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Supreme Court upholds interprovincial trade law in cross-border alcohol case

New Brunswick resident Gérard Comeau buys beer at a store in Listuguj, Que., on April 29, 2016.

Serge Bouchard/The Globe and Mail

Canada has no constitutional guarantee of free trade between provinces, the Supreme Court has ruled in upholding a fine against a New Brunswicker who brought alcoholic beverages from Quebec into his home province.

Gérard Comeau was fined $292 after the RCMP caught him six years ago with 14 cases of beer and three bottles of spirits from Quebec. (Mounties on the Quebec side followed him back to the Restigouche River and radioed ahead to their colleagues on the other side as he crossed a bridge.) The province has a limit of 12 pints of beer or one bottle of liquor purchased outside its borders.

When he successfully fought the fine in New Brunswick Provincial Court, the case became about much more than beer. It had potential consequences for the flow of all manner of goods, from eggs to chicken and soon, to marijuana.

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But the Supreme Court of Canada ruled unanimously on Thursday that New Brunswick was within its rights to fine Mr. Comeau. The case turned on Section 121 of the 1867 Constitution, which says goods must be “admitted free” as they move from one province to another. The court said the term, although ambiguous, should be interpreted in light of the principle of federalism, which allows regional diversity and local concerns to be reflected within a single nation.

“The federalism principle supports the view that provinces within a federal state should be allowed leeway to manage the passage of goods while legislating to address particular conditions and priorities within their borders.”

The ruling was authored by “The Court” − a signature used in major cases to lend a ruling more weight.

The court said the provinces cannot set out to impose trade barriers on the flow of goods. But as long as the provinces are regulating goods for a different purpose − as in Nunavut and the Northwest Territories, which control the flow of liquor from elsewhere for public-health reasons − the side-effects on trade must be allowed.

New Brunswick said its purpose is to manage the supply of liquor in the province, not to set up trade barriers.

The ruling was quickly seized on in the dispute between Alberta and British Columbia over a pipeline expansion, with B.C. saying a proposed Alberta law that would restrict the flow of oil out of the province would be struck down by the Supreme Court as a barrier to the flow of goods.

In Ottawa, the Conservative Party called on Prime Minister Justin Trudeau to do more to reduce interprovincial trade barriers, citing a Senate study that put their cost at more than $50-billion a year. The Prime Minister said in London that the government will look at the decision, but that it has made progress with an internal free-trade agreement last year.

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Ian Blue, a lawyer representing Mr. Comeau, said the judges shrank from doing their constitutional duty. “I thought the Supreme Court would have a little more courage than they showed,” he said in an interview. “We consider it a political decision to favour the status quo.” By that, he meant that the court “bought into the broader provincial rights paradigm that we live in nowadays.”

Others cheered. Rob Cunningham, senior policy analyst with the Canadian Cancer Society, which intervened in the case, said a decision in favour of Mr. Comeau could have affected public health by allowing people to get cigarettes from provinces such as Quebec that have lower tobacco taxes. “Had the decision gone the other way, it would have opened the floodgates for interprovincial cigarette smuggling,” he said.

Provincial regulations on the sales of cannabis, once possession is legalized this summer, would be easy to evade if the provinces could not set the rules within their borders, he said. “It would have been a race to the bottom for health, safety and environmental standards.”

A New Brunswick judge who heard expert evidence from a single historian ruled that Canada’s founding fathers intended to allow internal trade to be completely free. But the Supreme Court said the judge substituted an expert’s opinion for nearly a century of appellate court rulings.

The Supreme Court of Canada has ruled to maintain the status quo on interprovincial trade, including the sale of alcohol. The Canadian Vintners Association says it will continue to work to remove trade barriers for Canadian wine. The Canadian Press

Paul Bates, a lawyer who represented the Consumers Council of Canada, which intervened in the case, called the decision a “classic Canadian compromise.”

“We don’t live in a land of constitutional absolutes. We live in a land of compromises and reconciliation.”

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He said the decision is good for consumers, who will be able to benefit from the protections of provincial laws, such as those that prohibit hazardous products that may be found in other jurisdictions.

But Alexandre Moreau, a public policy analyst with the Montreal Economic Institute, was disappointed. “It’s a big win for government monopolies, but it’s a guaranteed loss for 37 million Canadians.”

He cited the trucking industry: Provincial regulations on such things as tire size and the number of hours a driver may be at the wheel cause some firms to send their vehicles through the United States on trips between Canadian destinations. Or just to trade with U.S. states.

New Brunswick Provincial Court Justice Ronald LeBlanc had upended a 1921 ruling by the Supreme Court of Canada establishing that while customs duties are not allowed, other trade barriers are. Usually, lower-court judges have to follow Supreme Court precedents. But Justice LeBlanc cited the Supreme Court’s 2013 ruling on prostitution laws, which established that when the facts and circumstances of a case change, lower-court judges can overturn rulings of higher courts.

In the Comeau case, however, the Supreme Court said all that had changed was that an expert had testified with a different view of Canadian history. If lower-court judges were allowed to overturn precedents for that reason, Canadian law would become chaotic, it said.

The Comeau case was the last to be heard by Beverley McLachlin before she retired as chief justice in December. She participated in the ruling.

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