Reviewing Regulations of National Concern: Administrative Law Matter (No. 2) in the References re Greenhouse Gas Pollution Pricing Act, 2021 SCC 11

In my previous post on References re Greenhouse Gas Pollution Pricing Act, 2021 SCC 11, I discussed Côté J’s partial dissent on the constitutionality of Henry VIII clauses. There I noted that the argument about the constitutionality of Henry VIII clauses turns in part on the existence of robust judicial oversight. The topic of this post is larger, but I will touch on judicial review of the exercise of powers conferred by Henry VIII clauses. Inasmuch as some of the issues discussed below might arise in the exercise of my functions as a Review Officer of the Environmental Protection Tribunal of Canada (which has jurisdiction to review administrative monetary penalties issued for non-compliance with Part 2 of the GGPPA), my views are tentative and I am open to revising them on the basis of arguments that may be made in specific cases. As the majority rightly observed, at para. 220, this is all “speculative” in the absence of a concrete case.

The References concerned, first and foremost, the constitutionality of the GGPPA. The GGPPA establishes a backstop carbon-pricing regime. The provinces are in the driving seat in terms of setting prices for greenhouse gas emissions. But the GGPPA provides that if the federal government determines that provincial standards are insufficiently stringent, the pricing mechanisms set out in the GGPPA will kick in. Part 1 imposes a charge on prescribed types of fuel, “22 types of carbon-based fuel that release GHG emissions when burned, including gasoline, diesel fuel and natural gas, as well as to combustible waste” (at para. 30). Part 2 establishes a pricing system for large industrial emitters, with significant leeway to categorize emitters differently.

The federal government argued, successfully, that it could enact the GGPPA under the ‘national concern’ branch of the federal power to legislate for peace, order and good governance (“POGG”). This issue split the Supreme Court and each of the provincial courts of appeal which considered it. It is a difficult issue and, as the dissenting judges observed, the majority’s resolution of the issue may lead to difficulties in the future, as the federal cabinet adopts regulations to implement the GGPPA.

The issue is a difficult one because the POGG power has been treated as residual to the heads of legislative competence set out in ss. 91-92 of the Constitution Act, 1867. The analysis of whether Parliament or a provincial legislature can enact a statute usually depends on, first, characterizing the “matter” (by identifying the “pith and substance” of the provisions at issue) and, second, assigning the matter to one of the “classes of subjects” listed in ss. 91-92. But POGG is different. Because it is residual it has an amorphous quality (see e.g. at para. 115), applicable to “matters of inherent national concern, which transcend the provinces” (at para. 89). Just how residual POGG is provoked significant disagreement in the References (see e.g. Brown J at para. 341) but there is no doubt that POGG is different to the heads of legislative competence elsewhere set out in ss. 91-92.

Sometimes, the POGG power is described broadly (e.g. nuclear energy) but sometimes narrowly (e.g. the control of marine pollution by the dumping of substances). In essence, in POGG cases, the characterization of the matter can influence whether a particular statute is within the legislative competence of Parliament (see e.g. Wagner CJ for the majority, at para. 116 and Brown J, dissenting, at paras. 369-370). In this case, the pith and substance of the legislation was held to be the establishment of minimum national standards of GHG price stringency to reduce GHG emissions (at para. 80). And this “matter” was held to fall within the POGG power (at paras. 115 and 207).

But this creates a potential problem for the implementation of the GGPPA. The federal cabinet has regulation-making powers under the Part 1 and Part 2 of GGPPA. Normally, where Parliament or a provincial legislature has legislative competence to enact a statute, regulations made under that statute will also come within that legislative competence. Canadian regulations relating to nuclear energy, for example, can be made by the Canadian Nuclear Safety Commission (a federal commission) under the Canadian Nuclear Safety Act (a federal statute). As long as the regulations deal with nuclear energy, they will fall within the POGG power just as their enabling statute does. Of course, if they do not deal with nuclear energy but veer into provincial jurisdiction, they will be ultra vires, because they are unconstitutional and (almost certainly) outside the scope of the enabling statute.

Under the GGPPA, however, regulations could be intra vires the enabling statute but ultra vires on constitutional grounds. The constitutional basis on which the GGPPA was upheld is narrow — the creation of national minimum carbon pricing standards — but the powers granted by the GGPPA are extremely broad. A regulation might be within the broad powers granted to the federal cabinet by the GGPPA but nonetheless without the narrow constitutional basis of establishing a national minimum price for carbon emissions — as Huscroft JA put it in his punchy dissent in the Ontario Court of Appeal, upholding the GGPPA under POGG constitutionalizes the particular means used in the GGPPA and this means only (for, I would add, the moment at least) (2019 ONCA 544, at para. 224).

Accordingly, it seems to follow that regulations made under the GGPPA will have to be directed, in pith and substance, to the establishment of national minimum pricing standards in order to be constitutional. Otherwise, they will not be regulations which deal with the matter of inherent national concern identified by the majority in the References.

Problems may therefore arise because of the breadth of the federal cabinet’s regulation-making powers. As Brown J put it, Part 2 of the GGPPA can be seen as “a deep foray into industrial policy” (at para. 346) which allows the federal cabinet “to establish variable and inconsistent standards for an array of different industrial activities” (at para. 339). If regulations do so, they could be intra vires the GGPPA but nonetheless ultra vires on constitutional grounds, as Rowe J explained:

By design, regulations under Part 2 will have impacts that vary by enterprise, sector and region. These regulations will affect the viability, for example, of natural resource industries that need to generate power at remote locations or heavy industries that require intense heat, like making cement or smelting ore. By contrast, they will have little effect on industries that are either not power-intensive (like finance) or where production is electrified (like manufacturing). While the primary purpose of the legislation is environmental protection, Part 2 is premised on tailoring the impact of emissions reduction by reference, inter alia, to economic considerations (G. Bishop, Living Tree or Invasive Species? Critical Questions for the Constitutionality of Federal Carbon Pricing (2019), C.D. Howe Institute Commentary 559). Issues as to whether regulations veer too deeply into industrial policy, thus calling into question the regulations’ constitutionality, will inevitably arise (at para. 599).

This very much depends on the ends to which the regulation-making powers are put, of course. But this issue, as well as the observations in Côté J’s partial dissent about the constitutionality of Henry VIII clauses, does raise questions as to how exactly regulations made under the GGPPA are to be reviewed.

On this point, Wagner CJ laid out a familiar set of principles:

[T]he Governor in Council’s discretion is limited both by the statutory purpose of the GGPPA and by specific guidelines set out in the statute for listing decisions…Specifically, the discretion to list a province or territory [under Part 1] must be exercised in a way that is consistent with the statutory purpose of reducing GHG emissions by putting a price on them. And any decision of the Governor in Council with respect to listing would have to be consistent with the specific guideline of ensuring that emissions pricing is applied broadly in Canada and would have to take the stringency of existing provincial GHG pricing mechanisms into account as the primary factor: preamble, para. 16, and ss. 166 and 189. Moreover, because the GGPPA provides for a legal standard to be applied in assessing provincial and territorial pricing mechanisms, any decision of the Governor in Council in this regard would be open to judicial review to ensure that it is consistent with the purpose of the GGPPA and with the specific constraints set out in ss. 166(2) and (3) and 189(1) and (2). In other words, although the Governor in Council has considerable discretion with respect to listing, that discretion is limited, as it must be exercised in accordance with the purpose for which it was given…(at para. 73 and see further at paras. 75 and 76 for comments on Parts 1 and 2 respectively).

To this I would add the principle that Henry VIII clauses should be narrowly construed: see e.g. R (Public Law Project) v Lord Chancellor [2016] UKSC 39, at para. 25; this principle would be one of the legal constraints applicable to an exercise of a regulation-making power reviewed for reasonableness, Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, at para. 111.

In judicial review of regulations made under the GGPPA, the standard of review would be reasonableness as to the substance of the regulations and correctness as to their constitutional validity (cf. the discussion in Bertrand v. Acho Dene Koe First Nation, 2021 FC 287, at paras. 75-76). Rowe J raised the concern that, in terms of judicial review, decision-making of the federal cabinet is “very nearly a total black box” (at para. 606). The absence of extrinsic evidence about the purpose and effect of a regulation means “a court’s ability to effectively adjudicate the boundaries of federal and provincial powers may be made more difficult” (at para. 605).

If this proposition were true, it would provide further underpinning for Côté J’s concern about the inability of courts to robustly review the exercise of regulation-making powers under the GGPPA (and under the many other statutes which contain Henry VIII clauses) and raise concerns about whether the courts could adequately police the boundaries between provincial and federal authority. But while this proposition has been historically true, however, recent developments cast some doubt on it.

To begin with, regulations might not necessarily be challenged by way of an application for judicial review. They might be challenged by way of action, where the applicant can create a detailed evidentiary record (see R. v. Desautel, 2021 SCC 17, at para. 2, per, as it happens, Rowe J). The constitutionality of regulations might also be raised in enforcement proceedings, where the evidentiary record would be as expansive as required to dispose of the enforcement action, which could then be subject to judicial review (with any decision on the constitutionality of the regulations being subject to correctness review).

Moreover, even on a plain-vanilla judicial review of regulations, it is possible for applicants to put material relating to purpose and effect before the courts. For one thing, federal regulations are now typically accompanied by regulatory impact statements, from which purpose and effect can be divined: see e.g. Innovative Medicines Canada v. Canada (Attorney General), 2020 FC 725, at paras. 34-54.

For another thing, the mechanisms available in Federal Court to develop a fulsome record might be more robust than previously thought. Stratas JA recently considered this issue in detail in Canada (Citizenship and Immigration) v. Canadian Council for Refugees, 2021 FCA 72. As a matter of general principle, “Courts are alert to attempts by public authorities and administrators to immunize their decision-making by withholding documents and information necessary for judicial review or by failing to give explanations and rationales for decision-making” (at para. 106).

Given this general principle, claims of privilege over documents which the applicant seeks to include in the record are carefully scrutinized (at para. 109). And where claims of privilege are successful, it is possible for the reviewing court to draw an adverse inference from the respondent’s reluctance to put information before the court (at para. 111) or to strike the decision down as unreasonable for want of reasoning (at para. 112).

Faced with this general principle and the potential for it to be robustly applied, a sensible respondent might take the following course of action:

Public authorities and administrative decision-makers can sometimes prepare and disclose a summary of how they went about their task, what they took into account and why they acted the way they did, providing enough information to allow for an effective and meaningful judicial review. In law, the provision of such a summary in these circumstances does not waive privilege. For example, in Coldwater First Nation v. Canada (Attorney General), 2020 FCA 34, 444 D.L.R. (4th) 298, a certificate under section 39 of the Canada Evidence Act—the most drastic privilege on the books—was issued to render secret the Governor in Council’s deliberations and the sensitive documents and information it relied upon. But the Governor in Council provided a summary of its decision-making in the preambles to its Order in Council approving an infrastructure project. This was sufficient in the circumstances to make the judicial review effective, meaningful and fair (at para. 114).

And if a respondent does not take this sensible course? The Federal Courts (and, to the extent their procedural rules allow for it, any other superior court of record) have flexible mechanisms at their disposal:

[O]n motion by either side to the judicial review, the Court, using its powers under the Federal Courts Rules, its plenary powers, or both, can appoint the equivalent of an amicus who can receive unredacted or largely unredacted copies of privileged material and make submissions in the absence of the applicants on the challengers’ behalf in a closed hearing. This is analogous to the use of a special advocate acting for the challengers in a national security judicial review: Charkaoui v. Canada (Citizenship and Immigration), 2008 SCC 38, [2008] 2 S.C.R. 326.

Sometimes measures short of that suffice. Ex parte hearings may be necessary and useful in some circumstances. In some cases, counsel for the applicants on judicial review can be permitted to receive confidential information on their undertaking to keep it confidential or a more restrictive undertaking not even to divulge it to their clients.

The measures to which a court can resort are limited only by its creativity and the obligation to afford procedural fairness to the highest extent possible. Many variations of the measures discussed above can be imagined: see, e.g., the creative order made for access to highly confidential Cabinet materials in the Charter challenge in Health Services and Support-Facilities Subsector Bargaining Association v. British Columbia, 2002 BCSC 1509, 8 B.C.L.R. (4th) 281, particularly Schedule 1 thereto…(at paras. 118-120).

There are, therefore, varied ways of prising open the black box of cabinet regulation-making.

As such, if ever issues were to arise about the lawfulness of regulations under the GGPPA, there are mechanisms available to ensure that the reviewing court has ample information about the purpose and effect of the regulations. A reviewing court could, accordingly, carefully review the record to determine whether the regulations are directed, in pith and substance, to establishing a minimum national price for carbon emissions (intra vires the POGG power) or to furthering goals of industrial policy (ultra vires the POGG power).

And, more broadly, when a reviewing court is assessing the reasonableness of regulations, it can do so in light of a developed record. If the record reveals a rationale for the regulation, this rationale can be reviewed for its compliance with the legal and factual constraints bearing on the regulation-maker (Vavilov, at para. 137); and even if the record does not reveal a rationale, the reasonableness of the regulation will be reviewed having regard to those legal and factual constraints (at para. 138). In terms of legal constraints, although the statutory language is broad, there is a variety of legal principles (Vavilov, at paras. 111-113, plus the Henry VIII clause principle I noted above) which can tighten the legal constraints on regulation-makers. Perhaps more importantly, the information in the record might impose factual constraints on the regulation-maker — for example, the regulation-maker might have to demonstrate responsiveness to concerns raised by a regulatee prior to the regulation being made, account for the harsh consequences of a regulation on a particular regulatee, or ensure consistency between similarly situated regulatees. Of course, deference remains de mise (especially when expert judgement is being exercised) but Vavilov gives more ammunition to applicants.

As a result, regulations under the GGPPA can, despite the concerns of the dissenting judges, be subjected to appropriately robust review on constitutional and administrative law grounds.

This content has been updated on April 27, 2021 at 00:30.