Hon. David Arnot: Honourable senators, I am speaking to you from Treaty 6 territory and the homeland of the Métis. In treaty territory, I can tell you the sun is shining, the grass is growing and the river is flowing, and that’s the way it should be.

I rise to speak in favour of the recommendation of the Senate Standing Senate Committee on Legal and Constitutional Affairs that the Senate adopt Motion No. 14. I would like to say that it made good sense for the Senate to send this to the committee. I appreciated the opportunity to attend meetings of the committee to hear witnesses.

The witness for CP Rail advised that the corporation launched the litigation in Saskatchewan with intent to eventually achieve a win-win result. By that, he meant investment or partnership between Canadian Pacific and the Saskatchewan government to develop rail-line infrastructure. My interpretation of that is this: CP is attempting to lever additional monetary subsidies for rail‑line maintenance.

The question of fairness has arisen in this debate. I ask my colleague senators these questions: Is it fair for a corporation to claim recovery of taxes it paid since 1905 based on a historic anomaly created 142 years ago? Is it fair for that same corporation to assert a claim to be exempt from taxes in perpetuity today? Is it fair to give one corporation a huge advantage in the marketplace — a place where other competitors must pay their fair share of taxes but not Canadian Pacific? Is it fair to force the taxpayers of Saskatchewan to provide an unjust, unfair enrichment to a corporation listed on the New York Stock Exchange that recorded a profit of $2.8 billion in 2021?

The answer to each question is a resounding no, in my opinion. It is absolutely patently unfair and unconscionable to foist that burden, that responsibility, on the citizens of Saskatchewan.

In my view, “CP Kansas City,” as its name will become, comes to court seeking fairness with “unclean hands,” and that should never be rewarded. To explain, CP was allowed to abandon passenger service in Canada. They were allowed to abandon branch rail lines throughout Canada, and particularly Western Canada. They obtained subsidies to their liking in 1966. They were described in 1966 by Minister of Transport John Pickersgill as a fine example of good corporate citizenship when they agreed to end the in-perpetuity tax exemption.

Today, I say to you that it is open to draw the opposite conclusion from CP’s current actions. In my opinion, if we balance the scales of justice today in the modern era, those scales weigh heavily in favour of the taxpayers of Saskatchewan and not Canadian Pacific Kansas City rail.

The question of retroactivity has arisen in this debate. Concern about questions related to retroactive application of law is valid. Legitimacy of retroactivity is always open to debate. It deserves examination. The courts and the public are well aware of the unfairness of the concept unless there is a legitimate reason. Retroactive application of tax law is legitimate in some narrow circumstances.

The Supreme Court of Canada dealt with this issue in 2007 in the Kingstreet case. The court specifically noted the possibility for Parliament or a legislature to enact valid taxes and apply them retroactively to limit the recovery of previously paid ultra vires taxes. The Supreme Court of Canada made it clear that retroactive application of tax law is possible, lawful and constitutional.

In some circumstances, that mechanism may provide an equitable remedy. In my opinion, it is a legitimate remedy to an obvious inequity in the situation we have before us.

The amendment sought by the people of Saskatchewan will not provide a blanket precedent that would allow a hypothetical rogue government to pass laws with retroactive application for some nefarious purpose. The case is far too narrow and very unique. Its wide application is extremely unlikely.

Retroactivity in this case is the only fair way to protect the innocent taxpayers of Saskatchewan from the heavy fiscal responsibilities created by historical anomalies and the fact that CP took up the cudgel of litigation.

I’d like to pause there for a second to consider this historical context. Sir John A. Macdonald did not want one thin dime of financing for the railway to come from the United States of America. He needed Canadians to form a consortium of investors. Canadians George Stephen, from the Bank of Montreal, and Donald Smith, from the Hudson’s Bay Company, stepped up. They sought investors from the United Kingdom, France, Germany and the Netherlands.

The Canadian consortium needed the kind of incentive Macdonald provided — a tax exemption in perpetuity. In February 1885, George Stephen wrote to Macdonald that he and Smith would be considered fools by every businessperson in Canada for taking on such a high-risk venture. Why? Because they did not know the exact cost to build a rail line north of Lake Superior and through the Rocky Mountains. They did not know with any real certainty when revenue would flow to repay that debt. In fact, at one point, Stephen left Parliament Hill in Ottawa — he was an MP — to go home to Montreal, believing that he was about to go bankrupt; he was disillusioned and despondent. But that story changed miraculously.

Stephen and Smith became billionaires in today’s meaning. They retired in the United Kingdom and were appointed to the House of Lords: Stephen as Lord Mount Stephen and Smith as Lord Strathcona.

Historical context is very important. I want to remind you of this historical fact. When government surveyors came to the west to survey the land for the railway and the newcomers, they were turned back peacefully by the First Nations people. They were told they were not welcome on the land. That act accelerated the making of treaty with the First Nations in order to fulfill the national dream of a coast-to-coast railway.

As Senator Pate has mentioned in debate, and as Senator Clement raised in the committee and in public, there is much unfinished treaty business in this country. There is a lot of history to examine. The good intentions of the treaty parties were replaced by the paternalistic policies inherent in the Indian Act just a few weeks after Treaty 6 was created.

Now back to the CPR. I do not believe one can find a government in the last 200 years in the Western world that has given a corporate tax exemption to a single corporation in perpetuity and, in addition, incorporated the exemption in the Constitution of the said country. The clause in question is extremely rare and is probably the only example of its kind. The Legal and Constitutional Affairs Committee heard expert opinions of three constitutional law experts. I can say, in my opinion, it is extremely rare for Canadian constitutional law experts to be able to agree on one idea concisely and congruently. They found motion 14 is wholly constitutional.

In addition, the Senate has four constitutional experts, not all lawyers, in our midst: Senator Gold, Senator Harder, Senator Cotter and Senator Dalphond. I believe the first three senators have all commented favourably on the constitutional legitimacy of motion 14.

I have a caution. I believe there is one precedent the Senate should be loath to set. That precedent is the Senate rejecting the report of the Standing Senate Committee on Legal and Constitutional Affairs and, in effect, thwarting the will of the elected members of the Legislative Assembly of Saskatchewan and the will of the elected members in the other place. That will cause major public opprobrium in Manitoba, Saskatchewan, Alberta and, I believe, elsewhere in Canada. I ask any senator thinking about voting against the motion to give due consideration to that precedent-setting consequence. Thank you.