Section 121 of the Constitution Act, 1867
Section 121 of the Constitution Act, 1867 provides that:
This has received a restrictive interpretation in the Canadian courts.
Background
Prior to Canadian Confederation, duty-free status had already been accorded by New Brunswick, Nova Scotia and Canada to one another, each contingent on the other colonies' granting such status. There was also free trade between the colonies of British North America and the United States of America under the 1854 Reciprocity Treaty, but the United States had served notice in December 1864 that it wished to seek changes to the Treaty, including "modify the rights of transit from Canada through the United States." As goods from Canada were previously allowed to pass through the US in bond to ports in New Brunswick and Nova Scotia for transshipment to Britain, this represented a potentially significant non-tariff barrier that was on the minds of participants during the 18651867 intercolonial conferences that took place in Charlottetown, Quebec and London that led to the creation of Canada in 1867.Although the proceedings of the various conferences were not recorded, George Brown said later that union of all Provinces would "break down all trade barriers between us," and throw open all at once "a combined market of four millions of people." Alexander Galt said that the purpose of the Union was "free trade among ourselves." In February 1865, in a debate in the Legislative Assembly of the Province of Canada, John A. Macdonald declared that Canada wanted "to establish a commercial union, with unrestricted free trade, between people of the five provinces."
The actual provision did not appear until the final draft of the British North America bill in February 1867, where it was worded thus:
It was subsequently revised in March 1867 into its final form:
As such, it was duly passed as part of the British North America Act, 1867.
Canadian jurisprudence
Although s. 91 cases have stated that the provinces cannot enact laws that inhibit the free flow of goods across provincial borders, such laws that have only incidental effects may still be constitutional. There is no general rule that prevents the Parliament of Canada from enacting such legislation.Since 1921, the governing interpretation of s. 121 has come from Gold Seal Ltd. v. Alberta , which considers that it only bars the levying of customs duties on goods moving between provinces. This interpretation has been sustained in subsequent cases. As noted by Mignault J.:
In Lawson v. Interior Tree Fruit and Vegetables Committee of Direction, which involved a British Columbia law requiring agricultural producers to pay a levy in order to allow shipment of their produce anywhere in Canada, Cannon J. in his concurring judgment expanded on this, stating:
In Murphy v. C.P.R., Rand J., in a concurring judgment, attempted to present an alternative interpretation:
Rand J.'s comment was referred to, and adopted by, Laskin C.J. in Reference re Agricultural Products Marketing, where he said:
Proliferation of internal barriers
Because of the above, Gold Seal still governs the question of the movement of goods in Canada, although there is still debate as to whether the original case was rightly decided. Although customs duties and similar charges are prohibited on this activity, non-tariff barriers can still be instituted by both levels of government, such as:In addition, federal legislation in the following areas has been held to be valid:
As a result, there are probably greater obstacles to trade between the provinces than there are to trade between Canada and the rest of the world, and it may explain why Canada has lower productivity than the United States.
Is ''Gold Seal'' still good law?
There has been debate as to whether Gold Seal would continue to hold under the current Canadian practice for constitutional analysis, most notably in the following areas:It is therefore argued that, under a purposive interpretation such as Rand J. had proposed, s. 121 requires any federal or provincial statute to meet three requirements:
This proposition has not yet been tested, but it has been suggested that the Importation of Intoxicating Liquors Act could be found to be unconstitutional as a result.
Current developments
In 2015, a test case concerning the validity of certain portions of New Brunswick's Liquor Control Act started trial in Campbellton, New Brunswick. The defence included a constitutional challenge based on s. 121 which was supported by the Canadian Constitution Foundation. In April 2016, the trial judge invalidated the provisions, declaring, "That historical context leads to only one conclusion: The Fathers of Confederation wanted to implement free trade as between the provinces of the newly formed Canada." The local Crown Attorney sought leave to appeal the decision directly to the New Brunswick Court of Appeal, which dismissed the application in October 2016. Leave to appeal was granted by the Supreme Court of Canada on May 4, 2017, for which the hearing will be held in December 2017. When the application for leave was sought, it was welcomed by some commentators as "put an overdue issue to rest."The trial court judge was eventually overturned by the Supreme Court of Canada in R v Comeau, in which it stated that "hile one effect of s. 134 is to impede interprovincial trade, this effect is only incidental in light of the objective of the provincial scheme in general. Therefore, while s. 134 in essence impedes cross‑border trade, this is not its primary purpose. Section 134 does not infringe s. 121 of the Constitution Act, 1867".
Other measures for a Canadian common market
Before 1982, mobility rights had existed by virtue of section 91 of the Constitution Act, 1867, which gave the federal government full jurisdiction over citizenship. Citizens were free to move across provincial borders and live wherever they chose to, and only the federal government could limit this right. This was recognized by the Supreme Court in Winner v. S.M.T. Limited, where Rand J. observed:Since the introduction of the Canadian Charter of Rights and Freedoms, mobility rights between provinces have been expanded by its s. 6, but there has been little jurisprudence in that area. As well, the Agreement on Internal Trade has introduced limited freedom for bidding on government tenders in various jurisdictions, and the provinces of British Columbia, Alberta and Saskatchewan have reached a measure of economic integration through the New West Partnership.