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Supreme Court of Canada Rules Incidental Restrictions on Interprovincial Trade are Acceptable: Indirect Limits May be Placed on Out-of-Province Alcohol Purchases

The Supreme Court of Canada in R v Comeau, 2018 SCC 15 (“Comeau”) unanimously upheld the constitutionality of a New Brunswick law which places limits on the amount of alcohol that may be purchased from sources other than the New Brunswick Liquor Corporation.

The Comeau decision deals strictly with interprovincial trade and does not discuss international trade, nor does it comment on items that come into Canada that are subsequently moved across provinces.

In Comeau, a resident of New Brunswick purchased alcohol in Quebec in amounts exceeding the limit set out in s. 134(b) of New Brunswick’s Liquor Control Act. After returning to New Brunswick, the resident, Mr. Comeau, was stopped by RCMP and charged a fine for exceeding the allowable alcohol limit.

Mr. Comeau challenged the charge, arguing that s. 121 of the Constitution Act, 1867, which provides that all articles of manufacture from any province shall be “admitted free” across provincial borders, renders s. 134(b) unconstitutional. Mr. Comeau argued that s. 121 should be interpreted as a free-trade provision that disallows any impediment to passage of goods across provincial boundaries.

In defense of its legislation, New Brunswick argued that s. 121 serves the more limited purpose of preventing provinces from imposing tariffs or tariff-like charges at provincial borders. New Brunswick argued provincial legislation that results in only incidental effects on interprovincial trade, such as s. 134(b), is not prohibited by s. 121.

The trial judge agreed with Mr. Comeau and held that s. 134(b) is unconstitutional. The New Brunswick Court of Appeal dismissed New Brunswick’s request for permission to appeal. New Brunswick then appealed to the Supreme Court of Canada.

The Supreme Court held that s. 134(b) does not infringe s. 121 of the Constitution Act, 1867. The Supreme Court reached its decision on two grounds:

Firstly, the Supreme Court held that the trial judge erred in failing to follow binding precedent. Lower courts in Canada must apply the decisions of higher courts, a principle known as vertical stare decisis. This principle is subject only to extraordinary exceptions, and is fundamental to ensuring certainty in the law.  The trial judge was required to follow long-standing Supreme Court decisions which previously ruled that incidental restrictions on interprovincial trade are acceptable. The trial judge’s failure to follow binding authority was fatal to his decision, and the Supreme Court would have allowed the appeal on this ground alone.

Secondly, the Supreme Court held that s. 121 only prohibits legislation that has a primary purpose of restricting cross-border trade. In reaching this interpretation of s. 121, the Supreme Court considered the wording of the section, its history, its position in the Constitution, and the legal principles that guide how courts understand the Constitution. The Court also considered that, were s. 121 interpreted more broadly to prevent any and all restrictions on free-trade, many existing federal and provincial legislative schemes would be rendered unconstitutional and invalid.

The Supreme Court held that the primary objective of s. 134(b) is to prevent the holding of large quantities of non-Corporation liquor, including non-Corporation liquor originating from inside New Brunswick (such as bootlegged or homebrewed alcohol). The primary objective of the New Brunswick scheme is to enable public supervision of the production, movement, sale, and use of alcohol within New Brunswick. Because the primary purpose of s. 134(b) is not to restrict cross-border trade, s. 134(b) is not unconstitutional.

The Comeau decision provides a nuanced interpretation of s. 121 that protects free trade while also respecting provinces’ powers to control the supply and use of liquor within their boundaries. The decision confirms that provincial legislation with the primary purpose of restricting interprovincial trade is unconstitutional, however provinces are free to implement legislation that results in incidental restrictions on interprovincial trade. While absolute prohibitions on purchasing out-of-province alcohol continue to be suspect and likely remain unconstitutional, the Comeau decision may prompt other provinces to follow New Brunswick’s lead, and implement limits on how much alcohol may be purchased from sources other than provinces’ respective alcohol corporations.