Points of law

N/a

Summary of the case

The Public Service Alliance of Canada sought certification as bargaining agent for Canadian civilian trades people working for the U.S. Navy at a U.S. base established in Newfoundland pursuant to a World War II lend‑lease agreement. The base was a particularly "sensitive" communications installation and security required the use of passes, and in some areas, special passes and personal military escort for the workers. The workers were paid in Canadian currency, paid Canadian income tax and contributed to the Canada Pension Plan and Unemployment Insurance. They were required to sign a no strike contract. Prior to certification proceedings, the U.S. Navy agreed to collective bargaining under U.S. labour law. When it was determined that the relevant American legislation was not applicable, the U.S. Navy proposed that a collective agreement nevertheless be negotiated with the Base Commanding Officer's resolving any differences between the parties. PSAC found this solution unacceptable and filed for certification with the Canada Labour Relations Board. The Board found it had jurisdiction over the base's civilian employees but stayed certification proceedings so that the question could be referred to the Federal Court of Appeal. The court held that the United States could not claim state immunity from the application for certification. The United States appealed. At issue here was whether the State Immunity Act applied to provide immunity for the base, and in particular, whether the certification proceedings fell within the commercial activity exception in the Act.



Held (Sopinka and Cory JJ. dissenting): The appeal should be allowed.



Per La Forest, L'Heureux‑Dubé and Gonthier JJ.: The State Immunity Act is a codification of the restrictive theory of sovereign immunity developed by the common law. The Act continues and clarifies this theory, but does not alter its substance. The relevant provisions of the Act, ss. 2 and 5, focus primarily on the nature of the activity in question, as did the common law. However, as with the common law the Act must be applied through a contextual approach: both the purpose and nature of the activity are relevant to this inquiry. The commercial activity exception in the Act requires a two-step inquiry: the nature of the activity must be determined; then its relationship to the domestic court proceedings must be assessed.



Employment at a military base is a multi-faceted relationship. It is not valid to isolate one aspect of this activity and label it as either "sovereign" or "commercial" in nature. Rather, those aspects of the activity that are relevant to the proceedings in issue should be determined. Then the impact of the proceedings on these attributes must be assessed.



A bare contract of employment at the base is for the most part a commercial activity, and the Canadian employees will generally be entitled to enforce their contracts in our courts. But, employment at the base has sovereign aspects as well. In particular, the structuring of work at the base, traditionally a management prerogative, is reserved to the base commander. This aspect of employment goes to the heart of the base operations, and as such is sovereign in nature.



To fall under the commercial activity exception, the proceedings must do more than incidentally affect the hiring of civilian labour at the base. They must relate to the activity viewed in its entire context. While the certification proceedings touch on the employment contracts, the competing nexus between the proceedings and the management of the base must also be considered. The connection between the hiring of individual employees and the imposition of non-consensual labour-management relations under the Canada Labour Code is too tenuous to create the nexus required by the Act. At the same time, the supervision of base operations by a domestic tribunal creates a nexus that is unacceptable under the Act.



This latter nexus raises practical concerns. The right to strike implicit in the Canada Labour Code threatens the military mission of the base. In a war, the replacement of striking workers with military personnel may not be feasible. Moreover, it is conceivable that the Canadian government could in the future adopt legislation prohibiting the replacement of striking workers. As well, legislation to end a strike could only be passed by the Canadian Parliament, an option not available to the United States in this case. Finally, the Board's mandate would allow substantial intrusion into base affairs. For example, terms of a collective agreement could be imposed by the Board, and the Board could rescind disciplinary actions taken by the Base Commanding Officer.



The "private person" test for sovereign immunity should be restricted to the trading context in which it was developed. It does not apply in this case. Here, American control over base operations was explicitly granted by the 1941 Lease, and the Lease clearly bars any derogation of American authority through Canadian legislation.



The effects of the Board's proceedings are not limited to union certification. Certification triggers a host of rights and obligations, many of which are virtual certainties. Ignoring these inevitable obligations would frustrate the purpose of sovereign immunity: the foreign state would be required to claim immunity piecemeal, at each stage of the collective bargaining process. This approach is simply not workable.



It is regrettable that sovereign immunity deprives employees of their right to the protection of labour relations laws in this case. However, this result is a necessary consequence of Canada's commitment to policies of international comity and reciprocity, and to its commitments under the Lease. Whenever sovereign immunity is asserted, it is inevitable that domestic parties will be denied legal recourse. This is a policy choice implicit in the Act itself.



Per Sopinka and Cory JJ. (dissenting): The Canadian definition of commercial activity does not explicitly or implicitly bar a consideration of the purpose of an activity in determining whether or not that activity is protected by state immunity. The drafters of the Canadian Act were aware of the American legislation explicitly barring such a consideration and must have intentionally departed from it thereby avoiding an overly narrow interpretation of the definition.



The Canadian definition places paramount importance on the nature of the activity. To identify this "nature" or quality of an activity, a Court should have regard to the context in which the activity took place. It will often be necessary to consider the immediate purpose of the actions taken by the foreign state. This approach fosters the goal of reasonably restricting state immunity by looking beyond the ultimate purpose of the foreign state's action, which will almost always be public, while continuing to protect by immunity the truly sovereign acts of states from domestic court proceedings. It does not unduly restrict the courts in classifying an activity according to its nature by unnecessarily narrowing the scope of the inquiry. This contextual approach complies with the definition of "commercial activity" contained in the Canadian statute, by retaining the nature of the activity as the focus of the decision. On the other hand, it avoids the problems caused by attempting to treat the nature and purpose of an activity as completely separate and discrete inquiries.



The issue as to whether or not the U.S. is entitled to immunity depends here on (1) the task for which the workers were hired and (2) whether the activity of hiring a person to perform that task was one in which a private party could engage.



The workers were trades persons hired as support workers for the military personnel. These workers were not neither privy to sensitive information nor regarded by the U.S. Navy as secure personnel. Apart from their support role, they served no purpose that was critical to the operation of the communications centre. The hiring of workers for the base does not fall within the scope of public acts of sovereign states. A state may not rely on the ultimate purpose of an activity to qualify its acts.



The employment of maintenance workers with very restricted access to a secure site is certainly an activity in which private parties could engage. The hiring of these workers, therefore, must fall into the category of a private act which by its nature is a commercial activity.



The legal distinction between the common law of employment and the legislated scheme of collective bargaining provided by the Canada Labour Code was not relevant to the determination of the issues here. Both the common law of employment and the Code relate to the regulation of the employment relationship. It is the nature of that relationship of employment which must be considered in determining whether state immunity should apply. Entry into the collective bargaining relationship does not result in significant differences from an individual contract of employment, notwithstanding the Board's assuming broad authority to supervise labour‑management relations at the base after the union's certification. The threat of disruption of base operations by potential strike action by Canadian support workers was diminished by base's ready access to replacement workers in the vast U.S. military organization. The hiring of replacement workers was not barred by the Canada Labour Code .



The U.S. Navy was readily prepared to accept an American collective bargaining regime operating under the applicable American statute. The U.S. government therefore was not adverse to the certification of a union in general terms and was prepared to accept the consequences which arose from certification. That certification would result in the Board's having other powers including the hearing of grievances could therefore be of little real concern to the United States.



The U.S. government claim to state immunity from the processes of a Canadian tribunal must be rejected. The act of hiring support service employees was one which a private person could undertake. It was in the nature of a commercial activity. Once it has been demonstrated that a foreign state does not fall within the ambit of immunity protected by the Canadian statute it should not receive any special dispensation from Canadian law. A Canadian worker, working on Canadian soil, should not be deprived of the benefits of Canadian law unless the foreign state is acting in a context which warrants immunity. This is particularly is so when Americans working in the United States for a foreign state would, in similar circumstances, have the benefit of American law.

Sources

Supreme Court Judgments [1992] 2 SCR 50

Additional information (explanations, notes, etc.)

N/a