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.
“…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:
“ 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.”