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.]
As someone who is not an accidental American but, instead, left the Homeland well into adulthood, I fully expect my new country of citizenship to protect me from the predations of my former land, just like a Soviet defector during the Cold War. I don’t know why this isn’t just braindead obvious…
I like lawsuits. This lawsuit helps bring the Canadian Government to account, where before there was denial, waffling, disregarding, dismissiveness, treating the Canadian Charter of Rights as a scrap of paper, etc.
How many of those 40 have had further threats – beyond those faced by Canada – of financial penalty for not signing up? [I believe zero] When was the deadline for signing up? [?]
153 – 113 = 40
https://www.treasury.gov/resource-center/tax-policy/treaties/Pages/FATCA.aspx
Couldn’t the failure to provide reciprocal information by the US be considered a breach of the agreement sufficient enough to cancel the agreement or to postpone provision of FATCA data to the US, until the US now FIRST provides such reciprocal data to Canada? [?, yet “arguably”, yes]
IMO, there could be further clarification – even restatement ad nauseam – in regards to the asymmetry of the agreement.
Point of Information:
* US banks are not now or at any future point required to assess if account holders are Canadian residents or Canadian citizens.
The banking laws of some US states such as Delaware do not require the disclosure of beneficiaries of account holders. And change of such US state laws is made less likely by US law that cede more power to the states from the US Federal Government relative to that which is in practice in Canada.
Because of certain US state bank laws – providing a high degree of relative bank secrecy to other countries – and US non provision of account information to other countries, the US is now recognised globally as a top tax haven country with such position in the global tables ascendant.
Point of information. As discussed, the Canadian FATCA IGA agreement is a one-way agreement only to benefit of the US IRS. In the meantime the US has failed to offer to pay the considerable implementation and ongoing compliance costs of nearly every bank in Canada for nearly every Canadian account. Under the agreement the US is currently getting free information, at a cost not reflective of the considerable cost of the provision of that data; whereas if the cost for such “fishing expedition” of all accounts, as opposed to warrant backed search of specific accounts was all factored into a cost/benefit analysis on the part of the US government, that then such analysis may not support going ahead with the FATCA IGAs. Couldn’t the Canadian Government now ask for the US to pay for Canadian bank implementation and compliance costs, ultimately borne by Canadian bank customers, as the US has not provided reciprocal data nor are there any US laws passed that require the US to provide reciprocal data in future.
Unfortunately I have not been able to follow in real time – so thank you Stephen for posting points made as things proceeded. I hope the court knows that in terms of judging interest by #s logged in, even if we are not logged in to view in real time, that does not mean that we do not have a deeply felt interest in seeing whether justice will be done. Many of us have been following this since the beginning and are still here watching.
Best wishes to our dear brave plaintiffs, and all those who’ve contributed to bring this to this point in so many different ways.
I am with you in spirit and hope that the court will eventually agree to make the proceedings also available to us to view after the fact.
Thank you Mr. Arvay and Mr. Beddoes.
Looking back and thank you – Lynne Swanson – FINA Meeting 34 – May 13, 2014
As Mr. Arvay reminded, emphasized …
@Nonononymous
Except that many people have US assets…
@Fortune Cookie
US assets are fair game, unfortunately. Not much Canada can (or should) do to stop those being taken.
How I wish there was an edit function…
Because if you object to the US government touching Canadians’ assets in Canada, you can’t really argue that the Canadian government should have any power to prevent the US from touching US persons’ assets in the US.
@NonononymouS
It really doesn’t matter where the assets are located. It is still property owned by Canadian citizens that FATCA enables the US to seize. For many people FATCA does have teeth, and Canada is delivering those Canadians to the IRS.
@Calgary. When Lynne testified at that FINA conference, Every time she looked over her right shoulder, she was looking at my thumbs up. I was out of the picture but right beside her. I felt so proud to be there and have had been the one to accompany her there. She taught us all to be a fighter no matter what and to stand up for people’s rights. Canada can learn a lesson from her. Thank you Lynne Swanson. .
“No matter the decision, nothing can diminish my pride and appreciation that we have taken this matter into a Canadian courtroom and our protest is on the record.”
Yeah, but nothing will make most members of the public understand that a Canadian is a Canadian is a Canadian either. Maybe Trudeau stopped saying it because no one (except us) understood it.
“A dragnet of private information.
If you don’t fill out the form the bank will consider you to be a US person.”
Yeah, you should be able to take that to a US consulate and get a US passport. Not us, but some people would want one. All they have to do is not fill out a bank form.
‘Wow. I cannot believe that the judge asked the question she did re: “fostering” noncompliance of US law. Are we Canadians or not?’
It should not matter if we’re Canadians or not. If a Chinese citizen from Hong Kong visits Canada, or if a Chinese[*] citizen from Taiwan visits Canada, does Canada’s Charter “foster” noncompliance with Chinese law by letting them say they support independence for Hong Kong or Taiwan?
[* Taiwan is a province of China even though we have to call it Chinese Taipei because it’s a province of China.]
“What the justice makes of this will be up to her.”
We already know what the justice makes of this. Unfortunately there’s no relationship between what the justice makes of this and what the Justice makes of this.
@Fortune Cookie
Fair enough, but I expect that the Canadian government would argue that it’s not generally in the business of protecting its citizens’ foreign assets from foreign governments and their laws.
@NativeCanadian,
Thumbs up to you. I am so thankful you were by Lynne’s side, a real friend, that day and so many others.
@Nononymous
Yet no one is asking Canada to protect its citizens’ foreign assets from a foreign government, but rather, to not *help* a foreign government to seize its citizens’
Regarding Charter section 1 Arvay argued that the tax evader objective fails on rational connection and minimal impairment, the deleterious effects outweigh the “beneficial”. Is the law really accomplishing what it set out to do?
Enacting a law under duress cannot be a pressing objective per section 1.
Then Arvay mentioned,as possibly having some relevance to the present case, the 1772 Somerset (enslaved African) vs. Stewart (slaveowner) case in England involving a slave in England owned by an American. The English Court ruled that the enslaved African must be set free.
His final words: If the Court strikes down this law Canada will be armed…
“There are very clear principles of law and morality in play here and I can’t for the life of me understand why it isn’t just immediately obvious to everyone who hears this story.”
For two reasons. One you have already pointed out. The US is not the USSR nor is it China.
The second is that the individuals involved are not seen as innocents escaping tyrany, but either as tax evade/avoiders or as s/o who can not make up their minds about who they are. Are they Canadian or are they US citizens? Why have they not renounced.
Not my feeling or beliefs, but these are obviously held by many of the general public and in government.
Does plaintiff continue or did plaintiff close?
Mark, if I understand your question correctly, this morning Canada begins the presentation of its arguments — the response to Plaintiffs’ complaint.
Watch for Canada’s explanation as to why any violations of Charter sections 8 (privacy) and 15 (equality) are justified (section 1 argument). What really is the purpose of the FATCA IGA legislation?
The onus is on Canada, not our side, to convince the Justice that Canada has a “pressing and substantial” reason to infringe our Charter rights. Our lawyers say that the U.S. gun to the head if Canada does not comply cannot be used as justification.
There are others who disagree, but Mr. Arvay sums up Plantiffs’ position this way: Canada should not have done this.
Is anyone scared that Canadians who haven’t come out with regard to their US taxpayer status will be worse off if we win the lawsuit? FATCA doesn’t go away unless the US strikes it down. Wont Canadian banks just start following the FATCA law minus the IGA? So far self-certification of non USness has been accepted without providing proof of birthplace but isn’t that because of the protection of the IGA?
Thank you all … Petros, Blaze, Ginny, the remaining plaintiffs, witnesses, lawyers, champions like Stephen Kish and John Richardson, fellow donors large and small … And those who have been strong and kept the fires burning … Native Canadian deserves special thanks ! The fight is on.
@Gobsmacked
Got to do what is right and let the chips fall where they may. Of course, I am not in Canada so am not directly affected reagardless of the outcome of the lawsuit. But, are there not Canadian laws that prevent banks from turning client information over to a third party other than the Canadian government?
I think it more likely that Canadian FIs with operations in the US would first get hit by the 30% noncompliance fine on their US earnings.
If they did close, do they still get a chance to answer the question they deferred of whether bank customers are informed when information is passed on?
If it anything like here, then it’s also a good supporting argument.
In Germany, you are not notified when data is transferred, much less what data. Matter of fact, you do not even have the right to know even if you ask. The bank doesn’t have to tell you anything, except maybe that you are marked as a US person.
JapanT, not arguing about what is right but wondering if more pain is to come for Canadians who were starting to think they could hide their accounts from the US government. I can’t imagine banks are going to stop abiding by US FATCA rules based on a federal court ruling. Well have to sue them to stop them.