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.]
Thank you so much for the online commentary that helped us to hear at least some part of this long awaited and historic event. I wish I had been able to be present, or at least available to follow it in live time. Hoping the transcript will eventually be available, if not the live video after the fact.
Best wishes to all involved. Safe return home.
“However, I think all they are waiting for is instant-presto AI algorithms to effortlessly attach the red flags and I can see parliament passing the tax legislation to smooth the way for it when it arrives.”
A very likely out come, IMO.
“Buds must be nipped now in order to prevent a freedomless future.”
Yep.
Still don’t get what is so complicated. Rights are rights. All the government’s arguements having nothing to do with this at all. Remove all that nonsense and it is easy, if rights are still rights, that is.
@EmBee , yes good to note that Arvay raised the recent changes in witholdings by the US Treasury to lessen the threat of such FATCA wiholdings (the specifics of which I do not understand).
I thought this was an obvious that was not used: the 40 jurisdictions that have not signed up to FATCA or IGA, they have not been financially ruined years after the deadline. Sounds like no financial penalties against them.
Cases/stories that I would have liked to have seen raised:
Anne#1 was put in an impossible position as a bookkeeper with signing authority on trust accounts. Such persons are not only exposed to FBAR requirement to report employer accounts (a career limiting move if done), but also potentially exposed to bank FATCA reporting on those business accounts. It sounds like her firm had some understanding and let her go through the process of renunciation and the time this takes; yet others may have/ are being denied employment or promotion based on the fact of being a USP. What is the purpose of Canadian law that causes this situation?
Calgary411 mentally incapacitated son, open to exposure to US tax on Canadian savings vehicles for her son including on Canadian Government contributions to those funds. While US law prohibits the son from renouncing US citizenship. Either the Canadian government is for citizens following the law or not. They can’t have it both ways. The Canadian Government can not impose on citizens expectation that it is up to them to follow some laws but not others. The Canadian Government can’t have a Tax Treaty with the US that makes US Citizenship Based Double Taxation law the law of Canada – by not saying otherwise in the treaty or without explicit exclusions such as for the finances and accounts of the son of Calgary411 – and then for the Canadian Government to pretend that the tax treaty is not Canadian law. This has confused people immensely.
Answering a question in the feature text on Section 52 remedy: Google says: of no force or effect. Sounds good.
The Constitution of Canada, which includes the Canadian Charter of Rights and Freedoms, is the supreme law of Canada. Any law inconsistent with the provisions of the Constitution is, to the extent of the inconsistency, of no force or effect. Section 52(1) of the Constitution Act, 1982 so mandates.
Why would the decision be appealed if we win? Isn’t that counterproductive?
“Why would the decision be appealed if we win? Isn’t that counterproductive?”
Job security for lawyers.
The government will surely appeal if we win.
How much money must be raised by ADCS for the appeal?
Would the ADCS be able to get funds from the Court Challenges Program?
Marie, over the next week or so ADCS will be trying to estimate how much money we will need for the appeal. It will be a significant amount.
Regarding the Court Challenges Program, I am not certain that it is operational yet. If it is and we meet the criteria we will apply — but I strongly predict that the only way that we can participate in an appeal is to raise monies from our supporters.
At present, we do not want to collect any monies for the expected appeal until we have the actual Federal Court decision. Once we have the decision, we will have to scramble very quickly to come up with the funds, because of the short 30 day time windows for appeal responses to the Court, requiring work by our legal team.
My understanding (needs to be confirmed) is that a party wishing to appeal must file a Notice of appeal within 30 days of judgment being pronounced. A series of 30 day deadlines follow after that. The parties are required to agree on the contents of an “appeal book”, which the appellant must then file. Thereafter, the appellant has 30 days to file a memorandum of fact and law (the most significant document). And after that, the respondent has 30 days to file its responding argument.
Likely, during the next few weeks I will be asking our supporters via this site to provide a rough estimate as to how much they would be willing to provide to pay the legal fees for an appeal. This will give us a sense as to whether there is a reasonable possibility that we can raise the funds.
You did not ask, but yes, Canada has unlimited funds — we don’t.
“Even if the iGA is consistent with the income tax treaty that does not make it a charter free zone.”
If I understand correctly, mutual exchange of information articles began to be added to DTAs back in the 1940s, or maybe going right back to Bretton Woods, on the grounds that this would help the treaty partners detect and prevent wrongful claims to treaty benefits – not to enforce US extraterritorial taxation. The usual safeguards against unlawful search and seizure applied.
Automatic exchange, a.k.a. FATCA-style fishing expeditions, just seem to have been sticky-taped on to this conventional arrangement, without so much as paying lip-service to citizens’ rights. First with the IGAs, and then (when the OECD/EU/G20 saw that the US was getting away with it) CRS.
It would be interesting to see the rights and wrongs of this sleight-of-hand unpicked someday – not necessarily in a court but maybe in the academic journals.
Or maybe I’m just misinterpreting it.
I also appreciate those who provided commentary of the trial as work prevented me from seeing most of it.
I am curious if Peter Hogg’s 2012 letter to the gov. (warning them that FATCA enabling legislation would violate sec. 15) was submitted as an exhibit by our side.
http://elizabethmaymp.ca/wp-content/uploads/peter_hogg_fatca.pdf
I can’t find it in the ADCS Court Submissions (only a few textbook pages by him at the end of the 2018-12-13 Plaintiffs Reply Record Summary Trial Submission).
I hope that the judge has read, or will read, his letter – an unbiased opinion from a non US Person Canadian Constitutional expert that the predates the Canada/USA FATCA IGA and the C-31 legislation.
I supported this challenge with many hundreds of GBPs for years. as continuing therapy years after feeling being forced to renounce my US passport due to several pressures including increasing reporting requirements, unhappiness from UK spouse and professional considerations. i can only thank the visible plaintiffs for their courage and pledge future money as far as possible.
[February 1, 2019] CTV National News: CRA privacy breach
Ottawa is downplaying data that shows Canadians had their privacy violated by CRA employees. Annie Bergeron-Oliver reports.
“The information of thousands of Canadians has been accessed inappropriately by Canada Revenue Agency employees, CTV News has learned….
The CRA confirmed in a statement to CTV News that there were 264 privacy breaches between Nov. 4, 2015 and Nov. 27, 2018….
The CRA said that it has notified 1,640 of the affected individuals and is in the process of sending letters to 34 more…
“For us, one breach is too many,” she said….”
https://www.ctvnews.ca/canada/thousands-affected-by-cra-employees-snooping-1.4279916
As an aside one of our attorneys Mr. Beddoes has a pretty active TWITTER feed.
https://twitter.com/ardenbeddoes
“My understanding (needs to be confirmed) is that a party wishing to appeal must file a Notice of appeal within 30 days of judgment being pronounced. A series of 30 day deadlines follow after that. The parties are required to agree on the contents of an “appeal book”, which the appellant must then file. Thereafter, the appellant has 30 days to file a memorandum of fact and law (the most significant document). And after that, the respondent has 30 days to file its responding argument.”
The appeals court has no deadline for filing its decision. The 30 day deadlines for significant documents help make sure that hard cases make bad case law.
“You did not ask, but yes, Canada has unlimited funds — we don’t.”
One would have thought that Canada’s ability to spend unlimited funds would have caused the value of the Canadian dollar to go down last week, but instead it went up.
“Ottawa is downplaying data that shows Canadians had their privacy violated by CRA employees. Annie Bergeron-Oliver reports.”
Sigh. Even in the evil empire, TIGTA (Treasury Inspector General for Tax Administration) doesn’t downplay it when IRS employees do the same thing.
However, if a tax return becomes the subject of litigation, 100% of the tax return gets disclosed to the public, including social security numbers. Information exchange means the US will be able to disclose Canadian SINs to the public too. Do we have to omit SINs from our Canadian tax returns now.
Should the plaintiffs win, I presume the Canadian government would be given a deadline to remove the FATCA IGA legislation, at which point pure FATCA would be what the banks and thus it’s customers, would be dealing with directly. A successful appeal would be required to revert back to the IGA. Can someone please correct me if I am wrong.
In the States, the change you mention would normally be stayed until the outcome of all appeals. But I do not know if Canada has the same system.
If a law is found to violate the Charter, must it be repealed by the legislature, or does the court decision “kill” it in some fashion?
I thought it interesting when Arvay argued that pure FATCA was better for Canadians classified as US persons than the IGA, because that would open up a market for financial institutions able to ignore FATCA and cater to Canadians with US birthplaces.
JapanT. That is what I am trying to figure out.
Hopefully someone will let us know soon.
This article, and my tweet a year ago was pointed out to me:
“The person who wrote this letter is a Canadian bookkeeper. They felt forced to renounce U.S. citizenship because of #FBAR requirement to report employer accounts, and #FATCA coming to get them.”
Maybe this should be submitted to the court:
https://www.forbes.com/sites/robertwood/2014/11/15/i-am-canada-hear-me-roar-mr-president/#23526f0c5466
https://twitter.com/JCDoubleTaxed/status/980955285912141824
JT, yes I hope so. Life for Canadians tarnished with USness could change oce again soon. Would be nice to have a heads up for a change.
I bet ADCS’s lawyers knew Ann#1’s story from the Forbes article. But if they didn’t submit it to the court, they can’t now.