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.”
Did I read that right? The judge said that discrimination based upon “country of origin” is OK in Canada?
“COURT DISMISSES CHALLENGE OF DEAL THAT HELPS U.S. NAB TAX CHEATS IN CANADA.”
I’m seething and seeing bloody red over that headline. The insinuation is disgusting, blatantly biased and oh so typical of the media who all to often serve and protect the government and all its goonishness. Balance and accuracy in the press are at the same low level as privacy and sovereignty in the Canadian government. Looks like they all dutifully turned to the same page in the government hymnal to get their story and headline with no thought given to the other side. Thanks therefore to Pauline Saunders for her comment at the National Post:
All the news media I’ve seen so far are just regurgitating the same headline (and article) from the Canadian Press, and it’s a very lazy (never consulted the plaintiffs) useless article, symbolic of the quality of journalism today. Hopefully someone more intellectual (Elizabeth Thompson?) will pick up on this and tell the world what’s really going on.
From CrossBrit on Twitter:
They should be terrified. We are infuriated and onto all their little games. I’m absolutely livid that this gross violation of data rights by the government is allowed to stand while private companies get pummeled for much much less.
The next challenges should focus on the data. That is the zeitgeist now. Fatca puts us at unnecessary, disproportionate risk of data breach. It is surely discrimination and extortion etc but that angle just does not seem to wash with the courts. What they won’t be able to defend is the lack of proportionality of the data they are sending. Eg data of people who have no tax liability at all in the recipient country. Demand that they prove in court that fatca data transfer is reasonable and proportionate. They won’t be able to. Quashed. End of.
I see at #fatca on twitter that John Richardson has picked up on that infuriating headline too.
Thank you John. We concur!
Glad to hear that the media have all decided I’m a tax cheat for refusing to pay taxes to a country I haven’t lived in for 50 years. It makes me feel better about lying to a bank. No reason not to; I’m being blamed for it anyway.
The good news is this pathetic decision changes nothing. Lie to the banks, ignore the IRS, and stay away from the condors. Life goes on……Anyone know where I can get a fake CLN??
@NativeCanadian
Canada has a long history, dating back to the Civil War before Canada was formally established as a nation, of standing up to US bullying when the US adopts a bullying stance. Canada’s weakness on FATCA is out of character with Canada’s history as a nation and therefore quite disturbing. Indeed, I see Canada’s most important role on the world stage being one of standing up to the US whenever the US degrades from leadership to bullying as it is prone to do.
Please RT/Like on Twitter:
@JimBronskill taking some flak.
https://twitter.com/ExpatriationLaw/status/1153423478927835146
https://twitter.com/ExpatriationLaw/status/1153419284930076674
https://twitter.com/CrossBriton/status/1153417739610066950
https://twitter.com/goldretrieve9/status/1153470161195884544
https://twitter.com/MalkovichPaul/status/1153414573581426688
https://twitter.com/CrossBriton/status/1153405731879735300
The following is absolutely terrifying!!
“The result of this is that every Canadian resident who is an American citizen is subject to U.S. federal taxation on all of their income from all sources, wherever that income may be derived, even if he or she is also a Canadian citizen,” Mactavish says in her decision.
From @FixTheTaxTreaty
This is sad news. As long as the problem is framed as a problem of “Americans” resident in Canada (or Australia), those in power will fail to understand what is wrong with FATCA and Citizenship based taxation. The problem needs to be framed as a problem facing Canadian (or Australian) citizens with lingering US indicia. The US is the only country that insists on renunciation to cut tax jurisdiction.
I’ve lived in Canada continuously since 1993. I swore an oath of allegiance to the Queen of Canada in 2001. I’m confused. Am I a Canadian citizen or am I just an American person residing in Canada. Grrrr.
This decision is absurd and I don’t know if the Justice is a dimwit, a coward, or just plain old crooked.
The question that keeps coming to my mind is what would Canada have done during the Cold War if the USSR had made demands on it regarding the rights of former Soviet citizens/defectors living in Canada? I’m pretty certain that they would have told the USSR to pound sand and that their laws didn’t apply here. So, why is this different in this case? When I became a Canadian citizen, my assumption was that my new country would protect me from my former one, especially while resident on Canadian soil. I guess the the Charter isn’t worth the paper it’s written on. Especially ironic that it’s Justin Trudeau who is crapping all over his own father’s greatest legacy. A Canadian is a Canadian is a Canadian…unless, of course, you’re just an American resident in Canada, then you can get bent. The mind boggles…
As has been said many times on this site, all roads really do lead to renunciation. Get out now, if you can, and put all this nonsense behind you because this is never going to get better or be resolved for those with US citizenship attempting to live outside the fatherland. Get on with living your life free of the USA and its repugnant bullshit and restore your sanity and full citizenship rights in your country of residence. America is a dying empire and it’s uncertain what new hardships their continuing death throes will bring to the world. Neither Canada or any other country will protect you from what may come if you choose to retain US citizenship. It is time to look out for yourselves and your loved ones and not rely on any elected government or court inside or outside the USA to protect you. Just my $0.02.
She didn’t get it. Arvay wasn’t persuasive. The CP headline editors don’t get it. The status quo is maintained. Many of us have renounced. Some have done a virtual renunciation. Many will continue to lie low which is often the best choice.
Watch for the condors to renew their scare tactics.
Remember, the first priority of a government bureaucracy is to keep their jobs and to continue any and all programmes no matter how expensive or useless. The Brits have a marvellous expression. They call this type of bureaucrat a “jobsworth”. As in “it’s more than my job’s worth to rock the boat.”
mind blowing how the truth gets twisted for a buck. Canada needs America as a trade partner.
Extremely disappointed, but not surprised.
So in response to the headline quote I have two general opinions. One is that Charter jurisprudence has long gone beyond the intentions of it’s authors and the Parliamentarians who voted for it in 1982. Most politicial scientiticists and observers who were around at the time of Charter ratification who pretty strongly stated they do not believe those MP’s who voted for the Charter believe that it would lead to the drastic expansion of judicial power that occured in particular after 1990. Now whether occured in the past was “right” or “wrong” I suppose is an open question but for a lower court(albeit now appointed to the appeals court justice) to question this determination is now rather late in the day.
Second one must keep in mind whether or not the Charter was intended to foster “immunity” of Canadians from the duly-enacted laws of another democratic state of which they are citizens of the French Constitution which at least is one of the documents that inspired the charter quite explicitly fosters this type of immunity MacTavish rejects by refusing the extradition of French citizens from France for any crime committed against the laws of another country no matter how “Democratic” that other country is and even if the French citizen in question is also a dual national of that other country. While many outside of France argue this provision of the French Constituton is outrageous and I am sure many Canadian lawyers, judges, and politicians along with their British and American counterparts fall into the group one cannot say the idea of Constitutional immunity from duly enacted laws of other democratic states is so totally unprecedented.
Sigh. The reality won’t change for duals in Canada without US assets, it’s still “self-certification” with the banks for FATCA, no risk of penalty for non-compliance. But disappointing all the same.
I watched good chunks of the trial. I didn’t find Arvay particularly convincing either. It seemed like a week of expensive rambling by all concerned with neither side making important points terribly often. To be honest I thought the moment the judge’s sympathy was lost came when Arvay read out a submission from someone who worried that either renunciation and/or non-compliance (my memory is not exact) would put at risk their ability to enter the US; the government lawyer called this an outrageous request, which it basically was. At that point I thought to myself, oops, that was not smart.
I politely urge the ADCS leadership to compose a response to Bronskill of the Globe and the other reportage, in the hope that it might be published in op-ed position of the Globe and other papers. I think the purpose ought to be to correct the reporting, not dispute the decision itself. In particular, the notion that the law addresses American “tax cheats” living in Canada needs correction.
Court Challenges Program of Canada
In February 2017, the Government of Canada restored the Court Challenges Program with $5 million in funding. This might be a source of funding for an appeal.
@Portland
Arvay wasn’t persuasive.
I think that the summary trial wasn’t the ideal format for getting a persuasive message out. An attorney can be a lot more persuasive if they are simply backing powerful witnesses. I think it would have been easier to present a powerful message if we’d gotten some of our angry witnesses and plaintiffs on the stand, and they’d stood up well to cross examination (which I think they would have). As It is I think a lot of people see this as an arcane legal matter affecting some small set of dual citizens. It is much more than that, but I think without powerful and emotional testimony from real witnesses with real suffering caused by FATCA, that message simply didn’t get out to the Justice, the media, and the public.
The appeal process–and not the trial court–is generally where dry legal arguments shine more. So we’ll see how the appeal process goes. This summary trial was too dry a process to accurately convey the human costs of FATCA and the IGA.
I think I don’t want to read anymore of what Mactavish says. Justice did not prevail and that’s all I need to know. I hope our plaintiffs are doing okay and if this has any serious financial consequences for them I would like to help and I hope others will too. We tried to remedy this FATCA fiasco legally which was the right thing to do but remedies and advantages seem to go only to those who are prepared to use bribery, blackmail and bully tactics to get what they want. I’m glad we are reasonable and not ruthless but this is a tough ruling and it’s going to increase the fear factor for everyone Mactavish dismissed as not being worthy of charter protection.
Northern,
Thank you very much for reminding me of this program.
When this funding program was first announced I did make repeated calls to the apparent organizers, but no one returned my calls. I just called again and now find that the program is in operation (since January).
For an appeal there are eligibility criteria, application process, and panel decision that I am looking at and a max of 50k if successful.
Thanks again.
The only motto truly reflective of most western democracies is “Money Talks, Bullshit Walks.” Maybe a scholar here can translate it into Latin so it makes even more sense. Meanwhile, it is clear that Canada, just like the US, has the best government money can buy. Our plastic money trumps our paper Charter any day of the week.
And for all of Justin’s “A Canadian is a Canadian is a Canadian” malarky, we’re now officially just Jews hiding in attics and basements. Enjoy the view.
I said this would happen. When you have felon’s as judges , that’s what you get. So, there are no such thing as privacy laws in Canada. It’s all a lie. Next time you get caught breaking privacy laws. Don’t worry, just say it’s legal to break the law and just quote this judge as proof it’s legal to break the law. Pretty bad when we have illegal felons running the courts here in Canada.