Canadian Top Court's Beer Ruling Offers Few Clues for Kinder

(Bloomberg) -- A push for freer alcohol trade within Canada fell flat at the country’s highest court, in a ruling that offers little new clarity on the jurisdictional questions now plaguing a major pipeline project.

The Supreme Court of Canada ruled unanimously Thursday that it would allow an appeal by provincial prosecutors in the high-profile case of Gerard Comeau, a retired steelworker from New Brunswick whose fight to buy cheaper beer in a neighboring province caught national attention.

The case hinged on the powers of Canadian provinces to restrict trade between them –- 15 cases of beer in this case, but the question was broader. The decision will be watched closely in British Columbia as the Pacific coast province’s government maneuvers against Kinder Morgan Inc.’s C$7.4 billion ($5.9 billion) Trans Mountain oil pipeline expansion, which Prime Minister Justin Trudeau says is federal jurisdiction and insists will be built. The court’s ruling focused largely on provincial law and cautioned the circumstances could be different in a federal case.

Canada’s constitution “does not prohibit governments from adopting laws and regulatory schemes directed to other goals that have incidental effects on the passage of goods across borders,’’ the court ruled. In a nod at the potential ripple effect of the case, it noted “broad implications.’’

Political Reaction

Trudeau told reporters Thursday in London his government would “take the time to properly study the decision and work on the ramifications of it.”

The court said that if indeed Canadian law is “understood as a constitutional guarantee of free trade, the potential reach” of the law “is vast.’’ Instead, the ruling generally found that the case fell short of the threshold to overturn existing law, and that New Brunswick liquor laws should be upheld because they’re not specifically designed to restrict trade.

Roger Melanson, the New Brunswick minister responsible for trade, said all provinces are already working to recommend changes, including boosting the personal exemption for carrying booze across a border.

“It is not a question of winning or losing anything, it was about the right to regulate goods and services in a manner that protects the health and safety of our citizens,” he said in a written statement.

Provincial Rights

The Canadian Chamber of Commerce said it was disappointed the court “missed an important opportunity to take a historic step toward freer inter-provincial trade” and instead reinforced barriers blocking trade as businesses warn about fading competitiveness. Protectionist practices “stand in the way of their ability to grow and prosper.

The Canadian Constitution Foundation, a charity that had backed Comeau’s case, said in a written statement “the beer is still not free” but noted the court’s ruling articulated a new test that means not all provincial laws that block trade would be valid.

Howard Anglin, the CCF’s executive director, said he doesn’t think the case directly impacts Trans Mountain but might rule out some of the countermeasures being considered by oil-producing Alberta to push for the pipeline’s approval. “It may limit the options for an escalating interprovincial trade war,” he said in an email.

Alberta Finance Minister Joe Ceci said he doesn’t think the ruling supports B.C.’s argument that this province’s threat to halt oil shipments to its coastal neighbor is illegal.

‘Different Things’

“I think those are two different things,” Ceci told reporters. “One is on beer, bringing it in your trunk, and the other is on pipelines."

B.C. Attorney General David Eby said that the ruling supports his province’s positions on Alberta’s proposed oil shutoff as well as its earlier ban on imports of wine from his province, another measure meant to pressure B.C. to drop its opposition to Trans Mountain.

“The Supreme Court specifically noted that provinces are not allowed to impose tariffs or rules like tariffs to punish other provinces,” Eby said in an emailed statement. “This confirms that the Alberta ban on B.C. wine was inappropriate and that Alberta’s proposed legislation is completely unconstitutional.”

Spin-Off Effects

The court upheld the rights of provinces to legislate with spin-off effects on trade –- a decision that otherwise would have called into question many Canadian policies, such as the system of quotas and tariffs on dairy and poultry known as supply management, as well as public health provisions and environmental controls.

Canadian law doesn’t support imposition of “an absolute free trade regime within Canada’’ but instead a flexible system “that respects an appropriate balance between federal and provincial powers and allows legislatures room to achieve policy objectives that may have the incidental effect of burdening the passage of goods across provincial boundaries,’’ the court found.

Comeau was pulled over by police in 2012 after crossing into New Brunswick from Quebec with 354 bottles and cans of beer, and three bottles of liquor, the prices of which vary substantially between provinces. He got a ticket for a total of C$292.50, but fought it.

He won his case, with a provincial judge tossing out restrictions on bringing alcohol between borders of Canadian provinces. Thursday’s unanimous ruling allows an appeal and picks apart the original provincial judge’s decision -– saying the ruling was “incompatible’’ with legal interpretation and based on “erroneous’’ expert testimony.

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