SECU Committee Report

Charities are a vital component of Canadian society. They help the sick and the disadvantaged, they promote education and provide community facilities and they provide humanitarian assistance throughout the world. Accordingly, Canadian charities registered under the Income Tax Act (ITA) benefit from a number of tax privileges. Chief among these are exemption from tax under Part 1 of the ITA and the ability to issue tax receipts that allow donors to claim a corresponding tax credit or tax deduction. However, domestic law enforcement and intelligence agencies, as well as international organizations such as the UN Security Council and the Financial Action Task Force, have all documented the direct or indirect financing of terrorism through organizations that also have or claim to have charitable goals. In response, Parliament enacted the Charities Registration (Security Information) Act (CRSIA) as part of the ATA. The CRSIA allows the Government to make use of classified information in deciding whether an organization should be registered or continue to be registered as a charity under the ITA.

The Minister of Public Safety and the Minister of National Revenue may, after consideration of classified information, sign a certificate stating that it is their opinion that there are reasonable grounds to believe that an applicant or a registered charity has made, makes or will make resources available, directly or indirectly, to an entity that engages or will engage in any terrorist activity as defined in the Criminal Code. Once a certificate is issued, it is automatically submitted to the Federal Court for judicial review. Once a judge of the Federal Court, after hearing all of the evidence, determines that a certificate is reasonable, the certificate becomes conclusive proof that an organization is ineligible to become or remain a registered charity. Under the CRSIA, a charity can apply to have Ministers review their decision to issue a certificate on the basis of a material change in circumstances that led to the certificate action.

Taking into consideration the consequences of a decision to de-register or to refuse to register a charity, the Subcommittee recommended that such an outcome be precluded if it is established that the charity has exercised “due diligence” to avoid improper use of its resources and to limit refusal or de-registration to cases where the charity “knew or ought to have known” of the impropriety.

It should be understood that the process under the CRSIA is administrative. The CRSIA provides for an administrative measure (i.e. issuance of a certificate to permit the use and protection of classified information) resulting in an administrative remedy: revoking or refusing charitable registration, with the consequent lack of access to tax benefits. In addition, this approach is consistent with the ITA requirement that registered charities must control and remain accountable for the use of their resources. This requirement is lifted only when charities give their resources to a qualified recipient under the ITA.

Also, to maintain public confidence in the system of tax assistance for registered charities and to provide assurance to donors that charitable funds will be used exclusively for specified charitable purposes, the Government should make every effort to ensure that no benefit is extended to organizations that are linked to terrorism. To require in the CRSIA that an organization “knew or ought to have known” could, in some circumstances, effectively result in the Government of Canada providing a tax subsidy for resources tied to terrorism.

Further, incorporating a statutory defence of due diligence in conjunction with the establishment of detailed guidelines and a “checklist” to assess due diligence would make it possible for organizations with links to terrorism to use due diligence consultations to gain information about Canada’s counter-terrorism measures and to structure their affairs so as to create a defence against the CRSIA regime.

The foregoing changes could also weaken Canada’s conformity with the International Convention for the Suppression of the Financing of Terrorism and the Recommendations of the Financial Action Task Force.

Concerning judicial appeals under the CRSIA, the Government believes that further study is needed to assess the implications of recent judicial consideration of the provision governing access to appeals in the IRPA security certificate regime. There are also concerns that adding to the CRSIA a general prohibition on the publication of the identity of an organization, beginning from the time of investigation, and a general confidentiality ban on documents filed with the Federal Court, would depart from the principle of openness in court proceedings and would run a serious risk of contravening the Charter.

The Subcommittee has recommended that the words “at that time, and continue to be,” be removed from paragraph 4(1)(b) of the CRSIA so that Ministers are not precluded from taking action to refuse or revoke a charity’s registration if the terrorist organization to which it has provided resources ceases its terrorist activity before the Ministers have become aware of the assistance or are able to sign a certificate. This was not the result intended by this provision and the Government can, therefore, support the proposed amendment.

The ATA amended sections 37 and 38 of the Canada Evidence Act (CEA) to address the judicial balancing of interests when the disclosure of information in proceedings would encroach on a specified public interest and, in particular, would be injurious to international relations, national defence or national security. The reforms were designed to accomplish several objectives. They introduce greater flexibility into the system and offer the opportunity to resolve evidentiary issues early on in the proceedings. They also allow for use of information relating to international relations, national defence and national security in proceedings in a manner that is consistent with the right of an accused to a fair hearing, while at the same time preserving the federal government’s ability to protect information, the disclosure of which would be injurious to these interests.

The purpose of the Attorney General certificate is to provide, where necessary, a bar to the disclosure of information in connection with a legal proceeding. A certificate may be issued either to protect information that has been obtained in confidence from or in relation to a foreign entity, or to protect national defence or national security. Such information is often provided on the express condition that it not be disclosed. Canada is only in a position to provide the necessary guarantees to another state that information will not be disclosed if the ultimate decision is vested in the Attorney General of Canada and not the courts. In recent litigation concerning section 38 of the CEA, the federal Crown made the following argument: ^[5]

The consequences of a breach of the third party rule would be significant to Canada, given that it is generally a net importer of sensitive information. While other states may still be willing to share information with Canada, their calculations of risk and benefit might well be different in many cases if they considered as potentially unreliable Canada’s ability to guarantee the protection of information that was given to it in confidence. This would, in turn, impair Canada’s ability to combat terrorism.

The Attorney General also has the power to issue a fiat to take over and conduct any prosecution where sensitive or potentially injurious information is involved.

The Government believes that the current fifteen-year lifespan of an Attorney General certificate is not excessive, given the nature of the information at issue. However, the Government is prepared to accept the Subcommittee’s recommendation that a certificate should expire after ten years, unless it is re-issued by the Attorney General of Canada pursuant to section 38.13(9). Many safeguards already apply to any use of the Attorney General certificate. For example, the certificate, and any variance or cancellation of the certificate, must be published without delay in the Canada Gazette. However, in the interests of enhancing transparency, the Government accepts the Subcommittee’s recommendation that the CEA be amended to require the Attorney General of Canada to table an annual report in Parliament setting out the usage of the section 38.13 certificates and section 38.15 fiats. It is worth noting that although neither section has been invoked to date, both remain essential tools.

Currently, every party to a proceeding may apply to the Federal Court of Appeal for an order varying or cancelling the section 38.13 certificate and the judge who reviews the certificate may confirm, vary or cancel the certificate. The Government considers the existing judicial review mechanism to be adequate.

One of the new features introduced to section 38 of the CEA by the ATA was the requirement of certain persons to give notice to the Attorney General of Canada in circumstances where they expect to disclose or cause the disclosure of sensitive or potentially-injurious information. However, in respect of certain functions they perform, some entities (including Federal Court judges, the Information and Privacy Commissioners, and certain Commissions of Inquiry) were listed on the schedule to the CEA and, pursuant to paragraph 38.01(6)(d), are relieved of the need to give notice, except when they make a decision or order that would result in the release of such information.

These entities were added to the schedule because they have processes in place to protect sensitive information and potentially injurious information. As a result, the Government is not convinced that such entities are in need of written guidelines or need to establish review mechanisms to assist them in fulfilling their duty to prevent the disclosure of sensitive or potentially injurious information and to notify the Attorney General of Canada under subsection 38.02(1.1) of the CEA. Such guidelines might also be inappropriate in certain cases, such as in circumstances where judicial independence issues may be raised. That said, however, the Government would be pleased to respond to any requests to provide guidance on a case-by-case basis to the designated entities.

Following the giving of notice, under certain circumstances, applications may be made to the Federal Court under section 38.04 of the CEA. At present, the Attorney General of Canada bears the responsibility under the CEA of applying to the Federal Court on behalf of a witness who gives notice and the Subcommittee recommended that the Government bear the cost of the application. In such cases, the witness may be implicated in the proceeding, but would likely not have commenced it, and, as a matter of policy, should not have to bear the financial burden of commencing an application before the Federal Court. In the case of other persons, including those who seek the disclosure of the information, however, the Government believes that they should continue to bear the burden of commencing an application, notwithstanding the recommendation of the Subcommittee to require the Attorney General to apply to the Federal Court for an order with respect to disclosure of the information in every case where, except by agreement with the party, the Attorney General does not permit full disclosure without conditions.

Having received notice, the Attorney General may be in a position to consent to the disclosure of such information. The person seeking disclosure has the right to make an application to the Federal Court ten days after having given notice if disclosure has been denied, in whole or in part, or if the Attorney General has not responded within the ten-day limit. Ten days is frequently not much time for the Attorney General to complete a review of the documentation, given the volumes of material that may be involved, as well as the necessity for internal consultations. If the person were willing to wait a little longer before making an application, there would be a greater opportunity of exploring the possibility of entering into a disclosure agreement with the Attorney General. Moreover, the Attorney General must also weigh the public interest in disclosure as well as the public interest in non-disclosure before pronouncing upon the issue. Consideration should also be given to the resource implications for the Federal Court if this change were to be made. For these reasons, the Government is not considering any alterations to the status quo.

Concerning the recommendation of the Subcommittee that section 37.21 of the CEA, which was repealed in 2004, be re-enacted, the Government notes that, in Toronto Star Newspapers et al. v. R., the Federal Court held, inter alia, that subsection 38.11(1) of the CEA, which is the equivalent of section 37.21, violated the principle of judicial openness protected under paragraph 2(b) of the Charter. The Court took the remedial action of reading down the section so that it only applies to the ex parte requirements of the section 38 CEA regime. The Government did not appeal the decision.

The Supreme Court of Canada has also shown a strong support for the open court principle, even in light of national security considerations, in such cases as Ruby v. Canada (Solicitor General) ^[6] and Reference re s. 83.28 of the Criminal Code ^[7], dealing with the investigative hearing provision of the ATA. As a result, the Government does not share the view of the Subcommittee that the former section 37.21 of the CEA should be re-enacted. Section 37.21 was repealed in 2004 as a corrective measure.

Finally, the Government appreciates the recommendations from the Subcommittee concerning the need to improve the wording of subsection 37(7) of the CEA and to enact a provision akin to that subsection with respect to disclosure orders made under section 38.06. The Government agrees, in principle, with these recommendations.