The Federal Court Rules that the Order Labelling Plastics as a Toxic Substance is Unreasonable and Unconstitutional

November 23, 2023

Written By Brad Gilmour, Sean Assie, Nathan Green and Lindsay Chapman

The Federal Court of Canada (Court) released its decision on November 16, 2023, in Responsible Plastics Use Coalition v Canada,¹ which held that the Federal Government's labelling of all Plastic Manufactured Items (PMI) as toxic was both unreasonable and unconstitutional.

A consortium of companies with petrochemical operations applied to the Court for judicial review of the Federal Cabinet's order (Order) to add PMI to the List of Toxic Substances in Schedule 1 of the Canadian Environmental Protection Act, 1999 (CEPA) on both constitutional and administrative law grounds.² The provinces of Alberta and Saskatchewan intervened to support the argument that the Order was the latest example of federal overreach into provincial jurisdiction.

The decision is noteworthy from a policy perspective for two reasons. First, this decision brings the future regulation of PMI into question, which includes everyday items like straws and grocery store bags and is clearly of great importance to the petrochemical and plastics industry. Second, arriving on the heels of the Reference re: Impact Assessment Act (IAA Reference),³ this decision marks twice in just five weeks that Canada's courts have ruled that the Federal Government has exceeded their constitutional jurisdiction in environmental matters.

From a legal perspective, the Court's reasons for the decision, particularly regarding the criminal law power, point to how future environmental litigation may continue to develop this area of the law. We would note that the Minister of Environment and Climate Change Canada, Steven Guilbeault, has stated the federal government intends to appeal the decision.⁴

Below, we provide our insights into the specifics of the decision, and its likely implications for future litigation and policymaking.

Constitutional Review

Administrative Review

What Will This Decision Mean for Future Legislation?

How Does the Government Move Forward?

Constitutional Review

In its application, the consortium challenged the Order on the grounds that it improperly extends beyond the federal government's criminal law power granted to it under subsection 91(27) of the Constitution Act, 1867. Alberta and Saskatchewan intervened in support of this argument.

To be classified under this power, federal legislation must consist of a prohibition and penalty and have a valid criminal law purpose. The SCC has specified that legislation relying on this power must seek to address an "evil or injurious effect on the public."⁵

Over 25 years ago, the Supreme Court of Canada (SCC) held that Canada can use the criminal law power to enact environmental protection legislation in R v Hydro-Québec (Hydro-Québec).⁶ That decision was made in the context of a handful of substances that the SCC stated were "toxic in a real sense"⁷ such as lead, mercury, asbestos and PCBs.  After reflecting on Hydro-Québec, Justice Furlanetto zeroed in on the requirement that to satisfy the criminal law test, what is being restricted must be actually dangerous and found that Cabinet could not have been satisfied that PMI met this requirement. Therefore, the court decided that "the Order extends beyond the guardrails established in Hydro-Québec".⁸

Under the criminal law power, Parliament cannot assume control over an activity that is not itself harmful or dangerous to prevent the harmful or dangerous forms of the activity. To this end, the Court concluded that not every item within PMI has the potential to create a reasonable apprehension of harm. As a result, the Order was not properly supported under the criminal law power and, and thus was beyond Parliament's jurisdiction.

The arguments made in this case echoed those heard before the SCC in the IAA Reference in labelling Canada's stance as a "trust me" argument.⁹ While the Order effectively created the ability to regulate all PMI—the Federal Government argued that it would restrict the use of such regulations to only those PMI that create a real risk to the environment. The Court disagreed with the Federal Government, finding that those opposing the Order "should not have to wait until regulations are enacted to challenge an unconstitutional order."¹⁰

Justice Furlanetto remarked on how involved the provinces already are in the regulation of plastics. She observed that the ubiquity of plastics in society means that both the businesses that produce PMI, in its many forms, and those that use PMI already fall under provincial jurisdiction. She therefore concluded that this approach of passing an unrestricted, broad, and all-encompassing Order, with no reasonable apprehension of harm, threatens the balance of federalism.

Canada did not seek to uphold the Order on the grounds of the national concern doctrine, under the Federal Government's "Peace, Order and Good Government" constitutional head of power. Even so, in arriving at her decision, Justice Furlanetto opined in obiter that PMI would not satisfy the test for the national concern doctrine, which requires that a given subject matter must be sufficiently single, distinct and indivisible to be distinguished from matters of provincial concern.

Administrative Review

This review included examining the Order itself and the Federal Government's refusal to allow a Board of Review to assess the alleged risks associated with PMI following objections from various parties to the Order.

In undertaking a reasonableness review, the Court must consider the Order in the context of its enabling statute, in this case CEPA. At the time of the application, subsection 90(1) of CEPA allowed Cabinet to list substances under Schedule 1 only if it was satisfied that the substance is toxic. Justice Furlanetto confirmed that one of the purposes of Part 5 of CEPA is that "It provides 'a procedure to weed out from the vast number of substances potentially harmful to the environment or human life those only that pose significant risks of that type of harm.'"¹¹

The Court noted a few issues with Cabinet's determination. First, PMI is not a singular substance like lead or asbestos which are undisputedly listed on Schedule 1. Furthermore, while the government did conduct an assessment in arriving at its decision, it only considered a few specific plastic items.

The Court found that this assessment and the evidence considered by Cabinet could not have sufficiently established that all PMI were toxic. The Federal Government failed to bridge the gap from their assertion that all PMI has the potential to become plastic pollution to the Order listing all PMI as toxic. Justice Furlanetto concluded that the determination of PMI as toxic was an exercise in reverse logic and the listing of PMI on the Schedule was overly broad for what CEPA permits.

Having determined that Cabinet could not possibly have been satisfied by the evidence that all PMI are toxic, the Court then considered the reasonableness of the Minister of Environment's refusal of a Board of Review. The Court found that the refusal failed to address the parties' concern that the Order was overbroad.

In failing to address this central concern, the Minister of Environment and Climate Change Canada violated the principles of justification and transparency, which require an administrative decision maker to meaningfully account for the central issues and concerns raised by the parties. The lack of transparency and completeness led Justice Furlanetto to conclude the refusal was unreasonable.

What Will This Decision Mean for Future Legislation?

The Federal Government is expected to once again rely on the criminal law power to justify its proposed Clean Electricity Regulations, which will likely be introduced under CEPA in the near future (see Bennett Jones' blog on the proposed regulations here). These regulations have not been well received in provinces that rely more heavily on fossil fuels for power generation, like Alberta and Saskatchewan. Similarly, the Minister of Environment and Climate Change Canada has proposed oil and gas GHG emission cap regulations, which the Federal Government may seek to justify under the criminal law power.

The Federal Court's decision in this case suggests that Parliament's use of the criminal law power in such contexts will likely continue to invite scrutiny to ensure it is being used within its proper constitutional limits and in a manner that does not amount to "overreach". The Court's comments suggesting the need for a "reasonable apprehension of harm"¹² in its constitutional analysis of whether the criminal law power applies also suggests this specific issue related to harm—which has caused difficulty for the courts in the past¹³—may continue to be revisited in future constitutional litigation.

This decision may also have a consequential effect on the ongoing challenge before the Federal Court¹⁴ to the Single Use Plastics Regulation,¹⁵ which was enabled by PMI being listed as a Toxic Substance under CEPA.

How Does the Government Move Forward?

Despite the ruling, the decision will not lead PMI to be automatically struck from the Schedule as that authority rests with Cabinet. Moreover, after this litigation was initiated, the Federal Government repealed and re-enacted Schedule 1 with all the same listed substances under Bill S-5 the Strengthening Environmental Protection for a Healthier Canada Act,¹⁶ ("Bill S-5"), so the ruling was limited to the Order in its previous iteration.

Some commentators have suggested that one means of resolving this overbroad approach to regulating toxic substances might be to revisit the available scientific evidence and more carefully tailor the list of items added to the toxic substances list in CEPA to those items that the evidence actually supports as causing environmental harm.¹⁷ Nevertheless, this is not likely to be the Federal Government's approach in the near future. The Federal Government has said they intend to appeal the Court's decision.

Bennett Jones has experience in all aspects of energy and natural resource law, including in respect of capital projects in the oil and gas and petrochemical manufacturing sectors, and in developing strategies for industry to manage and adjust to changes in environmental and regulatory laws. If you have any questions about the potential impact of the Federal Court's decision on your business, contact one of the authors of this post or a member of the firm's Environmental practice group.

Authors