Re Canada Labour Code

Re Canada Labour Code
Collection
Supreme Court Judgments
Date
1992-05-21
Report
[1992] 2 SCR 50
Case number
21641
Judges
La Forest, Gérard V.; L'Heureux-Dubé, Claire; Sopinka, John; Gonthier, Charles Doherty; Cory, Peter deCarteret
On appeal from
Federal Court of Appeal
Subjects
International law
Labour law
Notes
SCC Case Information: 21641
Decision Content
Re Canada Labour Code, [1992] 2 S.C.R. 50
The United States of America Appellant
v.
The Public Service Alliance of Canada,
the Attorney General of Canada and the
Canada Labour Relations Board Respondents
Indexed as: Re Canada Labour Code
File No.: 21641.
1991: December 11; 1992: May 21.
Present: La Forest, L'Heureux‑Dubé, Sopinka, Gonthier and Cory JJ.
on appeal from the federal court of appeal
International law ‑‑ Sovereign immunity ‑‑ Canadian support staff at U.S. base in Canada seeking certification ‑‑ U.S. claiming sovereign immunity ‑‑ Whether activity commercial or sovereign ‑‑ State Immunity Act , S.C. 1980-81-82-83, c. 95, ss. 3(1), (2), 4(1), (2)(a), 5.
Labour relations ‑‑ Canadian support staff at U.S. base in Canada seeking certification ‑‑ U.S. claiming sovereign immunity ‑‑ Whether activity commercial or sovereign.
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.
Cases Cited
By La Forest J.
Considered: Goethe House New York, German Cultural Center v. N.L.R.B., 685 F.Supp. 427 (S.D.N.Y. 1988), rev'd 869 F.2d 75 (1989), cert. denied 110 S.Ct. 52; I Congreso del Partido, [1983] A.C. 244; De Sanchez v. Banco Central de Nicaragua, 770 F.2d 1385 (1985); Rush‑Presbyterian‑St. Luke's Medical Center v. Hellenic Republic, 877 F.2d 574 (1989); referred to: Texas Trading & Mill. Corp. v. Federal Republic of Nigeria, 647 F.2d 300 (1981); Joseph v. Office of Consulate General of Nigeria, 830 F.2d 1018 (1987); Bell Canada v. Quebec (Commission de la santé et de la sécurité du travail), [1988] 1 S.C.R. 749; Canadian National Railway Co. v. Courtois, [1988] 1 S.C.R. 868; Alltrans Express Ltd. v. British Columbia (Workers' Compensation Board), [1988] 1 S.C.R. 897; Reference re Industrial Relations and Disputes Investigation Act, [1955] S.C.R. 529; Segni v. Commercial Office of Spain, 650 F.Supp. 1042 (1986); Van der Hulst v. United States, Supreme Court of the Netherlands, No. 13.696, December 22, 1989, unreported; Kayiambakis v. United States, Norway, Eidsivating App. Ct., May 29, 1989, unreported; Libyan Arab Jamahiriya v. Trobbiani (1990), 73 Riv. Dir. Int. 402; Italian Trade Union for Embassy and Consular Staff v. United States (1981), 65 I.L.R. 338; State Bank of India v. N.L.R.B., 808 F.2d 526 (1986), cert. denied 483 U.S. 1005 (1987); Trendtex Trading Corp. v. Central Bank of Nigeria, [1977] Q.B. 529.
By Cory J. (dissenting)
Texas Trading & Mill. Corp. v. Federal Republic of Nigeria, 647 F.2d 300 (1981); Segni v. Commercial Office of Spain, 835 F.2d 160 (1987); Rush‑Presbyterian‑St. Luke's Medical Center v. Hellenic Republic, 690 F.Supp. 682 (1988); Brewer v. Socialist People's Republic of Iraq, 890 F.2d 97 (1989); Weltover, Inc. v. Republic of Argentina, 941 F.2d 145 (1991); Trendtex Trading Corp. v. Central Bank of Nigeria, [1977] Q.B. 529; I Congreso del Partido, [1983] 1 A.C. 244; Gouvernement de la République démocratique du Congo c. Venne, [1969] Que. Q.B. 818, rev'd [1971] S.C.R. 997; Zodiac International Products Inc. v. Polish Peoples's Republic, [1977] C.A. 366; Amanat Khan v. Fredson Travel Inc. (No. 2) (1982), 36 O.R. (2d) 17; State Bank of India v. N.L.R.B., 808 F.2d 526 (1986); Goethe House New York, German Cultural Center v. N.L.R.B., 869 F.2d 75 (1989), cert. denied 110 S.Ct. 52 (1989).
Statutes and Regulations Cited
Agreements Concerning Leased Bases in Newfoundland, [1952] C.T.S. No. 14, Arts. I, XXIX.
American Bases Act, S.N. 1941, c. 12.
Canada Labour Code, R.S.C. 1970, c. L‑1, ss. 3, 36(1).
Constitution Act, 1867, s. 91(7) .
Federal Court Act, R.S.C. 1970 (2nd Supp.), c. 10, s. 28(4).
Federal Service Labor‑Management Relations Statute, Pub. L. 95-454, 92 Stat. 1192, 5 U.S.C. {SS} 7103(a)(2)(i)).
Foreign Sovereign Immunities Act of 1976, Pub. L. 94-583, 90 Stat. 2891, 28 U.S.C. {SS}{SS} 1603(d), 1604, 1605(a), (2).
Labour Code, R.S.Q., c. C-27, s. 109.1.
North Atlantic Treaty Status of Forces Agreement, [1953] C.T.S. No. 13, Arts. IX(4), XVIII.
State Immunity Act 1978 (U.K.), 1978, c. 33, ss. 1(1), 3(1)(a), (b), (3), 4(1), (2), (3), (4), (5), (6).
State Immunity Act , S.C. 1980-81-82-83, c. 95, ss. 2, 3(1), (2), 4(1), (2)(a), 5.
Terms of Union of Newfoundland with Canada, Newfoundland Act, 1949, R.S.C., 1985, App. II, No. 32.
Visiting Forces Act, R.S.C., 1985, c. V‑2 .
Authors Cited
Canada. Senate of Canada. Proceedings of the Standing Senate Committee on Legal and Constitutional Affairs, Issue No. 10, March 19 1981.
Emanuelli, C. "Commentaire: La Loi sur l'immunité des États " (1985), 45 R. du B. 81.
[1976] U.S. Cong. & Admin. News 6604.
APPEAL from a judgment of the Federal Court of Appeal, [1990] 1 F.C. 332, 100 N.R. 221, rejecting a claim of state immunity on a reference by the Canada Labour Relations Board following a decision of that Board dismissing a claim of state immunity made in an application for certification. Appeal allowed, Sopinka and Cory JJ. dissenting.
Brian A. Crane, Q.C., and Donald Dow, for the appellant.
Ronald A. Pink, Q.C., and Gordon Forsyth, for the respondent Public Service Alliance of Canada.
Edward R. Sojonky, Q.C., and Gilles Villeneuve, for the respondent the Attorney General of Canada.
H. Scott Fairley and John S. Contini, for the respondent Canada Labour Relations Board.
//La Forest J.//
The judgment of La Forest, L'Heureux-Dubé and Gonthier JJ. was delivered by
La Forest J. -- This appeal concerns the application of the international law doctrine of sovereign immunity, as codified in the State Immunity Act , S.C. 1980-81-82-83, c. 95 (now R.S.C., 1985, c. S-18 ), to union certification proceedings taken before the Canada Labour Relations Board in respect of Canadian civilian employees of the United States naval base in Argentia, Newfoundland. The United States claims immunity from the Board's proceedings, and the question ultimately turns on whether the proceedings "relate to any commercial activity" of the United States.
Facts
The Argentia naval base was established under the Agreements Concerning Leased Bases in Newfoundland (Leased Bases Agreement), [1952] C.T.S. No. 14, concluded in March, 1941 between the United Kingdom and the United States, following an exchange of diplomatic notes the previous year. The lease is for a term of 99 years, and was incorporated into the law of Newfoundland by the American Bases Act, S.N. 1941, c. 12, which was continued by s. 18 of the 1949 "Terms of Union of Newfoundland and Canada", Schedule to the Newfoundland Act, 1949, R.S.C., 1985, App. II, No. 32. In 1951, Canada and her allies entered into the North Atlantic Treaty Status of Forces Agreement (SOFA), [1953] C.T.S. No. 13, and by an exchange of notes in 1952 between Canada and the United States, it was agreed that SOFA would apply to the Argentia base: [1952] C.T.S. No. 14. However, terms of the lease not duplicated or explicitly superseded by SOFA were to remain in force. Certain provisions of SOFA were later incorporated into Canada's domestic law by the Visiting Forces Act, R.S.C., 1985, c. V-2 . However, this Act does not incorporate the SOFA provisions dealing with domestic civilian labour.
The base is controlled by the United States and its current mission is to support anti-submarine warfare command and tactical forces through the operation of a communications centre. However, the terms of the lease contemplate a broad range of military activity, extending to all aspects of a "naval and air base". It is a secure facility, covering a two square mile area, and includes the communications centre, a fire hall, a maintenance hall, a power house, a school and living quarters for approximately 500 American and 70 Canadian military personnel. Additionally there are Canadian civilians working at the base, some 60 of whom are employed as firefighters and tradespeople such as plumbers, engineers, carpenters, boiler plant operators and electricians. These Canadian civilian employees are the subject of the certification proceedings at issue in this appeal.
These employees do most of the maintenance work at the base. When maintenance is required in the communications centre, an employee must obtain a special pass and is accompanied by a military escort. The area in which the maintenance is completed is then sealed off by military personnel. Thus the employees have minimal exposure to the actual military operations of the base. The employees report to a civilian foreman, but their ultimate superior is a United States military officer.
Some aspects of the employees' relationship with the base are connected to Canada: hiring decisions are made at Argentia and not at U.S. Navy Headquarters in Norfolk, Virginia; the employees are paid in Canadian dollars; they pay taxes, pension contributions and unemployment insurance premiums to the Canadian Government. On the other hand, the employees are subject to the American workers compensation program and are entitled to American official holidays, although they are also permitted to take leave on Canada Day.
Each employee is required to sign an employment agreement under which he or she agrees not to strike. The employees have never been unionized. In 1982, though, the Union of National Defence Employees (UNDE), now a component of the Public Service Alliance of Canada (PSAC), executed a "Memorandum of Understanding" with the base commander. The memorandum provided that UNDE and the Navy would jointly determine whether a majority of designated employees wanted a collective agreement. If such a desire was expressed, negotiations towards a collective agreement would commence according to terms specified in the memorandum. The memorandum also provided that UNDE would recognize and accept "U.S. law, regulations and instructions governing the employment of Canadian National Employees", and that the union would accept and honour the "no strike" clause in the employment contracts. There was apparently an understanding that the memorandum was subject to U.S. labour legislation; however the relevant American statute (the Federal Service Labor-Management Relations Statute, Pub. L. 95-454, 92 Stat. 1192, 5 U.S.C. {SS} 7103(a)(2)(i)) did not apply to aliens or non-citizens employed outside the United States. When advised of this, the base commander suggested that negotiations should be continued according to the terms of the memorandum and that any misunderstandings would be resolved by him. PSAC, which by this time had succeeded UNDE, refused to negotiate further under those conditions.
On May 27, 1987, PSAC filed an application for certification on behalf of the civilian personnel pursuant to the provisions of the Canada Labour Code, R.S.C. 1970, c. L-1 (now R.S.C., 1985, c. L-2 ). In correspondence with the Canada Labour Relations Board, the United States Department of the Navy objected to the proceedings on the ground that the Board was without jurisdiction. On November 12, 1987, the Board held a hearing on the question of jurisdiction, but the United States was not represented at the hearing; nor did it file submissions. However, the Attorney General of Canada was given status as mis-en-cause and took the position that the Board lacked jurisdiction. In its decision of July 27, 1988, the Board held that it had jurisdiction to proceed with the application, but because of the "exceptional and especially complex character of this case" decided to refer certain questions to the Federal Court of Appeal for hearing and determination under s. 28(4) of the Federal Court Act, R.S.C. 1970 (2nd Supp.), c. 10. The reference was filed on August 12, 1988 stating the following questions:
(1)Has the Canada Labour Relations Board erred in finding that the United States Government could not claim State immunity as provided in section 3 of the State Immunity Act , S.C. 1980-81-82-83, c. 95, with respect to an application for certification filed on behalf of Canadian civilians employed by the U.S. Department of Defense, at its Naval Facility at Argentia, Newfoundland?
(2)If not, has the Canada Labour Relations Board erred in finding that the labour relations between the U.S. Naval Base and its Canadian civilian employees fall under the federal constitutional jurisdiction?
(3)If not, has the Canada Labour Relations Board erred in finding that these labour relations fall under its own jurisdiction?
The Federal Court of Appeal unanimously affirmed the Board's decision on the first question, but declined to hear counsel on the second and third questions until the first had been finally determined. Nor are the latter questions before this Court. Only the first question is under appeal; the second and third questions will be dealt with by the Federal Court of Appeal only if this Court dismisses the present appeal. PSAC, the Board and the Attorney General of Canada are named as respondents in this appeal.
Legislation
The relevant sections of the State Immunity Act are the following:
2. In this Act,
. . .
"commercial activity" means any particular transaction, act or conduct or any regular course of conduct that by reason of its nature is of a commercial character;
. . .
3. (1) Except as provided by this Act, a foreign state is immune from the jurisdiction of any court in Canada.
(2) In any proceedings before a court, the court shall give effect to the immunity conferred on a foreign state by subsection (1) notwithstanding that the state has failed to take any step in the proceedings.
4. (1) A foreign state is not immune from the jurisdiction of a court if the state waives the immunity conferred by subsection 3(1) by submitting to the jurisdiction of the court in accordance with subsection (2) or (4).
(2) In any proceedings before a court, a foreign state submits to the jurisdiction of the court where it
(a) explicitly submits to the jurisdiction of the court by written agreement or otherwise either before or after the proceedings commence;
. . .
5. A foreign state is not immune from the jurisdiction of a court in any proceedings that relate to any commercial activity of the foreign state. [Emphasis added.]
Also of relevance is the first Article of the Leased Bases Agreement:
Article I.
(1) The United States shall have all the rights, power and authority within the Leased Areas which are necessary for the establishment, use, operation and defence thereof, or appropriate for their control, and all the rights, power, and authority within the limits of territorial waters and air spaces adjacent to, or in the vicinity of, the Leased Areas, which are necessary to provide access to and defence of the Leased Areas, or appropriate for control thereof.
. . .
Article XXIX.
The United States and the Government of the Territory respectively will do all in their power to assist each other in giving full effect to the provisions of this Agreement according to its tenor and will take all appropriate steps to that end.
During the continuance of any Lease, no laws of the Territory which would derogate from or prejudice any of the rights conferred on the United States by the Lease or by this Agreement shall be applicable within the Leased Area, save with the concurrence of the United States.
In addition, the following provisions of the North Atlantic Treaty Status of Forces Agreement should be noted:
Article IX
4. Local civilian labour requirements of a force or civilian component shall be satisfied in the same way as the comparable requirements of the receiving State and with the assistance of the authorities of the receiving State through the employment exchanges. The conditions of employment and work, in particular wages, supplementary payments and conditions for the protection of workers, shall be those laid down by the legislation of the receiving State. Such civilian workers employed by a force or civilian component shall not be regarded for any purpose as being members of that force or civilian component.
Judicial History
Canada Labour Relations Board (July 27, 1988)
The Board approached the question of sovereign immunity from two perspectives. First, it considered whether the United States had waived its sovereign immunity, as contemplated by s. 4(2) (a) of the State Immunity Act , by entering into SOFA. Second, the Board asked whether the employees' contracts of employment constituted a "commercial activity" within the meaning of s. 2 of the Act. In the Board's view, an affirmative answer to either of these questions would bar the United States' claim of immunity. On the first question, the Board concluded that SOFA could not be read as an "explicit" submission to Canadian courts. (It has been conceded that the Board is a "court" for purposes of the Act.) Given the language of s. 4(2) (a), any waiver must be clear and unequivocal, and the weight of academic opinion was that so-called "choice of law" clauses as found in Article IX(4) were at most an "implied" waiver of immunity. In the Board's view, the SOFA treaty lacked the requisite explicitness to qualify as a waiver.
Turning to the "commercial activity" issue, the Board found that the employment contracts fell within this exception to sovereign immunity, thus refuting the immunity claim of the United States government. In support of this conclusion, the Board presented a comprehensive exposition of the doctrine of sovereign immunity in international law and under domestic statutory law. The Board noted that Parliament chose to follow the American model for codification of the rules regarding the restrictive theory of sovereign immunity, in that both Canada and the United States define "commercial activity" in a general fashion, leaving it to the courts to develop a workable definition. This model can be contrasted with the English State Immunity Act 1978 (U.K.), 1978, c. 33, which carves out a specific exception from immunity for contracts of employment.
Because of the paucity of Canadian judicial authority on the interpretation of the State Immunity Act , and because it was patterned after the American model, the Board considered it useful to turn to American authority for guidance. The relevant provision in the American Foreign Sovereign Immunities Act of 1976, Pub. L. 94-583, 90 Stat. 2891, 28 U.S.C., is {SS} 1603(d):
(d) A "commercial activity" means either a regular course of commercial conduct or a particular commercial transaction or act. The commercial character of an activity shall be determined by reference to the nature of the course of conduct or particular transaction or act, rather than by reference to its purpose. [Emphasis added.]
In interpreting this provision, American courts and the Board found useful the following statement of legislative purpose of the U.S. House of Representatives Judiciary Committee, issued prior to the enactment of the Act (reprinted in [1976] U.S. Cong. & Admin. News 6604, at pp. 6614-15):
(d) Commercial activity. -- Paragraph (c) of section 1603 defines the term "commercial activity" as including a broad spectrum of endeavor, from an individual commercial transaction or act to a regular course of commercial conduct. A `regular course of commercial conduct' includes the carrying on of a commercial enterprise such as a mineral extraction company, an airline or a state trading corporation. Certainly, if an activity is customarily carried on for profit, its commercial nature could readily be assumed. At the other end of the spectrum, a single contract, if of the same character as a contract which might be made by a private person, could constitute a `particular transaction or act.'
As the definition indicates, the fact that goods or services to be procured through a contract are to be used for a public purpose is irrelevant; it is the essentially commercial nature of an activity or transaction that is critical. Thus, a contract by a foreign government to buy provisions or equipment for its armed forces or to construct a government building constitutes a commercial activity. The same would be true of a contract to make repairs on an embassy building. Such contracts should be considered to be commercial contracts, even if their ultimate object is to further a public function.
By contrast, a foreign state's mere participation in a foreign assistance program administered by the Agency for International Development (AID) is an activity whose essential nature is public or governmental, and it would not itself constitute a commercial activity. By the same token, a foreign state's activities in and `contacts' with the United States resulting from or necessitated by participation in such a program would not in themselves constitute a sufficient commercial nexus with the United States so as to give rise to jurisdiction (see sec. 1330) or to assets which could be subjected to attachment or execution with respect to unrelated commercial transactions (see sec. 1610(b)). However, a transaction to obtain goods or services from private parties would not lose its otherwise commercial character because it was entered into in connection with an AID program. Also public or governmental and not commercial in nature, would be the employment of diplomatic, civil service, or military personnel, but not the employment of American citizens or third country nationals by the foreign state in the United States.
The courts would have a great deal of latitude in determining what is a `commercial activity' for purposes of this bill. It has seemed unwise to attempt an excessively precise definition of this term, even if that were practicable. Activities such as a foreign government's sale of a service or a product, its leasing of property, its borrowing of money, its employment or engagement of laborers, clerical staff or public relations or marketing agents, or its investment in a security of an American corporation, would be among those included within the definition. [Emphasis added.]
This legislative history, the Board thought, clearly suggested that employment contracts with third country nationals would fall within the "commercial activity" exception in the American statute.
In the Board's view, the leading American case on "commercial activity" was Texas Trading & Mill. Corp. v. Federal Republic of Nigeria, 647 F.2d 300 (1981). This case adopted the so-called "private person" test for applying the exception, which was stated in this way, at p. 309: ". . . if the activity is one in which a private person could engage, it is not entitled to immunity." Applying that test to the instant case, the Board concluded that if the same facts had presented themselves in the United States, the contracts of employment would have been described as a commercial activity, because the hiring of civilian employees is an activity that can be performed by a private party. The Board adopted this public-private dichotomy in its interpretation of s. 2 of Canada's State Immunity Act , concluding that the hiring of civilian employees was a private act that fell within the "commercial activity" exception in that Act.
Two other issues were decided by the Board, neither of which arise on this appeal. First, the Board held that labour relations at the base fall under federal constitutional jurisdiction under s. 91(7) of the Constitution Act, 1867 , because the activity in issue is directly related to Canada's defence. Secondly, it concluded that the base constitutes a "federal work, undertaking or business" within the meaning of s. 2 of the Canada Labour Code and is therefore within the Board's jurisdiction.
Federal Court of Appeal, [1990] 1 F.C. 332
The Court of Appeal unanimously affirmed both of the Board's findings with respect to sovereign immunity. Mahoney J.A. wrote the principal reasons, Iacobucci C.J. (as he then was) adding separate reasons; Stone J.A. concurred with both. On the question of waiver, the court affirmed the Board's decision without detailed comment. On the question of commercial activity, both sets of reasons affirm the Board's finding, although Iacobucci C.J. differed with the approach taken by the Board.
Mahoney J.A. found that what is explicit in the American statutory definition of commercial activity ‑‑ the exclusion of consideration of the purpose of the activity ‑‑ is implicit in the Canadian definition. He noted that both the English and American models of sovereign immunity excluded employment contracts, and accepted the Texas Trading "private person" test. Finally, Mahoney J.A. adverted to the somewhat similar case of Goethe House New York, German Cultural Center v. N.L.R.B., 685 F.Supp. 427 (S.D.N.Y. 1988), rev'd 869 F.2d 75 (1989), cert. denied 110 S.Ct. 52 (1989), where it was held that the doctrine of sovereign immunity did not exempt a German cultural centre from American labour relations laws.
Mahoney J.A. recognized a distinction between labour relations and mere employment contracts. It seemed clear to him that the sovereign dignity of a foreign state would be embarrassed if a domestic tribunal could force that state to bargain collectively, and that this was quite different from enforcing the terms of a contract of employment freely entered into. In the end, however, Mahoney J.A. was satisfied (even though "disturbed" by the result) that the proceeding here "related" to a commercial activity within the meaning of the Act. He stated, at p. 349:
I have come to the conclusion that a certification proceeding does, nevertheless, "relate" to the employment of members of the proposed bargaining unit under contracts of service, entry into which is, in my view, plainly "conduct . . . of a commercial character" on the part of the U.S. I am unable to find anything peculiar to employment on the base that allows me to distinguish, in a meaningful way, the employment in issue. Only if one looks beyond the nature of the employment to its broad purpose ‑‑ to serve the defence requirements of the U.S. ‑‑ can invocation of state immunity be rationalized.
Iacobucci C.J. agreed with Mahoney J.A.'s approach. He noted that the Act's reference to the "nature" of the activity suggests a narrower scope of immunity than if "purpose" had been explicitly mentioned. In his view, deference to the purpose of the impugned activity would result in a scope of immunity as wide as that available under the "absolute theory" of sovereign immunity, thereby defeating the statutory intention of the Act. He agreed with Mahoney J.A. that the nature of the transaction in this case was commercial in that employment contracts entered into between the United States and Canadian civilians were at the heart of the matter and that the certification proceedings "related" to that commercial activity within the meaning of s. 5 of the Act.
Iacobucci C.J. noted, however, that the Board had gone somewhat astray in adopting the "private person" test as determinative in interpreting s. 2 of the Act. He illustrated the flaw in this approach with the example of a computer programmer hired to work on a foreign military base. That function could be performed by a private party but, if the work was in relation to highly confidential and sensitive information gathering and analysis, Iacobucci C.J. doubted whether those duties would constitute commercial activity.
Issue
The only issue to be dealt with by this Court is the following:
Has the Canada Labour Relations Board erred in finding that the United States Government could not claim State immunity as provided in section 3 of the State Immunity Act , S.C. 1980-81-82-83, c. 95, with respect to an application for certification filed on behalf of the Canadian civilians employed by the U.S. Department of Defense, at its Naval Facility at Argentia, Newfoundland?
PSAC has abandoned its argument that SOFA constitutes a waiver of immunity within the meaning of s. 4(2)(a) of the Act, so all that remains in issue is the "commercial activity" exception.
Analysis
This appeal raises the issue of sovereign immunity, as codified in the State Immunity Act . Specifically, the question to be decided is whether labour relations at a foreign military base constitute "commercial activity" under the statute, thereby depriving the base of sovereign immunity in that regard. I have concluded that labour relations at the base are not "commercial", and as such the base should be immune from the jurisdiction of any domestic labour tribunal.
The crux of this appeal is the proper interpretation of s. 5 of the State Immunity Act . It reads:
5. A foreign state is not immune from the jurisdiction of a court in any proceedings that relate to any commercial activity of the foreign state.
This is the provision by which the Board seeks to assert jurisdiction over labour relations at the base. The section, in combination with the definition of "commercial activity" in s. 2 , raises two basic questions. First, what is the "nature" of the activity in question ‑‑ i.e., does employment at the base constitute commercial activity? Second, are the proceedings in this case ‑‑ a union certification application ‑‑ "related" to that activity? The tw