Introduction – what this post is about …
I attended the hearing in Vancouver, B.C. on August 4, 5 2015. At that time I wrote a group of posts (here and here) discussing my perception of the hearing. Those posts included expressions of my opinion that Justice Martineau was highly engaged, was working hard on understanding the issues, and was affording all parties a fair hearing. Although, disappointed with his decision (handed down on September 16, 2015), and not agreeing with his conclusions, I reaffirm my sentiments in the previous posts.
This post is more about the “system” than it is about Justice Martineau specifically. In a judicial system, it is possible for “reasonable people” to have “reasonable disagreements” about the facts and the law. I say the law. What is the law? Well, it consists of a number of different things. That said there are at least (and certainly more) two kinds of law:
Type 1 – Statutes, treaties, etc – to control people
For the most part, these are laws enacted by legislative bodies. This form of law requires or proscribes specific conduct. People must pay taxes, etc. These kinds of law are not (in general) applied according to principles of fairness and justice. (The U.S. tax system comes to mind.)
Type 2 – Charter of Rights and Constitutional Laws – to control governments
This is a higher level of law. In general, these laws are designed to control legislative bodies. These laws are designed to restrict what legislative bodies can do. The Canadian Charter of Rights is an obvious example
It is important to recognize that Justice Martineau’s decision was made in the context of a “Type 1 Law”. He was NOT interpreting a Charter of Rights or similar type of law.
Nothing in this post should be construed as disparaging Justice Martineau. In fact, I believe that his judgement has actually strengthened the claim that the FATCA IGA and enabling legislation violate Canada’s Charter of Rights.
My thoughts on Justice Martineau’s decision continued …
Late yesterday afternoon I wrote my initial
reaction response (remember to NOT “react”, but to “respond”) to Justice Martinueau’s decision. I have reread the decision (but still not that closely). I don’t have a lot to add to the discussion of what is in the decision. There really isn’t much in the decision. See my post from yesterday. Rather than continue the discussion of what is in the decision, this post will focus on what Justice Martineau’s decision means for the future.
But, first the assumptions through which Justice Martineau views the issues …
 On the other hand, under US domestic law, all US citizens are deemed to be permanent tax residents in the US for federal income tax purposes – regardless of whether or not they actually reside in the US. “US persons” who are subject to US tax laws also include other categories of persons who reside in the US such as green card holders. Accordingly, every Canadian resident who is a US citizen, even if he or she is also a Canadian citizen, is subject to US federal taxation on all of their income from all sources, wherever derived. US persons are also subject to various tax reporting obligations, which include registering for a taxpayer identification number [TIN], filing annual tax returns, reporting income and computing US tax payable. Under US tax laws, the obligation to file income tax returns and to comply with reporting requirements is not always dependent on the existence of an actual tax liability for a particular year.
What Justice Martineau’s decision means in the context of the overall anti-FATCA litigation …
To put it simply:
Justice Martineau has demonstrated the following:
1. Why a democracy needs a Charter of Rights to protect the interests of political minorities (even if those minorities are minorities because they are being claimed by the United States)
2. That the the rules for statutory, treaty and tax interpretation will NOT be interpreted to protect the rights of minorities
3. That if there ever was a case and plaintiffs that were designed to test the interpretation of the Canadian Charter of Rights and Freedoms, then Gwen and Ginny are the ones …
4. That the Canadian Charter of Rights and Freedoms is to be used (at the initiative of Gwen and Ginny) to protect Canada as a whole from the extra-territorial application of U.S. law and a Government of Canada that (at the request of the Canadian banks) is happy to surrender Canada’s sovereignty to the United States in general and the IRS in particular. All Canadians should be thankful for Gwen and Ginny!
What the Justice Martineau ruling really says and what it really stands for …
Basically, Justice Martineau is ruling on the narrow issue of the proper interpretation of the Tax Treaty, and in so doing he says:
– how unfair
The environment created in Canada and the US by their respective domestic tax laws, including FATCA and the impugned provisions with all their reporting obligations, is certainly harsh
– how stupid
Legally speaking, it is apparent that FATCA has overreaching effects in practice.
– how potentially unjust and extra-territorial (although it’s not his job to consider justice at all)
It is true that the IGA requires Canada’s explicit assistance with a foreign sovereign’s extraterritorial jurisdiction. And it is true that the threat of economic sanctions is a serious matter that deserves international scrutiny where it is exercised.
It’s the law. Full stop. (And U.S. law at that …)
The plaintiffs may find this deplorable, but apart from a constitutional invalidation of the impugned provisions or a change of heart by Parliament or Congress, or the governments of Canada or the US, there is nothing that this Court can judicially do today to change the situation. The impugned provisions have not been held to be ultra vires or inoperative. Judicial courage requires that judges uphold the Rule of Law.
In so doing, he has demonstrated that in the normal interpretation of statutes and Treaties, the very values that are enshrined in Human Rights documents (including Canada’s Charter of Rights) don’t matter.
To put it another way:
Justice Martineau’s decision has underscored precisely why your FATCA Canada lawsuit IS an appropriate case to allege a violation of Canada’s Charter of Rights. In so doing, he has (in my view) put a strong wind into the sails of the “The Good Ship Charter Challenge”.
I encourage you to read the decision. It’s not complicated. It’s not technical. Here it is.
Justice Martineau simply says that FATCA, the IGA, those deemed to be “U.S. persons” (too bad for you if you were born in the USA – just renounce) are all simply matters of law. It’s the law. It’s the law. Justice Martineau’s hands are tied. It’s the law.
You see, the whole purpose of a Charter of Rights is to protect minority groups from “It’s the law”.
The broader issue is NOT the tax issue. The broader issue is the “citizenship issue”.
Justice Martineau writes:
 The plaintiffs may see themselves as “accidental Americans” but the application of fiscal law is not concerned with rhetoric: it focuses on the actual reality of each taxpayer and his or her taxable income. There cannot be a proper assessment of the situation if “relevant information” needed to decide whether an income is taxable or not is voluntarily withheld by taxpayers who have not produced their declaration or who have failed to declare all their sources of income worldwide, assuming that reporting obligations ensure compliance with fiscal laws. The environment created in Canada and the US by their respective domestic tax laws, including FATCA and the impugned provisions with all their reporting obligations, is certainly harsh, but it is now the law of the land. Perhaps US persons will seriously consider abandoning or relinquishing their Canadian or US citizenship. This will be a voluntary choice. Still, the Court must apply the laws enacted by Parliament. The characteristics of these laws – whether wise or unjust – are a matter for political debate, not judicial scrutiny. Parliament is sovereign; the will of people in a democracy is also sovereign.
Hmmm … I thought that most of these people were actually Canadian citizens resident in Canada!
Although no doubt offensive to some, I repeat what I witnessed in the Courtroom on August 3, 4 2015.
The Government of Canada, was spending money belonging to Canadian taxpayers to defend it’s “God Given” right to, to trade one million Canadian citizens into “U.S. Tax Slavery” in return for the United States to NOT attack Canada’s banks. Oh, and the Government of Canada is also agreeing to let the U.S. come back every year with new criteria for deciding which Canadian citizens they want to make U.S. taxpayers.
What does citizenship mean anyway? What are the rights and obligations?
Justice Martineau comments:
 According to the evidence on record, it is not true that under US domestic law US citizens who are bona fide residents of Canada bear no fiscal obligations to the US. Being a citizen of any state normally carries benefits (e.g. the right to enter or exit the country freely, diplomatic assistance, etc.). There are also obligations, some of which may be obvious and others less obvious, especially in the case of dual citizenship where an individual has never held a passport, worked, or declared revenues in their birth country. At this point in time, the Court is not in a position to make a general declaration having the legal effect of exempting all Canadian citizens from the application of US tax laws on the basis of the double taxation exception. That said, I fully appreciate the difficult situation that the plaintiffs – along with hundreds of thousands of dual citizens and permanent residents of Canada – may face after September 30, 2015.
What is the the “difficult situation” to which he refers? Justice Martineau recognizes that the implementation of FATCA in Canada is full of “known unknowns”. In a statement that is reminiscent of Nancy Pelosi’s famous “We have to pass the law to see what’s in it” statement, Justice Martineau acknowledges:
Under the IGA and Part XVIII of the ITA, there is no express requirement for a Canadian financial institution to provide notice to its consumers that this information is being collected on US persons for eventual sharing by the CRA with US tax authorities. Each Canadian financial institution has its own policies and procedures with respect to the collection and disclosure of personal information. Will they allow account holders to have access to the personal information that has been reported under the due diligence procedure outlined in the IGA? While we have no answers to these questions, Canadians will have a better idea of the impact of the impugned provisions after September 30, 2015.
In summary, Justice Martineau’s decision confirms that:
1. In his words:
Judicial courage requires that judges uphold the Rule of Law.
(including the decision of the Harper Government to make “U.S. law” “Canadian law” in Canada).
2. In effect:
The Canada U.S. FATCA IGA is a “legislative and political argument” for the existence of a Charter of Rights!
Through his decision, Justice Martineau has:
“Put wind in the sails of the Good Ship FATCA Lawsuit!”
Justice Martineau has explained the reason for the FATCA lawsuit and why it is important. The reason is simple:
“FATCA and the IGA are the law!!!!”
Never, never, ever confuse law with justice or morality!! Justice Martineau said as much.