An Ontario court ruling that blocked the sale of Hydro One Inc. has given unions a potent tool to challenge other government policy, labour law experts said yesterday.
Hydro One's shares were supposed to go on sale in June in the largest initial public offering in Canadian history. But last week Mr. Justice Arthur Gans of ther Ontario Superior Court ruled that the legislation creating Hydro One did not give the province the authority to sell the utility. The ruling came after two unions challenged the privatization in court.
The IPO is now in turmoil and the provincial government has yet to say if it will amend the legislation or seek an appeal. Investment bankers involved in the deal expect the government to appeal the ruling.
But opposition politicians are vowing to kill the sale. Yesterday, Ontario Liberal Leader Dalton McGuinty asked the Ontario Securities Commission to stop the IPO.
"I'm saying everything should be put on ice at this time," Mr. McGuinty said in an interview. "I don't want the OSC to make assumptions about either legislative changes or a [future]electoral mandate being obtained by the government."
An OSC spokesman said the regulator has no intention of making a decision about Hydro One's IPO because the utility has only submitted a preliminary prospectus. The OSC formally reviews public offerings only after a final prospectus has been issued.
Judge Gans' ruling involved a challenge by the Canadian Union of Public Employees (CUPE) and the Communications, Energy and Paperworkers Union of Canada (CEP).
However, neither union directly represents Hydro One workers. Lawyers for the province argued that as a result, CUPE and CEP should not be allowed to sue.
"Unions have capacity to sue solely for purposes of matters relating to labour relations," the province argued in court.
Hydro One employees are directly represented by the Power Workers Union (PWU), which supports the privatization. The PWU is affiliated with CUPE, but it opposed CUPE and CEP in court.
Judge Gans ruled that unions have interests that go beyond "mere economic gain for workers.
"I do not accept the suggestion that the applicants are mere busybodies or officious intermeddlers. They are neither," the judge said.
Judy Darcy, head of CUPE, said the ruling builds on a 1991 Supreme Court of Canada decision that said union dues can be used to finance a range of political activities.
"I'm not aware of a case since the [Supreme Court]decision, certainly not one of this magnitude, where unions' rights in that area have been reconfirmed," Ms. Darcy said yesterday.
"This judge, on a major major public interest matter, has ruled that unions have a responsibility and a right to stand up for the public interest. It's very, very significant."
Legal experts said the decision has painted the Ontario government into a corner. If it appeals the decision, it could be entangled in a lengthy and messy court dispute. If it doesn't, other public interest groups could use the courts to challenge other controversial government moves.
The prospect of such litigation was setting off alarm bells at a variety of organizations that do business with the province.
"You can imagine a whole set of scenarios where frustrated interest groups such as the teachers will use this decision to challenge controversial government decisions," said one Bay street lawyer who works with the province.
"If the government doesn't come out with guns blazing they could face any number of challenges," he said.
Kevin Coon, a Toronto lawyer who specializes in labour law at Baker & McKenzie, said the language in Judge Gans' ruling "will be seized upon by the trade union movement to take to their next fight, wherever that could be."
Paul Waldie