will be forwarded. Please keep them coming.
Thanks,
Stephen
@Anne Frank
I love your cool application of knowledge and logic.
Anne Frank, thanks for describing some work-arounds in case of ´disaster´. As you say, hopefully sanity would prevail at some point.
@Anne Frank
Great comments!
While diligence and perseverance are essential, we also must avoid the cognitive distortion of “Catastrophizing”.
http://www.psychologytoday.com/blog/in-practice/201301/what-is-catastrophizing-cognitive-distortions.
Because fundamentally, FATCA is “folly” – as well defined by Barbara Tuchman in her book “The March Of Folly – From Troy to Vietnam”. And folly eventually fails.
http://www.nytimes.com/1984/03/07/books/books-of-the-times-034849.html
Additionally, when the Canada FATCA IGA is judged unconstitutional, there may be somewhat less US pushback than expected. Here’s my take on it.
Due to large number of Canadian residents with some sort of US tie (as defined by FATCA), Canada is probably (and absurdly) the world’s capital of so-called “unreported offshore accounts illicitly held by US persons.”
If the FATCA IGA is applied diligently, the flood of new foreign bank account information to the US government will be enormous. It may also be largely worthless.
Canadian citizens domiciled in Canada with solely Canadian assets will remain essentially collection-proof regarding foreign tax debt or penalty arising from the information (unless the Canada-US Tax treaty “mutual assistance in collection” limitations that exempt each others citizens from assistance in collection are changed – which would require both Parliament and the US Congress to act in concert – which is improbable).
There is also a possibility that the US IRS will be having its budget significantly reduced, if recent legislation pushed thru the US HofR is passed. Adding to the vast and still undefined new IRS burden of enforcing certain provisions of Obamacare.
“Law360, New York (July 23, 2014, 7:45 PM ET) — Republican lawmakers irate over allegations the Internal Revenue Service illegally scrutinized conservative groups’ tax-exempt applications recently pushed legislation through the House of Representatives to lop nearly $1.5 billion from the agency’s budget, drawing criticism from attorneys who say the move spites Congress as well as the IRS… ”
http://www.law360.com/articles/560232/proposed-irs-budget-cuts-could-jeopardize-us-tax-system
@ Anne Frank
Another Impressive analysis and although financial stuff is mostly way over my head I believe you are right on the mark. Canadian banks can survive the aftermath of our successful legal challenge. It’s just a pity that they didn’t look as many steps ahead as you have BEFORE they opted to lobby the Canadian government to adopt FATCA — illegally IMHO.
I remember when CIBC took a terrible hit because it dabbled way too much in US investments. It got a $3B spanking from its Enron involvement and later took a $10B loss from US subprime mortgage investments. Now CIBC is focusing on Canadian investments and is doing quite well. This article explains it better than I can …
http://www.fool.ca/2013/09/13/5-years-after-the-crash-cibc-is-emerging-from-the-ruins/
Consumer reports says you might have trouble if you retire abroad.
http://www.consumerreports.org/cro/news/2014/08/retire-abroad-taxes-health-insurance-medicare-and-banking-considerations/index.htm
@Anne Frank
Thank you so much for these comments.
One of the “facts” oft-quoted to me when discussing this online, is to look at what the US did to the Swiss and that any idealistic nonsense will not put a dent in that same action being applied to Canada. I don’t remember clearly each situation/case regarding Swiss banks, but I do remember the word settlement being involved. My question is, did the Swiss settle just to avoid the 30% witholding and being shut out of US capital markets? Or did it involve more than that?
A question I have:
Does the Charter apply to the banks? I had been of the thought that as the banks were federally regulated, the Charter applies. Now I’m not so sure. Does anyone know definitively? This question takes on a bit of importance when/if the lawsuit is successful.
Anyone know?
@tdott … The Charter of Rights apply to all Canadians and Canadian entities so far as I see it.