If You Build It

A good decision for federalism and for property rights from the Supreme Court

This morning, the Supreme Court has delivered its decision in Rogers Communications Inc. v. Châteauguay (City), 2016 SCC 23, holding that a municipality cannot prevent a telecommunications company from building an antenna at a site authorized by the federal government, since under the constitution that government has exclusive competence over radiocommunications. I believe this is the right decision from the standpoint of federalism doctrine and policy. It is also, if only coincidentally, a good decision from the standpoint of property rights.

Simplifying somewhat, the case arose out of Rogers’ attempt to build an antenna for its cellular network in Châteauguay, on a site that it had leased from a willing owner. Federal rules required it to obtain permission from the federal government and also to consult the municipality, while allowing the federal government to resolve any conflict with local authorities. Rogers did all this, and initially the municipality gave it the green light. However, after citizens concerned about the supposed effects of radio waves on their health and the environment petitioned the municipal authorities, they changed their mind and tried to get Rogers to agree to build its antenna on a different location. The owner of that site, however, was not willing to lease it out to Rogers, while the municipality tried to expropriate it, Rogers was unwilling to wait until expropriation proceedings would conclude, and decided to go ahead with its original project. The municipality responded by issuing, and subsequently renewing, a “notice of reserve” which signified its intention to expropriate the site, and prevented Rogers from building there.

Rogers argued that this was both unconstitutional and in bad faith and thus invalid under municipal law. In reasons by Justices Wagner and Côté, an eight-judge majority held that the notice was not a valid exercise of a provincial, and therefore a municipal, power. Justice Gascon, who concurred, was of the view that while the notice was a valid exercise of provincial power, it was inapplicable to Rogers by virtue of the doctrine of interjurisdictional immunity.

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The municipality argued that its “ultimate purpose in establishing the reserve was to protect the health and well‑being of its residents living close to” Rogers’ chosen site for its antenna, “and to ensure the development of its territory” ― purposes that fall within the provincial and therefore municipal jurisdiction. The majority of the Supreme Court disagreed, however. The notice of reserve was clearly intended to forestall Rogers’ work on the antenna. It had no other purpose or effect than to interfere with its choice of location, which falls within the federal jurisdiction over radiocommunications. The majority added that

[e]ven if the adoption of a measure such as this addressed health concerns raised by certain residents, it would clearly constitute a usurpation of the federal power over radiocommunication. [46]

Thus, in “pith and substance,” the “matter” with which the notice of reserve dealt was radiocommunications, and the notice was ultra vires ― beyond the competence of the body that enacted it.

The majority acknowledged that the Supreme Court’s division of powers jurisprudence favoured flexibility and “co-operative federalism.” This principle, however,

can neither override nor modify the division of powers itself. It cannot be seen as imposing limits on the valid exercise of legislative authority … Nor can it support a finding that an otherwise unconstitutional law is valid. … [F]lexibility has its limits, and this approach cannot be used to distort a measure’s pith and substance at the risk of restricting significantly an exclusive power granted to Parliament. [39, 47]

The majority added that holding otherwise, or finding that the notice of reserve had a “double aspect” ― i.e. that it dealt with a provincial “matter” at the same time as a federal one ―

could encourage municipalities to systematically exercise the federal power to choose where to locate radiocommunication infrastructure while alleging local interests in support of their doing so. [47]

In his concurrence, a rather exasperated-sounding Justice Gascon disagrees, saying that he

find[s] it a bit much to suggest that a flexible approach to the pith and substance doctrine could encourage municipalities to hide behind local interests in order to exercise a federal power. [95]

He concludes that Châteauguay acted “not simply to control the siting of a radiocommunication system, but rather to respond to its residents’ concerns” [100] regarding health and the development of the municipality’s territory. In Justice Gascon’s view, the majority goes astray in not adopting a sufficiently flexible approach to the “pith and substance” analysis, and also in overemphasizing the practical effects of the notice of reserve at the expense of its purposes.

However, Justice Gascon agrees with the majority that even if the municipality had the constitutional authority to issue the notice of reserve, the notice would be inapplicable to Rogers by virtue of interjurisdictional immunity. The choice of locations for communications equipment has already been determined to fall within the “core” of the federal power, and the municipality’s attempt to prevent Rogers from building its equipment at a site approved by the federal government in the exercise of that power rose to the level “impairment” sufficient to trigger the application of the immunity doctrine.

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As I mentioned at the outset, I believe the Court ― and specifically, the majority ― has it right. At the level of doctrine, I think that the majority is right to conclude that the reserve notice was ultra vires the municipality. As it noted, all the notice did was interfere with the choice of location of Rogers’ equipment. The fact that the motivation for this interference had to do with health and development concerns does not change the fact that the notice itself only had to do with radiocommunications.

Indeed, Justice Gascon’s approach ― finding that the notice of reserve was, in pith and substance, related to health and local development but could not apply to the only party to whom it was ever intended to apply strikes me as rather artificial. As the majority notes, the case is different from one in which, as in Quebec (Attorney General) v. Canadian Owners and Pilots Association, 2010 SCC 39, [2010] 2 S.C.R. 536, the law at issue is one “of general application that has numerous legal and practical effects,” [48] only a small subset of which are constitutionally suspect. It makes sense to resolve such a case by applying the doctrine of interjurisdictional immunity to prevent this small subset of effects from occurring while allowing the law as a whole to stand undisturbed. Justice Gascon invokes interjurisdictional immunity to deprive the notice of reserve of its effect and raison d’être. It seems more logical to say that the notice is simply void, because it is entirely about a federal, not a provincial, “matter.”

From the policy perspective, these details matter little. What is important is that the Supreme Court’s decision allows the federal government to exercise its constitutional powers without being impeded by nimbyists all over the country who would raise this or that local concern ― if not some scientifically discredited theory, as seems to have been the case here ― to prevent any national infrastructure being built. The constitution makes federal government responsible for telecommunications ― as well as for physical inter-provincial links, such as railways and, perhaps most importantly in the current political context, pipelines, for a good reason. These matters have to be treated at a national scale because of the holdout issues and collective action problems that would arise if the provinces ― and, a fortiori, municipalities ― could stand in the way or had to deal with them on their own.

Appeals to co-operative federalism are misguided in this context. After the Supreme Court handed down another decision limiting the power of that principle, the one in the gun-registry litigation, Quebec (Attorney General) v. Canada (Attorney General), 2015 SCC 14, [2015] 1 S.C.R. 693, I tentatively suggested that the principle the Supreme Court applied was that of competitive rather than co-operative federalism. Competitive federalism is usually understood as involving competition between members of the federation (i.e. provinces in Canada) to get individuals and businesses to move from to another. But the Court’s federalism jurisprudence fosters “vertical” competition between the federal government and the provinces, I wrote, “for the political benefits that result from enacting policies that citizens want to see enacted.” Such competition is fine so long as its costs can be internalized by the voters for whose benefit it exists. For instance, when Québec sets up its own gun registry to replace the one scrapped by the federal government, Québec taxpayers will pay for it. But when the preferences of one set of voters are satisfied at the expense of others, what takes place is not competition, but rent-seeking. Allowing municipalities to interfere with the development of infrastructure that benefits people well beyond their borders in order to allay the local voters’ concerns would encourage just that sort of behaviour. The Supreme Court was right to step in to prevent it.

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I briefly turn now to the property rights perspective on this case. The Supreme Court has seldom been solicitous of property or economic rights (except, that is, the economic rights of unionized labour), and there is no reason to think that property rights concerned it here. However, it is worth pointing out that, even if unintentionally, the Court’s decision is a clear win for property rights and freedom of contract. Consider that Rogers had found a willing lessor for the land it needed to build its antenna. The owner of the alternative site proposed by the municipality, by contrast, did not want to do business with Rogers. So the municipality wanted to expropriate her, and deprive the owner of Rogers’ preferred site of a business opportunity. And when that plan failed, it decided to expropriate the owner of that site as well. This casual indifference to property rights and economic liberty of the municipality’s own citizens is disheartening, and even if the Supreme Court preserves these rights by a happy accident, its decision is worth celebrating for that reason.