This morning the Supreme Court of Canada rejected the concept of a national securities regulator. They did this under the authority of s. 53 of the Supreme Court Act whereby the Federal government can directly refer to the SCC a question of law or facts concerning the constitutionality of proposed legislation. The Provinces too have similar provincial legislation permitting a Reference to their respective appellate courts.
On a Reference, answers to the questions posed by the government are not legally binding but due to practice have become so. Typically, the government referring the matter heeds the Court's decisions and either re-draft the legislation to conform to the precepts set out by the Court or return to the negotiating table if it is a matter of social or political policy. Thus, matters referred are issues of public importance, which require the speedy process of a Reference to receive timely input on the viability of proposed legislation before it is enacted.
Such a procedure to determine the correctness of legislation is not a tool broadly used in common law countries. Both the United States and Australia have found such a pre-vetting tool unconstitutional. England has a modified version through the use of advisory opinions.
The International Court of Justice will hear issues on reference. However, this practice has been criticized by many international experts. The procedure been used to garner support for controversial political issues without full support of the international community including the countries directly involved. A list of such reference cases can be found here.
Canada, on the other hand, has successfully used the Reference process for controversial issues. In 1981, the SCC determined, on Reference from three Provinces, the format of the patriation of the Constitution from the UK. As a result, the Federal government could not amend the constitution without unanimity. The provinces and the Federal government returned to the negotiating table, resulting in major changes to the Charter, including the addition of the s.33 "notwithstanding clause." This modification gave the provinces the power to override the application of certain sections of the Charter, including the fundamental freedoms, if such sections conflicted with provincial legislation. This later permitted the PQ government in Quebec to re-enact all of their provincial legislation with the override protection.
The Federal government has also used the Reference mechanism politically when it referred the hypothetical issue of Quebec secession in 1998. The decision, which determined a province could not unilaterally secede, also suggested that if a province had a popular mandate to do so, the Federal government had an obligation to negotiate on the issue.
Thus, we return to today's Reference with perhaps a better understanding of the process and the import of the decision. The SCC has decided, through a division of powers analysis, that a national securities regulator is inconsistent with our Constitution Act. Not doubt, this decision will do as References have done in the past, send the Federal government back to the drawing table and negotiating table, in an effort to implement, albeit in a different manner, their political intentions. The end result may prove, in the long run, to be the best result for Canada.