THE INTENDED FOCUS OF THIS POST IS THE ALLIANCE FOR THE DEFENCE OF CANADIAN SOVEREIGNTY (ADCS) FATCA IGA LEGISLATION TRIAL IN CANADA HELD ON JANUARY 28, 2019.
The Government of Canada (who we are suing), together with some commenters on this site, strongly emphasize that Canadians should thank their lucky stars because they can easily get out of any FATCA-related “problems” (e.g., Canada won’t collect on behalf of the IRS at the present time, IRS at present time is not prosecuting all those turned over by FATCA, American interference is only hypothetical, “US citizens in Canada don’t seem to have much to fear from America or Canada, apart from the pointless automatic reporting. Canada may in fact be the last remaining country in the world where dual citizen status isn’t risky.” etc.). Why then did our Plaintiffs put themselves personally at financial risk with this lawsuit?
One reason for this trial is that Plaintiffs Gwen and Kazia want Canada’s FATCA IGA legislation, infringing on their privacy (Charter section 8) and equality (section 15) rights, declared unconstitutional by Canada’s Federal Court — and that a lawsuit is the way to achieve this specific objective.
Do privacy and equality rights matter? Should we care?
Plaintiffs also say in their court submission: “Canada effectively maintains that it enacted the Impugned Provisions under duress from a foreign state. The Court should be very slow to accept this as a justification for infringements of the Charter. Canada is expected to defend the constitutional rights and freedoms of its citizens and not bargain them away or capitulate to threats from a foreign bully state.”
Is it important that Canada be a sovereign nation and not bargain away Charter rights because of a threat from a foreign bully? Does standing up to a foreign bully matter?
The CBC tells us that information on 600,000 accounts/year has been turned over to the US IRS during the past years. Even those who do not support Plaintiffs’ lawsuit would likely admit that at least “some” of the accountholders did not give consent for the turnover — meaning that the loss of Charter rights is not hypothetical.
Gwen and Kazia believe, and shouldn’t this really be obvious to all Canadians?, that the loss of our Charter rights, the loss of Canada’s sovereignty, and the loss of dignity of a subgroup of Canadian citizens, are more than, as some commenters argue, just “a relatively abstract sort of harm”.
Canada argues no harm caused by the FATCA IGA, but does acknowledge that if Charter rights are infringed, it had plenty of justification to do so — Canada had no choice but to comply with United States FATCA demands and could not have said “no”.
The lawsuit began during the time of the Harper Conservative government. We had hoped that when the Liberals came to power, there would be no need to continue the lawsuit, because of statements made on June 25, 2015 by Justin Trudeau to ADCS (“The Government of Canada has a responsibility to stand up for its citizens when foreign governments are encroaching on their rights. We believe that the [FATCA] deal reached between Canada and the U.S. is insufficient to protect Canadians.”) — but this was not to be, and the lawsuit continues even with the change in government.
When reading the diverse comments below on a variety of topics please try to consider what Plaintiffs’ Gwen and Kazia want to achieve, on behalf of all Canadians, with their lawsuit.
More discussion of the lawsuit below:
THANKS TO our brave Plaintiffs Gwen, Kazia, and Ginny, witnesses, supporters who never stopped giving, and lawyers Joe Arvay and Arden Beddoes— and thanks to the Federal Court for selecting this trial for the very first live webcast
Our Alliance for the Defence of Canadian Sovereignty’s FATCA IGA legislation lawsuit finally (almost five years after ADCS incorporation as a non-profit) came to a Charter-Constitutional trial in Canadian Federal Court. It was held in Vancouver British Columbia from January 28 – February 1, 2019. We expect a decision in June or so of this year.
See our ADCS legal counsel John Richardson interviewed by CBC on the FATCA trial. In 2016 and 2017 private information on a total of 600,000 private accounts were turned over by Canada to the U.S. IRS each year. Read the Court submissions.
SOME OF THE TRIAL EVENTS:
DAY FIVE: Canada argues that our Plaintiffs have no standing. Arvay responds that the fact that Plaintiffs are designated US persons and have banking accounts at risk should be enough. Also mentions the public interest in this case and that Plaintiffs are carrying the torch for all those designated as US persons in Canada.
Discussion of remedy: (Section 24 vs. 52 vs. Declaration). Arvay asks that primary remedy sought be section 52. Canadian Charter section 52 says: “The Constitution of Canada is the supreme law of Canada, and any law that is inconsistent with the provisions of the Constitution is, to the extent of the inconsistency, of no force or effect“.
If Plaintiffs Gwen and Kazia win, Arvay wants the remedy applied in six months, argues that Canada never keeps to one year remedy. Canada wants one year.
A lot of discussion on CRS (which came after the IGA) vs. the IGA. Arvay says that we are not in court to defend or challenge the CRS.
Canada says that banks put data into a T5 for millions of Canadians, so what’s the big deal with the IGA? Arvay responds by saying that if Canada tried to impose a requirement for IGA data in, for example, the massive cash-independent contractor economy, would that not require a warrant? Absolutely he says. Where is the warrant for the IGA?
Arvay: The IGA is a HUGE fishing expedition just because of a hunch. WE WOULD NOT ALLOW THIS FISHING EXPEDITION IN CANADA. IGA allows IRS to pursue those people under the rubric of the tax system.
Canada justifies the legality of the IGA on the basis that our Tax Treaty with US says each will assist the other in tax compliance. But Arvay responds that just because we have a treaty with a country — that does not make it charter-proof: A TREATY DOES NOT MAKE A CHARTER-FREE ZONE as Canada appears to suggest.
There was a discussion on whether the merits of US tax law impact on this case.
Arvay pointed out that the only reason the IGA is relevant to the US tax scheme is because the US has citizenship-based taxation (CBT). But it has also been argued that the Court cannot rule on the merits of a foreign tax. Yet Arvay says that isn’t Canada obliged to explain why it is important for CANADA to give effect to the US CBT law? No evidence, he says, that this purpose is important to Canada.
He gives an example: So what if the US amended its tax law so that there would be a special tax on all US persons whose parents were born in China (because the US is angry at China).
Would we then uphold a Canadian IGA law that helped in this human rights-violating US tax compliance? Canada would say Yes? Because we are not allowed to consider the merits of any sacrosanct US tax law — and we said in the treaty that we would help in US tax compliance? Canada can’t be asked to do this just because it is in the treaty, Canada has to justify that the law has a valid purpose says Arvay.Canada asserts that the IGA is better for Canadians than FATCA. Arvay counters in part by saying that with FATCA you get a choice to disclose or not disclose — puts the choice in the hands of the citizens, not the banks.
Canada asserts that it provides oversight when providing our banking info to the IRS. Arvay responds that CRA placing a stamp on the documents could not be oversight that provides any protection.
Arvay disagrees with Canada’s assertion that a section 1 onus to justify for Canada only applies to criminal case. Disagrees also with Canada’s narrow view on a section 15 criterion that the category of persons affected (US citizens plus others) is too broad.
Canada says that Parliament already provides protection to Canadians because Canada cannot collect on behalf of the US per the Tax treaty. Arvay responds that the IGA exposes a group of Canadians to enforcement and has denied this group the protection of Canadian sovereignty.
Arvay points out that Canada did not respond to his assertion on whether the IGA is arbitrary re: “accidental” “Americans”.
Canada argues that there is no problem using IGA obtained data for domestic purposes. Arvay argues that that is not a purpose of the IGA and that the type of data collected could not be used in Canada without a warrant.
Arvay mentions that yes it is true that Canada will not help collect FBAR penalties, but Canada has provided no evidence that IRS will not use IGA data for FBAR purposes.
Trial ends. Justice says that this is a complicated case.
DAY FOUR: Just so no one has any doubt whatsoever as to Canada’s number one reason for the IGA, Canada confirmed that, yes, as we all had expected, the primary objective of the IGA was to avoid those nasty complications of non-compliance. [If a really powerful country points a gun to your head, just comply.] Canada says that this primary important objective weighed against the low privacy concerns of the data seizure and the minimally intrusive way the info is collected make the IGA provisions reasonable.
Canada points out that some of our witnesses received a Chapter 3 and not a FATCA letter, but the point is that Canada does admit that accountholder information has in fact been turned over to IRS and that is not in dispute. [600,000 in 2016 and in 2017 per CBC]
Canada feels that IGA is not overly broad because you can’t check what you don’t know. The IGA is ok because everybody does it (e.g., CRS).
Regarding privacy Canada says that once account info has been turned over to CRA an expectation of privacy is lost and it’s ok for Canada to use the info for domestic purposes (not a purpose in the IGA).Even if there is an expectation of privacy that expectation is very low.
Regarding section 15 equality Canada says that the distinction between the Plaintiffs and other Canadians is not an acceptable enumerated factor — we say it is and the Justice said that she will think about it. For those who feel that we might re-negotiate a better deal with the bully, Canada helpfully told us that FATCA is what it is and that we can’t change that system.
Canada says that it does careful monitoring of the info sent to IRS because an officer puts a stamp on the document telling IRS to keep the contents secret.
The Charter should not protect those who flaunt US law says Canada. Canada ended today’s presentation with this: Plaintiffs are asking the Court to put the country at risk just so that someone can travel there — this is outrageous and NOT a privilege that the Charter can protect. In other words, we and the Plaintiffs are in it only for the travel.
DAY THREE: Canada explained in its scholarly economic assessment that there can only be MUCH DOOM AND GLOOM FOR CANADA if Plaintiffs Gwen and Kazia win the lawsuit. Canada says that if Gwen and Kazia win on behalf of all Canadians, and the Court rules that the FATCA IGA legislation violates our Charter rights, the U.S. would never re-negotiate FATCA because Canada brings NOTHING to the table.
DAY TWO: Our side explained why Canada’s FATCA IGA violates Charter sections 8 and 15 and why a section 1 override is not justified. Mr. Arvay read the powerful words of our witnesses who felt that they were abandoned by their country, treated as a second class citizen, betrayed by Canada — statements relevant to the section 15 violation.
DAY ONE: The Justice asked our lawyers generally: So what SHOULD Canada have done [instead of the IGA legislation?] Our lawyers answered in part: We expect Canada to stand up to the bully when our Constitutional rights are at stake…We don’t negotiate our Constitutional rights away for economic reasons…
[DISCLAIMER: The official record of the trial events is only the official transcript provided by the Court — and not the recollections made in the Post or in any comments below.]
Unforgiven Too:
“However, banks may only even ask for citizenship or place of birth because of the change in laws due to the IGA.
If those laws were restored, then they could not ask, ”
That’s the question.
You may be right. To me, it’s not clear. I tend to think that in the UK, the issue would have to be tested in court all over again, and in a WA-CRS case the EU would have an interest. I just don’t share your opinion that CRS is not a problem for US-born individuals.
If CRS had come before FATCA, and the IGA (or had they not been implemented) then there would not have been any need to change any Canadian privacy laws to implement it.
Also the regulatory purpose would allow it.
The problem with her arguement is the equivalency.
It is a problem for US born persons who give their Bank a contact address (or similar) in a different jurisdiction (any other jurisdiction), but not for those who work, bank, and invest solely in the country they live in
@Maz57 (08:39pm 31/1)
Bingo.
“Not violating the Charter isn’t ‘catering’ to any group of persons. Its respecting the rights of all
Canadians that the Charter is there to guarantee.”
Failure to honour the Charter would be deeply shameful. It would formally allow institutional foreign (US/IRS) expediency to take precedence over evil perpetrated against Canadian individuals. Exactly what the Canadian Charter, if it is worth the paper on which it was printed, should fundamentally deliver.
The eyes of the world are on this Courtroom.
Thank you to all who have and are enabling, participating in, and urging this process to a just outcome. We all stand shoulder to shoulder.
@King, yes, and a decision to allow the laws of another country to override Canadian Charter rights would set an incredibly dangerous precedent, opening the judicial floodgates to all manner of fascist scumbags who want to implement their own laws on Canadian soil.
Unforgiven Too:
“It is a problem for US born persons who give their Bank a contact address (or similar) in a different jurisdiction (any other jurisdiction), but not for those who work, bank, and invest solely in the country they live in.”
It has been a problem for me. And if you look at the OECD implementation handbook (https://www.oecd.org/tax/exchange-of-tax-information/implementation-handbook-standard-for-automatic-exchange-of-financial-information-in-tax-matters.pdf)
it’s obvious that there’s plenty of scope for CRS to be a problem for a US-born individual, unless/until the individual’s residence country explicitly prohibits banks from treating US birthplace as indicative of US tax-residence.
Some residence countries may allow birthplace discrimination in the name of CRS; some may not.
If your country allows the question then that is a constitutional question there.
The way I see it, if Canada were to strike down the IGA but still allow the question by the banks for flagging purposes, then CRS in it’s modified form would not be Charter compliant.
It’s hard to see how any AEOI regime in any country can be non-discriminatory if it allows banks to treat same-country accounts as cross-border accounts (hence reportable) when held by a CLN-less US-born individual. No other group is subject to this treatment.
Yet the OECD, the EU, and the individual IGA1 countries all want their banks to identify and report accounts held by residents who have US citizenship.
Japan T: “Whatever the case may be at present it wiil be just the first step to incrementally widened approaches. Eventually, all information including the names and ages of your cats is going to be exchanged.”
You may have been writing in jest, but I can confirm the truth of what you say. Belgium is at the vanguard of this sort of thing, and cats are now tightly regulated. I recently went through an adoption process here for 2 cats. You can no longer advertise to give away cats. You must go to a proper shelter. You must agree to have them spayed, if they are not already. They are all RFID tagged with the shelter’s name and theirs and after a few months you have it changed to your name. Their names are registered. When they die you must notify authorities. If they get lost you must document efforts to find them. You cannot decide to have kittens (having a fertile cat is illegal anyway). You cannot give your cat to somebody else. You must follow proper vaccination schedules, which are documented in their health record. Some shelters specify that the cat cannot go outside, others that the cat remains their property for life and that they can come visit your home anytime to see how it is doing, and that they may decide to take it back.
Lest I be accused of digressing, I write this to illustrate how important it is to fight for privacy and freedom, which the plaintiffs are bravely doing, because, indeed, if we don’t fight it will only get worse.
Well, only a little in jest. While I had no idea that such was the case anywhere in the world, it is clear to me that the world is indeed moving in that direction.
Back in the 70’s my great grand parents lamented the loss of freedoms they witnessed in their lives. Compare what we could do in the 70’s with what we can do now and it is frightening. 5, 10, 20 years from now and it won’t just be our cats but our children too.
Yes, we must continue the fight for privacy and freedom.
CRS, common reporting standard, compels the reporting of accounts held by non-residents to countries where they reside. It is my understanding that if Canada and the US adopted this instead of FATCA, our Plaintiffs would not be impacted at all. It would only impact US residents with bank accounts in other countries.
I think the point is that the constitutionality if the CRS is not under consideration of this court, only the constitutionality if the FATCA IGA.
All this CRA stuff just muddies the water.
Under CRS Wider Approach, a government may opt to have its banks apply due diligence procedures to identify accounts held by tax-residents of another jurisdiction (for example the US), even if it doesn’t have a bilateral CRS agreement with that country. The rationale being that it saves compliance costs in case jurisdictions (such as the US) eventually join CRS.
Thus, in theory, Canadian FIs could be instructed to identify accounts held by USC Canadian residents.
Whether this would actually transpire under Canada’s implementation of WA-CRS, if the case succeeds and the IGA is ruled in breach of the Charter, is a good question, IMO. I have little doubt that the UK, where I live, would barely miss a beat.
The Govt is spinning lies. What about Canadian citizens having a level playing field within their own country with regards to tax benefits? Selling a house (no cap gains), winning a big lottery prize, planning for retirement or be a partner in a business equally?
It boils down to one thing. Can the banks be allowed to override the Charter because the US Govt has artificially created a situation where they have to choose sides – their own interests vs the Canadian citizen customer?
We did get off on a tangent with CRS.
However, my statement was (and I am not a proponent of CRS or any AEOI) that the Canadian lawyer’s arguement that CRS and the IGA are the same is threading the IGA is charter conform is just plain not true.
They are similar, but it is the differences that make the IGA (more) discriminating.
If it was Pakistan instead of the US imposing this regime on Canada, there would be no debate. Case closed. That itself is enough to prove that these are actual violations Canada would not tolerate EXCEPT in the case of the most powerful country on Earth imposing them.
The judge must rule that it violates the charter, and then the charter should be modified to allow foreign governments to get data on their citizens in Canada. It’s the only way
@fatca@btinternet.com
In response to your point, what the government argued over the past two days was, essentially, that (1) the playing field was never level in the sense that you describe – those US tax obligations existed long before FATCA, so nothing has changed, and (2) FATCA does not compel compliance or enable enforcement – i.e. sending a cheque to the IRS to pay such a tax is voluntary, or optional.
I don’t see anything fundamentally wrong with either of those claims. What I find amusing is the hypocrisy of their broader argument: (1) We support FATCA because, in principle, tax evasion is bad. (2) FATCA isn’t really hurting Canadians because the tax treaty protects them from collection by the IRS.
Where I think the anti-FATCA case has strength is on violation of privacy rights for one class of Canadians but not another. If nothing else is achieved, the judge could still rule that CRA not be allowed to look at the data for its own purposes. The long argument up-thread about differences between FATCA and CRS may also prove useful. I won’t go into it further.
One further point, there seems to be some misinformation about what banks can and cannot do with US indicia. I speak only of Canada here. It’s very instructive to give the CRA guidance a careful read. For existing accounts, as I understand it, if a bank finds an indicia it must ask the customer to explain – i.e. self-certify the presence or absence of US personhood. There was never any record of birthplace or citizenship prior to 2014, so under normal conditions the only indicia would be a US address or phone number. (Things might be a little different for high-value accounts where there’s a personal relationship with an investment advisor.) The point being, the account is not automatically reported just because US indicia are found. If the customer refuses to answer, it’s classed as recalcitrant and reported. For new accounts the US tax-residence/citizenship/personhood question is asked up front, but barring any contradicting evidence on file, the bank must accept the customer’s answer.
Note also that it was a bit Wild West circa 2014, with banks doing things differently, some being more aggressive than others, some possibly getting it wrong and reporting accounts prematurely. But, based on my non-exhaustive research and subjective experience, things have settled down somewhat, and it’s just a routine checkbox on an account-opening form, and one’s answers are not challenge. Once banks understood that they met their obligations exclusively through self-certification, they stopped asking secondary questions about country of birth etc.
Reading from the plaque on the courtroom door:
The Canadian Charter of Rights and Freedom guarantees the rights and freedoms set out in it subject only to such reasonable limits prescribed by law as can be demonstrably justified in a free and democratic society.
@ Stephen Kish
That’s a good way to start this final day of our charter challenge. Best wishes to Mr. Arvay and Mr. Beddoes in their closing arguments. Judge Mactavish has a complex case before her which does involve US tax law, US immigration law, Canadian tax law and more but the key and what should be the focus of this trial is the Canadian Charter of Rights and Freedom. Surgite!
Day 5 begins
darn it’s started and I am not getting any sound. Anyone else?
I have audio Ginny.
Arden deals with chapter 3 vs fatca issue.
now sound is ok.
Arvay deals with standing issue and says that both plaintiffs are designated us persons and have bank accounts at risk this should be sufficient.