Committee amends Liberal clause in budget bill that critics say 'dynamites the rule of law'

OTTAWA — Conservative amendments to provide more guardrails to a provision in the federal budget that would allow cabinet ministers to exempt entities from federal laws was passed by the finance committee on Monday, with support from the Liberal government.

Buried in the federal government’s 600-page Bill C-15 is a provision that gives cabinet ministers discretionary power to exempt a company or individual from any act of Parliament for a three-year period, except for the Criminal Code, for the purposes of what’s called a “regulatory sandbox.”

The provision is proposed under amendments to the Red Tape Reduction Act, legislation that was first passed under the Stephen Harper government in 2015.

Regulatory sandboxes are a tool used by federal regulators that allow industry to demonstrate the real-life impacts of a new product or service in the marketplace under a temporary set of rules and controlled by regulatory supervision.

The exemptions in question could be given by a minister if they are within the public interest, the benefits outweigh the risks and “would enable the testing of, among other things, a product, service, process, procedure or regulatory measure with the aim of facilitating the design, modification or administration of a regulatory regime to encourage innovation, competitiveness or economic growth.”

The exemptions have been the subject of criticism from opposition parties and Canadian civil, legal, and environmental groups, who call the provision the “King Henry the VIII” clause, “draconian” and “offensive” to democratic institutions.

Earlier this month, Finance Minister François-Philippe Champagne defended the measures, which he said were a key ask by innovators, particularly in the tech sector.

But the Canadian Civil Liberties Association said the original language in the bill suggests the powers would go beyond just regulatory sandboxes.

“It does not streamline regulation,” said Anaïs Bussières McNicoll, director of the fundamental freedoms program at CCLA. “It applies to almost every piece of federal legislation and regulation, and it truly dynamites the rule of law itself by creating a two-tier legislative system whereby laws debated and enacted by Parliament can be suspended for political convenience with little to no accountability or transparency.”

Secretary of the Treasury Board of Canada Bill Matthews disputed this interpretation during testimony at the Standing Committee on Government Operations and Estimates.

“There is not exemption from any law,” he said on Feb. 12. “The exemptions have to be relevant to the legislation or regulation the minister bringing forth the proposal is responsible for, so they’re boxed in.”

However, Green Party Leader Elizabeth May, who presented an amendment that was defeated during Monday’s committee meeting to limit the exemptions to just regulatory sandboxes in the financial sector, also expressed concerns about the scope of the amendments.

“It can’t be that broad,” she told the committee on Monday. “It should be restricted to its historic, traditional use of the term regulatory sandbox, to financial innovations, innovations within the financial sector.”

Champagne has said other jurisdictions have used regulatory sandboxes, but May said those jurisdictions which included the United Kingdom Financial Conduct Authority in 2017 and the Monetary Authority of Singapore in 2016 were primarily for innovative financial products, which represent a much narrower approach to the regulatory tool.

NDP Interim Leader Don Davies said he heartily agreed with May’s assessment.

“In my view, I don’t think it’s an exaggeration to say Bill C-15 contains a serious threat to Canada’s democratic foundations,” said Davies. “This means things like labour standards, health and safety rules, environmental protections, indigenous rights, privacy laws and many more could be set aside at a minister’s discretion.”

On Friday, the CCLA published a letter to the federal government along with signatures from over 100 organizations asking the federal government to remove the provision altogether.

“If passed, the amended Red Tape Reduction Act would introduce vague and overbroad notions like “competitiveness” and “economic growth” as legitimate reasons for exemptions from any Act of Parliament,” the letter said. “Left for the interpretation of the minister that wants to wield them, these terms can mean anything.”

The new guardrails brought forward through Conservative MP Sandra Cobena’s amendments, include expanding the list of legislation that can’t be exempted, to include the Access to Information Act, the Auditor General Act, the Canada Elections Act, the Conflict of Interest Act, the Criminal Code, the Export and Import Permits Act, the Financial Administration Act, the Foreign Influence Transparency and Accountability Act, the Investment Canada Act, the Lobbying Act, the Nuclear Safety and Control Act, the Privacy Act, the Proceeds of Crime (Money Laundering) and Terrorist Financing Act or the Public Servants Disclosure Protection Act.

Cobena’s amendments also include a mandatory 30-day consultation prior to making the exemption and a mandatory report to Parliament 90 days after the exemption was made.

The amendments also narrow the exemptions to clean technology or the financial technology sectors of the economy and ensures the exemptions can apply to any business or commercial entity operating in those sectors.

“While I would have preferred that this provision be removed from the Budget Implementation Act entirely, given the importance of this provision, I believe that these amendments present a balanced and responsible path forward,” Cobena told the committee.

“It meets the urgency of this moment while preserving the accountability, transparency and democratic standards Canadians expect.”

In a statement, Bussières McNicoll said Monday’s amendments increase transparency and are step in the right direction.

“However, even as amended, the proposed exemption powers remain anti-democratic and overly broad,” she said. “We reiterate our call to Parliamentarians to remove Part 5, Division 5 from Bill C-15.”

National Post

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