OTTAWA – The pace of play at the Federal Court of Appeal’s (FCA) hearing on Globalive Wireless’ ownership yesterday was certainly not like an NHL playoff game, but both sides used their opportunities to rough up their opponents.
After an in-depth explanation why the Federal Court erred in its decision to overturn the Governor in Council (GIC) decision giving Globalive the green light to operate, lawyers for the government of Canada took their first jab at Public Mobile, arguing that the company shouldn’t have even had the right to appeal the GIC in the first place. They said Public Mobile’s “standing” in the case was marginal at best because they were intervening for purely commercial reasons.
In response, Justice Stratas raised concerns of a potential to “immunize” the GIC from further review. “If standing isn’t granted,” he asked, isn’t the “the GIC immunized from any sort of challenge? Isn’t this sort of a classic situation where standing has to be granted?”
Alexander Gay, a lawyer with the Attorney General of Canada, representing the government, said it’s about characterizing the application.
“The concern here is about leveling the playing for themselves; it isn’t one where they’re saying we have greater public policy concerns,” he said. “So clearly within this context, when you characterize their concerns, which are very important, there’s an alternate means of getting at the issue. Adopt the very same financial situation that Globalive has adopted, put that to CRTC and if you’re not happy with the results, take it to the Federal Court of Appeal or go to the GIC.
To which Justice Sexton responded: “The other way to deal with this is to let every person who is concerned about foreign debt financing bring their own applications.”
For Public Mobile, the issue is black and white: Was the governor-in-council bound by the “mandatory recipe” as set out in Section 16 of the Telecommunications Act for determining ownership and control? “Parliament has constrained both the CRTC and the Governor in Council by prescribing the specific factors that must be taken into account in determining Canadian ownership and control,” explained Public Mobile lawyer John Lasken.
Public Mobile contends that the GIC exceeded its power by introducing new ingredients to the recipe of ownership and control. “In our submission that is precisely what the governor in council did in stating in the context of a determination on whether the requirements of section 16 were met that the act should be interpreted in a way that ensures access to foreign capital, technology and experience,” he said.
Justice Sexton raised the issue that foreign debt is not specifically mentioned in that section of the Act. “You say the GIC is bound by the strict word of section 16 but section 16 doesn’t mention foreign debt at all. So what are the words in section 16 that the Governor in Council did not have regard to when it considered the issue of foreign debt?” he asked.
After dancing around the answer for a few minutes, Lasken said “A debt holder can exert control.”
“Common sense tells you that, but section 16 doesn’t tell you. You’re talking about a strict interpretation of section 16,” retorted Justice Sexton.
“Section 16(3)(c) sets the contours of the inquiry and the contours relate to control in fact,” Lasken replied.
Lawyers for Telus Corp. pulled out transcripts from Hansard (transcripts of debates in the House of Commons) to kick off its testimony. Lawyer Kenneth Jull noted that at the time Perrin Beatty, who tabled the proposed Telecommunications Act for third reading, highlighted the three principles of the act: ensure that Canadians have access to affordable and reliable telecommunications service; to improve the competitiveness of the Canadian telecommunications industry; to promote Canadian ownership and control of the Canadian telecommunications infrastructure.
“The last of these three principles, that is the Canadian ownership and control, is fundamental to the achievement of the first two,” Jull said, quoting Beatty.
Telus also spoke about the foreign debt matter.
“We’re not saying this act prohibits a Canadian company going out and obtaining financing from a foreign bank. This act does not prohibit a Canadian company from going to Bank of America to Deutsche Bank, any number of banks. But what this act does prohibit control by a foreign entity and that’s the case here,” he said.
With respect to the foreign debt issue raised earlier in the hearing by Justice Sexton, Jull described Section 16 as a “basket clause” designed to cover creative methods of trying to get around foreign ownership.
“You can’t set out each and every possible method of control,” said Jull. “You’ve got [subsection] (a) which covers directorships, that’s pretty clear. You’ve got [subsection] (b) which covers ownership, that’s pretty clear. You’ve got the regulations, those are pretty clear, and the basket clause covers off everything else, side deals, debt, other methods. And it has to be by definition open ended, because it’s a basket clause.”
Telus delved into the matter of control as well, noting that the OIC’s determination on this is flawed. The decision doesn’t talk about being controlled by Canadians, said Jull, but rather not being controlled by non-Canadians. “That is logically and mathematically flawed and impossible,” he said, noting that if 51% of any given company is controlled by Canadians, then mathematical the remaining 49% are non-Canadians.
“There has to be a directing mind in a corporation. There is no in between,” he stated, adding that the Act dictates the directing mind has to be Canadian.
The GIC “has created chaos and confusion as to what the rules are,” Jull said, arguing that the FCA should uphold the lower court ruling because the OIC “perpetuates confusion and it’s inconsistent with the legislative intension of the framework.”
A decision on the appeal was reserved and will be released as soon as possible, the bench said.
