Proceedings of the Standing Joint Committee on
Scrutiny of Regulations

Issue 9 - Evidence

The Standing Joint Committee of the Senate and the House of Commons for the Scrutiny of Regulations met this day at 9:10 a.m. to elect the Joint Chairman and the Vice-Chairman, House of Commons, and for the review of statutory instruments.

[Translation]

Mr. Jean-Michel Roy, Joint Clerk of the Committee: Honourable senators and members, I see a quorum.

Pursuant to Standing Order 106(1) of the House of Commons, the first item of business is the selection of a joint chairman. I am ready to hear motions to that effect.

[English]

Mr. McNally: I move that Mr. Grewal take the chair as one of the joint chairs.

The Joint Clerk (Mr. Roy): It is moved by Mr. McNally that Mr. Grewal do take the chair of this committee as joint chair.

I declare Mr. Grewal duly elected joint chair of the committee in absentia.

For the second item of business, in the absence of Mr. Grewal, I am ready to receive motions for the election of an acting joint chair to preside over the election of the vice-chair.

Mr. Wappel: I move Mr. Lee.

The Joint Clerk (Mr. Roy): Is that agreed?

Hon. Members: Agreed.

Mr. Derek Lee (Acting Joint Chairman) in the Chair.

The Acting Joint Chairman (Mr. Lee): Thank you for your vote of confidence. We now move to the election of vice-chair. I will receive motions.

Senator Moore: I move that Mr. Tom Wappel be elected vice-chair of the committee.

The Acting Joint Chairman (Mr. Lee): If there are no further nominations, is it agreed?

Hon. Members: Agreed.

The Acting Joint Chairman (Mr. Lee): Having completed that item of business, it would be appropriate to turn over the chair to the newly elected vice-chair.

Mr. Tom Wappel (Vice-Chairman) in the Chair.

The Vice-Chairman: Thank you, colleagues. As Mr. Lee said, thank you for your vote of confidence.

We have an agenda, as we always do. We have witnesses, so I would invite them to take a seat at the table. While they are doing that and getting settled, Mr. Bernhardt will give us a brief resumé of this matter.

SOR/93-43 -- ORDER VARYING A "LETTER DECISION" (CHANDLER SUBDIVISION) ISSUED BY THE NATIONAL TRANSPORTATION AGENCY

Mr. Peter Bernhardt, Counsel to the Committee: I will be brief. As members know, the committee will be hearing from witnesses from the Department of Transport this morning in connection with this file; in particular, the government's response to the committee's fifth report. Members have before them a note that reviews the reasons why the government's response was found to be unsatisfactory. As the final paragraph of that note explains, the committee wished officials to appear to answer one question, namely, what wording in subsection 178(1) of the National Transportation Act, 1987, does the department rely upon in support of its conclusion that the variation order registered as SOR/93-43 is consistent with the letter of the law?

It is also the wish of members that the department be expressly advised that the appearance is to be solely for the purpose of providing an answer to this specific question. In other words, the committee is not interested in explanations of the policy underlying the act, the fairness of the variation order, or how it is in keeping with the spirit of the act. The department has claimed that the variation order is consistent with the letter of the law. What wording in section 178 supports this claim?

As is observed in footnote number 1 on the first page of the note, the National Transportation Act, 1987, has been replaced and the new act does not provide for payment of branch line subsidies. However, the legality of this particular order, and of the over $3 million paid pursuant to it, is a matter of continued importance.

It may be useful to briefly review the regime that existed under the National Transportation Act, 1987, for the payment of branch line subsidies.

A railway company wishing to abandon a branch line was first required to obtain an abandonment order from what is now the Canadian Transportation Agency. The agency, in turn, was required to issue an abandonment order, unless it determined either that the branch line was economic, or was uneconomic but there was a reasonable probability of it becoming economic in the foreseeable future, and also that the operation of the branch line was required in the public interest.

The act then went on to provide for the payment of subsidies for the operation of branch lines in an amount equal to the actual losses incurred in their operation for a year falling within a claim period. For our purposes this morning, "claim period" was defined in subsection 178(1) of the act as the period beginning on the date of the making of an application to abandon, and ending on the date fixed for abandonment in the abandonment order.

In this particular instance an application was made by CN. The agency concluded that the segment of the Chandler subdivision in question was indeed uneconomical. It therefore ordered CN to abandon it and it fixed a date for doing so.

Appeals were made to cabinet, however, and as a result, the Governor in Council used his power under section 64 of the act to rescind the abandonment order. This then effectively required CN to continue operating the branch line.

CN then applied to the agency for the payment of subsidies in compensation for the losses it would incur in operating the branch line. The agency rejected CN's request on the ground that once the abandonment order had been rescinded, there was no date fixed for abandonment. If there was no date fixed for abandonment, there was no claim period; if there was no claim period, there could be no subsidies.

Essentially, this is the very same position that the committee has taken. In this case, however, the Governor in Council then made the variation order, which purported to vary the agency's decision so as to allow for the payment of branch line subsidies.

The power conferred on the Governor in Council by section 64 of the act to vary or rescind any decision, order, rule or regulation of the agency could not be used to do that which was not authorized under the act in the first place. Therefore, the Governor in Council had no power to vary a decision to permit the payment of subsidies other than in the circumstances contemplated by section 178. This being the case, the committee concluded there was no lawful authority for the payment of the subsidies pursuant to the variation order.

The government's position has been that even though there was no order for abandonment and no date fixed for abandonment, the fact that subsidies would end whenever abandonment eventually took place is sufficient to establish an end for a claim period in respect of which subsidies could be paid. It asserts that a claim period existed from the moment an application was filed on the basis that the act required every application to be reviewed within three years, and at some point in the future, an as-yet-unspecified date would be fixed for abandonment. In effect, it is saying that payments could be made for years that would eventually fall within a claim period once that claim period end date had been fixed.

In the committee's view, this ignores the fact that subsection 178(1) provided that a claim period was a period beginning on the date fixed for abandonment, not on the date that might be fixed for abandonment.

Second, under the regime in the act, there is no guarantee that there would ever be a date fixed for abandonment. The agency was, indeed, required to reconsider the application within three years, but at that time it was perfectly free to dismiss it entirely if circumstances had changed.

What would be the status then of any subsidies that had been paid out? In the view of the committee, as set out in its fifth report, the establishment of a claim period with both a beginning and an end date is a pre-condition of the payment of subsidies. One could argue that is simply a matter of common sense. You cannot have a period until you have a start and an end date.

That is what defines a period. In light of the failure of the government response to the fifth report to address the specific wording of subsection 178(1), members considered the appearance of witnesses to discuss this question to be desirable. That is where we are this morning.

The Vice-Chairman: Thank you, Mr. Bernhardt. The letter requesting that the witnesses appear specifically stated that:

The Committee wishes departmental officials to appear before the Committee to answer this specific question: "What statutory language in section 171(8)(b) of the National Transportation Act, 1987, supports the conclusion that a "claim period" was established with respect to the payment of branch line subsidies to CN?" As you may recall, the Committee wished you to make it clear to departmental officials that the Committee does not wish to hear a presentation on the history of this matter, nor to listen to a general claim that the referenced order was within the spirit or letter of the law, nor to be told how it would have been unfair to CN not to pay subsidies; the Committee wishes to be given a specific answer to the specific question cited above.

I only mention that because this is a different committee. We are now reconstituted with different members. If we wish to continue and ask only that one question, get an answer to it, and then ask other questions on that topic, I am in your hands. Or we can open it up to a broader series of questions. In light of Mr. Bernhardt's remarks, I think it would be only reasonable and fair to permit the witnesses a brief opening statement, but I would ask them to skip the three first three bullet points.

Mr. Jacques Pigeon, General Counsel, Legal Services, Transport Canada: I have been with the Department of Transport since 1981. I was asked to come before the committee today to explain legal issues, not policy. I understand the comments that the chairman made. I would like, however, to state that in order to be fair on a matter of interpretation, one needs to look at not only the exact wording of the statute -- certainly that is relevant and it was my intention to address the issue of the language of subsection 178(1) -- but also, when there is a dispute on a purely legal question and the subject matter is a question of interpretation of a provision, the legislative context.

In saying "legislative context," I am setting parameters that will not allow me to discuss either policy or intent.In order to fairly answer the question that is being put to me, I need to be allowed to discuss not only the wording of subsection 178(1), but also its placement -- that is, how it fits within the part or the division.

Our position, Mr. Chairman, is that we find support for our position in three areas. In the language of subsection 178(1), which is the definition of claim period, we find support in the legislative context is provided by two things. One is the substantive provision in which the definition is used, which is subsection 178(2); and also sections 159 and 157, which deal with abandonment, but which are referred to in subsection 178(1). That is my first comment by way of opening remarks.

You have asked me to skip over the first three bullets. With respect to the fourth bullet, we are here on a matter of interpretation. The difference of opinion which has developed is rooted in a pure question of law, which itself turns on the correct legal interpretation of the definition of "claim period" in subsection 178(1) of the National Transportation Act, 1987, which must be read in its legislative context.

Correspondence was exchanged between the committee and the minister on this subject and both sides were unable to reach an agreement or a common legal position on the interpretation of that section. We hold a very different view on that interpretation, which I am here to explain.

In our respectful submission, this is one of those legal issues where there is room for reasonable persons to disagree. We take the position that the better view is that a claim period, as defined and used in section 178, exists once an application for abandonment has been made, and that such period continues until one of the events described in paragraph 178(1)(b) occurs. I would like to elaborate on that. This position is based of three things: first, the language found in 178(1); second, the legislative context; and third, the practice of the agency in dealing with subsidy and in interpreting that section, which is relevant to the issue that we are discussing today.

I would like to give you more information on each of these areas.

The Vice-Chairman: No. If you do not mind, I will ask the committee if they want to ask you any questions now that you have made your opening remarks.

Mr. Lee: Mr. Pigeon, this is a little like the environment in the Court of Appeal, where the factums are all in and everyone has had their say. We must focus on the precise legal issue that we have to deal with here.

You are explaining to us the perspective of the department on the definition of "claim period." I will try to re-articulate what you have just said to put it fairly and in its best light. You are saying that in the department's view, a claim period exists, based on the trigger point in subsection 178(1), even though it has not been crystallized through an actual abandonment date. Even though in the view of the committee a claim period does not exist until you have a beginning and an end, the department's view is that since it has begun, in its opinion, the department may, ex post facto, whether 100 years or 50 years from now, look back and say, "We finally have an end to the claim period. A claim period did exist. Therefore, you had a valid claim." Is that what the department is urging us to accept?

Mr. Pigeon: No. We do not have an open-ended concept. Our belief is that the claim period arises as of the date of the filing of the application for abandonment. In this case, I think it is common ground that there is such a beginning date. I think it is in the report.

Mr. Lee: I agree.

Mr. Pigeon: We are submitting that once the claim period begins, it continues, by necessary implication, until the end date has arrived. The end date is conceptually defined in paragraph 178(1)(b) by reference to three different events.

Although it may not have been determined at any given moment, it is always determinable, so that we can recognize when it arises.

Mr. Lee: "It" being the end of the conceptualized claim period?

Mr. Pigeon: One way the end comes about is if an order is made by the agency for abandonment on a specific date. Thus, the date of abandonment is certainly the end of the claim period. Paragraph (b) defines what the end of a claim period is conceptually. Although at any given moment it may not have been determined, it is always determinable.

With respect, I submit that paragraph 178(1)(b) is not uncertain in that respect. At any given moment, we can always know what the end is and recognize it when it arrives.

Mr. Lee: Yes, but you do not know it until you get there. Therefore, the end of the claim period might not occur for 50 years. You will know when you get there. Our view has been that you do not have a claim period until you have a beginning and an end. The department is saying that you have a claim period from the time it begins, even though there is no crystallized end, and we will know when we get there. Are you saying, "We will know when we get there"?

Mr. Pigeon: I am saying that the agency has control over the disposition of applications for abandonment. The beginning of the period arises once the application is made. I am also saying that it then becomes incumbent on the agency to dispose of that application in accordance with the provisions of the act.

Therefore it is not open-ended. The agency always has the ability to make a decision, bring about the end, and create, if appropriate, the events that are contemplated in paragraph 178(1)(b). It is not open-ended and not something that could be left hanging for ever.

Second, although it may not have been determined at a precise point in time, it is always determinable.

Mr. Lee: Tell the committee, if you can, when the claim period ended in this particular sequence of events.

Mr. Pigeon: The Canada Transportation Act in 1996 --

Mr. Lee: No. Just indicate when the claim period ended in this particular case. We know when it began. When did it end?

Mr. Pigeon: As a matter of fact -- it is not a question of law -- my understanding is that as of 1996, when these provisions were repealed, no events contemplated by paragraph (b) had occurred. I am making that assumption of fact.

Mr. Lee: Those are the facts. That is fine. The period never really ended because we changed the act and moved the authority. In fact the universe collapsed. The claim period never ended. It would have gone on ad infinitum.

Mr. Pigeon: Not necessarily.

Mr. Lee: Do you accept that the claim period in this case never ended with one of the events set out in paragraph 178(1)(b)?

Mr. Pigeon: This provision should be understood in the context of division 2, which starts at section 157. There are other cases that I could submit to you where subsidies ought to have been paid, and were paid, by the agency and where end dates were not specified. That is my submission.

Mr. Lee: You are submitting that other illegalities will condone this illegality. That is what you are saying.

Mr. Pigeon: No. I am submitting that in its practice, the agency has paid claims in the context of paragraph 178 in situations arising out of paragraph 169(b). I submit they were rightly paid in law.

The Vice-Chairman: If I may, gentlemen, you asked us to look at three things -- the language of the section, the legislative context, and the practice of the agency. You have just told Mr. Lee that the language of the section did not fit the facts.

Mr. Pigeon: With respect, sir, I was addressing paragraph 178(1)(b). Factually, none of the events contemplated by paragraph 178(1)(b) had occurred when the section was repealed on July 1, 1996.

The Vice-Chairman: Yes. Just so the committee understands, 178(1)(b) specifies the end date of a claim period.

Mr. Pigeon: That is correct.

The Vice-Chairman: Did you just tell us that none of the circumstances set out in that section are relevant in this situation? The Chandler subdivision situation is not contemplated in paragraph (b). Therefore there is no end date for the circumstances which we are discussing as defined in paragraph (b)?

Mr. Pigeon: That is my understanding of the facts.

The Vice-Chairman: That is the legal aspect. You have asked us to look at the section. You have also asked us to look at the agency. Our counsel has told us that the agency came to the same conclusion as you have just set out, and denied payment. You also agreed with that, did you not?

Mr. Pigeon: May I suggest to you --

The Vice-Chairman: Did the agency pay or not?

Mr. Pigeon: If I may --

The Vice-Chairman: Did they deny the claim, sir? Is it not true that they did?

Mr. Pigeon: In this case, when they made the letter decision that was varied by the Order in Council, the agency had denied, but --

The Vice-Chairman: Excuse me. Do you know an M.J. Monahan, interim director, departmental secretariat?

Mr. Pigeon: Yes. Mr. Monahan was in the departmental secretariat for many years.

The Vice-Chairman: In a letter to our counsel, which you may not have, dated May 18, 1995, on page 2, he states that in the case at hand, the agency's abandonment order was rescinded by the Governor in Council pursuant to section 64, an action that is not covered under paragraph 178(1)(b).

Do you agree with that?

Mr. Pigeon: Paragraph 178(1)(b) does not make reference to a rescission order made by the Governor in Council under section 64. There is reference in 178(1)(b) to variation.

The Vice-Chairman: Let me understand this, then. Under two of the three grounds you have asked us to look at -- and we will get to legislative context in a moment -- and under the language we have looked at in paragraph 178(1)(b), the factual circumstances in the case that we are examining are clear. As you have stated, there is no end date as defined in that paragraph; is that correct?

Mr. Pigeon: On the facts, but I have an argument on submission.

The Vice-Chairman: We will let you argue that in a minute. Let us just get through this.

Do you agree that there is no ending date as contemplated in paragraph 178(1)(b) in the circumstances before us?

Mr. Pigeon: That is my understanding from a factual point of view.

The Vice-Chairman: We have looked at the language, and it does not support the department. We now go to the agency and its practices. The agency essentially agreed with our position and the Governor in Council had to overturn the decision of the agency. Is that not right?

Mr. Pigeon: They may have agreed, but not necessarily for the same reason. Let me explain, if I may.

The Vice-Chairman: All right.

Mr. Pigeon: The only knowledge I have of the agency's reason is the one included in the report of your committee, which is textually quoted at paragraph 12. It states:

The National Transportation Agency considers that the situation dealt with in Order in Council P.C.1991-2326 is not provided for in section 178 of the National Transportation Act, 1987 and that the effect of this Order was to terminate the claim period for subsidies effective November 21, 1991.

I submit to this committee that nowhere is it stated that it was because there was no end date. There is no such reason given. In other words, the reason that the committee has chosen for stating its position -- that there is no end date -- is not the reason cited by the agency.

Furthermore, I submit that the agency has in fact paid for claims where there were no end dates in circumstances provided for under paragraph 169(b).

I am in your hands, but I would like, if I may, to explain it briefly. I think there is a misunderstanding about the scope of the section.

The Vice-Chairman: I am not sure that there is. You must make a claim in order to get paid.

Mr. Pigeon: Yes, that is certain.

The Vice-Chairman: The claim must be for a period of time.

Mr. Pigeon: No, sir. If I may, the claim has to be for a financial year and not in respect of a claim period. That is a fundamental difference.

The Vice-Chairman: What was that again?

Mr. Pigeon: Subsection 178(2) makes it clear that any claim has to be in respect of a financial year. The concept of a claim period is simply used as a technique in that section to define the outer limits and to separate years that are eligible for payment from years that are not. In other words, the claim is not made in respect of the claim period. The expression is a bit misleading in that sense. Subsection 178(2) is the substantive provision in which the definition of claim period is used. It uses the concept simply to separate years that are eligible from years that are not. The claim process is handled on a yearly basis. You will see in subsection 178(4), I believe, that there is also a limitation period. In other words, the railways must submit their claims annually. They have to do so before July 1 of the next year, otherwise they run out of time.

The Vice-Chairman: There has to be a reason for having a claim period, otherwise it would not be in the --

Mr. Pigeon: I understand.

The Vice-Chairman: Is that correct?

Mr. Pigeon: Yes, that is correct.

The Vice-Chairman: What is the reason for having a claim period?

Mr. Pigeon: I submit that the reason is to set the criteria for determining which financial years are eligible and which are not.

The Vice-Chairman: Let us take a situation where the claim period begins as defined in the section.

Mr. Pigeon: That is correct.

The Vice-Chairman: That happened?

Mr. Pigeon: Yes.

The Vice-Chairman: And it ends on the date fixed for abandonment in the order, which did not take place in this case, correct?

Mr. Pigeon: Factually, I think that is correct.

The Vice-Chairman: Or the date on which it is rescinded, which did not happen; or the date on which the company ceases to operate, and of course CN is still operating.

Mr. Pigeon: That is correct.

The Vice-Chairman: The end, as defined in the claim period, never happened.

Mr. Pigeon: That is correct, but the statute nevertheless says, in paragraph (a), that the period begins.

The dispute over the interpretation depends on which paragraph one puts the emphasis. I believe the committee has put the emphasis on paragraph (b), which is the end. By doing so --

The Vice-Chairman: I am sorry, but there is a beginning and an end to a claim period. That is what section 178 says, does it not? There is a beginning and there is an end. Are not both those words properly defined?

Mr. Pigeon: The words "claim period" are clearly defined. The beginning is defined by concept and the end is defined by concept. This is straight from the language. However, I would submit to you that my interpretation respects paragraph (a). I believe my interpretation is the only one that can be thoroughly reconciled with paragraph 178(1)(a), which says "the period begins." It does not say that the period begins only if the end comes about, or if it becomes known, or when it becomes known; it says that the period begins upon the date of the filing of the application.

Parliament, I would submit, never intended that the agency would have to deal with the application instantaneously upon filing. In our respectful submission, when Parliament has said in paragraph 178(1)(a) that the period begins, we would have to add words to say it begins only if and when the end comes about or it becomes known in order to support the committee's interpretation.

The Vice-Chairman: Sir, that is exactly what it says. You have the word "and" at the end of subparagraph 178(1)(a)(ii). It is a twofold test. There is a beginning and an end, which is exactly what the section says. A year begins with January 1 and ends with December 31. It does not happen at any time. A person who puts in a claim on January 1 cannot get paid immediately if the end is December 31.

Mr. Pigeon: I would submit that the wording of 178(1), taken as a whole, including subparagraphs (a) and (b), are also capable of bearing another interpretation, which is that it begins the moment the application is filed and continues until it ends. Even our interpretation in that respect is in accordance with that definition. We are not saying --

The Vice-Chairman: I submit that that is a tortuous view because you are adding many words that are not there. It says it begins and it ends. It does not say it begins and it continues until it ends.

Mr. Pigeon: Can I make one distinction which perhaps was not clear from my earlier responses? It is one thing to say that a claim period is defined by reference to a beginning and an end -- and we are also saying that. We are not saying otherwise. However, it is quite a different matter to say that the beginning will not come about, or the claim period will not arise, until the end is known. I submit that it is sufficient to provide the certainty required for statutory application that the end be determinable, even though at any given moment it may not have yet been determined. It will be determined sooner or later. It is in the hands of the agency as to when it will come about. The beginning is the submission of an application to the agency. As of that moment, the agency has control over the end.

The Vice-Chairman: Is it not possible to have a beginning but not an end?

Mr. Pigeon: I do not believe that it is possible. The only possibility of not having an end is in cases where lines are uneconomic but have a reasonable prospect of becoming economic and are needed in the public interest. In those cases, the whole scheme of the act was to ensure that, first, the lines were retained, and second, that the railway company was subsidized for actual losses incurred in the operation of these lines.

The Vice-Chairman: Therefore it is possible to have a beginning and no end.

Mr. Pigeon: In that circumstance, but it is subject to a three-year review under section 171. The agency must review that file every three years and make a fresh decision on whether it is still needed in the public interest.

The Vice-Chairman: However, it is possible to have a beginning and no end.

Mr. Pigeon: If it is needed in the public interest.

The Vice-Chairman: Is your answer "yes"?

Mr. Pigeon: In that circumstance, I think it is possible, yes.

The Vice-Chairman: Thank you, so your premise is wrong. You have just admitted there are circumstances in which you could have a beginning and no end, but your whole argument has been that where you have a beginning, you will have an end. How can you say both things at the same time?

Mr. Pigeon: It is probably because you are looking at it from your interpretation and I am looking at it from mine.

The Vice-Chairman: No, I am looking at it from the point of view of what you just said. You said there is a beginning, and while an end may not have been determined, it is determinable. Those are your words.

Mr. Pigeon: Yes, absolutely, in the statute.

The Vice-Chairman: Then you said it is possible to have a beginning and no end. Those two statements cannot be reconciled.

Mr. Pigeon: I believe they can, sir. I am saying that in paragraph 178(1)(b) of the statute, the end is conceptually defined by reference to three events. The end is determinable from the words of the statute. The words are clear. If any one of these events comes about at any time, even five years after the application was submitted, the agency and the department are able to recognize that the end has arrived. I do not think I am contradicting myself on that.

I am also saying that, in the circumstances of subsection 169(b), if the agency determines that a line is uneconomic, but has a reasonable prospect of becoming economic and is needed in the public interest, it is possible that for as long as the agency holds that view, it will not set a date for abandonment, and therefore abandonment, as a matter of fact, will not arise.

That is a reconciliation of what you heard with what I intended to say. Because we are coming at it from two different interpretations, we may have been at cross-purposes.

The Vice-Chairman: I recognize that we will not be able to convince each other. We are just trying to find out where we are.

Are there any other questions?

Mr. Lee: I am struck by how philosophically profound the discussion is. We are dealing in definitions of infinity here, and beginnings without end.

You were going to make reference, Mr. Pigeon, to some kind of payout by the agency under section 158, I believe, that you feel offers an additional perspective on interpretation under the act. I regret that I have to attend the opening of the House and therefore may not hear the end of this discussion, but I also wanted to --

The Vice-Chairman: Does that mean there is an end to this question?

Mr. Lee: Maybe you could walk me through that section 158 scenario.

Mr. Pigeon: I have prepared a short document setting out the different scenarios. I devised the chart with three columns to show the different possibilities, because I realize that this is a very complex scheme.

The second column deals with the abandonment provisions in sections 157 to 177. The subsidies, in the third column, are found in section 178. In my submission, they must work together.

When the National Transportation Act of 1970 was amended in 1987, many of the amendments dealt with taking away some discretion from the agency and ensuring that it would, in certain circumstances, have no choice but to order abandonment so that the only branch lines that would be ultimately eligible would be those strictly needed for the public interest.

Under this scenario, if an application was not opposed, mandatory abandonment had to occur under section 162. If it was opposed but was economic, there were two possibilities. The first was that it was not needed in the public interest, in which case there was a mandatory abandonment under section 166. The second possibility was that it was needed in the public interest. In that case, the application had to be dismissed. In both of those cases, where it was economic, there was no subsidy payable, but we did not have to rely on the concept of claim period to reject the subsidy because there was no actual loss.

I submit that in those situations, the reason there was no subsidy paid was not because "claim period" is defined the way it was, but because there was no actual loss.

On the other hand, if it was uneconomic, there were three possibilities. The first possibility was, if it was not economic and had no reasonable prospect of becoming so, the agency was mandated under section 165 to order the abandonment. The second possibility was, if there was a reasonable prospect of it becoming economic and it was needed in the public interest, the agency had to order continuance under subsection 169(b).

That is what I refer to when I say that there were payments made under that scenario. Under that scenario, you would not have an end; you would not have a date for abandonment.

I cannot speak on behalf of the agency, but my understanding is there were payments of that type made on the CN Sorel line. The reference I have here is order number 1995 R299. I was given four cases as examples of that.

Mr. Bernhardt: If I understand what you are saying, your view of subsection 178(1) is that in every case where someone has made an application for abandonment, an eligibility automatically arises by virtue of filing that application for subsidies?

Mr. Pigeon: Yes.

Mr. Bernhardt: In every instance, no matter how it is eventually worked out?

Mr. Pigeon: Yes.

Mr. Bernhardt: I have another, hypothetical question. In this instance of the Chandler subdivision -- assuming the act had not been repealed -- what would have been the situation if the agency had conducted its three-year review, looked at some changed circumstances, and then dismissed the application under paragraph 169(1)(a)?

Mr. Pigeon: The only instance under the scheme of the act where a dismissal is contemplated is where the line is economic. Let me make sure of that. I have that on my list here. It is only under paragraph 169(1)(a) that a dismissal is contemplated. It is only in a case where the line has become economic.

Mr. Bernhardt: I wish to refer you to section 166, because in fact that is not the case. It states that it applies where it is uneconomic, but there is a reasonable probability of it becoming economic in the foreseeable future.

Mr. Pigeon: The application is not dismissed. It is continued and reviewed every three years under section 171. That is my position.

Mr. Bernhardt: No. You dismiss it outright. You cannot review it under section 171. Section 171 is not contemplated in the review of a dismissed application.

Mr. Pigeon: There are two cases in section 169. First, if it is economic and it is needed in the public interest, the application is dismissed by the agency. It would not be eligible for subsidy anyway because there is no actual loss.

Mr. Bernhardt: However, it has already received subsidies. You have been paying subsidies since the application was filed. For example, suppose it lost money for a year and then was economic for two years. You have paid subsidies for that first year, yet the application has been dismissed. Not only is there no end to a claim period, but there is no possibility of an end to a claim period. What happens to the subsidies that have been paid?

Mr. Pigeon: Applications are made to the agency. The agency generally has the obligation and the responsibility to deal with those applications. It is not open ended, because the agency has the ability to deal with it expeditiously within the framework and the time frame specified in the act.

Mr. Bernhardt: It has written a cheque that has been cashed. How does it deal with the situation now? Does it ask for the money back?

Mr. Pigeon: There is a provision that deals with adjustments in section 179, but I did not look at that aspect per se.

Mr. Bernhardt: Section 179 does not cover the situation at all. First, it talks about payments during a claim period. We agree that there was no claim period here because it was dismissed. Second, it covers a situation where the actual loss differs from the amount certified by the agency. Let us assume here that there was no difference. There was a loss the first year, but it was the proper amount and it was properly paid.

Mr. Pigeon: I have not agreed that there was no claim period.

Mr. Bernhardt: What was the end date of the claim period?

Mr. Pigeon: I agreed that none of the events contemplated by paragraph 178(1)(b) occurred.

Mr. Bernhardt: However, this was paragraph 169(1)(a).

Mr. Pigeon: Yes. That is the only situation that I know of in the act where there is a dismissal of the application. In all other cases, there is either an order to continue the operation or an order for abandonment.

The Vice-Chairman (Mr. Wappel): Any other questions?

Mr. François-R. Bernier, General Counsel to the Committee: I do not expect an answer, but, Mr. Pigeon, you indicated that the reasoning of the agency in dismissing or refusing the application for subsidies by CN in this case was not based on the fact that there was no end to the claim period.

The Vice-Chairman: To be fair, he said that he did not know what it was based on.

Mr. Bernier: Could you find out and let the committee know the reason why the agency refused that application?

Mr. Pigeon: I am not with the agency. It may be more difficult for me to find out. I could try, but I am with the department.

My position is exactly as the chairman said. I was reading from the report of the committee that quoted from the excerpt. I said that the excerpt does not state that the agency felt there was no claim period because there was no end date.

The Vice-Chairman: All right. Maybe we can avoid having you come back here again. If the agency's reasons do say that, does that change your testimony today?

Mr. Pigeon: Well, no. It would not change my testimony, because it would be inconsistent with the practice that occurred in the four cases that I submitted to you under paragraph 169(1)(b).

The Vice-Chairman: Your position is that, notwithstanding that the language of the section does not fit the case, or that the agency itself may -- I am not saying "did" because we do not know -- agree with this committee, the overriding factor for you is the legislative context and how the bureaucracy dealt with this over a series of cases, whether or not it complied with the letter of the law. That is what you are asking us to accept, is it not, in a nutshell?

Mr. Pigeon: I am submitting that what was done was lawful under the provisions of the act as properly interpreted.

The Vice-Chairman: Okay. Thank you very much for coming here this morning. We do appreciate the candour and the brevity of your remarks. We will decide what to do from here. Thank you.

We are running out of time again. I notice that we have two items on our agenda described as "Reply Unsatisfactory." Perhaps we could jump ahead and look at the replies to see why they are unsatisfactory. We can then return to this situation and decide what we want to do.

SOR/98-248 -- ORDER AMENDING THE EXPORT CONTROL LIST

SOR/99-99 -- ORDER AMENDING THE EXPORT CONTROL LIST

(For text of documents, see Appendix D, p. 9D:1.)

The Vice-Chairman: Next are the last two items in your package, under "Reply Unsatisfactory."

Mr. Bernhardt: This concerns orders under the Export and Import Permits Act. Paragraph 3(d) of the act authorizes the Governor in Council to include in a list of goods known as the Export Control List, "any article the export of which the Governor in Council deems it necessary to control$to implement an intergovernmental arrangement or commitment."

The order registered as SOR/99-99 purports to list blinding laser weapons, as described in Protocol IV of the relevant international convention. At present, however, there are apparently no such weapons in existence. It was suggested to the department that the words "goods" and "articles" in the act must be taken to mean goods and articles that actually exist. Adding a description of something that does not exist to the list does not add any goods or articles in the real world. It was suggested that the Governor in Council had exercised the regulation-making power prematurely. Once these weapons exist, then the Governor in Council is free to decide whether their export should be limited. He or she can then decide whether to add them to the list. In a nutshell, how you can export something and how can there be a need to control the export of something that does not exist?

The department replies that such articles will come into some form of existence at some point in their development stage. Déjà vu all over again!

The Vice-Chairman: This department is saying that at some point, there will be a beginning.

Mr. Bernhardt: Even the RIAS accompanying SOR/99-99 says the weapons in question are thought to be in the development stage; therefore, it seems the department itself is not even sure whether that is in fact the case. The department also makes much of Canada's need to comply with international agreements, although it is difficult to see how that requires you to make a regulation dealing with something that is non-existent.

In addition, in the two files here, there is the subsidiary issue of incorporation by reference. The orders incorporate the description of weapons in the relevant agreements "as amended from time to time." Section 3 of the act requires the Governor in Council to deem it necessary to control the export of an article before putting it on the list. I suggest this requires a consideration of necessity in each case. That simply will not take place if future amendments to the list are included in advance. I would suggest that both these points should be pursued through a further letter to the department.

The Vice-Chairman: Are there any comments?

They use the phrase "dynamic incorporation by reference." Is that an adjective?

Mr. Bernhardt: It is a synonym for "open"; sometimes you see the word "ambulatory."

The Vice-Chairman: We will proceed in accordance with your advice. Let us then go back to the first item with which we just dealt. Counsel, where can we go with this, or was this exercise just to make us feel good or bad, as the case may be? What can we do? The act has been repealed. There is a new regime.

Mr. Bernier: The only ongoing point had to do with the legality of the subsidies paid, so we are talking of a sum of approximately $3 million, and possibly of other similar cases. In fact, it was confirmed that there have been similar payments.

The Vice-Chairman: Four.

Mr. Bernier: Realistically, the committee might well consider that it has done what it could. Obviously common sense will not prevail. We have periods that are not really periods. That being said, I cannot conceive of avenues beyond what the committee has already done -- which was to report to the houses -- that would produce further results.

The Vice-Chairman: Can we close it by sending a letter to the department saying that after having listened to and questioned the witnesses, we are still of the view that our fifth report is correct and that we will watch the department in the future?

Mr. Bernier: That certainly could be done, Mr. Chairman, but I would perhaps suggest that I read the testimony, review it carefully, then come back to the committee.

The Vice-Chairman: You will get a copy of the agency's decision?

Mr. Bernier: Yes. There could be something in what Mr. Pigeon said, but I doubt it.

The Vice-Chairman: You will bring it back to us?

Mr. Bernier: Yes.

[Translation]

Ms Venne: Could it somehow be argued that the National Transportation Agency does not take the same approach as the minister?

Mr. Bernier: I believe the Chairman made some reference to this fact. We were looking for additional details as to why the National Transportation Agency refused to award subsidies. The Chairman quoted the letter in a letter from the Department of Transport dating back several years. The departmental official bluntly stated that the Chandler situation was not something that could be anticipated under subsection 178(1)b). Notwithstanding this acknowledgment today, people continue to insist that this falls under the purview of section 178. I am not convinced that even if the Agency issued a clear statement, the Department of Transport's opinion on the matter would change. That is my opinion.

The issue, in my view, is the amount of money at stake. Sums may have been paid elsewhere. I think the government would rather die than admit that unauthorized monies were paid out for years.

[English]

The Vice-Chairman: We will proceed in accordance with counsel examining the transcript and bringing back his conclusions.

SOR/2000-251 -- REGULATIONS AMENDING THE ROYAL CANADIAN MOUNTED POLICE REGULATIONS, 1998

Mr. Bernier: The amendments to the RCMP regulations set out the limits imposed on members of the force in the exercise of their rights and freedoms when engaging in political activities. As mentioned in the note distributed to members, the committee is left to decide how best to pursue its earlier recommendation that any significant limitations on Charter rights and freedoms be imposed by Parliament itself, in an act of Parliament, and not by means of regulations.

The committee, of course, has already had a commitment from a succession of Solicitors General that this option would be kept in mind for the future.

The Vice-Chairman: Is that enough?

Mr. Bernier: You will recall that the committee spent quite a bit of time dealing with the issue of political activities by members of the force in its reports. These regulations, after several reports from the committee and a number of meetings, do put in place a regime with limitations that, in the view of the committee, are entirely compatible with the Charter of Rights and Freedoms. That is a significant achievement.

Senator Moore: Yes.

Mr. Bernier: The other issue is more of a legislative policy issue.

The Vice-Chairman: Maybe you could raise it with the committee as it is duly constituted after the next election.

Mr. Bernier: Will that be soon, Mr. Chairman?

The Vice-Chairman: We will see. I think it will be sooner rather than later.

SOR/91-572 -- PROHIBITED WEAPONS CONTROL REGULATIONS

SOR/92-436 -- PROHIBITED WEAPONS CONTROL REGULATIONS, AMENDMENT

(For text of documents, see Appendix A, p. 9A:1.)

Mr. Bernier: The reply to these SORs is satisfactory, Mr. Chairman, and the undertaking will be monitored in the usual way.

The Vice-Chairman: Are there any questions?

There being none, the next item is air transportation regulations.

SOR/94-240 -- CANADA PORTS CORPORATION ADMINISTRATIVE BY-LAW, REVOCATION

SOR/94-319 -- PRINCE RUPERT PORT CORPORATION ADMINISTRATIVE BY-LAW, REVOCATION

SOR/94-332 -- HALIFAX PORT CORPORATION ADMINISTRATIVE BY-LAW, REVOCATION

SOR/94-360 -- ST JOHN'S CORPORATION ADMINISTRATIVE BY-LAW, REVOCATION

SOR/95-318 -- PORT OF QUEBEC CORPORATION ADMINISTRATIVE BY-LAW, REPEAL

SOR/95-460 -- VANCOUVER PORT CORPORATION ADMINISTRATIVE BY-LAW, REPEAL

Mr. Bernier: There are three files referred to in the correspondence, Mr. Chairman, but today we will be dealing specifically with the Canada Ports Corporation administrative bylaw and other similar bylaws of local port corporations. The other two files will be before the committee shortly.

The issue with the bylaws is described in point 3 of the chairmen's letter of February, 2000. In his reply, the minister does accept the committee's position with "considerable reluctance." The minister expects the Canada Ports Corporation bylaw to be revoked upon the bringing into force of section 197 of the Canada Marine Act, which will dissolve the Canada Ports Corporation. Should this not occur as quickly as foreseen, the minister states he will take steps to see that the bylaw is brought into compliance with the Statutory Instruments Act.

As for the similar bylaws made by other port corporations, and which may continue in force for some time following adoption of the new Canada Marine Act, the minister indicates that he has asked his officials to consult with the relevant successor port corporations concerning the appropriate disposition of those by-laws. If the bylaws are to stay in place for a considerable period of time, they will need to be registered under the Statutory Instruments Act.

I suggest that we follow up with the department as to the current status of the consultations with local port authorities.

The Vice-Chairman: There being no comments, are we agreed?

Hon. Members: Agreed.

SOR/98-315 -- ORDER REPEALING CERTAIN DIRECTIONS TO THE ST. LAWRENCE SEAWAY AUTHORITY

(For text of documents, see Appendix B, p. 9B:1.)

Mr. Bernhardt: The issue was whether it was proper to treat this order as a regulation within the meaning of the Statutory Instruments Act. Upon reflection, the department has concluded it was in error to so treat the order. Counsel would agree with this conclusion. If members concur, the file can be closed.

The Vice-Chairman: Are we agreed?

Hon. Members: Agreed.

SOR/96-474 -- ARCTIC SHIPPING POLLUTION PREVENTION REGULATIONS, AMENDMENT

(For text of documents, see Appendix C, p. 9C:1.)

Mr. Bernier: This correspondence touches on the validity of regulatory provisions which impose certain obligations on the master of an oil-carrying vessel navigating in a shipping safety control zone.

According to the last letter from Mr. McCullough, paragraphs 6(3)(b), (c) and (d), and subsection 6(3.1) of the regulations are all derived, by necessary implication, from the powers set out in section 12 of the act.

For regulatory authority to exist through necessary implication would require a finding that section 12 of the Arctic Waters Pollution Prevention Act is meaningless unless it is interpreted to allow these kinds of regulations. That, of course, is nonsense in this case. It is fairly clear that the department has no real understanding of the nature and limits of the necessary implication concept.

Paragraph 6(3)(c), to give one example, requires the master to send a message to the Canadian Coast Guard detailing certain facts. The regulations that are authorized to be made under subparagraph 12(1)(a)(viii), which is referred to by the department, and I quote, "are regulations relating to the maps, charts, tide tables and other documents or publications to be carried on board a vessel navigating in a zone."

It should be clear that a requirement to provide information to the Coast Guard has nothing whatsoever to do with an enabling provision that allows regulations to be made concerning the prescription of documents to be carried on board the vessel, by necessary implication or otherwise.

I suggest the reply is entirely unsatisfactory. We recommend that the matter be pursued with the department.

The Vice-Chairman: Could I ask why you did not put it under "Reply Unsatisfactory"?

Mr. Bernier: That is a very good question. It is one my colleague, Jacques Rousseau, who is responsible for this file, and I sought to clarify yesterday, and we could not remember. We must have had a reason.

The Vice-Chairman: Your recommendation is that we find the reply unsatisfactory and that we pursue it. Is that agreed?

Hon. Members: Agreed.

The committee adjourned.