Breaking down the Supreme Court fees ruling

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A decade in the making, the latest Supreme Court ruling against the banks and credit card companies over foreign exchange fees is an important one. Yet lawyers of all stripes admit the case is complex, and that means it can be hard for the general population to appreciate its significance.

First, read this overview of the ruling. To go deeper, here's a quick explainer of the two core issues.

Paramountcy and Interjurisdictional Immunity

The Canadian Bankers Association, which represented financial institutions at the Supreme Court, argued that the relevant provisions of the Quebec Consumer Protection Act in this case "are inapplicable to banks under interjurisdictional immunity and inoperative under federal paramountcy."

Interjurisdictional immunity prevents laws "enacted by one level of government from impermissibly trenching on the 'unassailable core' of jurisdiction reserved for the other level of government," according to the Supreme Court. Applying this, the banks argued that the relevant provisions of Quebec's CPA would impair core federal banking power.

"We disagree," the court said bluntly.

To start, the Supreme Court ruled that the foreign exchange fees are not considered 'core federal banking power' and then went on to say that even if they were "imposing a broad disclosure requirement for charges relating to currency conversion in no way impairs that power." In other words, the relevant portions of Quebec's consumer code do not threaten the power of the Bank Act; they just deal with different issues.

The issue of paramountcy sounds like the same thing, but it is a distinct idea under Canadian law and "is engaged where there is a conflict between valid provincial and federal law," according to the Supreme Court. In Canada, consumer banking products are federally regulated under documents such as the Bank Act and the Financial Consumer Agency of Canada Act, while consumer protection in Quebec is regulated under the CPA.

In the Marcotte case, as it is known, the Banks argued that their federal governance is designed to provide for "clear, comprehensive, exclusive, national standards applicable to banking products and banking services offered by banks" – language included in the preamble to the Bank Act. However, the Supreme Court ruled that the relevant portions of the Quebec CPA deal with the province's contractual norms, and contract laws are always handled province-by-province. That means, once again, both the Bank Act and Quebec's consumer code can co-exist.

"If the Banks' argument amounts to claiming that the federal scheme was intended to be a complete code to which no other rules at all can be applied, that argument must also fail as the federal scheme is dependent on fundamental provincial rules such as the basic rules of contract," the court stated.

Class Action Legitimacy

Before this ruling, it was unclear whether it was possible to bring a class action suit against multiple defendants in Quebec where the representative did not have a direct cause of action against each of them. In other words, can I sue all of the Big Six banks if I'm only a Toronto-Dominion Bank client?

The law was especially murky because there have been cases in which this has been allowed, but only after the "post-authorization" phase, meaning there could be two different readings as to whether it was allowed – pre-or-post authorization.

The Supreme Court says it sees no difference. "The question of whether representative plaintiffs can have standing against defendants with whom they do not have a direct cause of action must have the same answer whether or not it is raised before or after the class action is authorized."

After debating the issue, the court ruled that a small number of plaintiffs can sue multiple defendants, even if they don't have contracts with all of the defendants, so long as the issue at hand is applicable to a wide audience. In this case, the foreign exchange fees were applicable at all the banks and could affect all of their clients, therefore the plaintiffs had reason to launch a class action.