Trade and Commerce

• Author: Patrick J. Monahan, Byron Shaw
• Pages: 286-323

286

CHA PTER 9

TR ADE AND COMMERCE

A. INT RODUC TION

As discussed in Chapter 7, the decision of the Privy Council in Cit izens’

Insurance Co. v. Parsons1 is the starting point for the federal trade and

commerce power under section 91(2) of the Constitution Act, 1867.2 In

Parsons, t he Privy Council held that there were two branches of the

trade and commerce power: (1) the regulation of interprovincial and

international tr ade; and (2) “general regulation of trade affecting the

whole dominion.” In neither of these c ategories, however, could the

federal power over trade and commerce extend to the regul ation of the

contracts of a particul ar trade or business within a province.

As previously discus sed, the Privy Council severely restricted the

scope of the second branch of the trade and commerce power. Early

cases held that t he trade and commerce power was effectively limited

to the regulation of goods, persons, or activities crossing provinci al

borders. This chapter exami nes the extent to which the Supreme Court

has departed from the P rivy Council’s restrictive approach and broad-

ened the ambit of the trade and commerce power, particularly in rela-

tion to the second branch of Pars ons .

1 (1881), 7 App. Cas. 96 (P.C.) [Pars ons].

2 The Constitution Act, 1867 (formerly the Brit ish North America Act, 1867) (U.K.),

30 & 31 Vict., c. 3.

Trade and Commerce 287

B. INTER NATIONAL AND INTER PROVINCIAL

TR A DE

1) The Scope of Federal and Provincial Authority

A key distinction in the t rade and commerce jurisprudence is between

“interprovincial and international trade” on the one hand and “local

trade” on the other. Parliament has exclusive legislative authority to

regulate international and interprovincial trade — the regulation of

goods, persons, capital, or ser vices crossing provincial or Canadian

borders for a commercial purpose. Provincial jurisdiction is limited to

the regulation of trade wit hin a province. The text of section 92 of the

Constitution Act, 1867 limits the provinces to t he regulation of trans-

actions, activities, or person s “in the province.” Provincial power over

local trade is derived from section 92(13) “Property and Civil Rights in

the Province” and section 92(16), “Matters of a merely local or private

Nature in the Province.” Accordingly, the provi nces have no juri sdic-

tion to regulate transactions, activities, or persons enter ing or leaving

the province.3

Parliament has exercised its authority to regulate imports, exports,

and interprovincia l trade in a wide variety of contexts for various policy

objectives.4 Few doubts have ever been raised about the constitutional

validity of these en actments. However, doubts have been raised about

Parliament’s ability to regulate local or int raprovincial trade.

In the Margarine Refere nce,5 for example, the Supreme Court

of Canada considered the validity of federal legislation banning the

manufacture, importat ion, or sale of oleomargarine. It was conceded

that oleomargarine was substantially as nutritious and f‌it for human

consumption as butter. According to the Supreme Court, the purpose

3 See Ont. (A.G.) v. Can. (A.G.), [1896] A.C. 348 (P.C.), holding that the provinc es

have no power to prohibit th e importation of intoxicatin g liquor into the prov-

ince. Importat ion of liquor is regulated by Parli ament under the Importation of

Intoxicating Liqu ors Act, R.S.C. 1985, c. I-3. See al so: Canadian Industrial Ga s &

Oil Ltd. v. Saskatchewan (1977), [1978] 2 S.C.R. 545.

4 See, for example, Energ y Eff‌iciency Act, S.C. 1992, c. 36, s. 4 (prohibiting i nter-

provincial t ransportation or imp ortation of energy-using product s unless

product complies wit h applicable standard); Meat Inspec tion Act, R.S.C. 1985

(1st Supp.), c. 25, ss. 6– 9 (prohibiting export, impor t, and interprovincia l trans-

portation of meat pro ducts that do not comply with applicable s tandards); and

Motor Vehicle Safety Act, S.C. 1993, c. 16, ss. 4 & 5 (prohibiting import ation and

interprovi ncial shipment of motor vehicles unle ss applicable standard s are met).

5 R eference Re Validity of s. 5(a) of Dairy Indu stry Act (Canada), [1949] S.C.R. 1

[Margarine Re ference].

CONSTITUTIONA L LAW

288

of the legislation was “to give trade protection to the dairy industry in

the production and sale of butter as against substitute s”6 and “to benef‌it

one group of persons as against competitors in busi ness in which, in

the absence of the legislation, the latter would be free to engage in the

provinces.”7

The legislation considered in the Margarine R eference did not merely

ban the importation of oleomargar ine; it also prohibited its local manu-

facture and sale. The Supreme Court held that the federal prohibition

on manufacture and sale was i nvalid, since it amounted to regulation

of property and civil rights in the province. However, the Court stated

that the legislation would have been upheld if it had been re stricted to

a prohibition on importat ion:

There is next the prohibition of impor tation of these substa nces. …

Such scope of action is clearly nece ssary to the nat ion’s jurisdiction

over trade with other st ates. Only Parliame nt can deal with foreign

commerce; provincia l power cannot in any mode, aspe ct, or degree

govern it: and it would be anomalous th at the jurisdict ion to which

regulation is comm itted, which alone can act, and wh ich in this seg-

ment of trade is in subst ance sovereign, should be powerless to em -

ploy such an ordinar y measure of control.8

In the result, the Court upheld the portion of the legislation banning

importation on the basis t hat it could be severed from the invalid at-

tempt to regulate local manufacture or sale.

The Supreme Court drew a similar dist inction between interprov-

incial and intern ational trade on the one hand and intraprovincial

trade on the other in R. v. Dominion Stores Ltd.9 The case concerned

the constitutionality of Part I of the Canada Agricultural Products Stan-

dards Act, which established and regulated the use of grade names for

various classes of agricultural products. Part I of the Act applied to the

local sale and posse ssion of agricultural products. Part II of the Act

compelled the use of the same grade names in the export and i nter-

provincial movement of agricultural products. Part I was held to be

unconstitutional in its application to intr aprovincial trade. However,

the validity of Part II was b oth conceded by the party challenging the

legislation and assumed by t he Court.10 While Parliament could not

6 Ibid. a t 27–28.

7 Ibid. at 50.

8 Ibid. at 52 –53.

9 [1980] 1 S.C.R. 844 [Dominion Stores].

10 Ibid. at 849, La skin C.J. Although Laskin C .J., disse nting, would have upheld

Part I, he obser ved that the validity of Par t II of the Act had been conceded by