Doing Business in Canada – Part 1(*1) – The Canadian Legal System

Canada is a federal state with a constitution. Canada has an elected parliamentary system of government. In addition to the federal government it has ten provincial governments, three territorial governments. At the federal level Canadians elect the prime minister and at the provincial levels, the premier. The Constitution Act, 1867 sets out the powers assigned to the federal government and the powers assigned to the provincial and territorial governments. English common law is applied in nine provinces and three territories. French civil law is applied in the province of Quebec.

Federal jurisdiction was designed to encompass decisions that affect all Canadians across the vast country – matters of national significance. The federal government has powers that include national defence, foreign affairs, employment insurance, banking, federal taxes, the post office, federal taxes, fisheries, shipping, railways, telephone, pipelines, indigenous lands and rights and criminal law. Provincial and territorial jurisdiction includes direct taxes, hospitals, prisons, education, marriage, property and civil rights. Agriculture and immigration is shared. Certain aspects of provincial powers are delegated to municipal governments, which enact their own bylaws. Legislative jurisdiction is subject to limits provided by the Canadian Charter of Rights and Freedoms, which forms part of the Consitution Act, 1982.

Depending on the business, it may be subject to either federal or provincial regulation. For example, an airline may be subject to federal law, such as the federal labour code, for matters dealing with labour and employment but be also subject to provincial laws dealing with real property.

The division of powers is further complicated by the “opting” out by provinces from federal programs. For example, Quebec administers its own provincial pension plan. It operates separately from the Canada Pension Plan.

In addition, unique arrangements have been developed for Aboriginal peoples in different regions of Canada. Aboriginal groups may have a range of rights and powers over certain lands under the Indian Act and pursuant to historic and treaty rights.

The federal and provincial and territorial governments are all responsible for the judicial system in Canada. (*2) Canada’s judiciary is completely independent from other branches of government and all government action is subject to judicial scrutiny. Canadian judges are appointed for life. Canadian judges are fair and well-respected.

Only the federal government can appoint and pay judges of the superior, or upper-level, courts in the provinces. Parliament can also establish a general court of appeal and other courts. It has created the Supreme Court of Canada, the Federal Court and the Federal Court of Appeal, as well as the Tax Court. 

Parliament also has exclusive authority over the procedure in courts that try criminal cases. Federal authority for criminal law and procedure ensures fair and consistent treatment of criminal behaviour across the country. 

The provinces administer justice in their jurisdictions. This includes organizing and maintaining the civil and criminal provincial courts and civil procedure in those courts.

The graphic below is an outline of Canada’s Court System (*3).

The Supreme Court of Canada is Canada’s final court of appeal. Its nine judges represent the four major regions of the country. Three of them must be from Quebec to adequately represent the civil law system.

The Federal Court specializes in areas such as intellectual property, maritime law, immigration law, federal-provincial disputes and civil cases related to terrorism.

The Provincial and Territorial level courts are roughly the same across Canada. Each province has three levels: lower courts, superior courts and appeal courts. Nunavut is the exception. It has a single-level trial court.

Administrative boards and tribunals deal with certain types of disputes over the interpretation and application of laws and regulations. Examples are human rights, entitlement to employment insurance or disability benefits and refugee claims. Decisions of administrative tribunals may be reviewed by a court to ensure fairness and proper legal process.

Canadian courts may look to foreign judicial decisions for guidance, and both the federal and provincial legislatures frequently adopt foreign legislative models: for example, the Personal Property Security Act in force in Ontario is essentially the same as Article 9 of the U.S. Uniform Commercial Code. 

Arbitration clauses in agreements are generally enforced by courts and arbitration is extensively used. Canadian courts will generally recognize arbitration decisions, including foreign awards.

Canada also hosts a number of mediations with many former judges and senior lawyers available to mediate complex commercial disputes.

Canada provides an attractive climate for foreign businesses. It has stable political and economic systems. It has abundant natural and human resources.

Endnotes

(*1)     This article is part 1 of 17 parts dedicated to a review of doing business in Canada. Subsequent articles will include: Foreign Investment, Business Structures, Securities Regulation, Canadian Immigration, Employment Laws, Directors and Officers, International Trade, Competition, Sale of Goods, Intellectual Property, Privacy, Real Property, Environmental Laws, Taxation, Insolvency, Litigation and ADR.

(*2) see http://www.justice.gc.ca/eng/csj-sjc/just/07.html

(*3) Ibid