Hon. Brent Cotter: Honourable senators, I rise to speak to the message on Bill C-22. We are on the verge of a great achievement for tens of thousands of Canadians with disabilities. We’ve reached this point through the leadership of Minister Qualtrough; the determined work of people with disabilities and advocates for disabled people across this country; and the commitment of every member of the other place, every member of the Social Affairs Committee and every member in this Senate. Senators’ remarks today reinforce this.

I urge you to accept the message without modification so that this bill can receive Royal Assent.

First, I want to say, by way of context, that in these remarks, I’ll speak only to the part of the message that deleted the Senate amendment related to the prohibition of clawbacks in insurance contracts — I will call this the “no clawbacks” amendment. The other amendments, in my view, are great. This one would be too if it were constitutional, and that’s the point about which I will speak.

We heard from many witnesses and senators about the valid and serious concerns regarding the potential clawbacks of insurance benefits. I agree that all of these are legitimate and valid concerns, and I share them all. Unfortunately, for reasons I will explain, this is something that, as a federal Parliament, we cannot address through legislation. If it were an arguable case, I would be in favour of it.

The purpose of these remarks is to give you some comfort that we are doing the right thing by accepting — in its present form — the message that’s come to us. In that regard, I note and applaud the statements of senators who strongly support the “no clawbacks” provision, but who have also indicated that they will, nevertheless, vote in support of the bill in the form before us.

You have heard arguments in committee and in this chamber about why we can do this. I’m going to take this time to explain why we cannot — not just as a competing opinion, but also to express a certainty that this provision is, regrettably, an unconstitutional intrusion into provincial jurisdiction.

I will now talk about the Constitution of Canada, and I apologize for this sounding like a lecture. Though the clause is small, the point is significant.

We know that the Constitution is the supreme law of Canada. We are empowered by it and, in some ways, constrained by it. One of those constraints is federalism. As you know well, in Canada, legislative authority is divided into two categories: federal authority, or heads of power, nearly all of which are enumerated in section 91 of the Constitution Act, 1867; and provincial authority, or heads of power, in section 92 of the Constitution Act, 1867. The key provincial one relevant to our discussion is property and civil rights within the province, which is universally understood to include the regulation of contracts in the province, and, parenthetically, virtually every aspect of the insurance sector has been ruled by our highest court to be of provincial jurisdiction.

We don’t think very much about this next point: Everything we do in the Parliament of Canada has to be located in one area or other of federal jurisdiction. If it’s a matter related to section 91, Ottawa has free rein to regulate. If it is a matter related to section 92, the provinces rule.

Let me provide two examples of section 91 authority that you know well, one being banks and banking. In this head of power, Ottawa gets to set the rules. This includes regulating contracts under this power — contracts concerning banks, minimum wages, employment standards for bank employees under the banking power.

Another is criminal law. If something is genuinely criminal, Ottawa can prohibit it, including contracts. Just this week we will do this by making loans above a certain rate of interest — contracts to provide loans — a crime, again, under the criminal law power.

Next, the spending power: There is a federal spending power. The spending power is not listed in section 91. It is based on the idea that Ottawa has property — in this case money — and can do with it as it pleases. This is true within limits I will explain. It is a powerful but limited federal authority.

All are agreed with respect to this legislation that it resides within the federal spending power, and only within the federal spending power. The question we are facing is whether the “no clawbacks” provision is a constitutional use in the exercise of the spending power.

I should just say parenthetically that despite Senator Pate’s observation about ancillary provisions, ancillary powers do not apply to the spending power — and for obvious reasons I will get to.

At committee and in this chamber, three arguments were advanced to justify the constitutionality of the “no clawbacks” clause. Each of these is 100% incorrect. The first was the reference to the Merchant Seamen Compensation Act. This federal statute has a similar “no clawbacks” provision, which has never been constitutionally challenged, but the reason the Merchant Seamen Compensation Act provision has not been challenged is it’s not an exercise of Ottawa’s spending power. Indeed, it has nothing do with the spending power at all. It is an exercise of Ottawa’s section 91 head of power over navigation and shipping, a section 91 power specifically. You only have to read a little bit of this bill to discover this. And just like banking has a specific head of power given to Ottawa, Ottawa can regulate entirely in that area, including, just like banking, it can regulate contracts.

The second argument to the effect that Ottawa can regulate contracts was the Supreme Court of Canada decision regarding the constitutionality of the Genetic Non-Discrimination Act, which dealt with contracts and was upheld by the Supreme Court of Canada. But when you read this case, you discover that what Ottawa did in this context — for example, with respect to the example Senator McPhedran identified, requiring employees to take genetic testing — is that Ottawa invalidated those contracts by making them a crime. And if it is legitimately a crime, Ottawa has the power to regulate — that is, prohibit — contracts under the criminal law power.

Indeed, but for the finding that Ottawa was exercising its criminal law power in those cases, the provisions would have been profoundly unconstitutional interferences with property and civil rights.

Furthermore — and this is important — just because Ottawa can regulate or prohibit contracts in one specific area does not make that authority transferable to another area and, in particular, not transferable to the spending power, and there are very good reasons, sadly, for that.

The third spending-power argument was a quote from a distinguished, now deceased, professor Peter Hogg, the dean of constitutional law in Canada. This is what the quote said, speaking about the spending power:

. . . Parliament may spend or lend its funds to any government or institution or individual it chooses, for any purpose it chooses; and that it may attach to any grant or loan any conditions it chooses . . . .

Now, Professor Hogg had a bit more to say about the spending power, and the sentences that follow that quote explain what the limits of the spending power are.

Professor Hogg said:

There is a distinction, in my view, between compulsory regulation —

— think here the “no clawbacks” provision —

— which can obviously only be accomplished by legislation enacted within the limits of legislative power, and spending or loaning or contracting, which either imposes no obligations on the recipient . . . . There is no compelling reason to confine spending or lending or contracting within the limits of legislative power —

— meaning Ottawa can go where it wants with its spending, and it does, as you know —

— because in those functions the government is not purporting to exercise any peculiarly legislative authority over its subjects.

That is, people can take the money or not. There is no legislative power engaged.

What this means is that in spending its money, Ottawa can spend in areas of provincial jurisdiction and can impose any conditions it likes on the recipient of the money, but it cannot use its legislative power to impose obligations on anyone else, obligations that are in provincial jurisdiction. To be sure of this, I read every case Professor Hogg cited, and all of them confirm this.

The bottom line is that Ottawa can attach conditions to the receipt of money by the recipient but it can’t go beyond that. Think of it like a pipeline down which money can flow. Ottawa can attach terms and conditions to the flow of that money. If the terms are not met, it can cut off the flow or it can require money to flow back, but it can’t legislate outside the walls of the pipeline.

Let me suggest for you an example of the most significant use of the spending power in this country and a compelling example of its limits: funding to support health care. Ottawa transfers billions of dollars to the provinces to support the delivery of medicare under provincial jurisdiction. It does this in the exercise of the spending power and it attaches conditions to the transfer of the money. You know it well, particularly the five principles of the Canada Health Act.

One of the most obvious concerns is that Ottawa does not want doctors to extra-bill patients for insured services under medicare. You’ve heard this a million times. If, as is argued, the spending power is essentially unlimited, the most obvious way to achieve this would be for Ottawa to transfer the money and then simply legislate that doctors can’t extra-bill. I hope you can see the parallel.

But Ottawa does not do this. A condition of the health transfer is that doctors aren’t allowed to extra-bill, but that obligation is imposed by the provinces. The prohibition against extra billing in every province in this country is done by provincial legislation not because Ottawa wouldn’t want to do it — by God, they would — but because, constitutionally, they can’t. And it’s the same with the “no clawbacks” provision: It would be great to do it, but we can’t. Just because it’s a very good idea, doesn’t make it constitutional. Section 91 does not have a head of power called “good ideas.”

Now, this is a small provision, but constitutionally the overall issue is enormous, quite frankly. If Ottawa can, through the use of the spending power, wade into provincial jurisdiction whenever and wherever it wants to spend money, as the proponents of this provision would have it, it would actually be destructive of federalism.

Senator Plett spoke a while ago about the attention we need to pay to regional interests. I would invite you to focus for a moment on provincial interests and our duty to be respectful of provincial jurisdiction on which those interests rest.

There is likely to be litigation if this clause were implemented, and here is an awkward, tragic dilemma: The provinces, even sympathetic to the intentions of this clause, would have to join with insurance companies to avoid an unprecedented expansion of spending power into provincial jurisdiction.

Whether we like it or not — and I don’t — the “no clawbacks” clause has within it the seeds of an almighty constitutional fight which Ottawa would assuredly lose, to say nothing of the way in which it would poison federal-provincial relations just at a time when federal-provincial cooperation in the delivery of this benefit is at its most crucial.

Some have suggested that declining to include the “no clawbacks” provision by the government and 314 members of Parliament — twice — is being done in deference to the insurance industry. I would invite you to think of it in a different way. It’s actually an expression of respect for the provincial jurisdiction at play here and a statement that honours the provinces and signals a desire to work with them rather than against their interests.

Indeed, this approach increases the possibility mentioned here earlier that provinces will exercise their own jurisdiction to protect this benefit by disallowing insurance clawbacks and it increases the prospect of working out protocols with industry whereby the disability benefit will not result in clawbacks.

I’m not happy with that outcome. I am as concerned as anyone about the stories that both you and I have heard, but there are limits to what we can do. Indeed, we have an obligation to respect those limits whether we like it or not.

I hope and trust that this will give you some degree of comfort that, in adopting the message as received, we are doing the right thing as we now have the opportunity to launch this bill and its great benefits for our most deserving citizens.

Thank you.