The Canadian Legal System

In this unit, we study how laws would be promulgated and how decisions are made. As a business person, it is important to understand:

The background and philosophy of the legal system in which you operate as a legal business entity. This understanding gives a sense of why the law is what it is and what evolution may be expected based on contextual changes this is akin to understanding the present through understanding history.

The substantive laws that apply to the business and the impact potential changes to the law might have on the manner in which business is done. How does your organization keep abreast of changes to the law? Is there a compliance function that circulates the information and determines the appropriate policies? Do you recall, for instance, how your company or organization dealt with the new privacy laws which came into effect across Canada in the earlier part of this century?

The options that are available for dispute resolution and the pros and cons of each option. This plays into situations where you have a choice of dispute resolution mechanisms (such as in agreeing to arbitration). Even when you do not have a choice of tribunal, it is helpful to know the field in which you will present your case.

Unit Discussion

This Units discussion will ask you to examine points 2 and 3 in the context of your organization or an organization of your choice. You will have to review the different functional areas, the market, and physical environment in which the business operates to identify the applicable substantive laws. You may have to contact the legal counsel and/or compliance officer to understand how they perform their jobs. If there is no legal counsel and/or compliance officer, who is responsible for this important function and how does the organization manage these risks?

As a businessperson you may not be presenting the legal arguments, but rather understanding the jurisprudence. Having a skeletal knowledge of applicable substantive laws, you will be able to provide your lawyer with pertinent information that may advance your case or help distinguish/depart from unfavorable legal positions.

Below are some high points on the legal systems of the world and Canada.

Broadly, there are 2 legal systems in the world Common Law and Civil Law. Certain societies may also be bound by traditional or religious legal systems. When you choose to live, work, or operate a business, it is necessary to determine under which legal system you must comply.

The term common law could refer to a legal system or to laws promulgated in former decision on cases involving the same question of law (a.k.a. case law). Canada follows a common law system. Additionally, within Canada, Quebec is an island of civil law jurisdiction. civil law Jurisdictions differ from common law jurisdiction in the role played by former decisions (persuasive but not binding) and the approach taken in hearings (see below).

Common law legal systems have a historical linkage to the UK and are used in former British colonies such as Canada, the US, Australia, New Zealand, India, Malaysia, and Singapore. Common law legal systems have the basis of law in legislation, but previous judgments on the same question of law is persuasive (if at an equivalent court level, e.g., as between 2 cases at the same level of course in the same province; or as between 2 cases in different provinces on a provincial matter) or binding (if at a higher court level within that jurisdiction). Civil law legal systems make reference to, but are not bound by, former decisions. Having the same common basis in English common law, decisions of another common law jurisdiction, even in another country, could be argued to be persuasive; however, the counterargument is that legislation and local considerations are important bases for distinguishing cases decided in another jurisdiction, domestic Canadian, or foreign.

Case law may be quicker in reacting to changing circumstances. Over time, legislation may have been enacted to address matters that once were addressed only in case law.

The doctrine of stare decisis (binding precedent) in common law systems applies to questions of law and questions of mixed law and fact, but not to questions of fact. Therefore, in a given situation, it would be necessary to distinguish if at issue is a question of law or mixed law and fact or a question of fact.

When a former decision is unfavorable, the party proposing to distinguish that former case would argue that that former decision is based on a different question or law, different set of facts, or different policy considerations.

Separation of Powers

Unlike some other common law jurisdictions in Canada, for historical reasons, separation of powers usually refers to the division of law-making jurisdiction between the federal and provincial government. (In other jurisdictions, separation of powers refers to the separation of power between the legislature, the executive branch of the government, and the judiciary.)

The Constitution Act of 1867 assigned different legislative powers to the federal and provincial governments. The powers of the federal government are set out primarily in section 91 of the Constitution Act, 1867, and those of the provincial governments in section 92. The federal government has power over such matters as banking, currency, the postal service, criminal law (although not its enforcement), regulation of all import and export activities, taxation, environmental concerns, money and banking, interprovincial and international transportation, and intellectual property.

The provinces have jurisdiction over such matters as hospitals, education, the administration of the courts, and commercial activities carried on at the provincial level, the sale of goods, consumer protection, employment, workers compensation, collective bargaining, secured transactions, incorporation, real estate, and licensing.

For industries that fall within federal jurisdiction, such as banking and the railways, there are corresponding federal statutes, such as collective bargaining and incorporation legislation. Under the Peace, Order, and Good Government (P.O.G.G.) clause (found in the introduction to section 91), the federal government has residual power to make law with respect to things not listed in the Constitution Act, 1867, such as broadcasting and air transportation.

At the municipal level, there may be additional regulations which apply to a business. Municipalities have delegated powers for local matters, for example, parking regulations.

Therefore, it is important to look at applicable rules at federal, provincial, and municipal level.

Equity and Ethics

As much as when you play a game, you need to know the rules of the game so too there is a balance to be struck between certainty and justice. Where the legal rules may result in an unfair outcome, equity may provide a solution and concession. To invoke equity, the party must come with clean hands and equity can only be invoked as a shield and not a sword. As you examine the substantive law in each unit, identify the areas in which equity has come in to balance off what is potentially a harsher result from the black letter law.

The rule of law (i.e., all actions of government and government agencies must be authorized by valid legislation) gives persons and businesses confidence in the justice system and the jurisdiction in which they live or work. The law provides a baseline for conduct, but as a person or business, you may choose to hold yourself to a higher standard of conduct. Ethical or moral conduct is sometimes useful as a tool for market differentiation.

Dispute Resolution

Traditionally, disputes are resolved by a judge. In the common law system, the process is described as adversarial. The judge listens to both sides presenting and arguing their positions and makes a decision. In criminal matters, the prosecuting party has to convince the judge that the defendant is guilty beyond a shadow of doubt. In civil law (i.e., non-criminal matters), the judge decides which party should win on the matters at issue based on a balance of probabilities. In the civil law system, the process is described as inquisitorial. The judge is usually more proactive in leading and directing the evidence brought in.

There are several types of alternative dispute resolution mechanisms that have taken root over time in civil matters. The principal ones are negotiation, mediation, and arbitration. A major advantage is that each of the alternative dispute mechanisms seek to achieve a confidential out-of-court settlement or decision. The third-party mediator or arbitrator may also be someone agreed to by the parties and someone with subject matter expertise. Mediation and negotiation are often seen as less adversarial than arbitration and litigation. At the end of the negotiation or mediation process, an agreement may be drawn up to capture the settlement. Arbitration requires an agreement to do so and the agreement should say that the arbitration is binding. Many jurisdictions have enacted legislation to give effect to and enforce agreements for binding arbitration. Countries have entered into treaties to enforce arbitral awards such as the New York Convention for the Reciprocal Enforcement of Arbitral Awards may have an advantage over trying to enforce a foreign court judgment.

The Canadian Legal System

In this unit, we study how laws would be promulgated and how decisions are made. As a business person, it is important to understand:

The background and philosophy of the legal system in which you operate as a legal business entity. This understanding gives a sense of why the law is what it is and what evolution may be expected based on contextual changes this is akin to understanding the present through understanding history.

The substantive laws that apply to the business and the impact potential changes to the law might have on the manner in which business is done. How does your organization keep abreast of changes to the law? Is there a compliance function that circulates the information and determines the appropriate policies? Do you recall, for instance, how your company or organization dealt with the new privacy laws which came into effect across Canada in the earlier part of this century?

The options that are available for dispute resolution and the pros and cons of each option. This plays into situations where you have a choice of dispute resolution mechanisms (such as in agreeing to arbitration). Even when you do not have a choice of tribunal, it is helpful to know the field in which you will present your case.

Unit Discussion

This Units discussion will ask you to examine points 2 and 3 in the context of your organization or an organization of your choice. You will have to review the different functional areas, the market, and physical environment in which the business operates to identify the applicable substantive laws. You may have to contact the legal counsel and/or compliance officer to understand how they perform their jobs. If there is no legal counsel and/or compliance officer, who is responsible for this important function and how does the organization manage these risks?

As a businessperson you may not be presenting the legal arguments, but rather understanding the jurisprudence. Having a skeletal knowledge of applicable substantive laws, you will be able to provide your lawyer with pertinent information that may advance your case or help distinguish/depart from unfavorable legal positions.

Below are some high points on the legal systems of the world and Canada.

Broadly, there are 2 legal systems in the world Common Law and Civil Law. Certain societies may also be bound by traditional or religious legal systems. When you choose to live, work, or operate a business, it is necessary to determine under which legal system you must comply.

The term common law could refer to a legal system or to laws promulgated in former decision on cases involving the same question of law (a.k.a. case law). Canada follows a common law system. Additionally, within Canada, Quebec is an island of civil law jurisdiction. civil law Jurisdictions differ from common law jurisdiction in the role played by former decisions (persuasive but not binding) and the approach taken in hearings (see below).

Common law legal systems have a historical linkage to the UK and are used in former British colonies such as Canada, the US, Australia, New Zealand, India, Malaysia, and Singapore. Common law legal systems have the basis of law in legislation, but previous judgments on the same question of law is persuasive (if at an equivalent court level, e.g., as between 2 cases at the same level of course in the same province; or as between 2 cases in different provinces on a provincial matter) or binding (if at a higher court level within that jurisdiction). Civil law legal systems make reference to, but are not bound by, former decisions. Having the same common basis in English common law, decisions of another common law jurisdiction, even in another country, could be argued to be persuasive; however, the counterargument is that legislation and local considerations are important bases for distinguishing cases decided in another jurisdiction, domestic Canadian, or foreign.

Case law may be quicker in reacting to changing circumstances. Over time, legislation may have been enacted to address matters that once were addressed only in case law.

The doctrine of stare decisis (binding precedent) in common law systems applies to questions of law and questions of mixed law and fact, but not to questions of fact. Therefore, in a given situation, it would be necessary to distinguish if at issue is a question of law or mixed law and fact or a question of fact.

When a former decision is unfavorable, the party proposing to distinguish that former case would argue that that former decision is based on a different question or law, different set of facts, or different policy considerations.

Separation of Powers

Unlike some other common law jurisdictions in Canada, for historical reasons, separation of powers usually refers to the division of law-making jurisdiction between the federal and provincial government. (In other jurisdictions, separation of powers refers to the separation of power between the legislature, the executive branch of the government, and the judiciary.)

The Constitution Act of 1867 assigned different legislative powers to the federal and provincial governments. The powers of the federal government are set out primarily in section 91 of the Constitution Act, 1867, and those of the provincial governments in section 92. The federal government has power over such matters as banking, currency, the postal service, criminal law (although not its enforcement), regulation of all import and export activities, taxation, environmental concerns, money and banking, interprovincial and international transportation, and intellectual property.

The provinces have jurisdiction over such matters as hospitals, education, the administration of the courts, and commercial activities carried on at the provincial level, the sale of goods, consumer protection, employment, workers compensation, collective bargaining, secured transactions, incorporation, real estate, and licensing.

For industries that fall within federal jurisdiction, such as banking and the railways, there are corresponding federal statutes, such as collective bargaining and incorporation legislation. Under the Peace, Order, and Good Government (P.O.G.G.) clause (found in the introduction to section 91), the federal government has residual power to make law with respect to things not listed in the Constitution Act, 1867, such as broadcasting and air transportation.

At the municipal level, there may be additional regulations which apply to a business. Municipalities have delegated powers for local matters, for example, parking regulations.

Therefore, it is important to look at applicable rules at federal, provincial, and municipal level.

Equity and Ethics

As much as when you play a game, you need to know the rules of the game so too there is a balance to be struck between certainty and justice. Where the legal rules may result in an unfair outcome, equity may provide a solution and concession. To invoke equity, the party must come with clean hands and equity can only be invoked as a shield and not a sword. As you examine the substantive law in each unit, identify the areas in which equity has come in to balance off what is potentially a harsher result from the black letter law.

The rule of law (i.e., all actions of government and government agencies must be authorized by valid legislation) gives persons and businesses confidence in the justice system and the jurisdiction in which they live or work. The law provides a baseline for conduct, but as a person or business, you may choose to hold yourself to a higher standard of conduct. Ethical or moral conduct is sometimes useful as a tool for market differentiation.

Dispute Resolution

Traditionally, disputes are resolved by a judge. In the common law system, the process is described as adversarial. The judge listens to both sides presenting and arguing their positions and makes a decision. In criminal matters, the prosecuting party has to convince the judge that the defendant is guilty beyond a shadow of doubt. In civil law (i.e., non-criminal matters), the judge decides which party should win on the matters at issue based on a balance of probabilities. In the civil law system, the process is described as inquisitorial. The judge is usually more proactive in leading and directing the evidence brought in.

There are several types of alternative dispute resolution mechanisms that have taken root over time in civil matters. The principal ones are negotiation, mediation, and arbitration. A major advantage is that each of the alternative dispute mechanisms seek to achieve a confidential out-of-court settlement or decision. The third-party mediator or arbitrator may also be someone agreed to by the parties and someone with subject matter expertise. Mediation and negotiation are often seen as less adversarial than arbitration and litigation. At the end of the negotiation or mediation process, an agreement may be drawn up to capture the settlement. Arbitration requires an agreement to do so and the agreement should say that the arbitration is binding. Many jurisdictions have enacted legislation to give effect to and enforce agreements for binding arbitration. Countries have entered into treaties to enforce arbitral awards such as the New York Convention for the Reciprocal Enforcement of Arbitral Awards may have an advantage over trying to enforce a foreign court judgment.

Pick an organization of your interest and try to answer the following questions based on today's lecture and reading materials. 1. What are the legal rules that might apply to this organization? 2. What additional compliance rules might apply to this organization? 3. How are disputes resolved with suppliers, employees, customers and stakeholders? 4. Would litigation or ADR work better in the context of your organization? Why? Pick an organization of your interest and try to answer the following questions based on today's lecture and reading materials. 1. What are the legal rules that might apply to this organization? 2. What additional compliance rules might apply to this organization? 3. How are disputes resolved with suppliers, employees, customers and stakeholders? 4. Would litigation or ADR work better in the context of your organization? Why