The link #29 ... October 2008
The Bijural Revision Services Unit (Taxation and Comparative Law) of the Legislative Revision Services Group of the Department of Justice of Canada is pleased to keep you posted on the most recent harmonization news.
Bijuralism and the Interpretation of International Agreements
Canada’s System of International Taxation
Stated in the simplest terms, the impact of Canadian bijuralism on the interpretation of federal legislation is clear: Where an act of Parliament refers to concepts that lie within the law of property and civil rights without providing a legislative definition of those concepts, the law of the province in which the federal legislation is to apply will in principle govern the meaning of said undefined concepts. Canada is however also party to numerous international agreements, thus giving rise to the following questions: How does one define undefined terms in an international agreement? Do general Canadian principles of bijural interpretation ever apply?
The rules of interpretation set out in The Vienna Convention on the Law of Treaties do not provide for a default reliance on the domestic law of a Contracting State. Instead, paragraph 1 of Article 31 states the general rule:
“A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.” The Vienna Convention however also recognizes the right of treaty partners to assign special meanings to terms. Canada’s tax treaties (there are over 80 of them) have adopted a hybrid approach to undefined terms.
Most of Canada’s tax treaties include language similar to that contained at Article 3(2) of the 2005 OECD Model Tax Convention which provides that, unless the context otherwise requires, undefined terms in a treaty are to have the meaning under domestic law, with the meaning in domestic tax laws to be given preference. Following this approach, in defining undefined terms in a tax treaty, one must: Determine whether the particular context excludes reliance on one country’s domestic meaning; and, if appropriate, determine the applicable domestic meaning. This renvoi to domestic law has the potential effect of bringing Canadian bijural principles onto the international stage, creating multiple sources for Canadian domestic law.
In April 2008, the Advisory Panel on Canada’s System of International Taxation released a far-ranging consultation document, inviting submissions on myriad aspects of Canada’s system of international taxation. One of the issues identified by the Panel was a general concern over the meaning of the term “beneficial owner,” a concept central to restricting access to treaty benefits. However, if indeed a renvoi to domestic law is operative in interpreting the term (a matter not yet settled), such renvoi is highly problematic from a bijural perspective, as any legal notion of “beneficial ownership” is entirely foreign to the civil law. This difficulty is central to the recent decision of the Tax Court of Canada in Prévost Car Inc. 2008 DTC 3080, which decision is currently under appeal to the Federal Court of Appeal (A-252-08). We will be following up on this case in future issues. We also await with interest the recommendations of the Advisory Panel, which is scheduled to deliver its report to the Minister of Finance in December.
Canadian Institute for the Administration of Justice
Who really writes the law? That is the theme of the conference held in Ottawa on September 11th and 12th and organized by the CAIJ Legislative Drafting Committee, chaired by John Mark Keyes, Chief Legislative Counsel of Canada. The conference highlighted the many aspects of the drafting process, including the role of bijuralists and jurilinguists. Interestingly, several speakers and participants alluded to the challenges of legislating in a global environment. To learn more about the Institute’s work, visit the Canadian Institute for the Administration of Justice.
Legislation on Bijuralism
Bill C-10 Ceases to Exist with Dissolution of Parliament
On September 7th, the second session of the 39th Parliament was dissolved and a general election called for October 14, 2008. As a result, Bill C-10 has ceased to exist. Among the provisions included in Bill C-10 were proposals concerning non-resident trusts, foreign investment entities, various technical amendments and a number of harmonization proposals prompted by bijural considerations.
Bill C-10 (former Bill C-33), An Act to amend the Income Tax Act, including amendments in relation to foreign investment entities and non-resident trusts, and to provide for the bijural expression of the provisions of that Act, was passed by the House of Commons on October 29, 2007, received second reading in the Senate on December 14, 2007, and had been before the Senate’s Standing Committee on Banking, Trade and Commerce when Parliament was dissolved.
Please consult http://canada.justice.gc.ca/eng/csj-sjc/harmonization/index.html for other documents and resources on the subject of legislative bijuralism in Canada.
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