Monday, December 13, 2004

Jurisdictional limitations on Canadian privacy law

Canada's privacy law is already hobbled by the constitutional division of power. For example, as a federal law, it cannot apply to the provincially regulated workplace. But, theoretically, it can apply outside of Canada's border. This has been the theoretical position of officials from the Office of the Privacy Commissioner. However, when dealing with an actual complaint, the Commissioner did not extend the federal privacy law to an organization entirely outside of Canada.

Michael Geist, in his weekly Toronto Star Column, reports on an as-of-yet unpublished finding of the Commisioner that concludes that the law cannot regulate the use of Canadian personal information that is in the hands of an organization that has no presence in this country: - CIBC breach spotlights hole in privacy law:

"...According to a recent unpublished letter from the privacy commissioner, the answer is unfortunately no. The Commissioner has adopted the position that Canada's privacy legislation stops at the border and that her office does not have the power to investigate companies that do not have a physical presence in Canada.

The letter was issued in response to a complaint launched by the Canadian Internet Policy and Public Interest Clinic (CIPPIC) against, a U.S. company that harvests databases and public reports. The company uses the information to produce reports that allegedly include, in some cases, psychosexual profiles. CIPPIC filed its complaint in June, claiming that Abika collects, uses, and discloses the personal information of Canadians without their consent in violation of Canada's national privacy law.

The privacy commissioner's office responded privately to Canadian Internet Policy and Public Interest Clinic two weeks ago. It noted that the company does not have a physical presence in Canada and therefore concluded that 'while the organization may well be collecting information on Canadians, our legislation does not extend to investigating organizations located only in the United States. We are, therefore, unable to investigate this matter under PIPEDA' (the Personal Information Protection and Electronic Documents Act, Canada's national privacy law that governs how businesses collect and use personal information)...."

I tend to agree with Michael ... the Privacy Commissioner could have asserted jurisdiction and then dealt with the challenges of enforcement. This would at least have left the complainant with the ability to take the finding to the Federal Court of Canada to see if a real remedy could be fashioned.

Under traditional principles of international law, there are six bases on which a country such as Canada can assume jurisdiction to proscribe the actions of individuals and companies. (In most cases, these principles have arisen in the criminal law context but there is no reason to believe the Canadian courts would not apply them.) Four of the bases for jurisdiction are relevant to this discussion:

  • Territorial Principle – A state has the jurisdiction to regulate individuals and subjects within its territory, including internal waters and airspace. This is the primary and most universal base for jurisdiction.
  • Nationality Principle – Civil law countries have traditionally asserted jurisdiction over their nationals, regardless of where they may be located.
  • Passive Personality Principle – States have assumed jurisdiction over crimes committed abroad against its nationals.
  • By Agreement – A country may, by agreement, grant another country jurisdiction over certain persons or subjects within its borders.

Traditionally, the territorial principle has been the most persuasive and widely applied. This is based on the fundamental principle of international sovereignty that a state has absolute jurisdiction over "all persons, citizens and aliens alike, and things within its territory."

The Supreme Court of Canada’s decision in Libman v. The Queen is the leading Canadian authority on the issue of how and when a Canadian court may assert jurisdiction. Libman dealt with a "telemarketing scam" where the calls originated from Canada but were made to residents of the United States. Justice LaForest, who delivered the judgment of the unanimous court, recited the relevant facts:

3 During the period covered by the informations, Mr. Libman operated a telephone sales solicitation room (or "boiler room") at 43 Menin Road in Toronto, where a number of individuals were employed as telephone sales personnel. Pursuant to Mr. Libman's directions the sales personnel telephoned United States residents and attempted to induce them to purchase shares in two companies, Hebilla Mining Corporation and Claravella Corporation, which purported to be engaged in gold mining in Costa Rica. In addition to the telephone representations, the United States residents also received promotional material which was mailed from Panama City, Panama and San José, Costa Rica by associates of Mr. Libman.

4 The telephone sales personnel, on the direction of Mr. Libman, made material misrepresentations with respect to their identity, where they were telephoning from, and the quality and value of the shares they were selling. As a result of these misrepresentations, a large number of United States residents were induced to purchase shares in the two mining companies. There was some evidence tendered at the preliminary inquiry from which it could be inferred that these shares were virtually worthless.

5 The United States residents who agreed to purchase shares were told by the telephone sales personnel to send their money to offices operated by Mr. Libman's associates in either San José, Costa Rica or Panama City, Panama. There was evidence tendered that Mr. Libman went to a location outside Canada, usually Costa Rica or Panama, to meet with his associates and receive his share of the proceeds of the sale of the shares. Mr. Libman then brought this money back to Toronto and distributed a portion of it to his sales personnel. There was also evidence tendered at the preliminary inquiry with respect to the wire transfer of monies from Panama City to Mr. Libman in Toronto.

The appellant, Mr. Libman, was charged in Canada with fraud under the Criminal Code. In his defence, the appellant argued that Canada did not have the jurisdiction to prosecute him for the offence as the deprivation of the victim is the essential element of the offence and, if it did occur at all, it did not occur in Canada.

Justice LaForest began with the essential principle of territorial jurisdiction:

11 The primary basis of criminal jurisdiction is territorial. The reasons for this are obvious. States ordinarily have little interest in prohibiting activities that occur abroad and they are, as well, hesitant to incur the displeasure of other states by indiscriminate attempts to control activities that take place wholly within the boundaries of those other countries; see R. v. Martin, [1956] 2 All E.R. 86, at p. 92. … As well, along with other types of protective measures, states increasingly exercise jurisdiction over criminal behaviour in other states that has harmful consequences within their own territory or jurisdiction; see The Lotus (1927), P.C.I.J., Ser. A., No. 10. It follows from this that the same criminal act may occasionally be subject to prosecution in more than one country, a matter to which I shall refer from time to time.

The analysis is relatively straightforward where all the elements and effects of an alleged offence are within the bounds of the prosecuting state: Territorial and subject matter jurisdiction unambiguously provide that state with sufficient grounds to assert jurisdiction. In fact, it would be difficult for another state to attempt to exert jurisdiction. Matters become much more complicated when transnational activities are in question:

16 The cases reveal several possibilities, of which I mention a few. One is to assume that jurisdiction lies in the country where the act is planned or initiated. Other possibilities include the place where the impact of an offence is felt, where it is initiated, where it is completed, or again where the gravamen, or essential element of the offence took place. It is also possible to maintain that any country where a substantial or any part of the chain of events constituting an offence takes place may take jurisdiction.

17 Though counsel for Mr. Libman argued that exclusive jurisdiction belongs to the country where the gravamen of the offence took place or where it was completed, a review of the English authorities does not really support that position. What it shows is that the courts have taken different stances at different times and the general result, as several writers have stated, is one of doctrinal confusion, a confusion compounded by the fact that the discussion often focuses on the specific offence charged, a discussion made more complicated by the further fact that some offences are aimed at the act committed and others at the result of that act.

After surveying the threads of English and Canadian jurisprudence, LaForest J. concluded that a Canadian court may assert jurisdiction in circumstances where there is a "real and substantial link" between the offence and Canada:

74 I might summarize my approach to the limits of territoriality in this way. As I see it, all that is necessary to make an offence subject to the jurisdiction of our courts is that a significant portion of the activities constituting that offence took place in Canada. As it is put by modern academics, it is sufficient that there be a “real and substantial link” between an offence and this country, a test well-known in public and private international law; see Williams and Castel, supra; Hall, supra. As Professor Hall notes (p. 277), this does not require legislation. It was the courts after all that defined the manner in which the doctrine of territoriality applied, and the test proposed simply amounts to a revival of the earlier way of formulating the principle. It is in fact the test that best reconciles all the cases. The only ones that do not fall within it are those like Harden and Rush which, in my view, should no longer be followed.

75 That this approach is attuned to modern times is evident from the fact that some variant of it has been recommended by numerous law reform bodies or adopted in legislation…

76 Just what may constitute a real and substantial link in a particular case, I need not explore. There were ample links here. The outer limits of the test may, however, well be coterminous with the requirements of international comity.

77 As I have already noted, in some of the early cases the English courts tended to express a narrow view of the territorial application of English law so as to ensure that they did not unduly infringe on the jurisdiction of other states. However, even as early as the late 19th century, following the invention and development of modern means of communication, they began to exercise criminal jurisdiction over transnational transactions as long as a significant part of the chain of action occurred in England. Since then means of communications have proliferated at an accelerating pace and the common interests of states have grown proportionately. Under these circumstances, the notion of comity, which means no more nor less than “kindly and considerate behaviour towards others”, has also evolved. How considerate is it of the interests of the United States in this case to permit criminals based in this country to prey on its citizens? How does it conform to its interests or to ours for us to permit such activities when law enforcement agencies in both countries have developed cooperative schemes to prevent and prosecute those engaged in such activities? To ask these questions is to answer them. No issue of comity is involved here. In this regard, I make mine the words of Lord Diplock in Treacy v. Director of Public Prosecutions cited earlier. I also agree with the sentiments expressed by Lord Salmon in Director of Public Prosecutions v. Doot, supra, that we should not be indifferent to the protection of the public in other countries. In a shrinking world, we are all our brother's keepers. In the criminal arena this is underlined by the international cooperative schemes that have been developed among national law enforcement bodies.

78 For these reasons, I have no difficulty in holding on the facts agreed upon for the purpose of this appeal, that the counts of fraud with which the appellant is charged may properly be prosecuted in Canada, and I see nothing in the requirements of international comity that would dictate that this country refrain from exercising its jurisdiction. Since these fraudulent activities took place in Canada, it follows for the reasons set forth in the Chapman case that the conspiracy count may also be proceeded with in Canada.

It goes without saying that the evolving adoption of privacy and data protection laws are not identical to criminal law, either domestically or internationally. However, analogies are easily made and there is an evolving international cooperative scheme, beginning with the OECD Guidelines.

As the basis for Canada to claim jurisdiction requires a "real and substantial link" between the activity and Canada, one must consider whether the collection of personal information about Canadians by foreign companies would be considered to provide a "real and substantial link" to Canada or the collection of information about non-Canadians by a Canadian company. The facts in Libman are sufficiently analogous to provide authority for the proposition that a court on review would likely find a “real and substantial link” between such activities and Canadian jurisdiction, notwithstanding any argument that the connection is de minimis.

The Personal Information Protection and Electronic Documents Act sets out, at Section 4, the basis of its application:


4. (1) This Part applies to every organization in respect of personal information that

(a) the organization collects, uses or discloses in the course of commercial activities; or

(b) is about an employee of the organization and that the organization collects, uses or discloses in connection with the operation of a federal work, undertaking or business.


(2) This Part does not apply to

(a) any government institution to which the Privacy Act applies;

(b) any individual in respect of personal information that the individual collects, uses or discloses for personal or domestic purposes and does not collect, use or disclose for any other purpose; or

(c) any organization in respect of personal information that the organization collects, uses or discloses for journalistic, artistic or literary purposes and does not collect, use or disclose for any other purpose.

Other Acts

*(3) Every provision of this Part applies despite any provision, enacted after this subsection comes into force, of any other Act of Parliament, unless the other Act expressly declares that that provision operates despite the provision of this Part.

The application section is entirely silent with respect to its intended territorial application. The only reference to specific jurisdictions are contained in the transitional provisions and the definition of "federal work, undertaking or business". The transition provisions begin with Section 30:




30. (1) This Part does not apply to any organization in respect of personal information that it collects, uses or discloses within a province whose legislature has the power to regulate the collection, use or disclosure of the information, unless the organization does it in connection with the operation of a federal work, undertaking or business or the organization discloses the information outside the province for consideration.


(1.1) This Part does not apply to any organization in respect of personal health information that it collects, uses or discloses.

Expiry date

*(2) Subsection (1) ceases to have effect three years after the day on which this section comes into force.

*[Note: Section 30 in force January 1, 2001, see SI/2000-29.]

Expiry date

*(2.1) Subsection (1.1) ceases to have effect one year after the day on which this section comes into force.

*[Note: Section 30 in force January 1, 2001, see SI/2000-29.]

These provisions are temporary (and expired on January 1, 2004), as they assist with the gradual implementation of the legislation, providing individual provinces with the ability to put in place substantially similar legislation during the period in which the law only applies to the federally regulated private sector and cross-border sales of information. It may be notable that the cross-border reference says "outside the province" and not "to another province".

In the absence of clear guidance from the statute, one can interpret it to apply in all circumstances where there exists a "real and substantial link" to Canada, following the Supreme Court's guidance in Libman. In any event, there is nothing in the statute that would prevent Canada from assuming jurisdiction in the circumstances set out above.

In the past, Officials with the Office of the Privacy Commissioner have advised that the Commissioner likely would assume jurisdiction where the collection of personal information is about Canadians or Canadian residents or where the collection originates in Canada. This appears to no longer be the case. Not only would the collection take place "in Canada", the Commissioner’s office used to be of the view that PIPEDA is part of an international scheme of privacy protection that could reach over borders.

The Privacy Commissioner has an arguable basis to make this second assertion and assume jurisdiction. As mentioned above, Canada implemented PIPEDA following the OECD Guidelines and in light of threatened restrictions on cross-border data flows caused by the EU Directive. Recital 20 of the EU Directive reads:

(20) Whereas the fact that the processing of data is carried out by a person established in a third country must not stand in the way of the protection of individuals provided for in this Directive; whereas in these cases, the processing should be governed by the law of the Member State in which the means used are located, and there should be guarantees to ensure that the rights and obligations provided for in this Directive are respected in practice;

The EU Directive is implemented, for example, in the United Kingdom's Data Protection Act 1998, which provides that the statute would apply, for example, if a call centre contacting Canadians were located in the United Kingdom:

Application of Act.

5. - (1) Except as otherwise provided by or under section 54, this Act applies to a data controller in respect of any data only if-

(a) the data controller is established in the United Kingdom and the data are processed in the context of that establishment, or

(b) the data controller is established neither in the United Kingdom nor in any other EEA State but uses equipment in the United Kingdom for processing the data otherwise than for the purposes of transit through the United Kingdom.

(2) A data controller falling within subsection (1)(b) must nominate for the purposes of this Act a representative established in the United Kingdom.

(3) For the purposes of subsections (1) and (2), each of the following is to be treated as established in the United Kingdom-

(a) an individual who is ordinarily resident in the United Kingdom,

(b) a body incorporated under the law of, or of any part of, the United Kingdom,

(c) a partnership or other unincorporated association formed under the law of any part of the United Kingdom, and

(d) any person who does not fall within paragraph (a), (b) or (c) but maintains in the United Kingdom-

(i) an office, branch or agency through which he carries on any activity, or

(ii) a regular practice;

and the reference to establishment in any other EEA State has a corresponding meaning.

While Canada is obviously not bound by the EU Directive, it appears to be the spirit of PIPEDA that the Canadian law fit within this general scheme of international data protection.

This may be academic, as this no longer appears to be the position of the Office of the Privacy Commissioner.


Anonymous said...

Heather Mac Donald who is a John M. Olin fellow at the Manhattan Institute calls far left and loony activists Privocrats who put privacy ahead of national security. A honest person has nothing to fear from the free flow of information as they have nothing to hide. Our society has prospered and thrived by learning about each other, not by hiding from each other.

Anonymous said...

PRIVACY PERPETUATES VIOLENCE AND SUBORDINATION AGAINST WOMEN, CHILDREN, AND THE ELDERLY. Vulnerable citizens cannot be protected from domestic violence if unbreachable boundaries of legally sanctioned privacy surround the family. The worthiness of the privacy ideal has been called into question as problems of domestic violence suggest a need for more, rather than less, involvement in the traditionally "private" spheres of home and family life.
-- Anita L. Allen, Professor, University of Pennsylvania School of Law

Anonymous said...

Autocrats control and oppress people by tyranny and Privocrats control and oppress people by secrecy.