CITATION: Defense Contract Management Agency – Americas (Canada) v. Public Service Alliance of Canada, 2013 ONSC 2005
DIVISIONAL COURT FILE NO.: 513/12
DATE: 20130503
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
M. BROWN R.S.J., SWINTON and LEDERER JJ.
B E T W E E N:
DEFENSE CONTRACT MANAGEMENT AGENCY – AMERICAS (CANADA)
Applicant
- and -
PUBLIC SERVICE ALLIANCE OF CANADA and ONTARIO LABOUR RELATIONS BOARD
Respondents
Malcolm Ruby and Michael Comartin, for the Applicant
Andrew Raven and Wassim Garzouzi, for the Respondent Public Service Alliance of Canada
Leonard Marvy, for the Respondent Ontario Labour Relations Board
HEARD at Toronto: March 22, 2013
Swinton J.:
Overview
[1] The Defense Contract Management Agency – Americas (Canada) (“DCMA”) has brought an application for judicial review of a decision of the Ontario Labour Relations Board (“the Board”) dated August 31, 2012 in which the Board certified the Public Service Alliance of Canada (“PSAC”) as the bargaining agent for DCMA’s civilian employees working in Ontario.
[2] At issue in this application is the correctness of the Board’s determination that it had jurisdiction to make the certification order because the DCMA was not entitled to claim sovereign immunity. In my view, the Board erred in assuming jurisdiction, as the DCMA is entitled to claim sovereign immunity as a branch of the United States government. That immunity was not waived, nor has the immunity been lost, as the DCMA is not engaged in commercial activity. Therefore, I would grant the application for judicial review and set aside the Board’s certification order.
Statutory Context
[3] This case turns on the application of the State Immunity Act, R.S.C. 1985, c. S-18 (“the SIA”), a statute that codifies Canadian law on sovereign immunity. Subsection 3(1) creates a presumption of sovereign immunity. It states,
Except as provided by this Act, a foreign state is immune from the jurisdiction of any court in Canada.
[4] “Foreign state” is defined in s. 2 to include:
(a) any sovereign or other head of the foreign state or of any political subdivision of the foreign state while acting as such in a public capacity;
(b) any government of the foreign state or of any political subdivision of the foreign state, including any of its departments, and any agency of the foreign state; and
(c) any political subdivision of the foreign state.
An “agency of the foreign state”, referred to in paragraph (b), is defined in s. 2 to mean “any legal entity that is an organ of the foreign state but that is separate from the foreign state.”
[5] Different rules of service apply to a foreign state and an agency of the foreign state. An agency may be served in accordance with the rules of court (s. 9(3)). However, service on a foreign state, absent consent or special rules in an international convention, must be through the Canadian Department of Foreign Affairs (“DFAIT”) (see s. 9(1)). Service is effective once DFAIT certifies to the court that there has been transmission to the foreign state (s. 9(5)).
[6] Section 4 of the Act deals with waiver, providing that a foreign state is not immune from court jurisdiction “if the state waives the immunity conferred by subsection 3(1) by submitting to the jurisdiction of the court in accordance with subsection (2) or (4).” For purposes of the present case, only subsection (2) is relevant. By its terms, it must be read with subsection (3). Those provisions state:
(2) In any proceedings before a court, a foreign state submits to the jurisdiction of the court where it
(a) explicitly submits to the jurisdiction of the court by written agreement or otherwise either before or after the proceedings commence;
(b) initiates the proceedings in the court; or
(c) intervenes or takes any step in the proceedings before the court.
(3) Paragraph (2)(c) does not apply to
(a) any intervention or step taken by a foreign state in proceedings before a court for the purpose of claiming immunity from the jurisdiction of the court; or
(b) any step taken by a foreign state in ignorance of facts entitling it to immunity if those facts could not reasonably have been ascertained before the step was taken and immunity is claimed as soon as reasonably practicable after they are ascertained.
[7] Section 5 of the Act provides an exception to sovereign immunity if the proceedings relate to “any commercial activity of the state.” “Commercial activity” is defined in s. 2 to mean “any particular transaction, act or conduct or any regular course of conduct that by reason of its nature is of a commercial character.”
Factual Background
[8] DCMA is established as a “Combat Support Agency” within the U.S. Department of Defense (“DoD”). It is funded by U.S. government appropriations and acts under the authority, direction and control of the U.S. Secretary of Defense. Its purpose is to administer contracts of the DoD and other U.S. government departments. For the DoD, it administers contracts for the procurement in Canada of supplies, services and weapons for the American military.
[9] DCMA operates pursuant to bilateral and multilateral treaties, including the Defence Sharing Agreement between Canada and the U.S. and the NATO Status of Forces Agreement. Its Ottawa operations are based in office space provided and paid for by the Canadian government, while its London, Ontario operation uses office space in a weapons supplier’s facility.
[10] DCMA employs both U.S. and Canadian military and civilian personnel in the two locations. The certification order pertains to 24 “Locally Engaged Staff”, who are Canadian civilians working in a variety of jobs, including information technology, property management, production surveillance, and contract administration.
[11] On June 15, 2011, PSAC faxed a certification application to the Commander of DCMA, Captain Hayes, an officer in the United States Navy. The Board’s Form C-1 indicated that a response was required in two days, and it was an offence to fail to comply with the Board direction. As Captain Hayes was then in the U.S. on business, he instructed his Deputy Commander to respond.
[12] A representation vote was held within 7 days of the certification application, on June 22, 2011. On June 23, Captain Hayes’ office was invited to make post-vote representations, which were due June 30.
[13] Captain Hayes has given evidence that he knew nothing about the potential applicability of sovereign immunity until the post-vote representation phase. While he had consulted with counsel at DCMA headquarters in Virginia, he had not been informed about sovereign immunity by that individual. However, in the period leading up to the post-vote representations, he was informed by Jonathan Welch, counsel in the U.S. Department of Justice’s Office of Foreign Litigation, that DCMA was immune from the Board’s jurisdiction. Captain Hayes then raised the issue of sovereign immunity in his post-vote representations on June 30.
[14] On July 12, 2011, the Board certified PSAC as the bargaining agent for the DCMA civilian employees. Subsequently, the U.S. government sent a diplomatic note objecting to the method of service that had been used. DCMA successfully sought reconsideration of the Board’s decision, and eventually a hearing was held on April 5, 2012 to determine the sovereign immunity issue. In the interim, service was properly effected through DFAIT.
The Board Decision
[15] On August 31, 2012, the Board issued a decision finding that DCMA was not immune from its jurisdiction. In doing so, it held that DCMA was an “agency of a foreign state” within s. 2 of the SIA, rather than a part of the U.S. government itself. The Board then concluded that DCMA had been properly served under s. 9(3) with the original certification application. As noted above, that provision allows service of an originating process on an agency of a foreign state in accordance with the applicable rules of court – or, in this case, the rules of the Board - rather than by service through DFAIT.
[16] In any event, the Board concluded that even if DCMA had not been properly served, DCMA had waived immunity by submitting to the Board’s jurisdiction under s. 4(2)(c) of the SIA. It concluded that DCMA could not rely on s. 4(3), stating at para. 61 of its Reasons:
To the extent that section 4(3) of the SIA is prepared to excuse the taking of any step in ignorance of facts entitling the entity to immunity, it is only “if those facts could not reasonably have been ascertained before the step was taken.” For an agency that proudly operates so extensively internationally and proclaims on its website that its:
“mission is to “provide customer-focused acquisition support and contract management services to ensure worldwide warfighter readiness, 24 hours a day, 7 days a week”
we are not prepared to conclude that the facts for such a fundamental assertion as state or sovereign immunity could not reasonably have been ascertained in these circumstances. (emphasis added in Board reasons)
[17] Finally, in the alternative, the Board held that if DCMA was entitled to claim sovereign immunity, the exception for commercial activity in s. 5 of the SIA would apply. Accordingly, the Board certified PSAC as the bargaining agent for the Canadian civilian employees.
The Issues
[18] The following issues arise in this application:
What is the appropriate standard of review of the Board’s decision?
Did the Board err in finding that the DCMA was an agency of the United States?
Did the Board err in finding that DCMA had waived sovereign immunity?
Did the Board err in finding that the commercial activity exemption applied?
Issue No. 1: What is the appropriate standard of review of the Board’s decision?
[19] The Board was applying the State Immunity Act, a statute grounded in principles of international law. The issues raised with respect to that Act are outside the Board’s specialized expertise, which lies in the area of labour relations. Moreover, the application of the SIA raises issues of central importance to the legal system as a whole. Accordingly, the standard of review is correctness (Dunsmuir v. New Brunswick, 2008 SCC 9 at para. 60).
[20] PSAC argues that the Board’s findings of fact are deserving of deference and, therefore, the standard of reasonableness should apply to findings of fact – for example, relating to waiver and commercial activity. I disagree. The issue of waiver under the Act, as well as the scope of the commercial activity exemption, raise issues of mixed fact and law in which the legal principles are closely entwined with the factual issues. In such a case, the correctness standard should apply.
Issue No. 2: Did the Board err in finding that the DCMA was an agency of the United States?
[21] The Board found that the DCMA was an agency of a foreign state, but not part of the state itself. Accordingly, it held that the DCMA had been properly served, because service occurred in accordance with the rules of the Board.
[22] “Foreign state” is defined to include the government of the state, including any departments and any agency of the foreign state. “Agency of a foreign state” is defined as a legal entity that is an organ of the state but that is separate from the foreign state” (emphasis added).
[23] In applying that definition to determine the status of the Panama Canal Commission, Reed J. in Ferguson v. Arctic Transportation Ltd., [1995] F.C.J. No. 1270 looked at whether there was a separate legal corporate entity, whether there was a right to sue and be sued, the degree of Presidential control of its activities, and the fact that the activity of the Commission was undertaken pursuant to an international treaty imposing duties on the U.S. government. She concluded that the Commission was not a “foreign agency”, as it was not an organ of the U.S. that was separate from the U.S. government (at para. 20).
[24] In Tritt v. United States of America (1989), 1989 4254 (ON SC), 68 O.R. (2d) 284 (H.C.J.), Steele J. held that members of the Organized Crime Strike Force of the U.S. Department of Justice were acting for the state and not an agency separate from the state (at p. 5 Quicklaw version).
[25] In Collavino Inc. v. Yemen (Tihana Development Authority), 2007 ABQB 212, Wittmann A.C.J.Q.B. found that the Tihana Development Authority was an operationally separate entity from the state of Yemen and not an alter ego of Yemen. However, he found that the Authority was a foreign agency as defined in the SIA, because it was an organ of Yemen, although separate from the state (at paras. 116-117, 121).
[26] In my view, the Board erred in finding that the DCMA is a foreign agency within the meaning of the SIA. When the structure and operations of the DCMA are considered, it is evident that the DCMA is part of the United States government and controlled by it. The DCMA is not an organ of the foreign state separate from it, as required by the definition of a foreign agency. Accordingly, the DCMA was not properly served with the application for certification in June 2011. It should have been served in accordance with s. 9(2) of the Act – that is, through the Canadian Department of Foreign Affairs.
[27] In determining whether the DCMA is a part of the U.S. government, as opposed to an agency separate from the government, it is useful to begin with a consideration of the entity’s status under American law. The DCMA is a Combat Support Agency within the U.S. Defense Department, operating under the control of an Undersecretary of Defense.
[28] The United States Code defines a “Defense Agency” as “an organizational entity of the Department of Defense established by the Secretary of Defense ... to perform a supply or service activity common to more than one military department” (see Subtitle A, Part I, Organization and General Military Powers, §101). The Code authorizes the Secretary of Defense to “provide for the performance of a supply or service activity that is common to more than one military department by a single agency of the Department of Defense” (§191(a)). Such an agency is to be designated as a “Defense Agency” or a “Department of Defense Field Activity” (§ 191(b)).
[29] Pursuant to §193, the Chairman of the Joint Chiefs of Staff is to provide periodic reports to the Secretary of Defense on combat support agencies, including “the responsiveness and readiness of each such agency to support operating forces in the event of a war or threat to national security.”
[30] A 2000 Directive of the Department of Defense designated the DCMA as an agency of the DoD and a combat support agency under §193 of Title 10. The Directive sets out the DCMA’s mission, organization, responsibilities and authority. The DCMA is to provide contract administration services for DoD and other authorized federal agencies, foreign governments and international organizations in accordance with the Federal Acquisition Regulation. Among the DCMA’s relationships, it is “responsible to the Chairman of the Joint Chiefs of Staff for combat support and other related activities, as appropriate” (Application Record, pp. 291-4). The Directive also contains specific delegations of authority from the Secretary of Defense – for example, to exercise the Secretary’s powers on employment and direction of the DCMA civilian personnel. I note that the DCMA is authorized to use the Government purchase card for micro-purchases and has a power to enter and administer contracts.
[31] The DCMA’s task is essentially a military support function. It is to administer U.S. government contracts, and primarily DoD contracts for the procurement in Canada of military supplies, services and weapons, including weapons used in ongoing conflicts such as the war in Afghanistan. In performing its functions, it is required to comply with American laws, regulations and policies governing procurement. According to Captain Hayes’ affidavit, the DCMA performs its mission in Canada through partnerships with the Canadian Commercial Corporation, Public Works Government Services of Canada and the Canadian Department of Defence.
[32] Further indication that the DCMA acts as part of the U.S. government is found in its funding and the terms of employment for foreign nationals. The DCMA is funded by the U.S. government. However, its offices in Ottawa are provided by the Canadian government, in accordance with an agreement between Canada and the U.S. This, too, indicates that the DCMA is a part of the U.S. government.
[33] The DCMA’s relationship with its Canadian civilian employees is subject to an instruction of the U.S. Department of Defense that provides detailed regulations about Canadian civilian employment. I note, for example, that approval of salaries, wages and compensation policies for such employees is the responsibility of the Undersecretary of Defense for Personnel and Readiness. The governing procedures deal with the right to strike, providing “wherever possible, negotiated employment systems should have specific clauses prohibiting or restricting strike action as basic features” (p.11).
[34] In evidence, as well, is a Guidance Memorandum for the DCMA foreign national employees in Canada from March 2007, which contains detailed provisions on employment terms. Among those terms is the requirement that employees who suffer a work-related injury or illness be compensated under the U.S. Federal Employees Compensation Act (Application Record, p. 88). Contributions to the Canada Pension Plan are made by the U.S. government and the employee (p. 89). The U.S. government will pay an annual contribution to the employee’s RRSP account. Any amount paid to an employee for jury duty is to be reimbursed to the U.S. government (p. 91). Again, all of this indicates that the DCMA is operating as part of the U.S. government structure.
[35] I note, as well, that in the collective agreement between the DCMA and the American Federation of Government Employees, which applies to American civilian employees, the Union acknowledges that the DCMA is a component of the U.S. Department of Defense (Application Record, p.107).
[36] The Board, in its decision, relied on historical information from the DCMA website, concluding that it showed the independence of the DCMA (Reasons, para. 53). With respect, the Board focused too narrowly on one part of the site and failed to consider the statutory framework and the overall operations of the DCMA. When all the relevant information is considered, it is clear that the DCMA is very much a part of the U.S. government, and that it carries out an important policy role for that government in ensuring military preparedness. The following quotation from its website is illustrative (see Record, p. 278).
The Defense Contract Management Agency is a Department of Defense combat support agency responsible for ensuring the integrity of contractual processes and providing a broad range of contract-procurement management services for America’s warfighters. As shown by the solid line in the chart below, the DCMA director reports directly to the Under Secretary of Defense for Acquisition, Technology and Logistics. The chart below has a dotted line connecting DCMA to its customers, to the Joint Chiefs of Staff - who oversee U.S. combatant commands - and the military services.
[37] When the structure and operations of the DCMA are considered as a whole, it is evident that the DCMA is operating as part of the American government and is not an agency that is separate from the government or independent of it, as required by the definition of a foreign agency in the SIA. Rather, the DCMA is integrated with the U.S. Department of Defense and carries out a military function for the department. The degree of government control of its operations, the nature of the delegated powers it exercises, and the terms of its employment relationships with foreign nationals all show clearly that the DCMA is part of the state and entitled to claim sovereign immunity as such. It is not a “foreign agency” as that term is used in the SIA.
[38] Accordingly, the Board erred when it held that the DCMA was properly served at the time of the application for certification. The DCMA should have properly been served in accordance with s. 9(3) of the Act, through the DFAIT channel.
[39] Had service occurred properly, the application would have been brought to the attention of appropriate officials in the U.S. Department of Justice or Department of State who would have been aware of the sovereign immunity issue. Moreover, the SIA has been interpreted consistently with international law to require that a foreign state be given 60 days notice before being required to respond to any process (Croteau v. United States of America, [2006] O.J. No. 158 (C.A.) at paras. 6-7). Instead, the DCMA had two days to respond to the application for certification.
Issue No. 3: Did the Board err in finding that the DCMA had waived sovereign immunity?
[40] In the alternative, the Board held that the DCMA had waived sovereign immunity by appearing and responding to the certification application. It found that the DCMA had participated in the Board proceeding, and it could not claim the protection of s. 4(3)(b). That provision provides a defence if a foreign state takes steps “in ignorance of facts entitling it to immunity if those facts could not reasonably have been ascertained before the step was taken and immunity is claimed as soon as reasonably practicable after they are ascertained.”
[41] Captain Hayes filed an affidavit that was not challenged in which he states that he did not know about the legal concept of sovereign immunity at the time of the response to the application for certification. Moreover, Captain Hayes stated that he had no authority to waive sovereign immunity. He was informed by Jonathan Welch of the U.S. Department of Justice that the assertion of sovereign immunity is the sole responsibility of the Attorney General of the United States. According to U.S. law, the conduct of litigation in which the United States is a party is reserved to the U.S. Department of Justice (see 28 United States Code, §516).
[42] The Board gave no effect to this evidence. Rather, it relied on an implied waiver, holding that Captain Hayes and the DCMA counsel at its headquarters in Virginia could reasonably have obtained information about sovereign immunity before responding to the application. Therefore, the DCMA could not rely on s. 4(3)(b) of the SIA.
[43] Waiver of sovereign immunity must be by the foreign state. Subsections 4(1) and (2) of the SIA speak of waiver by the “foreign state” and of submission to the courts by the “state”. Since s. 3 of the SIA establishes a presumption of immunity, the onus is on the respondent PSAC here to establish waiver (Kuwait Airways Corp. v. Iraq, 2010 SCC 40, [2010] 2 S.C.R. 571 at para. 22).
[44] Decisions of the English courts have held that waiver is effective only if done explicitly, with full knowledge of the state’s rights, and by a person with the authority to act for the state (see, for example, R. v. Madan, [1961] 2 Q.B. 1 at 7; Baccus S.R.L. v. Servico Nacional Del Trigo, [1957] 1 Q.B. 438 (C.A.) at 471; Aziz v. Republic of Yemen, [2005] ICR 1391 (C.A.) at para. 56).
[45] Leading English texts also set out stringent requirements for waiver of immunity. Waiver must be unequivocal and certain. As well, the consent, express or implied, must be that of the state itself, and the representative who waives immunity must be authorized by the state to do so (Hazel Fox, Q.C., The Law of State Immunity (Oxford: Oxford University Press, 2002) at pp. 265, 267). See, also Xiaodong Yang, State Immunity and International Law (Cambridge: Cambridge University Press, 2012) at p. 342:
Thus, whether explicit or implicit, a waiver must be intentional, displaying a willingness on the part of the defendant foreign State to submit to the jurisdiction; it must be clear, unambiguous and unmistakable; and it must be specific, in that it must be directly related to the proceedings at hand.
[46] In United States of America v. Friedland (1999), 1999 2432 (ON CA), 182 D.L.R. (4th) 614, the Ontario Court of Appeal interpreted s. 4(2)(a) of the SIA, the provision dealing with waiver by a foreign state that explicitly submits to the jurisdiction of a court. The Court observed that “any waiver of immunity must be clear and unequivocal; it cannot be presumed” (at para. 15). While the Court was not dealing with s. 4(2) and (3), as in the present appeal, the statement that waiver must be clear and unequivocal is consistent with the English case law above and with international law principles.
[47] In interpreting s. 4 of the SIA, the modern approach to statutory interpretation requires consideration not only of the plain and ordinary meaning of the statute, but also a consideration of its objects. Section 3 presumes sovereign immunity unless there has been waiver or an exception applies. Given the importance of sovereign immunity in Canadian and international law, s. 4 must be understood as requiring the foreign state to clearly waive its immunity. As well, that the waiver must be by someone with the authority to give such a waiver on behalf of the foreign state.
[48] While Smith v. Chin, [2006] O.J. No. 4091 (S.C.J.) is not directly on point, it is interesting that Cumming J. in that case stated (at para. 33):
A Court must allow some latitude to achieve fairness and reasonableness, and to achieve a result consistent with the underlying policy of the Act in determining whether a foreign state has submitted to the jurisdiction by taking a “step in the proceedings before the court”.
[49] In the present case, the application was not served in the manner that would have ensured that those familiar with the issue of sovereign immunity in the U.S. Department of State or the Department of Justice would have notice of the application. They would also have had adequate time to respond, rather than the two days provided for under the Board’s rules.
[50] Captain Hayes gave unchallenged evidence that he was not familiar with the concept of sovereign immunity. Moreover, he had no authority to grant such a waiver on behalf of the United States government. Therefore, there was no clear waiver by a person with authority to waive sovereign immunity.
[51] The Board erred in disregarding this evidence. Instead, it unreasonably drew an inference that the DCMA should have known about the law of sovereign immunity because of its global operations. However, because Captain Hayes had no authority to waive the immunity of the United States, his actions cannot be taken as a step in the proceedings by the foreign state under s. 4(2)(c) of the SIA. Consequently, the United States did not waive immunity.
[52] Given this conclusion, it is not necessary to consider the exception in s. 4(3)(b).
Issue No. 4: Did the Board err in finding that the commercial activity exemption applied?
[53] In the alternative, the Board held that the DCMA was engaged in commercial activity and therefore, pursuant to s. 5 of the SIA, it was not immune from the Board’s jurisdiction. Again, the onus was on PSAC to prove the exemption applied.
[54] “Commercial activity” is defined as “any particular transaction, act or conduct or any regular course of conduct that by reason of its nature is of a commercial character.” Section 5 then removes immunity “in any proceedings that relate to any commercial activity of the foreign state” (emphasis added).
[55] The leading authority on the commercial activity exemption is the decision of the Supreme Court of Canada in Re Canada Labour Code, 1992 54 (SCC), [1992] 2 S.C.R. 50. That case arose when PSAC sought to have the Canada Labour Relations Board certify it to represent civilian employees at the United States naval base in Argentia, Newfoundland. The proposed bargaining unit would be composed of maintenance employees at the base.
[56] The majority, written by LaForest J., approached the issue by framing two interrelated questions: first, did the employment constitute commercial activity; and second, did the union certification application “relate” to that activity? The majority adopted a contextual approach that considered both the nature and purpose of the state activity (at p. 76).
[57] The majority described a bare employment contract as “primarily commercial in nature”. However, management and operation of a military base were held to be sovereign activity (at p. 80). LaForest J. described the operations of embassies and offshore military bases as “the quintessential examples of state activity that should be immune from foreign review” (at p. 80). Therefore, he characterized the activity at the base as both sovereign and commercial in nature.
[58] LaForest J. then went on to examine the relationship between the certification activity and the employment activity, stating that the entire context of the activity at the base must be considered. In doing so, he framed the question as “whether the connection between conditions of work and the certification proceedings is strong enough to override the competing nexus between these proceedings and management of the base” (at p. 81). He held that the objective of the Board’s proceedings was the imposition of collective bargaining under a Canadian legislative regime and under the control of Canadian courts. In his view, “[t]he nexus between this objective and the management of the base constitutes an unacceptable interference with American sovereignty” (at p. 81). He noted that a strike at the base would disrupt military operations (p.82), and he continued (at p. 83):
Beyond the possibility of a strike, collective bargaining curtails the U.S. Navy’s control of the base in many other ways. The Board’s mandate under the Canada Labour Code allows it to intrude in a variety of ways into internal base affairs. The Board can impose terms in a collective agreement, reinstate employees and rescind disciplinary actions taken by the base commander; it could order the military to provide information on its operations, and it has a broad right of inquiry into those operations. In my view, these would be unacceptable intrusions into the sovereign realm of the Argentia base.
[59] The majority expressed doubt about the reasoning of the decision in Goethe House New York, German Cultural Center v. National Labor Relations Board, 869 F.2d 75 (1989) (C.A. 2d Circ.) at pp. 86-87, a case on which the Board relied in the present case. Goethe House dealt with the application of U.S. labour law to a cultural centre operated by the German government In particular, LaForest J. noted the different impact of collective bargaining on the operations of a cultural centre and a military base.
[60] Each of the parties to this application for judicial review relies on the Canada Labour Code case. The DCMA argues that its activity is similar to the activity in the earlier case: namely, it acts on behalf of the U.S. government for a military purpose, ensuring that military weapons and supplies will be available in a timely manner to support American defence policy. To allow the Ontario labour relations regime to apply would potentially interfere with U.S. sovereignty, given that employees would have the right to strike and decisions about employment related matters, such as a dismissal for security reasons, would be subject to scrutiny and, indeed, override, by the Board or a labour arbitrator.
[61] In contrast, the respondent argues that the DCMA is engaged in commercial activity. The DCMA oversees the performance of contracts, both those with DoD and with other U.S. government departments. However, it does not negotiate or award supply contracts, and its activity does not engage U.S. sovereign interests.
[62] Re Canada Labour Code requires an examination of the entire context of the operations of a foreign entity like the DCMA. That context, as described above, shows that the DCMA is a Combat Support Agency within the U.S. DoD. It operates in Canada under both the Defense Sharing Agreement and the NATO Status of Forces Agreement. In Canada, it operates under the authority of the Chief of Mission of the United States Embassy in Ottawa and the Under Secretary Defence for Acquisition, Technology and Logistics. While its primary purpose - to oversee contract administration - might seem commercial, it is important to put that purpose in context. The aim of the DCMA is to ensure timely and proper compliance with contracts for the supply of weapons and other goods for use by the American military in defence activities. This is a sovereign activity.
[63] As in Re Canada Labour Code, subjecting the DCMA to the Ontario labour relations regime would result in the regulation of labour relations of a U.S. government entity by a foreign state and an interference with sovereign activity by the U.S. Given the nature of the DCMA’s mission and operations, the proceedings before the Board do not relate to a commercial activity. Rather, the nature and purpose of the DCMA activity is sovereign, undertaken on behalf of the U.S. government in order to meet military and defence needs and in accordance with American laws and regulations.
[64] The Board drew a distinction between negotiating and awarding contracts, on the one hand, and administering contracts, on the other hand. The former activity was seen to be “more sovereign” (Board Reasons, para. 71). However, the Board failed to deal with the evidence of Captain Hayes, which was not challenged, that described the broad range of activities of the DCMA, carried on in order to ensure the performance of contracts for the supply of military weapons and material.
[65] In my view, no meaningful distinction can be drawn between the facts in Re Canada Labour Code and the facts of this case. While there are commercial aspects to the individual employment contracts between the DCMA and its Canadian employees, the DCMA operations are structured to facilitate military preparedness in the U.S., which is a sovereign objective. As with the operation of the naval base considered in Re Canada Labour Code, subjecting the DCMA’s operations to Board oversight in a collective bargaining regime would interfere with sovereign activities of the United States. Therefore, the commercial activity exception in s. 5 of the SIA does not apply.
Conclusion
[66] As the DCMA is part of the U.S. government, carrying out sovereign activities, and the U.S. government has not waived its immunity to the jurisdiction of the Board, the Board erred in law in granting the certification application. Therefore, the application for judicial review is granted, and the certification decision is quashed.
[67] The Board does not seek costs and none are awarded.
[68] If the remaining parties cannot agree on costs, the DCMA may make written submissions on costs through the Divisional Court office within 21 days of the release of this decision. PSAC shall have 15 days thereafter to respond.
Swinton J.
M. Brown, R.S.J.
Lederer J.
Released: May 3, 2013
CITATION: Defense Contract Management Agency – Americas (Canada) v. Public Service Alliance of Canada, 2013 ONSC 2005
DIVISIONAL COURT FILE NO.: 513/12
DATE: 20130503
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
M. Brown R.S.J., Swinton and Lederer JJ.
B E T W E E N:
DEFENSE CONTRACT MANAGEMENT AGENCY – AMERICAS (CANADA)
Applicant
- and -
PUBLIC SERVICE ALLIANCE OF CANADA and ONTARIO LABOUR RELATIONS BOARD
Respondents
REASONS FOR JUDGMENT
Swinton J.
Released: May 3, 2013