De Facto Expropriation

Constructive Expropriation in Canadian Law #

The Path of Law and Mahon are both American sources but they—like others we have seen in the course—exerted a significant influence over the thinking of Canadian jurists during the twentieth century. The American law loomed large in this area because of its especially strong protections for private property against uncompensated takings.

Nevertheless, other than a small handful of cases prior to the 1990s, the domestic jurisprudence around de facto expropriation remained all but ignored by Canadian judges. It was not until the Nova Scotia Court of Appeal’s decision in Mariner Real Estate Ltd. that anything like a recognizable legal test for de facto expropriation began to emerge.

Why we’re reading it: Mariner establishes much of the legal framework for de facto expropriation embraced by the Supreme Court of Canada in two key cases we’ll read later this term.

What to look for: As you read Mariner, below, think about two important aspects.

• In what ways does Justice Crownwell’s decision conform or not to the modern style?

• What elements of a legal test for de facto expropriation emerge from the case?

Constructive Expropriation Revisited #

Recall that a claim of de facto expropriation is based on the theory that government has undertaken some type of activity that falls short of taking title to land or other property, but which nevertheless is tantamount to expropriation and therefore demands compensation. Since a modern framework for claims of de facto expropriation was articulated in Mariner Real Estate Ltd v Nova Scotia, that framework was subsequently picked up and largely endorsed by the Supreme Court of Canada in Canadian Pacific Railway v Vancouver (City), below. That framework was recently revised in *Annapolis Group Inc. v Halifax Regional Municipality.

At roughly the same time as the Supreme Court was addressing this matter in CPR, another set of legal developments was also playing out at the international level under the North American Free Trade Agreement (NAFTA). NAFTA—an agreement between Canada, the United States and Mexico—provides parallel protections for de facto expropriation that are afforded to foreign investors in each of the member states (e.g. Canadian investors in Mexico, or American investors in Canada). These protections, however, are not defined by Canadian domestic law on de facto expropriation as expressed in cases like Mariner Real Estate and CPR. Rather, they are interpreted by an international tribunal that arbitrates claims between private investors and the state party accused of violating the investor’s rights. Even more recently—and in part as a response to some of the criticisms of the original NAFTA regime—the NAFTA parties negotiated a new multilateral trade agreement to replace NAFTA. This is the Canada-United States-Mexico Agreement (CUSMA), signed in 2018.