On July 22, 2019 Canadian Federal Court Justice MacTavish ruled against Plaintiffs Kazia and Gwen in our FATCA IGA legislation lawsuit.
Here is the link to the decision.
— Our Vancouver lawyers, ADCS Board, and Plaintiffs are now considering the text of the decision and will get back to you, as soon as we can, on next steps.
Some excerpts:
“…I find that a major purpose for the enactment of the Impugned Provisions was to avoid the potentially catastrophic impact of FATCA on Canadian financial institutions, their customers and the Canadian economy as a whole.”
“According to Mr. Shoom, the Department of Finance considered the negotiation of this broad list of exempted accounts to be a “major success” that would significantly reduce the compliance burden for Canadian financial institutions and their customers.” etc. etc. for all the other “advantages” of the IGA…
“In light of this, I am satisfied that this action is indeed a reasonable and effective way to bring the issues raised by this case before the Court. The issues raised by this case have, moreover, been carefully advanced by experienced counsel on both sides, through a full and complete adversarial presentation. Allowing this action to proceed to judgment is, moreover, an economical use of judicial resources, and permitting this action to go forward serves the purpose of upholding the principle of legality. Indeed, I do not understand the Defendants to be strenuously opposing the granting of public interest standing to Ms. Deegan. For these reasons, I am therefore prepared to grant Ms. Deegan public interest standing in this matter.”
“…I am nevertheless satisfied that I do indeed have the power to grant the relief sought by the Plaintiffs in this case.”
“While acknowledging that they [Plaintiffs] (and other U.S. persons) have pre-existing obligations to report certain information to the IRS under American law, the Plaintiffs submit that they generally do not have an obligation to report this information to the Defendants. Canada has nevertheless admitted that the accountholder information it receives as a result of the Impugned Provisions is being used for domestic tax compliance purposes.”[!]
“…I am prepared to find that those affected by the Impugned Provisions likely have some subjective expectation of privacy with respect to their banking information. The question, then, is whether that expectation is objectively reasonable.”
“I am, however, satisfied that U.S. persons still have only a limited expectation of privacy in the accountholder information at issue in this case. This is because U.S. persons have a pre-existing legal obligation to provide their banking information to the IRS in accordance with the provisions of FATCA, quite apart from the disclosure requirements of the Impugned Provisions. In addition, some of this information is also subject to disclosure to the U.S. government by way of FBAR reports…
“The fact that the Plaintiffs and other U.S. persons have the pre-existing obligation to report their banking information to the IRS under American tax laws (as well as the obligation to file the FBAR reports that are required under the U.S. Bank Secrecy Act) suggests that their privacy interest in that information is limited…”
“Indeed, there are limits on the extent to which Canada will cooperate with foreign jurisdictions in the enforcement of the laws of those states, and it will not do so in situations where application of the foreign law could lead to a result that is contrary to Canadian values.”
“As Justice Martineau observed, there are differences between the OECD’s CRS and the Impugned Provisions. In particular, the CRS’s reporting requirements are triggered by residency as opposed to citizenship, and they do not entail the same sanctions as the Impugned Provisions (i.e. imposition of a withholding tax) in the case of non-compliance: Hillis, above at para. 49. That said, the CRS nevertheless draws extensively on the government-to-government approach taken in implementing the FATCA regime, as reflected in the Canada-U.S. IGA.”
“It bears noting, however, that if the Court were to strike down the Impugned Provisions, U.S. persons resident in Canada would still be subject to the filing and compliance obligations of FATCA and the American Bank Secrecy Act, and their account information may well still be shared with the IRS by Canadian financial institutions.”[unsure if that is an accurate statement]
“… That said, it is doubtful that Canada could have negotiated a better deal with the United States. The evidence before the Court is that some 100 countries have entered into intergovernmental agreements with the American government in efforts to mitigate the consequences of FATCA in each of these countries. Some of these countries, like Canada, are major trading partners with the United States. There is, however, no suggestion that any of these countries were able to negotiate agreements with the American government that were any more advantageous or less intrusive than the Canada…”
“…From this, it is apparent that the sharing of taxpayer information between countries has received international acceptance, further suggesting that the sharing of U.S. persons’ accountholder information with the IRS pursuant to the Impugned Provisions is indeed reasonable…”
“Even if the banking information of individuals who are not subject to American tax law is captured by the Impugned Provisions, the information is shared with the IRS under the Canada-U.S. Tax Treaty, with the result that it can only be used for the purposes of U.S. tax law. As a consequence, any impact on the privacy interests of the individuals in question is minimal.”[!]
“…The reasonableness of seizures that are carried out in accordance with the Impugned Provisions is further confirmed by the fact that the banking information in issue is shared with the IRS in confidence…”
“..I have concluded that the principle purpose underlying the Canada‑U.S. IGA and the Impugned Provisions – namely avoiding the consequences of the direct application of FATCA in Canada – is an important one. I have also found that individuals have a limited privacy interest in their banking records, and that the method used to collect this information is minimally intrusive. I have also found that the information that is shared with the IRS is afforded protection under the Canada-U.S. Tax Treaty…”
“…I note that there is a disagreement between the parties as to whether individuals seeking to avoid these disadvantages by renouncing their American citizenship will also be subject to an American “Exit Tax”, and whether any such obligation exists independent of FATCA. It is, however, unnecessary to resolve this question, as I do not understand there to be any disagreement about the fact that whether or not affected individuals are indeed subject to an Exit Tax, they will nevertheless face significant costs in terms of professional fees and administrative costs associated with the tax compliance and citizenship renunciation processes.”
“It is evident from the affidavits of several of the Plaintiffs’ witnesses that at least some individuals affected by the Impugned Provisions have little, if any, connection to the United States apart from having been born there. Some such individuals view themselves as being “accidental Americans”, and some were not even aware that they were in fact American citizens until they started looking into the matter.”
“…I am therefore satisfied that the Impugned Provisions draw a distinction between U.S. persons and non-U.S. persons based, at least in part, on their citizenship and/or their national origin…”
“The Charter does not require Canada to assist persons resident in this country in avoiding their obligations under duly-enacted laws of another democratic state, nor does it require this country to shelter those living in Canada from the reach of foreign laws. Indeed, as was noted earlier, insulating persons resident in this country from their obligations under duly-enacted laws of another democratic state is not a value that section 15 of the Charter was designed to foster.”[But all we ask for are our privacy and equality rights.]
“…I find that the Impugned Provisions do not reinforce, perpetuate or exacerbate disadvantage, nor do they violate the norm of substantive equality in subsection 15(1) of the Charter. I am also not persuaded that the Impugned Provisions involve the oppression or unfair dominance of one group by another, or a denial to one group of protections that are basic or necessary for full participation in Canadian society…”
“… While these individuals’ frustration may be understandable, when viewed objectively, the decision of the Canadian government to share these individuals’ banking information with the IRS because their American citizenship or national origin makes them subject to American tax laws does not devalue their worth as individuals. Nor does it send the message that U.S. persons are less capable or less worthy of recognition as human beings or as members of Canadian society. It is thus not discriminatory.
The justification for our ADSC-ADSC (Alliance for the Defence of Canadian Sovereignty) lawsuit, which began on August 11, 2014, is that Canada’s FATCA IGA legislation, infringes on privacy (Charter section 8) and equality (section 15) rights of Canadian citizens, and the sovereignty of our country.
—- Plaintiffs and their supporters went to Federal Court because they/we feel that privacy, equality, and sovereignty matter.
Justice Mactavish came to a different Conclusion in her decision:
“[442] Having failed to establish that the Impugned Provisions violate either section 8 or section 15 of the Canadian Charter of Rights and Freedoms, it follows that the Plaintiffs’ action will be dismissed.”
@PH, I understand that the Justice was using the term ‘busybody’ in a particular context, as ex.
“……..In English law, the doctrine of locus standi requires that a plaintiff have some connection with the matter being contested. In two cases in 1957 and 1996, Lord Denning ruled that “The court will not listen to a busybody who is interfering in things which do not concern him…”[7][8] Similarly, there is a long-standing rule that a person must have an insurable interest in a property or person that they wish to insure.[9]….” https://en.wikipedia.org/wiki/Busybody and I saw for example that it was referred to in a Supreme Court of Canada discussion of standing, the best use of court time and resources, etc. for ex. https://scc-csc.lexum.com/scc-csc/scc-csc/en/item/10006/index.do .
However, I bridled at even the potential for application of the term given all that those who’ve taken us this far have given of their time, funds, energy, wellbeing, etc. I guess I just wonder at a system in which ordinary citizens who have made this much of a sustained effort and sacrifice – and whose efforts are also on behalf of justice for countless others could possibly have such a term applied even in theory. It also sounds so paternalistic.
When it is basically a David vs. Goliath contest, and ordinary citizens are up against all the vast resources of the federal government, with access to bottomless amounts of our own taxpayer money fuelling the defence, and when the government owns all the information about the FATCA negotiations and chose to keep the banks apprised while keeping the Canadian public in the dark, and when they have all the time in the world to fight this, it is galling to have the plaintiffs depth of interest and motive even potentially in question.
I’m not a lawyer, just an ordinary citizen who understands that Gwen and Kazia have very little to gain by having come forward. I hope that in the end they may obtain some justice in exchange for their sacrifice.
Th court ignores how the so-called U.S. persons only have a legal duty under U.S. law and have a right to defy the laws of foreign countries while Canadian citizens living in Canada.
“… when the government owns all the information about the FATCA negotiations and chose to keep the banks apprised while keeping the Canadian public in the dark…”
Keeping their fellow democratic representatives of the people in the dark too, it seems, in all the IGA1 countries. If the agreements had received attention and debate in national parliaments, and consequently been reported in the press, constituents with US citizenship might have had a chance to raise the issue with their representatives. The same is true for the tax treaties: the tax treaty is supposed to be elective, yet here are these “Mutual Assistance” articles slipped into the back, stripping certain residents of privacy and data protection rights without their knowledge or consent. Not elective. Not at all.
“…a system in which ordinary citizens who have made this much of a sustained effort and sacrifice – and whose efforts are also on behalf of justice for countless others…”
If an appeal is contemplated, isn’t it rather essential to count, or at least in some way form a reasonably reliable estimate, of the number of fellow Canadians who feel that the lawyers for the plaintiffs are speaking for them?
@PH, re; “…isn’t it rather essential to count, or at least in some way form a reasonably reliable estimate, of the number of fellow Canadians who feel that the lawyers for the plaintiffs are speaking for them?….”.
Exactly. Many Canadian people don’t even understand that FATCA exists or why their data may be imperilled. I meet them everyday here in a region in which many have crossborder relationships created when their relatives and friends go to school in the US, are transferred to the US by their employer, etc. Several may have nominated those US residents/citizens to be executors of their estates or hold joint accounts, or have some other financial or economic relationship that would end up involving them in FBAR or FATCA.
And I remain very troubled about the burden on those who can never renounce/relinquish, and the most vulnerable – kept UStaxablepersons for substantial periods (minors) or for life (those deemed legally incompetent), with their RESPs and RDSPs and any Canadian support grants/benefits deemed taxable assets by the US. Those two last groups cannot mount a challenge on their own, yet have no remedy at all that they can access alone.
What of them? I would have hoped that our federal government (both the CONs and now the GLIBs) would have cared about those most vulnerable rather than banks, but it is clear that some Canadians were considered expendable sacrifices to the US emperor.
Badger: Thank you so much for all the time you’ve taken to make your thorough and well-reasoned comments. Much appreciated!
[430] That said, and focussing on the impact of the Impugned Provisions as I am required to do, at the end of the day, the effect of the Impugned Provisions is to compel U.S. persons in Canada to comply with their pre-existing obligations under American tax laws. The Charter does not require Canada to assist persons resident in this country in avoiding their obligations under duly-enacted laws of another democratic state, nor does it require this country to shelter those living in Canada from the reach of foreign laws. Indeed, as was noted earlier, insulating persons resident in this country from their obligations under duly-enacted laws of another democratic state is not a value that section 15 of the Charter was designed to foster.
Having a link to this thread that takes up 35 lines in the sidebar squeezes out the links to any an all comments on other topics
@ Portland, the lengthy title doesn’t squeeze anything out in the sidebar, just makes for a lot of scrolling. I’ve noticed that the author of this post changes its title frequently, presumably to highlight different aspects of the decision, so I suspect it’ll be shorter soon.
Notice how [430] above apparently distinguished “duly-enacted laws of another democratic state” from other foreign laws.
“nor does it require this country to shelter those living in Canada from the reach of foreign laws”
Does jurisdiction not matter？
Did Canada prevent Women with Saudi Arabian citizenship from driving in Canada before Saudia Arabia lifted (if they actually have lifted it) this restriction?
Note, it looks like I crossed names again. TinJapan and JapanT are both me.
I am amazed no Canada-only bank sued because they are being forced to obey a foreign law.
For the moment I file, report and pay US tax where it is due.
If it weren’t for the “busy body” behaviour of the Canadian government in enforcing US law in Canada, my private Canadian banking information would not be reported to the CRA without a warrant.
This is the reward I get from the Canadian judicial system and government for doing what they say I should be doing anyway.
The end of the ruling contains some troubling text. The plaintiffs are, no doubt, troubled about the possibility of being billed for the cost of this miscarriage of justice, which really adds insult to injury.
The Canadian government should NOT try to go after the plaintiffs for this. If the USA never threatened Canada to get Canada to bow to their demands, this case would never have happened. We all know there will never be justice here as this is bigger than all of us. This is one country bullying another country based on their military and financial clout. Once the USA is someday knocked off of it’s high horse, you will see justice prevail. Until then, so called judges and governments will continue to cover up these decisions to turn people into sacrificial lambs to the USA to keep peace.
@Tom, yes, the end text is very troubling re the potential costs. Another way in which the system is rigged against ordinary Canadian citizens and residents who are also COMPLIANT CANADIAN TAXPAYERS yet could be threatened or punished into silence and submission for daring to raise an injustice whose source is a demand by a foreign country and supported by our own government – using in part the plaintiffs and their supporters very own Canadian generated and Canadian sited taxpayer funds. The government has access to a bottomless well to fight for years ( ex. https://www.thestar.com/news/canada/2018/09/11/ottawa-settles-ei-sickness-class-action-with-new-moms.html ).
and,
maybe the distinction re ““duly-enacted laws of another democratic state” is a nod to nullifying arguments that compare the FATCA IGA assistance by Canada to the extraterritorial ‘obligations’ the US imposes unilaterally on those whose only relationship to the US is birthplace or parentage – a relationship with NO economic basis (as we know NOT a universal global majority recognized basis that any other ‘democratic state’ uses as a rationale for taxation), given that Canada does not assist Eritrea in enforcement of its extraterritorial taxation scheme and Eritrea has been condemned by the US and the UN for its efforts to assess and collect inside other states.
And as for; “…The Charter does not require Canada to assist persons resident in this country in avoiding their obligations under duly-enacted laws of another democratic state, nor does it require this country to shelter those living in Canada from the reach of foreign laws. Indeed, as was noted earlier, insulating persons resident in this country from their obligations under duly-enacted laws of another democratic state is not a value that section 15 of the Charter was designed to foster….”
Hmmm, will that help crack open the door to allowing other foreign nations to impose their laws inside Canada more easily? As long as they are ‘duly-enacted’? The US demands the registration of all males of draft age for the military. Does the Charter flexibly accommodate the US on that matter as well? I had no idea that our Charter was subject to the extraterritorial demands of other countries applied on Canadian soil.
Or is it because taxation is such a ‘special’ example that no rights need applly?
@MuzzledNoMore,
thanks, am trying to keep my blather dial set to minimal – successful I hope.
“democratic state”. Arguably, USP overseas are poorly represented and have no direct representative only focusing on their issues as the American Colonists had wanted. By use of “democratic state” it sounds as if it comes with the assumption of a fully functional democratic state.
I have not heard of the justification of taxation/claim of tax jurisdiction to include that the government is a democratic state.
These I have heard: the government provides resident services, the government provides protection of local property, the government provides protection of local rights. The U.S. does none of these for Canadian citizens resident in Canada who also are US persons.
I would assume that the “democratic state” reference in the judgement is nothing more than a bit of ass-covering to avoid any awkward comparisons with Ethiopia, where funnily enough the federal government has objected to extraterritorial taxation of the diaspora.
To my mind, extraterritorial taxation is extraterritorial taxation, no matter what form of government the offending country has. Its a ridiculous distinction and the same objection the Canadian government had to Eritrea’s tax should apply equally to the US tax. The judge should be ashamed of herself for coming up with such pretzel logic.
Besides, Eritrea’s tax is actually less punitive than the US tax because they just want some money; they don’t try to run the expat’s life. (And that’s from a dictatorship, not a so called democracy. So much for her argument.) So if anyone deserves help from the Canadian government it should be Eritrea, not the US.
What is disappointing is the plaintiffs or plaintiff,really, were the weakest ones to serve as such,having neither filed, nor paid any fines,nor having their financials revealed to the IRS,as later revealed.
However, I sympathize deeply for the anguish they must have gone through..
The judges shopping list of witnesses, included people who faithfully filed returns before renouncing or couldn’t financially continue to file nor afford to pay the extortion fee . For some reason, I feel that people who are permanently living abroad and had been filing income tax returns ,at one time or another, or are currentlly filing income tax forms and even serving as witnesses here or in the US are only legitimatizing the notion that filing and paying US taxes abroad is quite normal,no matter what the circumstances of the so called US citzen.,. The justice full well understood the hardships faced by those on that witness shopping list ,as well as, the ramifications of her decision.Her logic is not pretzel. It is the logic of the government she serves and those who selected her I suspect the decision was foregone when she was selected.
One observation is that the banks requested more than required,which is not surprising. But putting the banks aside, shouldn’t the primary focus be the on the CRA since they set the requirements and actually pass the information the IRS.
So what’s next? Now that Trump has brought back the death penalty will Canada start extraditing criminals with a US taint because they have a “preexisting obligation” to face the death penalty if they commit certain crimes? After all, the judge did state:
“…The Charter does not require Canada to assist persons resident in this country in avoiding their obligations under duly-enacted laws of another democratic state, nor does it require this country to shelter those living in Canada from the reach of foreign laws. Indeed, as was noted earlier, insulating persons resident in this country from their obligations under duly-enacted laws of another democratic state is not a value that section 15 of the Charter was designed to foster….”
Anyone want to bet that there will be another case in a few years in which the judge will conclude the exact opposite that this judge did in our case?
We expect to have an update on the litigation very soon. In the meantime, the ADCS website is offline while it is being revised.