The Power of Perspectives

The Canadian Bar Association

Yves Faguy

CBA Futures

Legal futures round-up

By Yves Faguy October 13, 2017 13 October 2017

Legal futures round-up

Inspired by the CBA Legal Futures report on Transforming the Delivery of Legal Services in Canada, here’s our regular round-up of noteworthy developments, opinions and news in the legal futures space as a means of furthering discussion about our changing legal marketplace.

Here at home, Conduit Law, after an 18-month affiliation, announced its “renewed independence” from Deloitte.  Canadian national expansion is certainly on the table. Founder Peter Carayiannis told CBA National he was “definitely looking forward to being an entrepreneur again” and hinted at plans for expanding Conduit Law nationally.

Meanwhile Big Four accountancy giant PwC  announced it is opening a U.S. law firm in Washington, D.C. The firm will operate as an affiliate, ILC Legal, and will work primarily on international corporate restructuring matters. PwC is also making a move into the alternative legal services market with a new flexible lawyering service.

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Trade

NAFTA rumble: Get ready for Round 4

By Yves Faguy October 10, 2017 10 October 2017

NAFTA rumble: Get ready for Round 4

 

 

 

Round 4 of the NAFTA renegotiation begins on Wednesday.  And predictably, U.S. President Donald Trump is again making threats about pulling out of the trade deal, just as Trudeau is about to visit the White House to impress upon him that Canada is not really the problem when it comes to viewing it through the lens of trade deficits.

Why this week is important: There are concerns that Trump's tactics are designed to sabotage NAFTA, rather than improve the trade deal. Following this round of negotiations, we should have a better idea of whether the U.S. is serious about striking a balanced deal that all parties can sell back at home.

What could derail negotiations: We can expect that Trump's negotiators will continue to push for raising North American content requirement (as well as for the U.S.) in NAFTA's auto rule of origin, even though U.S. car manufacturers oppose the proposal.  The U.S. is also now applying pressure to get more access to Canada’s supply managed dairy industry. It’s unclear how serious the Trump administration is about this item. What is clear is that it won’t be an easy sell in Canada. Particularly as the parties to NAFTA are also discussing procurement, where Trump is pushing for a “Buy American” exemption – also contentious. And fixing NAFTA’s broken dispute settlement process is also a priority, as well as eliminating Chapter 19 (in antidumping and countervailing duty matters). Unfortunately with recent trade action against Bombardier lurking in the background, positions appear to be hardening.

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The Supreme Court

SCC: Residential Schools Settlement Agreement records may be destroyed

By Yves Faguy October 6, 2017 6 October 2017

SCC: Residential Schools Settlement Agreement records may be destroyed

 

In Canada v. Fontaine, the Supreme Court of Canada has ruled that files on individual residential school survivors may be destroyed.

What the dispute was about: The Indian Residential Schools Settlement Agreement, implemented over a decade ago, settled several class actions brought by survivors of residential schools. It established what’s known as the Independent Assessment Process to compensate victims of psychological, physical or sexual abuse. Making a claim under the IAP involved disclosing highly sensitive information for an adjudicator to examine to determine compensation. The claimants were promised confidentiality. Asked how to dispose of the records, the Ontario Superior Court initially found that they must be destroyed following a 15-year retention period during which claimants could decide instead to have their own records preserved. After the Ontario Court of Appeal upheld that order, it was up to the top court to decide what to do with them. The issue is divisive. Some groups want to preserve a historical record of the residential school abuses, while others worry about causing further distress to victims and their families.

How a unanimous court saw it: “The destruction order is subject to a 15-year retention period, during which claimants may choose to have their IAP Documents preserved and archived. That choice will be brought to the attention of claimants through a notice program administered by the Chief Adjudicator. We recognize that this order may be inconsistent with the wishes of deceased claimants who were never given the option to preserve their records. A perfect outcome here is, in these circumstances, simply not possible. In our view, however, the destruction of records that some claimants would have preferred to have preserved works a lesser injustice than the disclosure of records that most expected never to be shared.”

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CBA advocacy

The CBA’s intervention on common interest privilege

By Yves Faguy October 5, 2017 5 October 2017

 

The CBA intervened this week in Iggillis Holdings Inc. v Canada (National Revenue) at the Federal Court of Appeal in Edmonton. Mark Tonkovich, Jacques Bernier, and Stephanie Dewey of Baker Mckenzie appeared for the CBA in this matter of common interest privilege. We interviewed Tonkovich about the intervention.

CBA National: The Federal Court's ruling in Iggillis Holdings turns on the question of common interest privilege. How does the concept work and in what context?

Mark Tonkovich: The concept is better thought of as an exception to the principle that disclosing solicitor-client privileged material to parties outside the solicitor-client relationship waives that privilege.  The common interest exception is essentially that a client's sharing of privileged material with a third party in pursuit of a common interest between the two will not waive privilege as against any other person.  The question of context is actually key here: while the Federal Court accepted that the common interest principle applies in the litigation context, the Court concluded that there is no similar rule in the transactional or advisory (non-litigation) context.

N:  So what is at stake in the wake of the Federal Court ruling?

MT:  The Federal Court of Appeal is being asked to provide clarity on the common interest exception, including whether it exists outside of litigation on the facts of this particular case (which involved two groups of clients and two different law firms contributing to a single tax law memorandum).  The appeal decision will be especially important because the Federal Court's very detailed analysis actually introduced significant confusion and uncertainty into the law of privilege by departing from prior cases.  It also cast doubt over established practices on how Canadian lawyers operate in transactional fields where multiple clients benefit from a common understanding of the law governing their transaction.  The issue arose in a tax case, but it applies in contexts as varied as M&A, environmental, competition, IP, securities, real estate, divorce and matrimonial, and wills and estates law.

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Culture

Netflix Canada: Preferential treatment or the beginning of something new?

By Yves Faguy October 4, 2017 4 October 2017

Netflix Canada: Preferential treatment or the beginning of something new?

 

It’s been a bit of bumpy ride for Heritage Minister Mélanie Joly, whose Netflix deal is drawing mixed reactions, though not in her home province of Quebec, where opposition to the deal (and her sales job) is near unanimous. The government has now passed a motion to impose provincial sales tax on the streaming entertainment giant. The major broadcasting and cable companies in the rest of Canada are also unhappy that Netflix doesn’t have to collect and remit GST or HST, which they do.

What’s the deal? Netflix has agreed with Ottawa to produce at least $500 million in new Cancon over the next five years, in both official languages. So far, only $25 million is committed to develop a market development strategy for French-language content and production.  This hasn’t been well received.  The government is also saying it won’t prop up outdated business models that aren’t viable in the media industry (though Andrew Coyne isn’t so sure). This also hasn’t been well received in some quarters.

Why not pay a sales tax? Michael Geist notes that extending GST to foreign-based digital services is still the subject of debate in Ottawa and elsewhere in the world – a point that Joly herself has tried to make. In the meantime, Geist writes, “requiring Netflix to collect and remit them without developing a broad-based approach to digital sales taxation makes no sense,” as it would not support Cancon anyway.

$500 million? Really? This part is unclear. Netflix could benefit from production tax credits that could range anywhere from 25-36 per cent of its expenses ($125-180 million), according to tax experts that La Presse interviewed.  The Heritage Minister says that Netflix Canada, under foreign control, would not be able tap in to those tax credits. We're going to need clarity on that.

Bottom line: The prevailing feeling among critics is that Netflix is getting preferential Cancon treatment and that it should pay tax like everyone else.  But defenders of the emerging policy give the government and Joly credit for addressing the challenge of making Canadian culture competitive in a global environment and trying a new tack in cultural policy. 

Why the story is far from over:  There is a plan afoot to review The Broadcasting Act, the Telecommunications Act and the Copyright Act. Last week’s announcement is only the beginning.

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