Copyright 2012, Blake, Cassels & Graydon LLP
Originally published in Blakes Bulletin on Competition, Antitrust & Foreign Investment, March 2012
On January 30, 2012, the Royal Bank of Scotland N.V. (Canada) Branch (RBS Canada) brought an application before the Ontario Superior Court (the Court) seeking to strike down an order issued by the Court pursuant to section 11 of the Competition Act (Act). The order, which was obtained on an ex parte basis by the Commissionerof Competition (Commissioner), required that RBS Canada produce an extensive amount of documentation in the possession, power or control of two of its foreign affiliates.
In May 2011, the Commissioner obtained section 11 orders against five banks being investigated by Canadian, U.S. and EC antitrust authorities for allegedly participating in a conspiracy to fix the interest rates for inter-bank loans. Section 11(1)(b) of the Act allows the Commissioner to apply to the court on an ex parte basis for an order compelling the production of records from any person that has or is likely to have information relevant to the Commissioner's inquiry. Where the Commissioner has sought an order under section 11(1)(b) in respect of a corporation, the presiding judge also may order an affiliate of that corporation to produce records, even if the affiliate is located outside Canada and is not controlled by the recipient of the section 11 order.
The Commissioner granted RBS Canada two extensions to comply with the section 11 order. When the Commissioner denied the company's third extension request, RBS Canada applied for, and received, a stay of the order on the condition that it file an application to challenge the order by January 30, 2012.
In its application, RBS Canada has alleged that the section 11 order should be set aside based on the following grounds:
- The statutory precondition for an order compelling production of the foreign documents under section 11(2) was not met because no documents were sought from RBS Canada under section 11(1)(b).
- The Commissioner did not provide full and frank disclosure to the Court by failing to make it clear in her ex parte application that no request for documents was being made pursuant to section 11(1)(b).
- RBS Canada (or any subsidiary corporation for that matter) cannot compel its foreign parent or sibling corporations to produce documents by virtue of corporate law principles of control.
- The section 11 order violates sections 7 and 8 of the Canadian Charter of Rights and Freedoms because, inter alia, the failure to produce foreign documents exposes the officers, directors and agents of the Canadian subsidiary to penal sanctions, even though compliance is beyond their control.
If a final judgment is rendered in this case, it will be the first since 2008 when the Labatt Brewing Company, represented by Blakes, successfully brought a motion setting aside the Commissioner's section 11 order in relation to the Commissioner's inquiry into Labatt's acquisition of Lakeport Brewing Income Fund. In that case, the Federal Court set aside the section 11 order on the grounds that the disclosure made by the Commissioner to secure the order was "misleading, inaccurate and incomplete", and had the court received complete disclosure, it would not have granted the order.
Although Toshiba Canada commenced proceedings in 2009 to set aside the foreign aspects of a section 11 order issued to it in 2007, those proceedings have been held in abeyance for some time.
The RBS Canada case will be followed with particular interest. Indeed, the case could have significant implications concerning the ability of the Commissioner to investigate foreign corporations for potential breaches of the Act. The case also could have constitutional repercussions, particularly in respect of the scope of Charter protections afforded to corporations and their directors.
An update on notification thresholds
The book value of assets threshold applicable to direct
acquisitions by WTO investors under the Investment Canada
Act has increased from C$312-million to
C$330-million for 2012. The transaction-size
threshold under the Competition Act (i.e., the book value
of the target's assets in Canada or gross revenues from sales
in or from Canada) has increased from C$73-million to
C$77-million for 2012. The party-size threshold
under the Competition Act (i.e., the aggregate book value
of the assets in Canada or revenues from sales in, from and into
Canada of the parties and their affiliates) remains unchanged at
C$400-million.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
