Telecom foreign ownership case a test of cabinet power

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A federal court will begin hearing a case that could answer profound questions in Ottawa: How much power do Stephen Harper and his cabinet really have - and are there any limits to it?

An appeal begins Wednesday of the Harper cabinet's 2009 decision to give the green light to Globalive - a cellular company with strong Egyptian ties - even though Ottawa's telecom regulator had already ruled it wasn't Canadian enough.

Public Mobile, a wireless competitor, asked for the judicial review, arguing the Harper cabinet exceeded its authority when it allowed Globalive and its Wind Mobile brand to operate despite the fact the firm wasn't sufficiently Canadian-owned or controlled for the Canadian Radio-television Telecommunications Commission.

Over the past five years, Mr. Harper's government has acquired a reputation for overriding the opinions of federal watchdogs and experts - from Statistics Canada on the need for a long-form census to the Parliamentary Budget Officer on whether Ottawa has a structural deficit.

In many cases, the federal cabinet has broad discretion to act, as legal rulings have recognized, on "matters of public convenience and general policy" - but in the case of telecom, its mandate and margin of manoeuvrability are governed by the Telecommunications Act.

Public Mobile, like other telecom firms, was upset the Harper government appeared to have changed the rules of the game even after the CRTC had balked at the fact that the Egyptian company, Orascom Telecom Holding, had put up most of the money for the Globalive venture. Carriers felt this was unfair to other firms that had stayed within foreign ownership rules.

"By doing so, the government of Canada in effect amended the act," Public Mobile argues in its submission to the court.

It's calling for the court to strike down the Harper government's cabinet decision of December, 2009.

The last time cabinet power on telecom was examined by the courts, the decision effectively shaped the legal view of cabinet authority for a generation. In 1980, a Supreme Court ruling on the Inuit Tapirisat's challenge of a cabinet decision on Bell Canada's rate structure effectively gave cabinet more blanket authority.

Hudson Janisch, a University of Victoria expert in regulatory law who helped revise the Telecommunications Act in 1993, said this court case is "a long overdue challenge" to the Inuit Tapirisat ruling and the expansive interpretation the government's lawyers have adopted.

"I would argue Inuit has been overtaken by time. We don't like the idea now of these very broad unchecked powers," he said.

Prof. Janisch said over the last three decades administrative law has grown more sophisticated, and a good argument can be made for "much more checks and balances … on the exercise of power."

The Telecommunications Act gives cabinet the power to change or rescind CRTC decisions, but Public Mobile argues this "cannot be used arbitrarily or in manner that is inconsistent with the express terms of the legislation from which [cabinet's]power derives, or with the legislation's purpose and intent."

In its December, 2009, Globalive decision, the Harper cabinet said it believes the Telecommunications Act "should be interpreted in a way that ensures that access to foreign capital, technology and experience is encouraged in a manner that supports all of the Canadian telecommunication policy objectives."

Other carriers object, saying this is not a case where the Harper government has to weigh two competing objectives. The Telecommunications Act's objective, they note, is to "promote the ownership and control of Canadian carriers by Canadians."

Telus, a major Canadian telecom player, is also weighing in on the case as an intervener, arguing cabinet's power to change CRTC decisions does not include the right to promote access to foreign capital.

"The words 'foreign,' 'capital,' 'technology' and 'experience' do not appear in the Telecommunications Act - even once. Indeed, it is difficult to conceive of a purpose more contrary to the purposes and scheme of the … act than one that aims at the encouragement of access to foreign capital, technology and experience," Telus writes in a brief.

Lawyers for Ottawa argue cabinet's power under the legislation is largely unbounded. "The Supreme Court has affirmed that the power exercised by [cabinet]under section 12 … is virtually unbounded," the Attorney-General's office said in a submission to the federal court.

The federal government argues that the cabinet drew different conclusions on whether Globalive was Canadian-controlled based on the same set of facts.

But other carriers, including Public Mobile, disagree, saying cabinet actually revised the facts under consideration.

"The [cabinet]made a series of findings that directly contradict findings made by the CRTC," Public Mobile says in its arguments. For instance, the CRTC's decision said the board structure at Globalive "does not ensure" the directors nominated by Globalive are sufficient "to offset the influence of Orascom, a non-Canadian shareholder."

The cabinet decision, however, presented different facts, saying the board structure "ensures that the nominees of Orascom, a non-Canadian shareholder, are insufficient in number to control the strategic or operational decisions of Globalive."