Public Mobile v. Canada (Attorney General)

Public Mobile v. Canada (Attorney General)
Court (s) Database
Federal Court Decisions
Date
2011-02-04
Neutral citation
2011 FC 130
File numbers
T-26-10
Notes
Reported Decision
Decision Content
Federal Court
Cour fédérale
Date: 20110204
Docket: T-26-10
Citation: 2011 FC 130
Ottawa, Ontario, February 04, 2011
PRESENT: The Honourable Mr. Justice Hughes
BETWEEN:
PUBLIC MOBILE INC.
Applicant
and
ATTORNEY GENERAL OF CANADA,
GLOBALIVE WIRELESS MANAGEMENT CORP., BELL CANADA, ROGERS COMMUNICATIONS INC., SHAW COMMUNICATIONS INC., AND TELUS COMMUNICATIONS COMPANY
Respondents
and
ALLIANCE OF CANADIAN CINEMA, TELEVISION AND RADIO ARTISTS, COMMUNICATIONS, ENERGY AND PAPERWORKERS UNION OF CANADA, AND FRIENDS OF CANADIAN BROADCASTING
Interveners
REASONS FOR JUDGMENT AND JUDGMENT
[1] This is an application for judicial review brought under the provisions of section 18.1 of the Federal Courts Act, R.S. 1985, c. F-7 of a Decision dated December 10, 2009, made by the Governor in Council pursuant to section 12(1) of the Telecommunications Act, S.C. 1993, c. 38. By that Decision, the Governor in Council varied a Decision of the Canadian Radio-television and Telecommunications Commission (CRTC), Telecom Decision CRTC 2009-678. The Governor in Council determined that the Respondent Globalive Wireless Management Corp. met the requirements of section 16 of the Telecommunications Act and is currently eligible to operate as a telecommunications common carrier in Canada.
[2] For the reasons that follow, I find that the Applicant Public Mobile Inc. has standing to bring this Application, that the Decision of the Governor in Council is quashed, that the Judgment will be stayed for forty-five days and that costs are to be spoken to.
INDEX
For convenience, these Reasons are indexed as follows:
THE PARTIES paragraphs 3 to 7
BACKGROUND FACTS paragraphs 8 to 13
CRTC DECISION 2009-678 paragraphs 14 to 37
THE GOVERNOR IN COUNCIL’S DECISION paragraphs 38 to 59
ISSUES paragraphs 60 to 61
COURT’S SUPERVISORY FUNCTION
– SECTION 18.1 paragraphs 62 to 65
ISSUE 1 a) Standing paragraphs 66 to 79
ISSUE 1 b) Alternative Remedy paragraphs 80 to 83
ISSUE 2 a) The Telecommunications Act paragraphs 84 to 95
ISSUE 2 b) Findings of Fact paragraphs 96 to 104
ISSUE 2 c) Legal Findings paragraphs 105 to 119
CONCLUSIONS paragraphs 120 to 121
COSTS paragraphs 122 to 123
JUDGMENT
THE PARTIES
[3] The Applicant Public Mobile Inc. successfully participated in 2008 in an auction of radio frequency spectrum conducted by the Minister of Industry. As a result it proposed to commence operation as a telecommunications common carrier and to introduce wireless services sometime in 2010. Public Mobile received a letter from the CRTC stating that Public Mobile was required to satisfy the CRTC as to whether it complied with the Canadian ownership requirements of the Telecommunications Act. The Record indicates that as of the date of filing of the Record, Public Mobile was engaged in hearings before the CRTC in this respect.
[4] The Respondent Attorney General of Canada represents the Governor in Council in these proceedings.
[5] The Respondent Globalive Wireless Managements Corp. also successfully participated in the auction of radio frequency spectrum in securing the right to use radio frequencies that would permit it to provide wireless telecommunications services to the public subject to compliance with the provisions of the Telecommunications Act. The CRTC held a hearing as to whether Globalive complied with the Canadian ownership requirements of that Act. The CRTC, in its Decision, determined that Globalive did not meet the provisions of section 16(1) of that Act in that it was controlled by a non-Canadian. The Decision of the Governor in Council reversed that determination.
[6] The Respondents Bell Canada, Rogers Communications Inc., Shaw Communications and Telus Communications, like Public Mobile and Globalive, also successfully participated in the auction of radio frequency spectrum. They were not required to demonstrate to the CRTC that they met the requirements of the Telecommunications Act, presumably since they had already been offering and providing wireless communication services in Canada. Only Telus appeared in these proceedings. It made submissions at the hearing supportive of the positions taken by the Applicant Public Mobile.
[7] The Alliance of Canadian Cinema, Television and Radio Artists; the Communications, Energy and Paperworkers Union of Canada and; Friends of Canadian Broadcasting were each granted intervener status in these proceedings. They were commonly represented by the same Counsel who provided written submissions and addressed the Court at the hearing. Those submissions were supportive of the positions taken by the Applicant Public Mobile.
BACKGROUND FACTS
[8] Long-distance wireless telecommunication in Canada is governed by federal statues, including the Telecommunications Act, supra, and the Radiocommunication Act, R.S. 1985, c R-2 and its Regulations SOR/96-484. The Telecommunications Act has an unusual history. It can be traced back to the Railway Act 1903, 3 Edw. VII, c. 58, although it has undergone several revisions, consolidations and new enactments since that time.
[9] Wireless telecommunication is enabled by electronic devices which make use of the electromagnetic spectrum. This spectrum encompasses a broad range of radio frequencies which are treated as a public resource owned and administered by the federal government. The government determines what frequencies may be used by what persons and for what purposes. Certain portions of the frequency spectrum may become available for commercial use, such as by those offering cell phone services, and have been sold by auction conducted by the federal government. The auction relevant to the issues here commenced in the latter part of 2007 when the federal government publicly announced the licensing framework for the issuance of spectrum licences in the Advanced Wireless Services (AWS) band. The auction was held in mid 2008 and several parties were successful in acquiring AWS spectrum licences. Among them were Globalive, Public Mobile, Bell, Rogers, Shaw and Telus. Sums ranging up to over $900 million dollars were paid by various of these parties for such licences. Globalive paid over $440 million for its licences.
[10] The successful bidders then had to obtain a licence from the Minister of Industry under the provision of the Radiocommunication Act and Regulations, supra. Among the matters upon which the Minister had to be satisfied was that the party was “Canadian owned and controlled” within the meaning of section 10 of those Regulations. This section uses wording identical to section 16(3) of the Telecommunications Act, which will be discussed later. The Minister did not hold hearings or deliver a reasoned decision under the Radiocommunication Regulations. A licence was simply issued. All parties, including Public Mobile, Globalive, Telus and the other corporate Respondents, received such a licence.
[11] The second hurdle was for Public Mobile and Globalive to demonstrate to the CRTC that each of them met the eligibility requirements of the Telecommunications Act and, in particular, Canadian ownership and control. For this purpose, these parties had to provide information and make submissions to the CRTC. The CRTC also invited submissions from other interested persons. It conducted separate hearings for each of Globalive and Public Mobile Inc. in public and in camera. On October 29, 2009, the CRTC released its Decision CRTC 2009-678 respecting Globalive. It determined that Globalive was in fact controlled by a non-Canadian and, therefore, it did not meet the requirements of section 16 of the Telecommunications Act, and was not currently eligible to operate as a telecommunications common carrier.
[12] Section 12 of the Telecommunications Act provides that, within a stipulated period, the Governor in Council may, on petition presented to it, or on its own motion, by order, vary or rescind a CRTC Decision or send all or a portion of it back for reconsideration. In this case, the Governor in Council on its own motion undertook a review of the CRTC Decision. Section 13 of the Act requires that each province be given the opportunity to make submissions. This was done. The parties, including Globalive and Public Mobile, made further written submissions to the Governor in Council. Other submissions may have also been received. The Attorney General’s Counsel was asked by the Applicant’s Counsel to produce copies of the documents referred to by the Governor in Council in coming to its Decision. The Attorney General’s Counsel refused to do so.
[13] On December 10, 2009, the Governor in Council released its Decision P.C. 2009-2008, the effect of which was to vary the CRTC Decision aforesaid, and to determine that Globalive was not controlled in fact by a non-Canadian, and thus was eligible to operate in Canada as a telecommunications common carrier. This is the Decision that is the subject of this judicial review.
CRTC DECISION 2009-678
[14] The CRTC released its Decision, 2009-678, respecting whether Globalive fell within the provisions of the Telecommunications Act, on 29 October 2009. The CRTC determined that Globalive did not meet the requirements set out in section 16 of the Act and was currently not eligible to operate as a telecommunications common carrier. It concluded at paragraph 119 of its Decision:
119. In light of the above, the Commission finds that Globalive is controlled in fact by Orascom, a non-Canadian. Therefore, the Commission concludes that Globalive does not meet the requirements set out in section 16 of the Act and is not currently eligible to operate as a telecommunications common carrier.
[15] The evidence before the CRTC constituted documents and submissions from Globalive. It appears that during the course of the proceedings, Globalive made certain amendments to some of the documents, particularly those related to financing arrangements between it and an entity known as Orascom Telecom Holding (Canada) Limited.
[16] At paragraph 30 of its Decision, the CRTC determined that Orascom was a non-Canadian entity within the meaning of the Regulations. This finding was not challenged by the Governor in Council.
[17] The matter of principal concern for the CRTC was whether Globalive met the requirements of subsection 16(3) of the Telecommunications Act, which states:
Canadian ownership and control
16. (3) For the purposes of subsection (1), a corporation is Canadian-owned and controlled if
(a) not less than eighty per cent of the members of the board of directors of the corporation are individual Canadians;
(b) Canadians beneficially own, directly or indirectly, in the aggregate and otherwise than by way of security only, not less than eighty per cent of the corporation’s voting shares issued and outstanding; and
(c) the corporation is not otherwise controlled by persons that are not Canadians.
[18] The first two of these provisions (a) and (b) are what are referred to as “legal control”. The CRTC found that Globalive met these requirements. The Governor in Council did not vary that finding. That finding was not challenged at the hearing before me.
[19] The point of controversy as between the CRTC and the Governor in Council, and as argued before me at the hearing, was whether Globalive met the provision of subsection 16(3)(c) of the Telecommunications Act. This provision is referred to as “control in fact”. The CRTC began its discussion as to this point at paragraphs 34 and 35 with reference to what has been called the Canadian Airlines decision. The Governor in Council acknowledged that this decision was pertinent
and no challenge in that respect was raised at the hearing before me. The CRTC wrote at paragraphs 34 and 35 of its Decision:
Control in fact
34. As noted in Broadcasting Decision 2007-429 (the CanWest3 decision) and applied in Broadcasting Decision 2008-69 (the BCE4 decision), the Commission considers that the appropriate test for assessing control in fact was set out in the Canadian Airlines decision5 of the National Transportation Agency, now the Canadian Transportation Agency. In that decision, the National Transportation Agency found that:
…There is no one standard definition of control in fact but generally, it can be viewed as the ongoing power or ability, whether exercised or not, to determine or decide the strategic decision-making activities of an enterprise. It can also be viewed as the ability to manage and run the day-to-day operations of an enterprise. Minority shareholders and their designated directors normally have the ability to influence a company as do others such as bankers and employees. The influence, which can be exercised either positively or negatively by way of veto rights, needs to be dominant or determining, however, for it to translate into control in fact.
35. The National Transportation Agency went on to say that the determination of control in fact turns on the consideration of individual factors which, taken together, may result in a minority shareholder exerting control:
In all previous Canadian ownership reviews and enquiries, the Agency has not only looked at individual arrangements between the shareholders and the air carrier to determine where control in fact lies but has also examined all arrangements taken together to make the determination. Individual arrangements between the minority shareholder and the airline can each result in the minority shareholder exerting a degree of influence over the company. Such influence, considered on an individual arrangement basis, may not be determining and may not result in the minority shareholder being able to exert control over the airline. All such influence taken together, however, may result in the minority shareholder being able to exert a degree of influence which translates into control. [emphasis added]
[20] At paragraphs 36 and 37 of its Decision, the CRTC acknowledged that a careful consideration of the facts in a particular case was required, and enumerated four major matters that it would consider:
36. A determination of control in fact necessarily involves careful consideration of the facts in a particular case. Accordingly, past Commission decisions with respect to ownership and control are not binding or determinative. However, they are useful in providing guidance for the interpretation and application of the test for control in fact.
37. Based on an analysis of all the information submitted in the course of this proceeding, the Commission considers that the following matters raise concerns relating to control in fact:
· corporate governance;
· shareholder rights;
· commercial arrangements between Globalive and non- Canadians; and
· economic participation of Globalive and non-Canadians.
[21] As to the first of these four matters, corporate governance, the CRTC determined that consideration of three points was required: composition of boards of directors, quorum provisions, and the appointment of officers. At paragraph 38 of its Decision, it wrote:
Corporate governance
38. As noted in the BCE and CanWest decisions, specific corporate governance arrangements may have substantial implications for control in fact. In the present case, the relevant arrangements include those with respect to the composition of the boards of directors, quorum provisions, and the appointment of officers.
[22] On the first point, composition of the boards of directors, the CRTC analyzed the facts and determined, at paragraph 45, that certain amendments were required to satisfy it on this point:
45. In the present case, the Commission considers that the revised board structure, including the role and composition of the selection committee, does not ensure that the nominees of the Canadian shareholder are sufficient in number to offset the influence of Orascom, a non-Canadian shareholder. In order to address this point, Globalive would have to amend its Shareholders' Agreement and corporate documents such that on each of the two boards, AAL nominates five directors, Orascom nominates four directors, and AAL and Orascom each nominate one Independent Director. There would be no further need for a selection committee.
[23] On the second point, quorum provisions, the CRTC concluded at paragraph 49 that provided amendments were made as requested in paragraph 45, the quorum provisions could be satisfied:
Commission’s analysis and determination
49. Provided that the boards are reconstituted according to paragraph 45 above, the Commission considers that the revised quorum provisions ensure that the number of nominees of the Canadian shareholder is sufficient to offset the influence of Orascom.
[24] On the third point, appointment of officers, the CRTC determined that it had no concern. At paragraph 53 it wrote:
53. The Commission has no concern with regard to the appointment of officers under the revised structure.
[25] The second major matter addressed by the CRTC was shareholders’ rights. In this regard, commencing at paragraph 54 of its Decision, the CRTC dealt with liquidity rights, eligible purchasers and veto rights. It concluded as to the first, liquidity rights, at paragraph 59 of its
Decision that, even in their revised form, liquidity rights provided an indication of Orascom’s influence over the venture:
Commission's analysis and determination
59. The Commission considers that the liquidity rights in the revised documents are an improvement on the array of rights originally granted to Orascom as minority voting shareholder. Nevertheless, the liquidity rights, even in their revised form, provide an indication of Orascom's influence over the venture. The specification of a floor price and the imposition of a cap on the proceeds generated in the event that AAL sells its shares are inconsistent with the relative voting interests of the shareholders.
[26] On the second point, eligible purchasers, the CRTC concluded at paragraph 64 of its Decision that certain amendments were required:
64. Accordingly, the Commission considers that Globalive should amend the definition of Strategic Competitor to include only entities which, taken together with their affiliates, hold more than a 10 percent share of the Canadian wireless market on a per-subscriber basis.
[27] On the third point, veto rights, the CRTC concluded at paragraphs 71 and 72 of its Decision that further amendments were required:
Commission’s analysis and determination
71. The Commission notes that the modifications made to the veto rights are substantial. The addition of an ordinary course of business exception is an important step in allaying concerns that the veto rights grant Orascom influence over the operation of the wireless business. However, the Commission considers that the value of the spectrum is not an appropriate foundation on which to base the five percent veto threshold. The Commission considers that Globalive's enterprise value is a more appropriate measure.
72. Accordingly, the monetary threshold for vetoes should be set at five percent of Globalive's enterprise value as determined by its board every two years, based on a third-party valuation.
[28] The third major matter addressed by the CRTC was commercial arrangements between Globalive and non-Canadians. In that respect, the CRTC considered a Technical Services Agreement (TSA) and a Trademark Agreement.
[29] With respect to the Technical Services Agreement (TSA), the CRTC determined that such an agreement resulted in continued influence by Orascom over operating and strategic decisions related to Globalive’s network. It wrote at paragraphs 82 to 84 of its Decision:
Commission’s analysis and determination
82. The Commission accepts that the TSA is a dual-purpose agreement in that it allows Globalive access to Orascom's considerable wireless operating expertise, including access to its global, preferred purchasing power, and it provides Orascom with certain financial benefits. The Commission notes that under the revised TSA, Globalive must pay a fixed fee to Orascom irrespective of whether services are rendered, and if it terminates the agreement, it must pay Orascom either an amount to be negotiated or $100 million less fees already paid, depending on the circumstances.
83. Moreover, the Commission notes that the TSA provides Globalive with benefits that operate as key determinants of its success. It is this reliance by Globalive on Orascom that defines their relationship and allows Orascom the opportunity to influence a wide range of operating and strategic decisions.
84. Given the significant benefits Globalive derives from the TSA, the Commission is of the view that Globalive will maintain the TSA for the foreseeable future. Consequently, the Commission considers that Orascom will continue to have influence over operating and strategic decisions related to Globalive's network.
[30] With respect to the Trademark Agreement (WIND) the CRTC determined that it provided Orascom with influence over Globalive. It wrote at paragraph 89:
89. However, the Commission finds that Globalive's adoption and use of a trademark belonging to an Orascom affiliate do provide Orascom (or its controlling shareholder) with influence over Globalive because Orascom has the power to limit how the brand can be used.
[31] The final major matter considered by the CRTC was economic participation of Globalive and non-Canadians. On this matter, the CRTC considered both equity participation and financing arrangements.
[32] As to equity participation, the CRTC determined that while there was an avenue of influence, it was not sufficient to convert that influence to control. It wrote at paragraphs 90 and 94:
Economic participation of Globalive and non-Canadians
A. Equity participation
90. The overall equity positions of the shareholders are the same under both the pre-hearing and the revised structures. The combination of Orascom's voting and non-voting shares in GIHC translates into 65.1 percent of Globalive's total equity.
. . .
94. Orascom's equity participation is 65.1 percent, which is consistent with levels of non-Canadian investment previously approved by the Commission.9 The Commission is of the view that, while in the circumstances of this case the level of equity participation provides an avenue for influence, it is not sufficient on its own to convert that influence into control.
[33] As to the financing arrangements, the CRTC devoted much attention to this matter in its Decision and determined, at paragraph 112, that the high level of debt in the hands of a non-Canadian was unacceptable. The CRTC began its discussion at paragraphs 95 and 96 of its Decision:
B. Financing arrangements
95. Orascom is the source of the vast majority of Globalive's debt, having advanced $442.4 million by way of a Spectrum Loan Agreement dated 31 July 2008 and committed a further $66 million under an Operating Loan Agreement dated 23 March 2008, for a total commitment of $508.4 million (collectively, the Orascom loan agreements). In addition to the Orascom loans, GCC, a wholly-owned subsidiary of GIHC, committed $400,000 to Globalive by way of a Loan Agreement dated 14 April 2008.
96. According to the pre-hearing loan documents, the loans were to be due in full in August 2011, including an initial term and extensions. Interest was set at a rate of LIBOR10 plus 12 percent for the initial term, LIBOR plus 15 percent for the first extension, and LIBOR plus 18 percent for the subsequent extension.
[34] The CRTC’s determination as to the financing arrangements led it to conclude that they were unacceptable. It wrote at paragraphs 104 to 112:
Commission’s analysis and determination
104. The Commission recognizes that there are no statutory restrictions on the amount of debt that a non-Canadian can provide to a telecommunications common carrier. However, debt levels and debt financing arrangements can be important indicia of where influence lies. As stated in the CanWest decision, the concentration of debt and equity in the hands of a single foreign entity can create an opportunity for undue influence over the venture by that non-Canadian entity:
The Commission was concerned that if a Goldman, Sachs & Co. entity was the lead syndicator with respect to the debt, or if it were the major debt holder under any of the lending agreements, this together with GSCP's equity interest could result in undue influence over the venture by a non-Canadian.12
105. In the case of the CanWest decision, the non-Canadian shareholder holding 65 percent of the equity was also providing a significant amount of the debt. Prior to the oral phase of that proceeding, the Commission expressed concern regarding the proposed level of debt, and during the oral phase, CanWest confirmed that the percentage of the debt held by the non-Canadian investor had been reduced to less than 20 percent and that Goldman, Sachs & Co. would not be lead syndicator.
106. In the present case, Orascom, the significant non-Canadian equity holder, has provided approximately 99 percent of Globalive's current debt, excluding some third-party vendor financing, which represents the vast majority of Globalive's total financing.
107. The concentration of debt and equity in the hands of a single entity can create an opportunity for influence. In circumstances such as the present, where a company is heavily debt financed, this opportunity can translate into significant influence over the venture by the debt holder.
108. The magnitude of the debt provided by Orascom, the relative debt to equity financing, and the fact that the debt is concentrated in the hands of a single entity cause the Commission concern with the loans as a source of Orascom influence. The modifications to the covenants and terms of the loans do little to reduce this concern. Furthermore, the Commission notes that covenants similar to those deleted from the Orascom loan agreements are still contained in Schedule A to the Shareholders' Agreement.
109. In addition to the above-noted concerns, the Commission considers that a company's inability to obtain financing from third-party sources may also be relevant to the issue of control in fact. As noted in the Unitel decision, "In certain circumstances it may be possible to conclude that a non-Canadian shareholder or lender may have a considerable amount of leverage, and even control, over a cash-strapped telecommunications common carrier."13
110. During the oral phase of the public hearing, Globalive noted that Orascom and AAL had planned to rely heavily on external financing to capitalize Globalive. However, following completion of the AWS auction, Globalive's efforts to obtain external financing to replace Orascom's loans coincided with a major downturn in the credit markets. Orascom indicated that it is not interested in remaining Globalive's major lender and is committed to transferring its loans to an outside party. However, at this time, Orascom remains the major source of financing for Globalive in the near term.
111. Globalive stated during the oral phase of the public hearing that the capital investment required for a national wireless start-up is well over $1 billion. Having raised approximately $600 million, Globalive will require significant further capital in order to complete its network rollout. The Commission considers that Globalive's dependence upon Orascom for financing may well increase in the near term, given its inability to date to attract substantial third-party financing.
112. It is the Commission's view that such a significant concentration of debt in the hands of Orascom, representing the vast majority of Globalive's enterprise value, serves to provide Orascom
with leverage over Globalive. Given Orascom's equity interest in Globalive, such a high level of debt in the hands of a non-Canadian is unacceptable.
[35] The conclusion reached by the CRTC was set out at paragraphs 113 to 119 of its Decision. It determined that each of the factors considered may lead to an avenue for influence, when combined they translated into the ability to control in fact (see section 16(3)(c) of the Telecommunications Act, supra). It wrote:
Conclusion
113. The Commission considers that each of the factors addressed above provides Orascom, a non-Canadian, with an avenue for influence over Globalive. While disparate points of influence may not individually result in control, when combined they can translate into the ability to control in fact.
114. As noted above, control in fact is only established where influence is dominant or determining. In particular, the issue is whether or not there is an ongoing power or ability, whether exercised or not, to determine the strategic decision-making activities of a corporation or to dominate the ability to manage and run its day-to-day operations.
115. Globalive has made numerous significant changes to its corporate structure and documents in order to address many of the Commission's concerns. In this decision, the Commission has identified additional changes that are necessary to address certain remaining concerns with respect to Orascom's influence over Globalive. These changes relate to the composition of the boards of directors, liquidity rights, and the threshold for veto rights.
116. Notwithstanding these additional changes, significant concerns remain with respect to the control in fact of Globalive by Orascom. In the present case, the record shows that Orascom, a non-Canadian
· holds two-thirds of Globalive's equity;
· is the principal source of technical expertise; and
· provides Globalive with access to an established wireless trademark.
117. Given the changes that were made during the public hearing and presuming that the additional changes that have been identified in this decision are made, these elements taken together, while significant, would not cause the Commission, in the circumstances of this case, to reach a decision that Orascom is in a position of influence that is both dominant and determining.
118. However, when these levers are considered in concert with Orascom's provision of the vast majority of Globalive's debt financing, the Commission finds that it cannot conclude that Globalive is not controlled in fact by a non-Canadian, to wit Orascom. In other words, the Commission finds that Orascom has the ongoing ability to determine Globalive's strategic decision-making activities.
119. In light of all the above, the Commission finds that Globalive is controlled in fact by Orascom, a non-Canadian. Therefore, the Commission concludes that Globalive does not meet the requirements set out in section 16 of the Act and is not currently eligible to operate as a telecommunications common carrier.
[36] As to paragraph 115 above, the CRTC issued an erratum on 4 November 2009, in which the words “liquidity rights” near the end of that paragraph, were replaced with the words “Eligible Purchasers” so as to read:
115. Globalive has made numerous significant changes to its corporate structure and documents in order to address many of the Commission's concerns. In this decision, the Commission has identified additional changes that are necessary to address certain remaining concerns with respect to Orascom's influence over Globalive. These changes relate to the composition of the boards of directors, Eligible Purchasers, and the threshold for veto rights.
[37] It was this Decision that the Governor in Council, on its own motion, undertook to review.
THE GOVERNOR IN COUNCIL’S DECISION
[38] On December 10, 2009 the Privy Council released the Decision of the Governor in Council, P.C. 2009-2008. This Decision comprised two parts. The first four pages set out a series of “Whereases” with a concluding “Therefore”. Attached as a Schedule were twenty-four paragraphs which amended several paragraphs of the CRTC Decision in various respects. The result was, as set out in paragraph 23 of the Schedule, to vary the CRTC Decision and to determine that Globalive was not controlled in fact by Orascom, a non-Canadian, and that Globalive was eligible to operate as a telecommunications common carrier. Paragraph 23 states:
23. In light of the above, Globalive is not controlled in fact by Orascom, a non-Canadian. Therefore, Globalive meets the requirements set out in section 16 of the Act and is currently eligible to operate as a telecommunications common carrier.
[39] Section 12(8) of the Telecommunications Act stipulates that when the Governor in Council makes an order such as this, reasons shall be set out. Mr. Heintzman, Counsel for Globalive, described the structure of the Governor in Council’s document as being one in which the section 12 Order is set out in the “Whereas” pages and the decision under section 16 as to whether Globalive is in fact not controlled by non-Canadians is set out in the Schedule. Mr. MacKinnon, for the Attorney General, argued that both the “Whereas” portion and the Schedule can be said to constitute the Order and the Reasons. Counsel for the Applicant and those supporting the Applicant were puzzled as to what portion of these documents can be said to be the Reasons.
[40] I prefer to consider the first four “Whereas” pages as being akin to what is sometimes referred to in this Court as a “speaking Order”, such that the “Whereas” paragraphs can be considered to be “reasons”. These Reasons may be considered to be supplemented by the Schedule.
[41] On the first page of the “Whereas” portion, the Governor in Council acknowledged that the CRTC had identified four areas of concern with respect to control in fact:
Whereas, in the Decision, the Commission identified four areas of concern relating to control in fact, namely, corporate governance, shareholder rights, commercial arrangements and economic participation of non-Canadians.
[42] The final paragraph of the first page stated that the debt financing was the main reason that the CRTC found that Globalive did not meet the Canadian ownership and control requirements:
Whereas, in the Decision, the Commission concluded that despite the changes made to Globalive’s corporate structure and documents and provided the additional required changes are made, the levers of influence by a non-Canadian, namely, the fact that it holds 65% of the equity financing, is the principal source of technical expertise and provides access to an established wireless trademark, would not have caused it to conclude that Globalive did not meet the Canadian ownership and control requirements if it was not for the fact that the same non-Canadian entity is providing the vast majority of Globalive’s debt financing;
[43] At the top of the second page, the Governor in Council stated what it considered to be a number of Canadian telecommunications policy objectives:
Whereas Canadian telecommunications policy objectives include rendering reliable and affordable telecommunications services of high quality accessible to Canadians in both urban and rural areas in all regions of Canada, promoting the ownership and control of Canadian carriers by Canadians and enhancing the efficiency and competitiveness, at the national and international levels, of Canadian telecommunications;
[44] This appears to reflect that which is set out in subsections 7(b), (c) and (d) of the Telecommunications Act:
Objectives
7. It is hereby affirmed that telecommunications performs an essential role in the maintenance of Canada’s identity and sovereignty and that the Canadian telecommunications policy has as its objectives
. . .
(b) to render reliable and affordable telecommunications services of high quality accessible to Canadians in both urban and rural areas in all regions of Canada;
(c) to enhance the efficiency and competitiveness, at the national and international levels, of Canadian telecommunications;
(d) to promote the ownership and control of Canadian carriers by Canadians;
[45] The Governor in Council then referred to the bidding process for spectrum, and that Globalive was a successful bidder. In the fourth paragraph on the second page, the Governor in
Council acknowledged that Globalive must satisfy the Canadian ownership and control requirements set out in the Act:
Whereas, in order to operate as a telecommunications common carrier in Canada, Globalive must satisfy the Canadian ownership and control requirements set out in the Act;
[46] These requirements are set out in subsection 16(3) of the Act previously referred to. They are the “legal” and “control in fact” requirements.
[47] The next paragraph of the Governor in Council’s “Whereas” provisions contains a puzzling use of the words “when possible”, suggesting that the policy objectives requiring Canadian ownership and control as set out in section 7(d) of the Telecommunications Act is somehow to be considered as flexible and possibly subordinate to other considerations, such as that set out in section 7(c), the enhancement of efficiency and competitiveness. One policy objective cannot be subordinate to another:
Whereas the Governor in Council considers that, when possible, the Canadian ownership and control requirements should be applied in support of the Canadian telecommunications policy objectives set out in the Act, including enhancing competition in the telecommunications market (emphasis added);
[48] The next “Whereas” is critical, as it appears to insert a policy objective not found in section 7 or anywhere else in the Telecommunications Act; namely, that access to foreign capital technology and expertise should be encouraged and ensured:
Whereas the Canadian ownership and control requirements of the Act restrict the ownership of voting shares by non-Canadians, but the Act does not impose limits on foreign investment in telecommunication common carriers and should be interpreted in a way that ensures that access to foreign capital, technology and experience is encouraged in a manner that supports all of the Canadian telecommunication policy objectives (emphasis added);
[49] The Governor in Council’s Decision next acknowledged that the test respecting control was both legal and factual and, as found by the CRTC, the legal requirements had been met. No party challenged this finding.
[50] The Governor in Council next considered “control in fact” and noted that the test, as set out in section 16(3)(c) of the Telecommunications Act, was expressed in the form of a double negative (i.e.) not controlled by persons who are not Canadian:
Whereas the Governor in Council considers that, as a matter of construction, it is significant that, when assessing control in fact, the Act does not require the Commission to determine that a telecommunications common carrier is controlled by Canadians but rather that it not be controlled by persons that are not Canadian;
[51] When asked whether this use of a double negative was purely a semantical exercise, Counsel for Globalive said no. This position was supported by Counsel for the Attorney General. They argued that this wording made room for a situation where a broadly held multi-national entity may have control. In this respect, they argued, control could be in the hands of an entity that was “not a non-Canadian”.
[52] At the fifth “Whereas” at page 3 of the Decision the Governor in Council stated that it did not agree with the CRTC’s finding as to multiple levers of influence. The sixth paragraph refers to
“Reasons” (not otherwise described or indicated as to where they could be found) which are said to show why Globalive is not considered to be owned and controlled by non-Canadians:
Whereas the Governor in Council recognizes that multiple levers of influence can, when combined, amount to control, but considers that that is not the case with Globalive;
Whereas the Governor in Council considers that, on the basis of a careful examination of the fact