On October 13, 2023, the Supreme Court of Canada released its highly anticipated judgment on constitutional challenges to the federal Impact Assessment Act (IAA) raised by the Province of Alberta. In a 5-2 split decision, a majority of the Court concluded that, while the federal government is permitted to create a federal impact assessment regime, the current “designated projects” scheme created by the IAA is beyond the legislative authority of the federal government and therefore unconstitutional. You can read more about the decision here.
Cooperative federalism and the presumption of constitutionality
In their reasons, both the majority and the dissenting judges invoked the principle of cooperative federalism. While acknowledging the concept, the majority cautioned against using cooperative federalism to erode Canada’s “constitutional balance,” and held that it cannot override or modify the separation of powers. They left only a limited role for the concept to play in this case, writing that it is open to Parliament and the provinces going forward to work together to develop solutions for environmental regulation “harmoniously, in the spirit of cooperative federalism.”
The dissent, however, relied heavily on cooperative federalism. For Justices Karakatsanis and Jamal, cooperative federalism “required” the Court to evaluate the constitutionality of legislation to favour, where possible, the preservation of statutes, and to avoid blocking laws that promote the public interest. More tangibly, the dissenting justices asserted that the concept of cooperative federalism gives rise to the “presumption of constitutionality” which requires that when statutes use broad terms, the Court should presume that these words are not intended to extend the operation of the law beyond that level of government’s jurisdiction.
In their support of the legislation, the dissenting justices highlighted that provincial participation is integrated into the IAA scheme, thereby promoting cooperative federalism. Specifically by providing for joint federal-provincial environmental assessment and by requiring federal authorities to consider provincial comments and assessments. The majority was not sold on this. The IAA did permit a provincial impact assessment to be substituted in lieu of an IAA assessment, but only if that provincial assessment considered the same mandatory factors as the IAA. This effectively imposed the federal factors from the IAA on any provincial assessment.
The meaning of “effects within federal jurisdiction”
One of the main reasons the majority decided the IAA was overbroad and unconstitutional was because of the term “effects within federal jurisdiction.” These words were core to the IAA. The presence of “effects within federal jurisdiction” determined if a project would be subject to the IAA, whether an assessment of its impacts would be required, the basis for deciding if the project could go forward, and what conditions might be imposed on it. The majority took issue with these words, finding that they captured positive and adverse effects of any magnitude.
After considering the full context and purpose of the IAA, the dissent disagreed. Relying on the presumption of constitutionality, they interpreted the term “effects within federal jurisdiction” to include a materiality threshold, i.e., that only effects of significant magnitude fell under its purview. Further, they argued that even if the majority’s interpretation of the term was reasonable, the presumption of constitutionality demanded that it be rejected in favour of the dissent’s constitutionally conforming interpretation. Where a law is open to both a wide and narrow interpretation, the dissent suggested that the Court should “read down” its scope to preserve its constitutionality. The majority’s response to this reasoning was that the Court must respect Parliament’s drafting choices, it cannot generously interpret the legislation to the point of rewriting it.
In adopting a permissive attitude towards broad language in the IAA, the dissent also relied on the “precautionary principle” for determining the constitutionality of environmental legislation. This principle recognizes that environmental damage can be irreversible and hard to predict with precision. Accordingly, lack of full scientific certainty should not be used as a reason to postpone measures that prevent environmental degradation. The dissent applied this principle to justify the IAA’s use of the term “may cause environmental changes,” which the majority had argued was too low of a threshold for blocking a project during the statutory assessment process.
Presumption of constitutionally conforming administration
In their reasons, the dissent also invoked the “presumption of constitutionally conforming administration.” This principle entails presuming that administrative decision-makers will exercise their powers in good faith and in a constitutionally compliant manner; legislation is not unconstitutional simply because it could conceivably be misused. In essence, the dissent argued that a hypothetical worst-case-scenario use of a power granted by the IAA is not grounds to invalidate the whole legislation. Further, the dissent placed considerable emphasis on judicial review as a counterweight for the broad discretion granted to the federal government by the IAA.
According to the majority, the constitutional validity of a law and its administrative application are distinct concepts. The majority found that being able to hold decision-makers to account by judicial reviews is not sufficient to save a law that grants, “virtually untrammeled power to regulate projects regardless of whether Parliament has jurisdiction to regulate a given physical activity in its entirety.” The prospect of recourse to administrative review cannot save an ultra vires law.
In determining if legislation is within the jurisdiction of the level of government that enacted it, a court must characterize the legislation’s purpose and effects, known colloquially as the “pith and substance” test. Then, the Court evaluates whether the purpose and effect fit into one of the subjects that the Constitution places under that level of government’s purview. The majority characterized the IAA’s purpose and effects as regulating “designated projects” with the aim of “mitigating or preventing their potential adverse environmental, health, social and economic impacts.” This characterization led to the conclusion that the IAA overstepped the federal government’s jurisdiction, and intruded into areas reserved for the provincial government to regulate. In its analysis, the majority considered both the legal and practical effects of the IAA. Legal effects being how the provisions in the legislation affect the rights and liabilities of those subject to its terms, while the practical effects are “‘side effects” or consequences that “flow indirectly from the application of the statute.”
Of note, the majority identified two practical effects of the IAA: first it results in delays of indeterminate duration because the Minister of the Environment can extend the decision-making timeframe while Cabinet is empowered to grant an unlimited amount of further extensions. Second, the impact assessment process requires the project proponent, federal authorities, and other implicated jurisdictions, to expend resources.
The dissent disputed the majority’s focus on the practical effects of the legislation. They cited the case of R. v. Morgentaler,  which held that the practical effects of legislation are of limited relevance in determining whether legislation is ultra vires. The dissent also relied on that case to support the idea that courts should focus on the legal effects to avoid the risk that concerns presented as practical effects end up really being critiques of the wisdom or efficacy of the legislation. Part of the court’s caution in Morgentaler was in the context of laws that had been in effect for only a short time, where assessments of the practical effects are speculative or theoretical; a concern clearly not reflected in the court’s decision in this reference.
The federal government has indicated it intends to amend the IAA as a result of the SCC decision. Dentons will continue to monitor legislative changes and any application of this decision by the courts.
For more information on this topic, please reach out to the authors, Laurie Livingstone, Brandon Barnes Trickett and Stefan Rus.