Filtered Insights

Canada Investment Summit 2026: What business leaders need to know

Tue, 01 Sep 2026 00:00:00 Z

The Government of Canada will host the inaugural Canada Investment Summit on September 14 and 15, 2026, in Toronto. The Summit is intended to convene the world’s largest investors, including leading CEOs, entrepreneurs and global business leaders around new investment in Canada.

The Summit focuses on nation-building projects and related opportunities across defence, major infrastructure, Indigenous partnerships, technology, energy, critical minerals and food and agricultural resilience.

The Prime Minister’s Apr. 17, 2026, announcement positions the Summit within a broader plan to catalyze $1 trillion in total investment over five years, create new career opportunities for Canadians, support economic growth and strengthen Canada’s economic resilience. The government’s case to investors rests on Canada’s energy and natural-resource base, skilled workforce, fiscal position and preferential access to approximately 1.5 billion consumers through 16 free trade agreements covering 51 countries.

This bulletin explains the federal measures shaping the Summit’s investment agenda and highlights the key legal and regulatory issues businesses and investors should consider when assessing Summit-related opportunities.

For broader context, BLG’s Doing Business in Canada guide outlines the Canadian legal and regulatory environment in which these opportunities will develop.

Federal measures shaping the Summit’s investment agenda

Several recent federal measures show how the government is supporting the Summit’s investment agenda across priority sectors. Canada has secured more than 20 new economic and defence partnerships and approximately $97 billion in foreign investment commitments since September 2025. At the same time, the Productivity Super-Deduction is intended to improve investment competitiveness, while the federal trade-diversification plan seeks to reduce reliance on a limited number of export markets. Together, these measures raise practical tax and structuring considerations, including the need to address tax issues early in project planning.

Foreign investors should also assess the Investment Canada Act early in transaction planning. This is particularly important where investments involve sectors such as critical minerals, defence, artificial intelligence (AI), or infrastructure, which may attract national security scrutiny regardless of transaction value or whether the investor acquires control. In practice, review timelines, filing obligations and potential conditions or remedial orders should be built into deal structure, financing and closing arrangements.

BLG’s Foreign investment in Canada: Understand the review process explains the review framework in greater detail.

Defence Industrial Strategy: building domestic capability

Security, Sovereignty and Prosperity: Canada’s Defence Industrial Strategy seeks to strengthen domestic defence capacity, reform procurement and support Canadian suppliers. It includes $6.6 billion over five years for industry and a Build-Partner-Buy framework focused on aerospace, munitions, AI and digital systems, space and uncrewed systems. Accordingly, suppliers should consider security clearances, controlled-goods compliance, supply-chain provenance, intellectual property terms and procurement eligibility, not only technical capability.

BLG’s Bill C-31 proposes major Defence Production Act changes affecting Canadian defence procurement examines related legislative changes affecting Canadian defence procurement.

Major Projects Office: accelerating nation-building projects

The Major Projects Office currently supports 18 projects and nine transformative strategies representing approximately $192 billion in new investment. Although the office coordinates federal decision-making and addresses policy and financing barriers, it does not replace statutory approvals or the Crown’s duty to consult. As a result, proponents should determine early whether a project meets the criteria under the Building Canada Act and map the provincial requirements, consultation path, permitting sequence and financing milestones needed to move the project forward.

BLG’s Fast-tracking Canada’s future: Recent projects announced by the Major Projects Office provides further context on the referred projects and their implications.

Indigenous partnerships and project development

Meaningful engagement with Indigenous Peoples is central to major project development in Canada. The Crown’s duty to consult is embedded across regulatory requirements, permitting and procurement processes, driving expectations and informing project design, approvals and financing. Projects with well-developed approaches to execution with partnerships in mind are expected to have better outcomes. The federal Indigenous Loan Guarantee Program and comparable provincial programs are designed to support Indigenous equity participation and access to capital. We recommend that structuring considerations be addressed early in diligence, financing and governance documents.

As discussed in BLG’s From mineral tenures to nuclear projects: The evolving role of UNDRIP in Canadian domestic law, consultation standards and regulatory decision-making continue to evolve, making early engagement critical to project design and execution.

Technology, AI and advanced manufacturing

Canada’s National Artificial Intelligence Strategy: AI for All and Canada’s Automotive Strategy direct support toward AI adoption and infrastructure, domestic manufacturing, battery technology, automation and advanced components. For organizations seeking public funding or procurement opportunities, data sovereignty, privacy, cybersecurity, intellectual property, supply-chain origin and skilled-labour requirements should be addressed at the design stage because these issues can affect both eligibility and the commercial allocation of risk.

BLG’s Canada’s new AI for All strategy: A business outlook on AI governance, adoption, and data sovereignty and Canada’s new automotive strategy examine the practical implications for businesses in these sectors.

Energy and critical minerals

In the energy and critical minerals sectors, federal policy is being advanced through Powering Canada Strong: A National Strategy for an Electrified Canadian Economy and The Canadian Critical Minerals Strategy. The electricity strategy addresses generation and grid expansion, while the critical minerals strategy supports domestic mining, processing and refining.

BLG’s Canada’s new electricity strategy: Powering an electrified future by 2050 examines the implementation, jurisdictional, and financing issues associated with this agenda. Related funding tools, including the First and Last Mile Fund and planned Critical Minerals Sovereign Fund, may help address infrastructure and financing gaps. Even so, proponents will still need durable offtake arrangements and financing structures that account for construction and commodity-price risk.

Food and agricultural resilience

Food security engages a different investment and regulatory framework. The Sustainable Canadian Agricultural Partnership supports capacity, competitiveness, climate resilience, market development, trade and innovation. Projects involving food production, processing, storage, or controlled-environment agriculture may face land-use, environmental, food-safety, labour, transportation and cold-chain constraints.

In that context, BLG’s When regulators shake hands: The CFIA-China food safety MOU illustrates how regulatory cooperation and food-safety requirements can affect agricultural market access. Funding eligibility should therefore be assessed alongside the approvals, trade requirements, and infrastructure needed to operate at scale.

BLG’s Canada Investment Leadership Forum

On Sept. 15, 2026, BLG will host the Canada Investment Leadership Forum in Toronto, in partnership with the Ontario Vehicle Innovation Network and PwC Canada.

This private forum builds on the Government of Canada's Summit, focusing on how investment in Canada's priority sectors can move from policy ambition to executable projects.

The program will address opportunities across defence, automotive, advanced manufacturing, energy, critical minerals, and AI, with practical discussion of financing, investment risk, sovereign capability, and shovel-ready programs.

Review the agenda and current speaker lineup on the Canada Investment Leadership Forum event page.

This event features a curated guest list and capacity is strictly limited. Senior leaders and executives may express interest in attending the forum.

How BLG can help

BLG advises businesses, governments, and investors on major projects, project finance, tax incentives, defence procurement, Indigenous partnerships, trade and supply-chain matters, and institutional co-investment structures. Drawing on the sector-specific analysis referenced throughout this bulletin, we help clients assess project alignment with government priorities, map overlapping approvals, structure financing and partnerships, and advise on regulatory, tax, procurement, and delivery risk.

To discuss how the Summit may affect your organization or project, please contact any of the key contacts listed below.

Prompt payment in British Columbia construction: Deadlines, disputes and adjudication

Tue, 25 Aug 2026 00:00:00 Z

Prompt payment is coming to British Columbia construction projects

On Nov. 27, 2025, the Construction Prompt Payment Act (the Prompt Payment Act, or CPPA) received Royal Assent. When it comes into force, the Prompt Payment Act will introduce a province-wide prompt payment system and bring several updates to the Builders Lien Act. The Prompt Payment Act, alosng with the related amendments to the Builders Lien Act and the Strata Property Act, will come into force on a date set by regulation.

The Prompt Payment Act is aimed at improving cash flow on construction projects. It will introduce mandatory payment deadlines, strict notice requirements, and a fast adjudication process to resolve construction payment disputes. Owners must pay within 28 days of a proper invoice, contractors must pay subcontractors within seven days, and payment disputes can be adjudicated quickly outside the courts. Contracts entered into on or after the Prompt Payment Act’s effective date must comply with its provisions.

It is anticipated that the regulations will offer additional guidance on the transition, as seen in other prompt payment jurisdictions.

How prompt payment works in British Columbia construction projects

1. Prompt payment deadlines for owners, contractors and subcontractors

Payments move downward through the contractual chain. Generally speaking, the owner pays the contractor, the contractor pays its subcontractors, and these subcontractors then pay their own sub‑subcontractors and suppliers, and so forth.

A single payment dispute or delay in making payment often disrupts or halts cash flow, causes work stoppages, and creates financial pressure on all parties in the contractual chain. Because of this, the Prompt Payment Act establishes firm payment timelines that owners, contractors, and subcontractors must follow.

Under the Prompt Payment Act, owners must pay contractors within 28 days of receiving a “proper invoice.” Contractors and subcontractors must pay their respective sub- and sub-subcontractors within seven days of receipt of payment, or within the time frame determined by their position in the chain of contracts (based on increments of seven days). If the contractor instead receives only partial payment from the owner, it must rateably pay its subcontractors within seven days, based on the amounts the owner actually paid for their work or materials.

2. What is a “proper invoice” under British Columbia’s Prompt Payment Act?

The Prompt Payment Act sets out the minimum requirements of a “proper invoice” as follows:

There must be a written bill or other request for payment for the work done or materials furnished in respect of an improvement under a contract.
That bill or request must be given to an owner at least every month unless the contract provides for a different period or provides for a proper invoice to be given on a milestone or other basis.
The bill or request must include:
- the contractor’s name and business address;
- the date of issuance and the relevant period, milestone or other basis for which payment is sought;
- information identifying the authority, whether in the contract or otherwise, under which the work was done or materials were furnished;
- a description of the work done or materials furnished, including quantity if appropriate;
- the amount requested for payment and the corresponding payment terms broken down for the work done or materials furnished;
- the name, title and contact information of the person to whom payment is to be sent;
- any other requirements as specified in the contract; and
- any other information that may be prescribed by the regulations.

3. Notices of non‑payment in British Columbia construction disputes

If an owner disputes any amount in a contractor’s invoice, the owner must issue a notice of non‑payment within 14 days of receiving the proper invoice. However, if the owner’s position is that the invoice is not a “proper invoice,” the owner must deliver the notice within seven days of receipt. After this seven-day period expires, the invoice is deemed to be a proper invoice.

The notice of non-payment must specify the amount of non-payment, the reason for non-payment, and anything else that may be prescribed by regulation.

If a contractor disputes any portion of a subcontractor’s invoice or receives a notice of non‑payment from the owner, the contractor must issue its own notice of non‑payment to the subcontractor. This notice must be delivered no later than the earlier of seven days after receiving the owner’s notice of non‑payment, or the deadline tied to the subcontractor’s position in the contractual chain.

While the contractor may withhold payment from a subcontractor based on the owner’s notice of non-payment, the contractor must provide the subcontractor with a copy of the owner’s notice and undertake to refer the matter to adjudication.

Construction payment disputes that can be adjudicated under the Prompt Payment Act

Adjudication is a streamlined dispute resolution process that takes place outside the court system. The introduction of adjudication alongside the prompt payment regime is intended to give contracting parties a fast, construction‑focused mechanism for resolving payment disputes. The Prompt Payment Act sets out the types of disputes that may be referred to adjudication. These include, among other things:

whether a payment is required under a contract, including disputes relating to change orders, whether approved or not;
a failure to make payment in whole or in part;
the valuation of services or materials supplied to the project;
whether a proper invoice has been delivered in accordance with the Prompt Payment Act;
issues relating to notices of non‑payment;
any matters prescribed by regulation; and
any other matters the parties agree to submit to adjudication.

Parties may choose to terminate an adjudication after the notice of adjudication has been issued but before the adjudicator releases a determination. In addition, the adjudicator may resign or may be terminated in accordance with the procedures set out in the regulations.

1. How to start an adjudication for a construction payment dispute

A party may begin adjudication by delivering a notice of adjudication to the other party. Adjudication becomes mandatory once a party issues a notice of adjudication.

The notice of adjudication must be delivered within 90 days of specific triggering events, failing which adjudication cannot proceed. For disputes relating to the head contract, the notice must be delivered within 90 days after the head contract is completed, abandoned, or terminated. For disputes relating to a subcontract, the notice must be delivered within 90 days of the earliest of:

the date the head contract was completed, abandoned, or terminated;
the date the subcontract was certified as complete; or
the date the subcontractor last supplied services or materials to the improvement under that subcontract.

As noted above, if a contractor issues a notice of non‑payment to a subcontractor based on the owner’s non‑payment, the contractor must also commit to commencing adjudication against the owner within 21 days after giving that notice of non‑payment.

2. Who can be an adjudicator?

An adjudication authority will be established by regulation. An adjudicator must be registered as such by the authority, and will be appointed to hear a dispute either by consent or by the authority. However, the parties will not be permitted to contract in advance to name a specific adjudicator in the event of an adjudication.

The adjudicator, once appointed, may conduct the adjudication in any manner considered appropriate by the adjudicator under the circumstances and has been granted several powers for this purpose, including, but not limited to:

issuing directions regarding the conduct of the adjudication;
drawing inferences from the parties’ conduct;
obtaining the assistance of an expert; and
conducting on-site inspections.

An adjudicator’s decision will be binding on the parties unless:

a court order is made;
a party applies for judicial review;
the parties agree in writing to resolve the dispute; or
the parties enter into a written agreement to appoint an arbitrator.

The adjudicator’s written decision must be issued within 30 days of receiving certain records prescribed by the Prompt Payment Act, or as otherwise agreed by the parties and the adjudicator.

Changes to the British Columbia Builders Lien Act affecting construction payments

The Prompt Payment Act is bringing a number of amendments to the Builders Lien Act.

The holdback period will be shortened from 55 days to 46 days. This change would also apply to the holdback on condominium purchases under the Strata Property Act. The CPPA does not bring any changes to the lien period.

The Prompt Payment Act makes it explicit that “a person does not have a lien under this Act against a required holdback.” While the holdback will still secure payment of lien claims filed by parties engaged by or under the person retaining that holdback, these amendments eliminate the standalone lien against the holdback that had previously been recognized in British Columbia under the Shimco Metal Erectors Ltd. v. Design Steel Constructors Ltd. decision.

Further, demolition work is now expressly included in the definition of an “improvement” in section 1(1) of the Builders Lien Act.

What issues remain unsolved?

What do we not know yet? An obvious, outstanding question is: when will the Prompt Payment Act come into force? That said, several other important questions remain unanswered.

Will the Prompt Payment Act apply to architects and engineers?

Based on the Prompt Payment Act’s definition of a “contractor” as a person who supplies services or materials for an improvement, it appears that professional service providers, such as architects and engineers, as well as materials suppliers will fall within the scope of the prompt payment regime.

These groups would therefore be required to follow the Prompt Payment Act’s payment timelines unless they are specifically exempt by regulation. However, at this stage, no such exemptions have been announced.

What will the adjudication body look like?

While the regulations will provide the structure of British Columbia’s adjudication body, we can look to other provinces for guidance. Across Canada, jurisdictions with prompt payment and adjudication regimes have designated Authorized or Recognized Nominating Authorities to oversee their systems, maintain adjudicator rosters, and administer adjudications. Examples include:

Ontario: Ontario Dispute Adjudication for Construction Contracts (ODACC) is the Authorized Nominating Authority under the Construction Act.
Alberta: ARCANA is a partnership between the Alternative Dispute Institute of Alberta (ADRIA), Alternative Dispute Resolution Institutes of Canada (ADRIC), and Royal Institute of Chartered Surveyors (RICS) in partnership as the ADR Institute / RICS Construction Adjudication Nominating Authority (Alberta).
Saskatchewan: The Construction Dispute Resolution Office (SCDRO) is appointed by the Government of Saskatchewan to serve as the Adjudication Authority for Saskatchewan’s construction industry under the Builders’ Lien Act.

Will the new legislation prohibit the use of a contractual paid when paid clause?

Section 47(2) of the Prompt Payment Act states that “a provision in a contract that provides that this Act is not to apply, or that the remedies provided by this Act are not to be available for a person’s benefit, is void.” Given this, the short answer is likely yes. That said, parties may still have some ability to contractually moderate how certain aspects of the new regime apply. The extent of this flexibility will ultimately depend on the regulations and how courts interpret the legislation once in force.

What projects will be exempt from prompt payment?

The Prompt Payment Act provides that it will not apply to certain “prescribed” projects, but those exemptions will be set out in the regulations. At this stage, it remains unclear which types of projects will be excluded from the prompt payment regime in British Columbia. However, other jurisdictions offer some guidance.

For example, several provinces have carved out largescale or “mega‑projects” by exempting projects that exceed a defined capital expenditure threshold. Whether British Columbia will adopt similar exemptions has not yet been announced.

What does this mean for British Columbia construction projects?

With strict prompt payment deadlines and mandatory adjudication, construction payment disputes in British Columbia should move faster than ever. Early preparation is essential. Key steps to prepare for this change should include the following.

Updating all contract documents, including construction contracts, subcontracts, purchase orders, and consulting agreements, to reflect the prompt payment and adjudication requirements.
Revising invoice templates so they meet the Prompt Payment Act’s requirements for a “proper invoice” and contain all mandatory information.
Preparing template notices, including notices of dispute and notices of non‑payment, so they can be issued quickly and within statutory deadlines.
Providing training on the prescribed forms and timelines required by the Prompt Payment Act.
Implementing or updating reminder and tracking systems to monitor the delivery and receipt of proper invoices, along with all corresponding payment and notice deadlines.
Staying aware of invoicing and payment timing up the contractual chain, since key timelines are triggered by the first proper invoice submitted to the owner.
Adjusting internal accounting processes to ensure payments can be reviewed, approved, and issued within the required timeframes.
Maintaining organized, accurate project records to support or defend potential adjudication claims.
Establishing claims or commercial response teams capable of reacting promptly to notices of non‑payment or notices of adjudication.

Strong record keeping and close attention to project activity will be more important than ever under the Prompt Payment Act. Subcontractors in particular will need to stay informed about when the contractor submits a proper invoice to the owner, as many of the Prompt Payment Act’s payment and notice deadlines begin running from that date. Without this visibility, subcontractors risk missing the statutory window to issue a notice of non‑payment, or to make payment further down the chain.

In addition, parties must be prepared to commence or respond to adjudications on very short notice. Given the accelerated timelines and documentary requirements in the adjudication process, maintaining organized, comprehensive, and up-to-date project records will be critical. Good record keeping is no longer simply best practice. It will be essential to protecting a party’s rights and meeting the CPPA’s mandatory timelines.

BLG can assist

Please contact a BLG Construction lawyer with any questions about how the Prompt Payment Act may affect your business. See also our Canada's Prompt Payment Legislation - A national perspective page for more details about prompt payment and adjudication regimes across the country, which includes an interactive map.

Ontario Court of Appeal allows social media defamation claim to proceed and awards costs against anti-SLAPP applicant

Tue, 25 Aug 2026 00:00:00 Z

Development projects often attract vigorous public debate, particularly in smaller communities where land use decisions can become intensely contested. However, Solmar Inc. v. Hall, 2026 ONCA 367 is a reminder that even heated social media debate has limits.

The Court of Appeal for Ontario upheld the dismissal of an anti-SLAPP motion brought by a Facebook user who accused a developer of corrupt business practices and suggested municipal officials may have received improper benefits. Although the posts related to a matter of public interest, the Court of Appeal held that the defamation action could proceed and confirmed that an unsuccessful anti-SLAPP applicant may face an adverse costs award where the impugned expression may have been motivated by malice.

The decision provides important guidance on social media defamation claims, anti-SLAPP motions, and the limits of online criticism where allegations of corruption and misconduct are advanced.

Understanding anti-SLAPP legislation and motions: What you need to know

Anti-SLAPP legislation exists to protect expression on matters of public interest, and to address the concern that the cost and burden of litigation may discourage participation in public debate.
The Supreme Court of Canada has recognized that strategic lawsuits against public participation (SLAPPs) are tactical proceedings brought to suppress expression on issues of public interest.¹
To address this, some provinces (including British Columbia and Ontario) have enacted anti-SLAPP legislation, thereby creating a pre-trial mechanism to screen proceedings arising from expression on matters of public interest and “weed out” SLAPPs.²
In British Columbia and Ontario, a defendant to an alleged SLAPP may apply to the court to have the lawsuit summarily dismissed if the defendant can satisfy the judge that it arises from an expression made by the defendant that relates to a matter of public interest.
In order to defeat an anti-SLAPP motion, the plaintiff to the action must satisfy the judge that there are grounds to believe that: (1) the proceeding has substantial merit; (2) the defendant has no valid defence in the proceeding; and (3) the harm suffered by the plaintiff as a result of the expression is sufficiently serious that the public interest in allowing the proceeding to continue outweighs the public interest in protecting the expression.
If an anti-SLAPP motion is successful, the default rule is for the defendant to receive its costs on a full indemnity basis. A plaintiff who successfully defends against an anti-SLAPP motion is not presumptively entitled to costs. In both instances, the motion judge retains discretion to make a different costs award.
Anti-SLAPP legislation does not provide blanket immunity for defamatory statements. Rather, it requires courts to balance the public interest in protecting freedom of expression against the public interest in permitting potentially meritorious claims, including claims seeking to vindicate reputation, to proceed.

Background of the dispute

The plaintiffs were a real estate developer, Benny Marotta, and Solmar Inc. (Solmar), who were involved in a controversial proposal to build a luxury hotel in Niagara-on-the-Lake, Ontario, a town of approximately 19,000 residents. The proposal was approved by municipal council in a close 5-4 vote.

The next day, Stewart Hall, a retiree who lived in Niagara-on-the-Lake, posted in a local Facebook group with approximately 3,100 members, accusing Mr. Marotta (and Solmar) of “corrupt and aggressive” business tactics, and questioning whether town staff or councillors who supported the project had received undisclosed cash or gifts.

In a follow-up comment, he wrote that everything in his post was “in the public record with some opinions thrown in,” while also stating that he had “no proof” that anyone other than one councillor had been offered cash.

Mr. Marotta and Solmar sued for defamation. Mr. Hall brought an anti-SLAPP motion under s. 137.1 of Ontario’s Courts of Justice Act, relying on the defence of fair comment. The motion judge dismissed the anti-SLAPP motion and allowed the claim to proceed (Solmar Inc. v. Hall, 2025 ONSC 1703), and ordered Mr. Hall to pay the plaintiffs’ costs on a substantial indemnity basis in the amount of $89,000 (Solmar Inc. v. Hall, 2025 ONSC 2578).

In dismissing the anti-SLAPP motion, the motion judge concluded that although the expression concerned a matter of public interest, there were grounds to believe that the proceeding had substantial merit and that Mr. Hall had no valid defence. In finding that there were no grounds to believe that Mr. Hall had a valid defence of fair comment, the motion judge concluded that Mr. Hall had acted with malice by showing a reckless disregard for the truth, an ulterior motive, and a desire to harm the plaintiffs by undermining the development approval.

Ultimately, the motion judge found that the weighing of harms to each of the parties favoured allowing the lawsuit to proceed, and dismissed Mr. Hall’s motion.

Mr. Hall appealed the dismissal of his anti-SLAPP motion and the costs award. The Court of Appeal dismissed the appeal and upheld the order permitting the defamation action to continue, although it reduced the costs award.

Analysis

Interpreting the meaning of the expression in social media posts

The Court of Appeal’s reasons are notable for their treatment of social media expression. Mr. Hall argued that, in assessing the meaning of the expression, the motion judge failed to account for the conversational nature of Facebook, which he claimed is a place for casual exchanges where expression is not always measured or precise.

The Court of Appeal rejected that argument. It found that the motion judge had correctly avoided parsing the posts “phrase by phrase,” had considered the social media setting throughout his analysis, and had appropriately recognized that rhetorical questions may reasonably be understood as veiled accusations. There was no basis to interfere with the motion judge’s assessment of the meaning of the expression.

Social media and the fair comment defence

The Court of Appeal also revisited the analysis of the fair comment defence. Although it held that the motion judge erred by assessing the “fairness” of Mr. Hall’s statements rather than asking whether they could honestly be held on the proved facts, the error did not affect the outcome.

Considering the issue afresh, the Court of Appeal concluded that there were grounds to believe the defence would fail because a reasonable trier could regard the allegations of corruption and bribery as assertions of fact, namely that Mr. Marotta and Solmar had engaged in actual corruption and bribery, rather than merely expressing an opinion. The Court of Appeal noted that the posts referred to gifts of cash, “perks,” and “corrupt” conduct, and that Mr. Hall represented that his allegations were grounded in matters of public record.

In that context, a reasonable reader could understand the posts as conveying factual allegations of misconduct. Since the fair comment defence protects opinions, not disguised assertions of fact, there were grounds to believe the defence would not succeed. As the Court of Appeal observed, allegations of criminal conduct may, depending on the context, fall outside the protection of fair comment.

The malice analysis is also noteworthy. The Court of Appeal upheld the motion judge’s conclusion that there were grounds to believe that Mr. Hall had acted with malice. While the Court of Appeal did not endorse every aspect of the motion judge’s reasoning, it agreed that the record supported findings of recklessness and a desire to injure the plaintiffs.

In particular, the allegations of bribery were not supported by the source materials on which Mr. Hall purported to rely, and the content and timing of the posts supported an inference that they were intended to harm Mr. Marotta’s reputation rather than advance public debate.

Serious harm and anti-SLAPP applications

The Court of Appeal’s decision also provides useful guidance on the serious harm requirement of the test for dismissal.

Plaintiffs need not prove actual economic loss at the anti-SLAPP stage. Rather, the question is whether the record permits an inference of likely serious harm. On the facts, the Court of Appeal upheld the motion judge’s inference that the posts could affect Mr. Marotta and Solmar’s reputation and future dealings with municipal decision-makers, particularly in a small community where the development proposal remained subject to future approvals and public scrutiny.

Costs consequences for unsuccessful anti-SLAPP applicants

The costs ruling is a commercially significant part of the decision. At s. 137.1(8), Ontario’s anti-SLAPP legislation presumes that a successful plaintiff respondent is not entitled to costs unless the judge determines that an award is appropriate in the circumstances. The motion judge exercised his discretion and awarded $89,000 in substantial indemnity costs.

The Court of Appeal held that the findings supporting malice were sufficient to rebut the no-costs presumption, but reduced the award to $40,000 on a partial indemnity basis because substantial indemnity costs require reprehensible, scandalous, or outrageous conduct, and the motion judge had not justified that higher scale. The Court of Appeal also ordered Mr. Hall to pay $12,500 in appeal costs.

The costs point has significance beyond Ontario. British Columbia’s Protection of Public Participation Act contains a similar asymmetrical costs regime: a successful applicant is presumptively entitled to full indemnity costs where the proceeding is dismissed, while a successful respondent is not entitled to costs unless the court considers such an award appropriate in the circumstances. The result in Solmar Inc. v. Hall is therefore a useful reminder for litigants in both Ontario and British Columbia that anti-SLAPP costs rules are designed to discourage abusive litigation, but they do not give unsuccessful moving parties a free pass where the impugned expression may have been motivated by malice, for example, on the basis of recklessness or a desire to harm.

Key takeaways

Solmar Inc. v. Hall confirms that public criticism and debate on development projects, corporate conduct, and municipal approvals remain protected by anti-SLAPP legislation, but where expression moves beyond criticism of the merits (for example, of a project) and into serious, unsupported allegations of corruption, bribery, or other criminal misconduct, a defamation claim may be permitted to proceed.
Courts will assess social media posts from the perspective of a reasonable reader. Rhetorical questions and social media informality will not necessarily shield a speaker from a defamation claim if the overall message would reasonably be understood as veiled accusations designed to lower the plaintiff’s reputation in the eyes of the reasonable reader.
Depending on the context, allegations of criminality may be viewed as allegations of fact, rather than protected comment.
A plaintiff opposing an anti-SLAPP motion need not prove actual economic loss. Evidence supporting an inference of likely serious reputational or business harm may be sufficient to satisfy the public-interest balancing analysis.
For defendants considering an anti-SLAPP motion, Solmar Inc. v. Hall underscores that unsuccessful applicants face real costs exposure. Although successful respondents are not presumptively entitled to costs, courts may depart from that presumption where there are grounds to believe the impugned expression was malicious, reckless, or motivated by an improper desire to injure the plaintiff.

BLG can assist

If you have questions about business defamation claims or anti-SLAPP applications, please reach out to any of the key contacts below.

The ETF next door? CIRO and CSA set expectations for foreign ETFs

Tue, 25 Aug 2026 00:00:00 Z

On July 29, 2026, the Canadian Investment Regulatory Organization (CIRO) and the Canadian Securities Administrators (CSA) published joint Staff Notice 81-339 – Industry Practices Relating to Foreign-Listed Exchange-Traded Funds (the Foreign ETF Notice).

The Foreign ETF Notice addresses three key areas:

the circumstances in which marketing activity for a foreign ETF may trigger Canadian prospectus and investment fund manager (IFM) registration requirements;
the application of the Know Your Product (KYP), Know Your Client (KYC) and suitability obligations to dealers and dealing representatives when recommending the purchase of foreign ETFs to a client or purchasing foreign ETFs on behalf of a client; and
a recommendation for order-execution-only (OEO) dealers to provide certain enhanced pre-sale disclosure to investors considering the purchase of a foreign ETF.

The regulators expressly acknowledge that the guidance provided in the Foreign ETF Notice is based on existing securities law requirements; it does not modify existing regulatory obligations or create new ones. However, the guidance sets expectations for how existing requirements apply in respect of foreign ETFs and encourages certain new practices.

In some cases, it also raises novel questions about how to interpret CIRO and CSA staff expectations, particularly where those expectations seem to differ from current market practice.

Prospectus requirement & IFM registration assessment

The Foreign ETF Notice is a reminder that a foreign ETF does not require a receipted prospectus in Canada merely because Canadian investors purchase its securities on a foreign exchange. Rather, the prospectus requirement is engaged where the relevant activity amounts to a “distribution” of securities in Canada. The guidance warns that “active steps” to market or promote the sale of a foreign ETF to retail investors in Canada may be an act in furtherance of a sale and, therefore, a distribution that requires a prospectus, absent an exemption.

The Foreign ETF Notice provides examples of activities that constitute “active steps” to market or promote and specifically calls out wholesaling, described as actively soliciting dealers to offer or recommend a particular foreign ETF to their clients. The Foreign ETF Notice also mentions advertisements on social media or digital channels that are targeted at Canadian investors, which raises the question of how the regulators will assess whether a social media campaign is “targeting” Canadians.

Managers of foreign ETFs that have enjoyed a healthy flow of Canadian investors should consider how to document that their marketing campaigns do not intend to target Canadians. These managers should also consider other actions taken by any person or entity on behalf of the foreign ETF to encourage purchases by Canadian investors, such as proactive, targeted actions or communications that are initiated for the purpose of soliciting investment.

Foreign ETF managers are also reminded of the requirement to register as an IFM in Ontario, Québec and Newfoundland and Labrador if they direct or manage the business, operations or affairs of an investment fund in those jurisdictions, and distribute securities to residents in those jurisdictions. The marketing of a foreign ETF in those jurisdictions could trigger the requirement to register as an IFM.

The Foreign ETF Notice states that, absent an exemption in such jurisdictions, unregistered foreign ETF managers would generally not be permitted to market their foreign ETFs in those jurisdictions. Left unanswered is the question of the circumstances in which a foreign ETF manager with securityholders resident in Ontario, Québec and Newfoundland and Labrador can rely on an IFM registration exemption in such jurisdictions.

The guidance is of particular note for organizations offering both Canadian and foreign ETFs. In particular, these organizations will need to be careful about how internal wholesalers respond to dealer inquiries relating to foreign ETFs, and should continue to consider whether additional guardrails are needed to avoid crossing into “active” marketing of foreign ETFs in Canada.

Distribution considerations

Know Your Product (KYP)

The Foreign ETF Notice introduces additional layers of compliance scrutiny in the distribution of a foreign ETF that may increase the compliance burden on dealers that offer foreign ETFs.

In what the regulators characterize as “product due diligence obligations,” dealers must not make a foreign ETF available to clients unless the firm has taken reasonable steps to assess the relevant aspects of the foreign ETF, including assessing a foreign ETF’s structure, features, risks and initial and ongoing costs, as well as the impact of those costs; approving the distribution of the foreign ETF on its “shelf”; and monitoring for significant changes in the foreign ETF.

CIRO and CSA staff continue to apply the principle of proportionality to the KYP requirements, and acknowledge that the depth of the KYP review may vary based on the complexity and risks of both the securities offered and the dealer’s business model. In the context of foreign ETFs, CIRO and CSA Staff’s view is that a KYP assessment may include consideration of the following:

disclosure available to investors;
general tax considerations applicable to such investments;
key currency exposure, including conversion cost implications;
whether the foreign ETF manager is registered as an IFM in the applicable jurisdiction of Canada and, if not, the implications to the Canadian investor of not having certain investor protections that apply to registered IFMs; and
implications to investors of not having certain investor protections that apply when an investment fund is distributed under a prospectus filed in Canada.

Dealers will need to assess how to document their KYP review of foreign ETFs, including the level of diligence applied to foreign ETFs and any limits on the availability or comparability of disclosure. It remains unclear to what extent a dealer is expected to evaluate differences between the disclosure available for, and legal protections applicable to, foreign ETFs versus Canadian ETFs, and what actions, if any, should result from that analysis.

Additionally, the Foreign ETF Notice does not resolve the differences in availability and comparability of certain expense data points between Canadian and foreign ETFs.

Know Your Client (KYC)

Dealers and their representatives are required to obtain sufficient information about a client’s investment knowledge, including the client’s understanding of different types of investments. The Foreign ETF Notice encourages dealing representatives, before recommending or purchasing a foreign ETF for a client, to consider whether the client understands the key differences between Canadian and foreign ETFs, including the relative risks and limitations of foreign ETFs compared to Canadian ETFs.

The Notice does not clarify whether the comparison of key differences between Canadian and foreign ETFs is intended to be conducted at a general level, based on jurisdictional differences, or at a more granular product-by-product level, which may require consideration of the particular features, risks, costs, tax considerations and disclosure of the specific foreign ETF.

Suitability

The Foreign ETF Notice provides that dealers may only recommend foreign ETFs after determining whether the action puts the client’s interest first and is suitable for the client based on:

the client’s KYC information;
the dealer’s understanding of the foreign ETF;
the impact on the client’s account of investing in a foreign ETF (including concentration and liquidity impacts);
the potential and actual impact of costs on the client’s return on investment; and
having considered a reasonable range of alternative actions available at the time of assessing suitability, including other products such as Canadian ETFs that offer similar exposure.

The suitability-assessment-related guidance applies to portfolio managers and their advising representatives when purchasing a foreign ETF for a client on a discretionary basis. The expectation to consider a reasonable range of alternatives, including similar Canadian ETFs, again raises questions around the level of comparative analysis required before recommending a foreign ETF.

OEO dealer disclosure

As OEO dealers do not make a suitability determination prior to the sale of a foreign ETF, the Foreign ETF Notice “encourages” OEO dealers to provide an alert or notification at one or more “critical interaction points” prior to an investor’s purchase of a foreign ETF to inform investors of the following:

the ETF they are seeking to purchase is a foreign ETF; and
the key differences between foreign ETFs and Canadian ETFs, which may include that each are subject to different regulatory requirements (which may result in different investor protections), there could be different tax considerations and, for accounts that do not hold the relevant currency in which the foreign ETF is denominated, there could be currency conversion costs that apply.

Key takeaways

Foreign ETF managers, as well as dealers that offer foreign ETFs, should consider reviewing the following:

Manager marketing and wholesaling practices for foreign ETFs to determine whether these activities amount to “active” marketing, and assess the related registration and prospectus implications.
The adequacy of dealer KYP processes relating to the approval and ongoing monitoring of foreign ETFs.
Dealer suitability and KYC procedures for foreign ETFs, including how representatives determine and evidence a client’s understanding of the key differences between Canadian and foreign ETFs.
The feasibility of a client alert or notification containing the recommended disclosure for OEO dealers that offer foreign ETFs.

Canada’s foreign influence registry is now in effect: Here’s what you need to know

Thu, 20 Aug 2026 00:00:00 Z

On Aug. 4, 2026, the Foreign Influence Transparency and Accountability Act, S.C. 2024, c. 16, s. 113 (FITAA), and Foreign Influence Transparency and Accountability Regulations, SOR/2026-152, came into force.

What you need to know:

FITAA establishes a registration regime intended to increase transparency concerning foreign interference and influence in Canada.
Individuals and organizations must register certain arrangements with foreign principals involving activities intended to influence political or governmental processes in Canada.
The new Foreign Influence Transparency Commissioner (the Commissioner) will maintain a public registry of registered arrangements and report annually to the Minister of Public Safety and Emergency Preparedness for tabling before Parliament.
Anton Boegman, formerly British Columbia’s Chief Electoral Officer, is the first Commissioner.

What types of arrangements must be registered?

FITAA’s central obligation requires an individual or organization to register an “arrangement,” meaning an undertaking to carry out specified activities in relation to a political or governmental process in Canada under the direction of or in association with a foreign principal.

FITAA defines foreign principal broadly. The term includes:

Foreign states and political subdivisions, groups of foreign states, and entities legally or de facto controlled or substantially owned by a foreign state or group of foreign states
Foreign governments, entities exercising or purporting to exercise governmental powers over a foreign territory, and political factions seeking to assume the role of government of a foreign state
Groups and associations of such foreign governments, including where a terrorist group is involved
Anyone acting under the direction of, for the benefit of, or in association with such a government

The undertaking must involve one or more of the following activities in relation to a political or governmental process:

Communicating with a public office holder
Communicating or disseminating information related to the political or governmental process, including through social media
Distributing money or other items of value
Providing a service
Providing the use of a facility

A public office holder is broadly defined to include:

Representatives of federal, provincial, territorial and municipal governments and their staff
Officers and employees of federal, provincial, territorial and municipal governments and public bodies, including departments, agencies, Crown corporations, commissions, boards and tribunals, as well as school board trustees, officers and employees
Members and employees of a band council or aboriginal government

A political or governmental process may be federal, provincial, territorial, municipal or Indigenous. It includes:

A legislative proceeding
Developing a legislative proposal, amendment, policy or program
A decision by a public office holder or government body, including a decision to award a contract
An election or referendum
Nominating a candidate or developing an electoral platform by a political party

What arrangements are excluded?

Arrangements in which a federal, provincial, territorial or municipal government in Canada is a party are exempt from registration.

Court and arbitral proceedings are also excluded. Federal, provincial and territorial judges are expressly excluded from the definition of “public office holder.” Judicial processes before a court and private litigation proceedings are also not considered “political or governmental process” as discussed in the Commissioner’s Interpretation Bulletin: Application to Licensed Legal Professionals and the Federation of Law Societies of Canada’s Notice to the Legal Professions. Providing privileged legal advice is also not considered an influence activity.

However, legal professionals are still subject to FITAA. The Commissioner notes that legal professionals may be required to register arrangements involving activities such as:

Representing a foreign principal in an engagement with a public office holder to secure financial support for a project.
Responding on behalf of a foreign principal to a request for proposals or another regulatory, legislative or governmental matter.
Meeting with a public office holder on behalf of a foreign principal to influence the development of a program, policy or regulation.
Conducting an advocacy campaign on behalf of a foreign principal.

Representing a foreign principal in an administrative proceeding before a Canadian board, commission or tribunal is not exempted from registration under FITAA or the Interpretive Bulletin.

What information must be provided?

The regulations prescribe the information that must be provided, including:

Identifying information about the individuals and organizations carrying out the activities in Canada
Identifying information about the foreign principal
Detailed information about the activities to be carried out

Providing false or misleading information to the Commissioner is specifically prohibited.

FITAA also does not displace other reporting obligations under the Lobbying Act.

When is registration required?

An arrangement must be registered within 14 days after it is entered into. Any change to the registered information must be reported within 14 days after the change occurs.

How is FITAA enforced?

The Commissioner may investigate potential violations of FITAA obligations and has the power to compel testimony and production of documents. Obstructing the Commissioner is an offence.

A violation may be addressed through an administrative monetary penalty (AMP) or prosecuted as an offence, but not both.

Under the AMP scheme, if the Commissioner has reasonable grounds to believe that a person has committed a violation, the Commissioner may issue a notice of violation setting out a proposed penalty. The recipient may pay the penalty or make representations to the Commissioner. If the recipient makes representations, the Commissioner will determine whether the violation occurred and, if so, whether to impose the proposed penalty. A decision finding a violation must be made public and is subject to judicial review in the Federal Court.

AMPs under FITAA range from $250 to $1 million.

If a violation is prosecuted as an offence, the potential penalties include a fine of up to $5 million, imprisonment for up to five years, or both. A due diligence defence is available.

BLG can assist

For more information about FITAA, its registration requirements or responding to a notice of violation, please contact one of the authors or a member of BLG’s White Collar Criminal Defence and Corporate Investigations team.

Canadian Securities Administrators propose new amendments to the listed issuer financing exemption (LIFE)

Wed, 19 Aug 2026 00:00:00 Z

The CSA have published for comment certain proposed amendments (the Proposed Amendments) to National Instrument 45-106 Prospectus Exemptions (NI 45-106) that would, among other things, codify increased financing limits, revise the dilution calculations, expand issuer eligibility and streamline certain conditions and disclosure requirements under the listed issuer financing exemption in Part 5A of NI 45-106 (the LIFE Exemption).

Many of the Proposed Amendments, including the increased financing limits and revised methodology for calculating dilution, are already currently found in a temporary blanket order related to the LIFE Exemption that would expire on the date the Proposed Amendments come into force.

What you need to know

The Proposed Amendments would codify key elements of Coordinated Blanket Order 45-935 Exemptions from Certain Conditions of the Listed Issuer Financing Exemption (the Blanket Order), including the higher financing limits, the revised 50 per cent dilution calculation and certain related investor protection conditions.
Consistent with the Blanket Order, issuers would be able to raise the greater of $25 million and 20 per cent of aggregate market value, to a maximum of $50 million, in any 12-month period.
The CSA proposes to replace the current 12-month sufficiency of funds requirement with a requirement that the issuer reasonably expect to have available funds to meet its short-term liquidity requirements.
The Proposed Amendments would also allow (i) certain successor issuers (including resulting issuers from RTOs) to use the LIFE Exemption, (ii) simplify the certificate requirement, (iii) permit the offering price to be omitted in certain marketed offerings and (iv) extend the time to close an offering from 45 days to 60 days.
The CSA is accepting comments on the Proposed Amendments until Oct. 21, 2026.

Background: How the LIFE exemption came to be

The LIFE Exemption was introduced in November 2022 to provide listed reporting issuers with a more efficient capital-raising option where they have securities listed on a recognized exchange and have filed all required timely and periodic disclosure documents.

In May 2025, the CSA adopted Coordinated Blanket Order 45-935 (the Blanket Order) to provide substantially harmonized relief from certain conditions of the exemption, including increased financing limits and a revised approach to the 50 per cent dilution limit.

The Blanket Order materially increased use of the LIFE Exemption. Before the Blanket Order, from Nov. 22, 2022, to May 15, 2025, 280 issuers raised $1.1 billion, with an average raise of $3.9 million. After the Blanket Order, from May 15, 2025, to May 15, 2026, 349 issuers raised $3.7 billion, with an average raise of $10.6 million and 40 issuers raising over $25 million.

Key proposed amendments

The Proposed Amendments would codify the following key features of the Blanket Order into NI 45-106:

Higher financing limits. Issuers could raise the greater of $25 million and 20 per cent of aggregate market value, to a maximum of $50 million, in any 12-month period.
Revised dilution calculation. The 50 per cent dilution limit would be calculated using the date of the news release announcing the offering, if the issuer has not closed a prior LIFE offering in the previous 12 months, or the date of the news release announcing the first LIFE offering in that 12-month period.
Treatment of warrants. Securities issuable on exercise of warrants would be excluded from the dilution calculation if the warrants are not convertible within 60 days after closing.
Change of control protections. A distribution under the LIFE Exemption could not result in a new control person or a person acquiring voting control sufficient to elect a majority of the issuer’s directors.

Other proposed changes

The CSA is also proposing several amendments intended to make the LIFE Exemption more flexible and easier to use:

Sufficiency of funds. The current requirement to have funds to meet business objectives and liquidity requirements for 12 months would be replaced with a short-term liquidity requirement. For issuers without revenue from ordinary activities, the CSA guidance indicates that this generally means having funds to reach the next significant milestone. For revenue-generating issuers, this generally means having funds to continue short-term operations, which the CSA generally considers to be 12 months.
Marketed offerings. Issuers would be permitted to omit the offering price from the offering document if prescribed conditions are met, including filing an amended offering document with the omitted information by the earlier of the purchaser’s agreement to purchase and the second business day after the offering price is determined. However, as currently proposed, the amendments contemplate that an issuer would be required to disclose the expected price range in the news release announcing the offering, which may greatly negate the usefulness and intended flexibility that this amendment is seeking to achieve for marketed offerings.
Successor issuers. Certain successor issuers, as defined in National Instrument 44-101 Short Form Prospectus Distributions, including resulting issuers from reverse take-over transactions (RTOs), would be permitted to rely on the LIFE Exemption where they acquired substantially all of their business from an entity that was a reporting issuer in Canada for the 12 months immediately before the acquisition.
Financial condition disclosure. Additional disclosure would be required if the issuer’s most recently filed financial statements include disclosure of material uncertainties about going concern, or if there has been a decline in the issuer’s financial condition since those statements that could result in such disclosure in the next financial statements.
Certificate requirement. The certificate requirement would be simplified by removing the option to insert a lookback date and increasing the lookback period to 18 months.
Time to close. The time to close an offering under the LIFE Exemption would be extended from 45 days to 60 days.

Next steps

The CSA has requested comments on the Proposed Amendments by Oct. 21, 2026. If adopted, the Proposed Amendments would embed the expanded financing framework of the Blanket Order while introducing additional flexibility for reporting issuers seeking to access the public markets.

We note that the CSA is seeking specific feedback on (i) the proposed changes to the sufficiency of funds and whether it should be removed altogether; (ii) whether convertible debentures that are convertible into listed equity securities should be permitted as a security eligible for distribution under the LIFE Exemption; and (iii) whether the dilution limit under the Proposed Amendments is appropriate.

Given that the average amount raised by issuers since the Blanket Order was adopted has only been $10.6 million, it would appear that further amendments to the market cap or dilution calculation limits may be necessary in order for issuers to be able to avail themselves of the much higher financing limits permitted under the exemption.

Overall, the Proposed Amendments represent a further step toward improving the efficiency of Canadian capital markets while ensuring its integrity is maintained but uncertainty remains around what shape the final amendments, if adopted, will take.

The authors would like to thank Carson Easy, summer student, for his contribution in writing this article.

Federal Financial Institutions Legislative and Regulatory Reporter – June 2026

Fri, 14 Aug 2026 00:00:00 Z

The Reporter provides a monthly summary of Canadian federal legislative and regulatory developments of relevance to federally regulated financial institutions. It does not address Canadian provincial financial services legislative and regulatory developments. In addition, purely technical and administrative changes (such as changes to reporting forms) are not covered.

June 2026

Published	Title and Brief Summary	Status (if applicable)
Office of the Superintendent of Financial Institutions (OSFI)
June 25, 2026	Streamlined Approvals Framework for Targeted New Entrants OSFI has launched a streamlined approvals framework for targeted new entrants. It is intended to give eligible new entrants, including entities with innovative or emerging banking models and credit unions, a quicker, clearer, and more predictable path to becoming federally regulated financial institutions. The new framework would move applicants through three phases, from an early readiness assessment to ministerial approval and commencement of operations. Each phase has a defined timeline. A public dashboard will show application status throughout the approval process. OSFI has provided eligibility criteria for targeted new entrants, overviews of the application process and application assessment process, and an application toolkit of required documents, guides and forms.
June 19, 2026	OSFI Lowers Domestic Stability Buffer to 3.0 per cent so Canada's Largest Banks Can Deploy More Capital OSFI has announced that it is lowering the Domestic Stability Buffer (DSB) to 3.0% from 3.5% of total risk-weighted assets. This is the first change in the DSB level since June 2023. In addition, OSFI is lowering the range of the DSB to 0 to 3% from 0 to 4%. OSFI expects all domestic systemically important banks (D-SIBs) to target a Common Equity Tier 1 ratio of at least 11.0% of total risk-weighted assets. In addition, OSFI is lowering the range of the DSB to 0% to 3% from 0% to 4%. OSFI provides additional background information on the decision in a Decision Summary Note.	DSB took effect June 19, 2026.
June 4, 2026	Modernizing How We Collect Data From Institutions OSFI’s Data Collection Modernization initiative, which runs from May 2023 to April 2028, is intended to modernize its regulatory data collection technology platform, and to advance prioritized data initiatives and enhance data quality. Its new platform, called Regulatory Data Hub (RDH), will go live late in the fall of 2026, and will be implemented in phases until spring 2028. As part of its industry engagement initiative, OSFI is launching a Basel Capital Adequacy Reporting (BCAR) Working Group in September 2026; it is soliciting participation from stakeholders in banks and loan and trust companies.	Stakeholders interested in participating in BCAR Working Group should register by August 14, 2026.
Bank of Canada
June 29, 2026	Reminder: PSP Reporting Obligations Under the RPAA The Bank of Canada has issued a communication to remind all payment service providers (PSPs) registered under the Retail Payment Activities Act (RPAA) of their ongoing reporting obligations. Responsibilities are listed under the following headings, with links to relevant policies and guidance: Incident reporting: PSPs must report any incident they become aware of that has a material impact on an end user, a payment service provider or a clearing house of a clearing and settlement system. Significant change or new activity reports: PSPs are required to notify the Bank of any significant change to their operations if the change could reasonably be expected to have a material impact on operational risks or the manner in which end-user funds are safeguarded, or before performing a new retail payment activity. Notification is required at least 5 business days before the change is made. Reporting changes to registration information: PSPs must inform the Bank whenever there is a change, or anticipated change, to certain information the PSP provided during the registration process. Acquisitions of control and prescribed changes: PSPs are required to submit a new application for registration, and become re-registered under that new application, before making certain changes to their organizational structure. Annual reports: PSPs must submit an annual report to the Bank by March 31 of the year following the calendar year being reported on (reporting year).
June 29, 2026	Reporting Changes to Registration Information Under the Retail Payment Activities Act (RPAA) and the Retail Payment Activities Regulations (RPAR), registered payment service providers (PSPs) must inform the Bank when there are changes or anticipated changes to certain information that the PSP provided during the registration process. The timing requirements for informing the Bank of these changes vary depending on the nature of the information. The Bank of Canada has issued an updated supervisory policy explaining how they expect registered PSPs to comply with requirements to provide updated registration information.
June 12, 2026	Bank of Canada to begin publishing Notices of Violation by Payment Service Providers The Bank of Canada has announced that it will soon start publishing Notices of Violation related to Payment Service Providers (PSPs) that are subject to the Retail Payment Activities Act (RPAA) and the associated Retail Payment Activities Regulations. After a PSP has received a Notice of Violation, and once the period for making representations has expired, the notice will be published on the Enforcement decisions section of the Bank’s website. The enforcement decision will provide some details on the nature of the violation, as well as the amount of any administrative monetary penalty. The violation will also be noted on the PSP’s entry on the Bank of Canada’s Registry of PSPs.
Financial Transactions and Reports Analysis Centre of Canada (FINTRAC)
June 23, 2026	FINTRAC Guidance Related to the Ministerial Directive on Financial Transactions Associated With the Islamic Republic of Iran This guidance explains the requirements of the Ministerial Directive on Financial Transactions Associated with the Islamic Republic of Iran. This Ministerial Directive includes requirements that: Enhance existing obligations of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations; and Extend the obligations of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations. In section 3.3, “Additional measures required,” the following requirement has been added: Assess the client information to determine whether you have property in your possession or control that is owned or controlled by or on behalf of a listed person or entity, for which you are required to make a disclosure to the Royal Canadian Mounted Police or the Canadian Security Intelligence Service, and report a Listed Person or Entity Property Report to FINTRAC. Information about Casino Disbursement Reports, which must be used after December 26, 2026, has been updated, and specific deadlines for reporting virtual currency transactions and casino disbursements have been added to the guidance.	Casino Disbursement Reports must be used after December 26, 2026.
June 22, 2026	Private-to-Private Information Sharing (Updated) This guidance explains the requirements for reporting entities that voluntarily choose to engage in private-to-private information sharing the exchange of personal information without an individual’s knowledge or consent between reporting entities that participate in an approved code of practice) under section 11.01 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. The guidance has been updated with the addition of a new section 7, entitled “What FINTRAC Expects from Participants in an Approved Code of Practice.”
Payments Canada
June 22, 2026	PRD-002 -Procedures for foreign currency transfers within Canada This procedure, part of the rules for Lynx, provides that members within Canada shall provide Swift transfer of U.S. funds and foreign currencies to other members within Canada in accordance with the procedures detailed in the following sections if the account of the beneficiary is domiciled in Canada. “Members” refers to both Canadian banks and non-bank financial institutions acting on their own behalf or on behalf of their foreign branches, affiliates and/or subsidiaries. A current list of members can be found in Appendix I. Members may request that all USD or foreign currency items be settled via Swift.
Bank for International Settlements (BIS)
June 2, 2026	Information and Communication Technology (ICT) Risk Management: Range of Practices Information and Communications Technology (ICT) is a key component of operational risk management, playing a vital role in supporting the broader goal of achieving operational resilience. Banks’ operational resilience to ICT incidents has become increasingly important in an evolving and digitalised technology landscape. The Basel Committee on Banking Supervision has analyzed ICT risk management practices across jurisdictions to address non-malicious ICT incidents. This report is part of an effort to strengthen banks' operational resilience to information and communication technology (ICT) incidents in an increasingly digitalised world; it complements the Committee’s 2018 report on cyber resilience. The Committee will continue to monitor developments related to the digitalisation of finance and financial technology from a prudential perspective.
Financial Action Task Force (FATF)
June 23, 2026	International Standards on Combating Money Laundering and the Financing of Terrorism and Proliferation: The FATF Recommendations The FATF Recommendations set out a comprehensive and consistent framework of measures which countries should implement in order to combat money laundering and terrorist financing, as well as the financing of proliferation of weapons of mass destruction. Countries have diverse legal, administrative and operational frameworks, and different financial systems, and so cannot all take identical measures to counter these threats. New amendments include changes to Recommendation 6, which requires countries to implement targeted financial sanctions to comply with United Nations Security Council resolutions (UNSCRs) relating to the prevention and suppression of terrorism and terrorist financing. The updated Standards will require countries to comply with the humanitarian exemption contained in UNSCRs 2664 and 2761, as well as 2615. The updated Standards are intended to ensure that sanctions measures do not block the flow of funds, assets, resources, goods, and services necessary for humanitarian assistance and basic human needs in line with the UN framework.	This version is as amended June 2026.
June 23, 2026	FATF Launches Public Consultation on Guidance to Increase Payment Transparency FATF is inviting the views of stakeholders on new guidance to support the implementation of strengthened FATF Standards on payment transparency when they come into effect. The revisions to FATF’s Recommendation 16, agreed upon in June 2025, are intended to keep pace with changes in the payment landscape, and strengthen the safety and security of the international payment system by increasing the transparency of information that accompanies cross-border payments and requiring the introduction of tools to protect against fraud and error. All countries around the world are expected to be ready to implement the changes by the end of 2030. The FATF is soliciting feedback from stakeholders, including financial institutions worldwide with different business models and capacity, payment system operators, civil society and the research community. It has provided as support a Public Consultation Explanatory Memorandum and a copy of Draft R16. Guidance for consultation.	Comments are due August 21, 2026.
June 2026	2022 Methodology for Assessing Technical Compliance with the FATF Recommendations and the Effectiveness of AML/CFT/CPF Systems The FATF assesses each member’s implementation of the FATF Recommendations and its actions to tackle money laundering, terrorist financing and the financing of proliferation of weapons of mass destruction on an ongoing basis. The Methodology for Assessing Technical Compliance with the FATF Recommendations and the Effectiveness of AML/CFT/CPF Systems (The FATF Methodology in short) sets out the process by which the FATF assesses each member’s implementation of the FATF Recommendations and its actions to tackle money laundering, terrorist financing and the financing of proliferation of weapons of mass destruction on an ongoing basis. The FATF Methodology focuses on two distinct areas: Effectiveness: each assessment will have a significant focus on effectiveness, to ensure that countries are implementing and making use of the laws, regulations and policies that are being passed. Technical compliance: each assessment also looks at whether a country has all the necessary laws, regulations and legal instruments in place, in line with the technical requirements of the 40 FATF Recommendations. The FATF commenced its 5th round of evaluations under this methodology in 2024, and FATF-Style Regional Bodies will also progressively use this methodology once they complete their previous round of evaluations.	This version is as amended June 2026.
Financial Stability Board (FSB)
June 10, 2026	Sound Practices for Responsible Adoption of Artificial Intelligence (AI): Consultation Report This consultation report highlights the benefits and risks associated with AI use in the financial system. To facilitate responsible AI adoption by financial institutions, it proposes 12 sound practices that financial institutions could apply in their organisation-wide AI governance and management of the relevant stages of AI development and deployment (AI lifecycle). It draws upon case studies drawn from real-world AI implementation practices by financial institutions. FSB is soliciting comments on the consultation report and a set of questions.	Comments were due July 22, 2026.
International Association of Insurance Supervisors (IAIS)
June 23, 2026	Technical note – Credit Rating Agencies and ICS Rating Category Mapping This technical note clarifies the Insurance Capital Standard (ICS) Rating Categories (RC) Mapping for the Credit Rating Agencies (CRAs) listed in Table 1, which originated during the monitoring period and was retained at ICS adoption for practical reasons. It also outlines the pathways under the ICS to recognize ratings from other CRAs.
June 17, 2026	FSI and IAIS Publish Joint Insights Note on the Cyber Insurance Market Financial Stability Institute (FSI) and IAIS have jointly published a note on the cyber insurance market, entitled FSI Insights on policy implementation No 75: Cyber insurance unpacked: the corporate digital safety net. Based on desktop reviews and interviews with supervisors, insurers, reinsurers, brokers and other market participants, this note takes stock of the evolving cyber insurance landscape. In particular, it examines cyber insurance product coverage, pricing and underwriting practices, and explores the insurance protection gap. The note also highlights key considerations for supporting the sound and sustainable development of cyber insurance.
Legislation
June 27, 2026	[Proposed] Regulations Amending the Financial Consumer Protection Framework Regulations The Budget Implementation Act, 2025, No. 1, introduced amendments to the Bank Act to combat consumer-targeted fraud. Once the relevant legislative amendments are in force, these amendments will require banks to have policies and procedures to address consumer-targeted fraud, allow consumers to adjust maximum transaction amounts, obtain express consent to enable certain prescribed account capabilities, allow consumers to disable certain account features, and require banks to collect and report prescribed fraud data to the Commissioner of the FCAC. These proposed regulations would provide more specificity to support these legislative amendments, such as prescribing additional policies and procedures banks would need to have, the account capabilities that banks must allow consumers to enable and disable, how banks must obtain express consent before enabling these capabilities, when banks must enable transaction limit increases requested by consumers, and the specific data points banks will need to collect and report to the FCAC with respect to consumer-targeted fraud. The intention is for the consumer-targeted fraud legislative amendments to come into force on the same day as the proposed Regulations.	Closes for comments July 27, 2026.
June 27, 2026	[Proposed] Consumer-Driven Banking Regulations The Consumer-Driven Banking Act (the Act), which received royal assent in March 2026, and the proposed Consumer-Driven Banking Regulations (the proposed Regulations), introduces a secure framework overseen by the Bank of Canada that enables Canadian individuals and businesses to share their financial data with accredited service providers of their choice. The proposed Regulations include requirements related to accreditation, security, national security, authentication and consent, reporting, record keeping, framework transparency, technical standards, assessments, and violations. The proposed Regulations also include the timelines and information requirements to support the national security review process related to the Minister of Finance’s national security authorities under the Act.	Closes for comments August 26, 2026.
June 18, 2026	Spring Economic Update 2026 Implementation Act, S.C. 2026, c. 22 (Bill C-30) Among its provisions to implement the 2026 Spring Economic Update, the following measures of Bill C-30 affect federally regulated financial institutions: Division 1 of Part 3 amends the Bank Act to provide that the Investment Canada Act does not apply in respect of certain transactions made by foreign banks or entities associated with a foreign bank if the transactions are subject to an approval under the Bank Act, the Trust and Loan Companies Act or the Insurance Companies Act. Division 2 of Part 3 amends the Bank of Canada Act to combine into a single act the Bank of Canada’s powers, duties and functions related to the recovery of costs incurred by it for or in connection with the administration of certain acts. It also makes related amendments to other acts. Division 3 of Part 3 amends the Canadian Payments Act to provide immunity for the Canadian Payment Association and certain individuals from any civil liability, other than in contract, for anything done or omitted to be done in good faith in the administration or discharge of any powers or duties conferred under that act.	House Third Reading June 18, 2026. Senate First Reading June 18, 2026. Senate Second Reading June 18, 2026. Senate Third Reading June 18, 2026. Royal Assent June 18, 2026. Division 1 of Part 3 comes into force on October 16, 2026 (the 120th day after the day on which Bill C-30 receives Royal Assent). Division 2 of Part 3 comes into force on proclamation but see coming into force provisions for section 20. Division 3 of Part 3 is in force on Royal Assent.
June 18, 2026	Canadian Payments Association By-law No. 10 — RTR, SOR/2026-133 This new Canadian Payments Association by-law is being implemented in connection with the planned introduction of the Real-Time Rail, a real-time payment exchange, clearing and settlement system (the RTR system or RTR). The RTR by-law reflects the RTR’s financial risk framework, key operational requirements, and policy requirements governing how the system operates. These policy requirements include, for example, the provision of payment amounts to payees and participant obligations in processing payments. The by-law also refers to the RTR rules, which will provide detailed technical and business process requirements for participants. The RTR by-law focuses on Payments Canada’s operation of the RTR system and the rights and responsibilities of system participants. It establishes the general eligibility criteria for RTR participation. Participation is voluntary and any Payments Canada member is eligible to become an RTR participant if it meets the requirements set out in the RTR by-law and rules. The RTR by-law establishes the classes of payment items acceptable for exchange, clearing, and settlement in the RTR. It also sets out the circumstances in which a payment will be cleared and settled in the RTR, key steps, and certain rights and obligations of participants related to the clearing and settlement process. The RTR by-law requires a receiving participant to make the amount of an RTR payment available to the payee (such as an individual customer) according to the time frames and procedures established in the rules, except under certain circumstances. It contemplates the possibility that the RTR, or a participant’s use of the RTR, may be disrupted. The by-law allows the President of Payments Canada to take a variety of actions to respond to disruptions or other emergencies. In conjunction with the RTR rules, the emergency provisions in the by-law will enable Payments Canada, working with the Bank of Canada and system participants, to safely and effectively respond to potential disruptions.	In force August 24, 2026.
June 18, 2026	Bill C-29, Financial Crimes Agency Act Bill C-29 establishes the Financial Crimes Agency (FCA) as a specialized federal law enforcement agency whose mandate is to investigate financial crimes and to contribute to the recovery of proceeds of crime. It also makes consequential amendments to certain acts and regulations. The FCA will be headed by a commissioner, employ its own staff and have powers to investigate serious and complex financial crimes. It will also participate in international efforts to combat these crimes and report on its operations. In addition, the bill provides a role and specific powers to the Attorney General of Canada regarding certain financial crime prosecutions that would normally fall under the authority of the provincial attorneys general. The bill also makes consequential amendments to a number of acts and regulations, in part to authorize the sharing and disclosure of information between the FCA and certain federal ministers and entities.	House Second Reading June 18, 2026. In force on Royal Assent, except for section 27, which comes into force on the first anniversary of the day on which Bill C-30 received Royal Assent. Section 29 comes into force on the day on which section 33 of the Public Complaints and Review Commission Act comes into force or, if it is later, on the day on which this Act receives Royal Assent.
June 17, 2026	Bill S-6, Federal Law–Civil Law Harmonization Act, No. 4 Bill S-6 is the fourth in a series of enactments drafted in the course of the harmonization of federal statutes by the Department of Justice of Canada resulting from the coming into force of the Civil Code of Québec in 1994. Among the acts amended by Bill S-6 are acts governing financial institutions: the Bank Act, the Cooperative Credit Associations Act, the Insurance Companies Act and the Trust and Loan Companies Act. The amendments are made in order to ensure that each language version takes into account the common law and the civil law.	Senate Third Reading June 17, 2026.
June 15, 2026	Bill C-36, An Act to enact the Protecting Privacy and Consumer Data Act, to amend the Personal Information Protection and Electronic Documents Act and to make amendments to other Acts Bill C-36 enacts the Protecting Privacy and Consumer Data Act to govern the protection of personal information of individuals while taking into account the need of organizations to collect, use or disclose personal information in the course of commercial activities. Consequently, it repeals Part 1 of the Personal Information Protection and Electronic Documents Act and changes the short title of that Act to the Electronic Documents Act. As a consequential amendment, it replaces references in the Bank Act, Insurance Companies Act, Cooperative Credit Associations Act and Trust and Loan Companies Act to Personal Information Protection and Electronic Documents Act with Electronic Documents Act.	House First Reading June 15, 2026. Act, except sections 1 and 51 and Part 3, to come into force on proclamation (but that day must not be before the day on which that Part 3 comes into force). See also s. 52(1) with respect to the coming into force of Bill C-34, Safe Social Media Act.
June 15, 2026	An Act respecting cyber security, amending the Telecommunications Act and making consequential amendments to other Acts, S.C. 2026, c. 9 (Bill C-8) Bill C-8 establishes a regulatory framework to protect systems and services essential to public safety or national security. Part 1 amends the Telecommunications Act to add the promotion of the security of the Canadian telecommunications system as an objective of the Canadian telecommunications policy and to authorize the governor in council and the minister of Industry to direct telecommunications service providers to do anything, or refrain from doing anything, that is necessary to secure the Canadian telecommunications system. Part 2 enacts the Critical Cyber Systems Protection Act (CCSPA) to provide a framework for the protection of the critical cyber systems of services and systems that are vital to national security or public safety and that are delivered or operated as part of a work, undertaking or business that is within the legislative authority of Parliament. The CCSPA imposes onerous cyber security obligations on “designated operators” of federally regulated critical cyber systems. These operators carry out vital services or systems (that is, infrastructure essential to preserving national security and public safety). These obligations include, among others: Developing, maintaining, and regularly reviewing cyber security programs (CSPs); Reporting material changes in ownership, control, or use of third-party products and services to the appropriate regulator, as to mitigate supply-chain and third-party risks; and preserving detailed records of cyber security programs and incidents. The CCSPA delegates broad, sector-specific powers to the appropriate regulators, including banking systems overseen by OSFI and the clearing and settlement systems overseen by the Bank of Canada. The CCPSA will allow the regulators to, inter alia, enter any place (subject to limitations) to examine records and data, order internal audits, and issue compliance orders. The CCPSA also introduces significant administrative monetary penalties for violations. While the proposed regime is designed to promote compliance, fines could amount to $15 million per violation, per day, for organizations, and $1 million per violation, per day, for individuals. Moreover, directors and officers of designated operators could be held personally liable if they were complicit in committing a violation.	Senate Third Reading June 4, 2026. Royal Assent June 15, 2026. Part 2 (Critical Cyber Systems Protection Act) in force on proclamation. Remainder of Act in force on Royal Assent.
June 3, 2026	Bill C-31, Budget 2025 Implementation Act, No. 2 Bill C-31 implements certain measures put forward in the November 4, 2025, Budget. Division 1 of Part 4 amends the Trust and Loan Companies Act, the Bank Act and the Insurance Companies Act to prohibit financial institutions from issuing documents in bearer form and provide for the replacement of documents that are currently in bearer form. Division 2 of Part 4 amends the Trust and Loan Companies Act, the Bank Act and the Insurance Companies Act to provide that no action lies against His Majesty in right of Canada and federal government officials for any acts or omissions made in good faith under those acts. Division 3 of Part 4 amends the Bank Act to require an institution to offer or sell deposit products in a non-discriminatory manner in certain circumstances. Division 6 of Part 4 amends Schedule II to the Access to Information Act to prohibit the disclosure of confidential information obtained under the Retail Payment Activities Act or prepared from information obtained under that act.	House Second Reading June 3, 2026. Division 1 of Part 4 in force on Royal Assent. Division 2 of Part 4 in force on Royal Assent. Division 3 of Part 4 in force on proclamation. Division 6 of Part 4 in force on Royal Assent.

Disclaimer
This Reporter is prepared as a service for our clients. It is not intended to be a complete statement of the law or an opinion on any subject. Although we endeavour to ensure its accuracy, no one should act upon it without a thorough examination of the law after the facts of a specific situation are considered.

Federal Financial Institutions Legislative and Regulatory Reporter – May 2026

Fri, 14 Aug 2026 00:00:00 Z

May 2026

Published	Title and Brief Summary	Status (if applicable)
Office of the Superintendent of Financial Institutions (OSFI)
May 21, 2026	Draft Guideline B-12 Interest Rate Risk Management Consultation OSFI has informed banks and trust and loan companies by letter of a consultation with respect to targeted adjustments to Guideline B‑12 – Interest Rate Risk Management. The adjustments would update the interest rate shock scenarios in the guideline to align with recent revisions from the Basel Committee on Banking Supervision (BCBS). BCBS published its revised Recalibration of shocks for interest rate risk in the banking book in July 2024. The guidance would also be updated with respect to how institutions should consider different types of balance sheet scenarios against earnings measures. In addition, details related to public disclosures would be replaced by a reference to OSFI’s Pillar 3 disclosure guidelines. The current version of Guideline B-12 was published in May 2019. The letter and draft Guideline are accompanied by a Backgrounder.	Comments are due July 20, 2026. OSFI plans to publish the final guideline on September 10, 2026. The guideline will come into effect on November 1, 2026 (for October 31 year ends) or January 1, 2027 (for December 31 year ends)
May 21, 2026	Draft Capital and Liquidity Treatment of Crypto-asset Exposures (Banking) Guideline (2027) OSFI has informed banks and trust and loan companies by letter of a consultation with respect to draft revisions to the Capital and Liquidity Treatment of Crypto-asset Exposures (Banking) Guideline. OSFI states that the revisions, building on the latest version of the guidance (in effect in Q1 2026), are meant to respond to developments in the crypto market, but also ensure that the capital and liquidity treatment of crypto‑asset exposures continues to reflect the underlying risks faced by institutions, and remains prudent in light of the dynamic nature of the crypto market. Targeted revisions would recognize cross‑exchange hedging for Group 2a crypto‑assets traded on regulated exchanges. OSFI states that the current draft revision does not address several key issues noted in its October 29, 2025, letter to industry, such as the risk weight applied to Group 2a crypto‑assets and Group 2a crypto-assets’ eligibility as collateral. The draft guideline is accompanied by a backgrounder.	Comments are due July 20, 2026. Final version of revised guideline will come into effect on November 1, 2026, or January 1, 2027 for institutions with a fiscal year ending October 31 or December 31, respectively.
May 21, 2026	Draft Liquidity Adequacy Requirements Guideline (2027) OSFI has informed banks and trust and loan companies by letter of a consultation with respect to draft revisions to the Liquidity Adequacy Requirements (LAR) Guideline. OSFI states that the revisions are aimed at ensuring that liquidity requirements continue to align with the underlying risk faced by institutions; at enhancing the clarity of its liquidity rules; and at improving the consistency of the application of those rules. It proposes: A new Level 1B high-quality liquid assets (HQLA) category to acknowledge the market liquidity of certain instruments that do not currently qualify as Level 1 HQLA; Adjustments to the transactions approved for interdependent asset and liability treatment under the Net Stable Funding Ratio; Updates to the guideline intended to improve structure and reliability, ensure alignment with other OSFI guidelines, and improve coherence.	Comments are due July 20, 2026. Final version of revised guideline will come into effect May 1, 2027.
May 21, 2026	Consultation on Pillar 3 Disclosure Guidelines for Interest Rate Risk in the Banking Book OSFI has informed Banks and Trust and Loan Companies by letter of a consultation with respect to draft amendments to Pillar 3 disclosure guidelines for domestic systemically important banks (D-SIBs) and small- and medium-sized banks (SMSBs) on interest rate risk in the banking book (IRRBB) disclosure expectations. The amendments incorporate the Basel Committee on Banking Supervision disclosure standard on interest rate risk in the banking book and align with draft amendments to Guideline B-12 – Interest Rate Risk Management. The amendments have no impact on capital or liquidity expectations for institutions in scope. For small- and medium-sized banks, disclosure expectations are applied in proportion to the nature, size, and complexity of the deposit-taking institution.	Comments are due July 20, 2026. Final version of revised guideline is expected to be published in September 2026, with disclosure expectations expected to come into effect for fiscal Q4 2027 reporting periods.
May 21, 2026	Draft Internal Liquidity Adequacy Assessment Process Guideline (2027) – Letter OSFI has informed banks and trust and loan companies by letter of a consultation with respect to a draft Internal Liquidity Adequacy Assessment Process (ILAAP) Guideline, with feedback intended to inform a final guideline that would take effect on May 1, 2027. The draft Guideline is intended to enhance alignment of liquidity requirements with underlying risks faced by institutions, improve clarity, and promote a more consistent application of liquidity rules. Feedback from a May 2025 discussion paper exploring Pillar 2 liquidity concepts about improving liquidity supervision and what should be taken into account when drafting an ILAAP guideline emphasized the need for a more proportionate approach for smaller, less complex deposit-taking institutions, with sufficient transition time built into the implementation to all for governance, data, and stress-testing enhancements. With respect to a more proportionate approach, OSFI states that while it expects the final guideline to apply to all deposit-taking institutions, it acknowledges that some of the Pillar 2 liquidity risks will not be applicable to all deposit-taking institutions; it has reflected this in the draft ILAAP Guideline. OSFI is proposing a proposing a three-year phased implementation schedule in the draft ILAAP Guideline, applicable to all deposit-taking institutions.	Comments are due August 19, 2026. OSFI proposes a phased implementation schedule, beginning in May 2027 and building to maturity by 2029 fiscal year-end.
May 21, 2026	Draft Guideline B-2 Large Exposure Limits (2028) OSFI has informed banks and trust and loan companies by letter of a consultation with respect to draft revisions to Guideline B-2 – Large Exposure Limits. The current version of Guideline B-2 applies to domestic systemically important banks (D‑SIBs); these draft amendments extend the scope of Guideline B-2 to Category 1 and Category 2 small‑ and medium‑sized banks (SMSBs). They would replace the 1994 large exposure guideline currently applicable to these institutions. In addition, under these revisions, Category 3 SMSBs and foreign bank branches will no longer be subject to the large-exposure guideline. Changes to Guideline B-2 will include the following: Expanding the scope of application of the guideline to Category 1 and Category 2 SMSBs at the consolidated entity level; Applying a general large exposure limit of 25% of Tier 1 capital for SMSBs, consistent with the approach for D‑SIBs; Aligning exposure measurement for SMSBs with the Capital Adequacy Requirements Guideline, including the recognition of eligible credit risk mitigation techniques; Updating the criteria for SMSBs to identify groups of connected counterparties to promote more consistent aggregation of exposures; Introducing quarterly large exposure reporting for SMSBs, using the same reporting template that currently apply to D‑SIBs; making minor SMSB‑specific adjustments to certain measurement approaches to support proportionality and limit regulatory burden.	Comments are due August 19, 2026. Final version of revised guideline will come into effect on November 1, 2027 or January 1, 2028 for institutions with a fiscal year ending October 31 or December 31, respectively.
Financial Transactions and Reports Analysis Centre of Canada (FINTRAC)
May 6, 2026	Administrative Monetary Penalties: Changes Following Legislative Amendments FINTRAC has issued a document explaining how FINTRAC will implement a new approach to administrative monetary penalties (AMPs), pursuant to amendments put in place by the Strengthening Canada’s Immigration System and Borders Act, S.C. 2026, c. 4 (Bill C-12). It describes how FINTRAC is updating its AMP policy and developing new guidance to reflect the changes resulting from the legislative amendments. The new guidance will explain how penalties are administered under the new legislative framework and will include guidance on compliance agreements and compliance orders as well as an updated approach to calculating penalties. According to FINTRAC, the new administrative monetary penalties framework will give it the authority to: Define prescribed violations and compliance order violations subject to penalties; Apply increased maximum penalty amounts (up to 40 times current limits); Consider ability to pay as part of the criteria for determining a penalty amount; Require mandatory compliance agreements for prescribed violations; Introduce compliance orders as an additional enforcement tool.	New legislative requirements will apply to violations that occur after March 26, 2026.
Payments Canada
May 27, 2026	CACPA Code STP Formatting Best Practices Payments Canada has released best practices and formatting guidelines for Canadian routing numbers, or CACPA codes, to facilitate straight-through processing (STP). This industry guideline is designed specifically for domestic and international payment originators who are sending wire transfers within or destined for Canada.
May 21, 2026	National Fraud Strategy: Payments Canada Feedback Department of Finance Canada issued a National Anti-Fraud Strategy Discussion Paper in April 2026, requesting feedback on three initial measures that might be taken to advance the strategy. Payments Canada has submitted its feedback, emphasizing the following: Multi-sector collaboration, uniting financial sector, telecommunications providers and digital platforms; Payment modernization; Consistent regulation, and proportionate and consistent application of anti-fraud requirements; Enhanced information sharing across sectors and with regulators; Coordinated oversight that includes a central coordinating function and sector-specific regulators; Consumer education; Law enforcement support.
Financial Stability Board (FSB)
May 6, 2026	Report on Vulnerabilities in Private Credit FSB has issued a report that highlights that private credit brings benefits but also vulnerabilities, including complex interlinkages with banks, borrower credit quality concerns, and valuation opacity. It reports that although the growth of private credit may bring benefits, it also brings potential vulnerabilities. Private credit at its current size and scope has not been tested during a severe economic downturn, which could expose leverage and borrower credit quality vulnerabilities. The report argues that authorities should work to close data gaps, harmonise definitions to enhance monitoring, and deepen analysis of financial interconnections and liquidity issues, while sharing supervisory insights.
Legislation
May 26, 2026, 2026	Bill C-30, An Act to implement certain provisions of the spring economic update tabled in Parliament on April 28, 2026 Among its provisions to implement the 2026 Spring Economic Update, the following measures of Bill C-30 affect federally regulated financial institutions: Division 1 of Part 3 amends the Bank Act to provide that the Investment Canada Act does not apply in respect of certain transactions made by foreign banks or entities associated with a foreign bank if the transactions are subject to an approval under the Bank Act, the Trust and Loan Companies Act or the Insurance Companies Act. Division 2 of Part 3 amends the Bank of Canada Act to combine into a single act the Bank of Canada’s powers, duties and functions related to the recovery of costs incurred by it for or in connection with the administration of certain acts. It also makes related amendments to other acts. Division 3 of Part 3 amends the Canadian Payments Act to provide immunity for the Canadian Payment Association and certain individuals from any civil liability, other than in contract, for anything done or omitted to be done in good faith in the administration or discharge of any powers or duties conferred under that act.	House of Commons Second Reading on May 26, 2026. Referred to Standing Committee on Finance. Division 1 of Part 3 comes into force on the 120th day after the day on which Bill C-30 receives Royal Assent. Division 2 of Part 3 comes into force on proclamation but see coming into force provisions for section 20. Division 3 of Part 3 is in force on Royal Assent.
May 20, 2026	By-law Amending the Canada Deposit Insurance Corporation Deposit Insurance Policy By-law, SOR/2026-81 Act to implement the Protocol on the Accession of the United Kingdom of Great Britain and Northern Ireland to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, S.C. 2026, c. 7, amended Schedule IV of the Bank Act to clarify how a country or territory acceding to an existing trade agreement is treated under Schedule IV of the Bank Act. Accordingly, the reference to Schedule IV of the Bank Act in the Policy By-law is amended by this By-law to ensure alignment with the amendments to Schedule IV to the Bank Act.	In force on the day Act to implement the Protocol on the Accession of the United Kingdom of Great Britain and Northern Ireland to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, S.C. 2026, c. 7, s. 11, comes into force.
May 6, 2026	Act to implement the Protocol on the Accession of the United Kingdom of Great Britain and Northern Ireland to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, S.C. 2026, c. 7 (Bill C-13) Bill C-13 implements the Protocol on the Accession of the United Kingdom of Great Britain and Northern Ireland to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, done July 16, 2023. It includes consequential amendments to the definition of “regulated foreign entity” in sections 2 of the Bank Act, Insurance Companies Act and Trust and Loan Companies Act, respectively.	Royal Assent May 6, 2026 Act comes into force on proclamation.
May 6, 2026	Bill C-31, Budget 2025 Implementation Act, No. 2 Bill C-31 implements certain measures put forward in the November 4, 2025, Budget. Division 1 of Part 4 amends the Trust and Loan Companies Act, the Bank Act and the Insurance Companies Act to prohibit financial institutions from issuing documents in bearer form and provide for the replacement of documents that are currently in bearer form. Division 2 of Part 4 amends the Trust and Loan Companies Act, the Bank Act and the Insurance Companies Act to provide that no action lies against His Majesty in right of Canada and federal government officials for any acts or omissions made in good faith under those acts. Division 3 of Part 4 amends the Bank Act to require an institution to offer or sell deposit products in a non-discriminatory manner in certain circumstances. Division 6 of Part 4 amends Schedule II to the Access to Information Act to prohibit the disclosure of confidential information obtained under the Retail Payment Activities Act or prepared from information obtained under that act.	House of Commons First Reading on May 6, 2026. Division 1 of Part 4 in force on Royal Assent. Division 2 of Part 4 in force on Royal Assent. Division 3 of Part 4 in force on proclamation. Division 6 of Part 4 in force on Royal Assent.

Disclaimer

This Reporter is prepared as a service for our clients. It is not intended to be a complete statement of the law or an opinion on any subject. Although we endeavour to ensure its accuracy, no one should act upon it without a thorough examination of the law after the facts of a specific situation are considered.

Updating membership criteria? What Ontario not-for-profits should know

Wed, 12 Aug 2026 00:00:00 Z

The Ontario Superior Court of Justice’s decision in Barrie & District Association of Realtors v Information Technology Systems Ontario, 2025 ONSC 3388, confirms that Ontario not-for-profit corporations may update their membership criteria, even where the changes could affect an existing member’s ability to remain a member.

The decision is useful for boards because it explains when courts will defer to internal governance decisions under the Ontario Not-for-Profit Corporations Act, 2010 (ONCA), and when they may intervene.

Key takeaways

Ontario not-for-profits may amend membership criteria to respond to legitimate governance or operational concerns.
Boards should ensure that amendments are adopted properly, clearly drafted, and aligned with the corporation’s best interests.
Courts will generally defer to board decisions unless there is a legal breach, procedural unfairness, or bad faith.

How the ONCA challenge arose

Barrie & District Association of Realtors was a member of Information Technology Systems Ontario, a not-for-profit corporation that pools MLS listing data for its member real estate associations.

After Barrie announced an integration with the Toronto Regional Real Estate Board, which Information Technology Systems Ontario viewed as a competitor, Information Technology Systems Ontario amended its by-laws. The amendment required members to maintain the same corporate structure and control as when they first joined.

Barrie challenged the amendment under ONCA section 191. It argued that the amendment was retroactive, unclear, inconsistent with the Act, and adopted in bad faith to target Barrie.

How the Ontario Superior Court ruled

The Court dismissed the application and upheld the by-law amendment. It confirmed that courts will usually avoid interfering in the internal affairs of not-for-profit corporations unless there is a breach of the corporation’s governing documents or the Act, a denial of natural justice, or bad faith.

The Court found that the amendment did not amount to a retroactive breach of contract. There was no agreement that the membership rules would remain unchanged forever.

The Court also rejected the argument that the amendment was too vague. The requirement to maintain the same “corporate structure and control” was sufficiently clear when read in context, and the Act did not require the by-laws to list every factor the board could consider when exercising discretion.

Finally, the Court held that the amendment was not made in bad faith. Information Technology Systems Ontario had a legitimate concern about a competitor gaining control over one of its member associations and followed the proper process to amend its by-laws.

Contact us

For any questions about this case or Ontario’s Not-for-Profit Corporations Act, 2010, please contact a member of our Charities & Not-for-Profit Group.

ONCA update: Court clarifies when a special resolution is required for certain by-law amendments

Tue, 11 Aug 2026 00:00:00 Z

A recent Ontario court decision, Chifor, et al v Windsor/Essex County Humane Society, 2026 ONSC 667, has clarified the interaction between sections 17 and 103 of the Ontario Not-for-Profit Corporations Act, 2010 (ONCA), confirming that certain by-law amendments require member confirmation by special resolution.

This decision provides welcome guidance on an area of the ONCA that has generated uncertainty since the legislation came into force. Organizations planning by-law amendments should review their approval process carefully to ensure compliance and avoid challenges to the validity of amended by-laws.

What happened?

The court considered amendments relating to matters listed in section 103(1)(g), (k) and (l) of the ONCA, and concluded that amendments dealing with those provisions must be confirmed by special resolution of the members.

Why does it matter?

This interpretation provides important guidance for organizations amending their by-laws. While ONCA generally permits directors to make, amend and repeal by-laws, that authority is subject to member confirmation. Organizations should carefully assess whether proposed by-law changes require member confirmation by ordinary resolution or special resolution before proceeding.

Practical takeaway

If your organization is amending its by-laws, then it should consider whether any proposed amendments engage the provisions identified in section 103(1)(g), (k), and (l) of the ONCA, as member confirmation by special resolution will be required.

The matters listed in section 103(1)(g), (k), and (l) relate to important members’ rights provisions, including the transfer of a membership, the manner of giving notice to voting members, and the method of voting by members not in attendance at a meeting of the members.

BLG can assist

For more information about ONCA compliance or governance reviews, please contact a member of BLG's Charities and Not-For-Profit Group.

Draft technical amendments expand the scope of taxable Canadian property

Mon, 10 Aug 2026 00:00:00 Z

On July 23, 2026, the Department of Finance released draft legislative proposals containing numerous technical amendments to the Income Tax Act (Canada) (the Act) accompanied by explanatory notes released on July 27, 2026. Among the proposals are amendments to the definition of "taxable Canadian property" (TCP) in subsection 248(1) of the Act.

Coming into force on Royal Assent, the proposed amendments will:

modify the rules governing when units of publicly traded partnerships constitute TCP;
broaden the look-through rule found in paragraph (d) of the definition of TCP;
reinstate the deeming rule for options and interests in property that previously applied in determining whether property is TCP.

1. Publicly traded partnership units

Under the proposed amendments, paragraph (d) of the definition of TCP no longer applies to partnership units listed on a designated stock exchange.

Instead, listed partnership units are brought within paragraph (e), alongside listed corporate shares and mutual fund interests, and are now subject to the 25 per cent ownership test and the more-than-50 per cent FMV test. Unlisted partnership interests continue to be tested only under the more-than-50 per cent FMV test in paragraph (d). This generally aligns the treatment of listed partnerships with that of listed corporate shares.

The revised language appears designed to better accommodate partnership structures when applying the ownership threshold. The proposal may therefore be particularly relevant for investment funds and other collective investment vehicles.

2. Broadening of look-through rule in paragraph (d)

The proposed amendments broaden the look-through rule found in paragraph (d) of the definition of TCP by permitting value to be traced through a wider range of intermediate entities, including through any corporation, trust or partnership (other than entities described in paragraph (e)).

Non-listed shares and interests that indirectly derive more than 50 per cent of their value from underlying TCP assets may now constitute TCP even where intermediate entities are not themselves TCP. As a result, shares that are not TCP under the current rules may become TCP because more underlying Canadian property is considered in applying the more-than-50 per cent FMV test.

3. Options, rights and interests: A significant broadening

The amendments also replace the existing deeming rules found in subparagraph (d)(iv) and paragraph (f) of the TCP definition with proposed subsection 248(1.2). New subsection 248(1.2) provides that, for the purposes of the definition TCP in subsection 248(1), a property described in any of paragraphs (a) to (e) of that definition is deemed to include an option in respect of, or an interest in, or for civil law a right in, the property, whether or not the property exists.

The explanatory notes indicate that the amendment is broader in its application than subparagraph (d)(iv) and paragraph (f) of the definition (which are consequently being repealed), as it ensures that options and interests themselves can qualify as TCP while also applying for the purposes of the TCP definition as a whole. The explanatory notes provide the following example:

a taxpayer who owns 24 per cent of the shares of a corporation and holds an option to acquire an additional 1 per cent of its shares meets the 25 per cent or more ownership test under subparagraph (e)(i) of the definition due to the application of this new deeming provision; consequently, both the taxpayer's shares and the option to acquire additional shares would be TCP, provided the condition in subparagraph (e)(ii) of the definition is also met.

As a result of the proposed amendments, options to acquire shares are once again factored into the 25 per cent test and can affect whether the shares are considered TCP.

Historical context

This new subsection reinstates the deeming rule that was repealed effective Oct. 1, 1996, when the definition of TCP was located in subsection 115(1) of the Act, with options or interests being dealt with in former subsection 115(3).

Subsection 115(3) provided that references to property described in subsection 115(1) included "any interest therein or option in respect thereof, whether or not such property is in existence.” As such, in Finance’s example above, the taxpayer would have also been deemed to have met the 25 per cent ownership test under the definition of TCP found in previous subsection 115(1).

When the TCP definition was relocated from subsection 115(1) to subsection 248(1) as part of the 2001 amendments, the former subsection 115(3) rule was not carried forward in its entirety. Although portions of the concept were subsequently reflected in subparagraph (d)(iv) and paragraph (f) of the TCP definition, the statutory language no longer expressly provided that options or interests are considered in determining whether the 25 per cent ownership threshold was met.

The Canada Revenue Agency acknowledged this issue shortly after the 2001 amendments. In technical interpretation 2002-0151795, the CRA noted that former subsection 115(3) was not reproduced when the TCP definition was moved to subsection 248(1), creating uncertainty regarding the treatment of options and interests in property for purposes of the TCP definition.

Viewed in this context, the addition of subsection 248(1.2) appears less like an expansion of the TCP regime and more like a restoration of a concept that existed under former subsection 115(3) before the 2001 reorganization of the Act.

Build Canada Homes’ first moves: 4,000 direct-build units and a controversial B.C. condo conversion push

Thu, 06 Aug 2026 00:00:00 Z

On Sept. 14, 2025, the Canadian government launched Build Canada Homes, a new federal agency designed to increase Canada’s housing supply by building affordable housing at scale. Build Canada Homes will work with provinces, territories, municipalities and Indigenous communities to build affordable community housing for low-income households, while also partnering with private developers to deliver affordable housing for middle-class Canadians.

The federal government introduced Bill C-20, the Build Canada Homes Act (the Act), on Feb. 5, 2026, to formalize and expand Build Canada Homes’ mandate. The Act provides the legislative framework to establish Build Canada Homes as a Crown corporation dedicated to building affordable housing at scale across Canada, with broader authority and operational flexibility.

The Act received Royal Assent on June 18, 2026, and the Government of Canada announced the milestone on June 19, 2026. Royal Assent established the framework for Build Canada Homes to transition to a Crown corporation. Further steps, including orders in council, governance implementation and leadership appointments, are required before it becomes fully operational as a Crown corporation later in 2026.

What you need to know

Build Canada Homes has moved from a policy announcement to the implementation phase, with a mandate to increase Canada’s housing supply by delivering affordable housing at scale.
Bill C-20, the Build Canada Homes Act, gives Build Canada Homes the legislative framework, authority and operational flexibility needed to transition into a Crown corporation.
Build Canada Homes’ first direct-build projects will oversee approximately 4,000 homes on federally owned sites, marking the first test of the federal government’s land-led housing strategy.
The Canada-British Columbia condo conversion project could convert more than 2,200 vacant condo units into affordable homes, but its structure, pricing and affordability conditions are still under consideration.
The Canada-British Columbia condo conversion project may include a first-of-its-kind rent-to-buy arrangement in Canada, giving Canadians who are unable to save a large enough lump sum for a down payment a new pathway to homeownership.

Federal land is the foundation of the strategy

The Canadian government provided Build Canada Homes with an initial $13 billion investment to help finance and launch affordable housing construction projects across Canada. The affordable housing projects under Build Canada Homes will utilize federal public lands as a central tool to reduce land costs, streamline construction and support affordability.

By bringing Canada Lands Company into the Build Canada Homes portfolio, Build Canada Homes has gained access to the federal government’s land portfolio, including 88 federal properties identified as suitable for housing. Build Canada Homes can lease or discount surplus and underused public lands to partners, reducing development and construction costs and supporting affordability targets.

Canada’s Housing Minister Gregor Robertson has described Build Canada Homes’ use of federal lands as a generational decision that will play a key role in ensuring everyone in Canada has a place to live.

While the majority of underused federal lands identified by the Canada Public Land Bank are in Ontario, there are public lands under consideration for project implementation across the country. As of time of publication, the Canada Public Land Bank has identified three British Columbia properties, located in Port Moody, Vernon and Vancouver, in the open-for-feedback phase.By contrast, Ontario has 46 properties under consideration, all of which are either open for feedback, accepting submissions or reviewing submissions.

Despite most of the initial opportunities being in Ontario, the government has instructed federal ministers to identify lands owned by their departments that may be suitable for housing construction beyond the 88 federal properties listed on the Canada Public Land Bank. As federal ministers continue to identify underused public lands, more opportunities to build affordable housing may arise in British Columbia.

From policy to projects: Build Canada Homes starts building

Build Canada Homes has begun implementing its strategy to optimize federal lands through six initial direct-build projects expected to deliver approximately 4,000 homes on federally owned sites.

As the planning process for the initial six build projects continues, Build Canada Homes is now selecting partners for the projects, with a focus on partnerships that prioritize Canadian resources, support Canadian industries and create high-paying careers across Canada.

The first six projects include:

Arbo (Toronto): 540 new homes on a portion of the site at Arbo Downsview in Toronto.
Naawi-Oodena (Winnipeg): A partnership between Treaty One First Nations and Canada Lands Company to deliver 320 new homes.
Village at Griesbach (Edmonton): 355 new homes on the northeast corner of the Village of Griesbach.
Pointe-de-Longueuil (Québec): 1,055 new homes located on the St. Lawrence River waterfront in the City of Longueuil.
Heron Road (Ottawa): Approximately 1,100 new homes on the 18-acre federal site 20 minutes outside downtown Ottawa.
Shannon Park (Dartmouth): Approximately 630 new homes on a dedicated parcel.

While the six initial build sites represent a meaningful first step to increase the supply of affordable housing in Canada, B.C. Housing Minister Christine Boyle has encouraged the Canadian government to implement similar direct-build projects in British Columbia. By using available federal properties in the Canada Public Land Bank, and continuing to identify new surplus federal properties, the hope is to see new affordable housing built directly in British Columbia.

In addition to the direct-build projects, Build Canada Homes has secured large-scale partnerships across the nation, including with the City of Ottawa, the provinces of British Columbia, Québec and Nova Scotia, and, through a tripartite agreement, with Nunavut and Nunavut Tunngavik Inc.These partnerships aim to generate capital investment, adopt modern construction practices, accelerate approvals and permitting, and reduce delivery costs.

For example, Build Canada Homes and the City of Ottawa are working together to support 3,000 new mixed-income and affordable homes, with construction supported by up to $400 million in federal and municipal contributions. The City of Ottawa has also committed to waiving fees, expediting approval and permitting processes, and providing property tax exemptions to help reduce costs and maintain affordability for residents.

In British Columbia, Build Canada Homes is exploring partnership opportunities through the Canada-British Columbia Partnership on Condo Conversion project (British Columbia condo conversion project). While the British Columbia condo conversion project is an opportunity to increase the supply of affordable housing in Canada, the initiative has attracted more public scrutiny than some of the other announced partnerships.

B.C.’s condo conversion project: Housing tool or developer bailout?

Under the British Columbia condo conversion project, launched on June 18, 2026, the federal and British Columbia governments aim to use financing tools to convert more than 2,200 vacant condo units into affordable homes through Build Canada Homes and BC Housing.

The proposal has drawn criticism from some commentators as a potential developer bailout that will artificially prop up housing prices rather than allow market forces to drive prices down to what Canadians can afford. However, some commentators are optimistic about the initiative, suggesting it could be a practical way to convert existing unsold inventory into affordable housing if the acquisition terms are appropriately structured.

While the details of the acquisition structure are still under consideration, the federal government has stated the condos will be purchased at below-market rates, ideally below the cost of construction. The federal government has also noted that the condos will not be purchased in the City of Vancouver, but rather that the acquisition will focus on regions where the economics work, such as the Fraser Valley, Okanagan and Vancouver Island.

As part of the condo conversion proposal, Prime Minister Mark Carney recently announced that the plan will include a rent-to-buy program aimed at supporting Canadians who are unable to save a large enough lump sum for a down payment. This suggests that at least some converted condo units will be used not only as rental housing, but also as a pathway to eventual homeownership.

Rent-to-buy arrangements typically require monthly payments to the property owner, with a portion of each payment, often called a rent credit, applied toward a future down payment. The occupant may then have an option to purchase the home on an agreed future date without providing the full down payment upfront.

To date, the federal and British Columbia governments have provided limited information about the specific structure of the British Columbia condo conversion project. As more details become available, developers, lenders and British Columbians will have a clearer picture of the project’s implications for affordable housing in Canada.

What to watch next

Taken together, the six initial direct-build projects and announced partnerships appear to be only the beginning. Build Canada Homes is actively accepting and reviewing affordable development project applications on an ongoing basis through the Build Canada Homes portal, creating new opportunities for lenders, municipalities and developers to participate.

The Commercial Real Estate Group at BLG will continue to monitor federal government updates and advise clients on how to leverage and participate in Build Canada Homes programs. If you have any questions, please reach out to BLG’s Commercial Real Estate lawyers.

Ontario Court of Appeal rules on ESA termination clauses: The Baker and Li decisions

Thu, 06 Aug 2026 00:00:00 Z

Two recent Ontario employment law decisions, Baker v. Van Dolder’s Home Team Inc., 2025 ONSC 952, and Li v. Wayfair Canada ULC, 2025 ONSC 2959, have renewed scrutiny of termination provisions that limit employees to minimum statutory entitlements under the Employment Standards Act, 2000 (the ESA). Although both cases address “ESA only” drafting, the lower courts had reached opposing conclusions. Both appeals were argued on March 25, 2026, and the Court of Appeal decisions provide clear guidance for employers.

Why these appeals matter

Employers have increasingly attempted to craft “ESA only” termination provisions to limit exposure to common law notice. However, inconsistent trial decisions have made it difficult to predict when such clauses will be enforced. Taken together, the Baker and Li Court of Appeal decisions provide much needed certainty in Ontario employment law regarding termination clause drafting.

Baker v. Van Dolder’s Home Team Inc.

Background and lower court decision

In Baker, the Ontario Superior Court considered a wrongful dismissal claim arising from a termination without cause. The employer relied on contractual termination provisions that limited the employee’s entitlements to ESA minimums.

Termination clauses in issue (excerpts)

“Termination without cause: we may terminate your employment at any time, without just cause, upon providing you with only the minimum notice, or payment in lieu of notice and, if applicable, severance pay, required by the Employment Standards Act. If any additional payments or entitlements, including but not limited to making contributions to maintain your benefits plan, are prescribed by the minimum standards of the Employment Standards Act at the time of your termination, we will pay same. The provisions of this paragraph will apply in circumstances which would constitute constructive dismissal.”

“Termination with cause: we may terminate your employment at any time for just cause, without prior notice or compensation of any kind, except any minimum compensation or entitlements prescribed by the Employment Standards Act. Just cause includes the following conduct: (a) Poor performance, after having been notified in writing of the required standard; (b) Dishonesty relevant to your employment (such as misleading statements, falsifying documents and misrepresenting your qualifications for the position you were hired for); (c) Theft, misappropriation or improper use of the company’s property; (d) Violent or harassing conduct towards other employees or customers; (e) Intentional or grossly negligent disclosure of privileged or confidential information about the company; (f) Any conduct which would constitute just cause under the common law or statute.”

The lower court had held that both the “without cause” and “with cause” provisions were unenforceable because the repeated use of “at any time”, together with the agreement’s definition of “just cause,” suggested an absolute right to terminate that is inconsistent with the ESA’s restrictions (including prohibitions on termination in certain circumstances, such as during statutory leaves or in reprisal). Relying on Dufault v. Township of Ignace and Waksdale v. Swegon North America Inc., the court concluded that:

A termination clause that misstates the ESA cannot be saved by general ESA compliance language.
The phrase “at any time” incorrectly conveys that an employer’s right to terminate is absolute.
Because one part of the termination regime was unenforceable, the entire termination provision failed, entitling the employee to common law reasonable notice.

Issues on appeal

The appeal in Baker raises issues of broader significance for Ontario employers and employees. As recognized by the Court of Appeal in granting leave to intervene in Baker v. Van Dolder’s Home Team Inc., 2025 ONCA 578 and 2025 ONCA 829, the appeal engages:

Whether contractual language allowing termination “at any time” necessarily violates the ESA;
How strictly courts should scrutinize termination provisions that purport to limit employees to statutory minimums;
The continued scope and application of Waksdale in ESA based termination clause analysis; and
The proper balance between the ESA’s remedial purpose and commercial certainty in employment contracting.

Appeal decision

The Ontario Court of Appeal allowed the employer’s appeal, overturning the lower court decision. The Court found that both the without cause and with cause provisions were ESA compliant. The without cause clause clearly stated that the employee would receive all of their minimum ESA entitlements, and was therefore enforceable. Similarly, the with cause provision remained enforceable because it preserved “any minimum compensation or entitlements prescribed by the ESA”, even though the contractual cause definition was broader than the ESA’s wilful misconduct standard.

Li v. Wayfair Canada ULC

Background and lower court decision

The lower court in Li had reached a different conclusion on similar issues. Mr. Li, a senior employee with less than one year of service, was terminated and paid the ESA minimum of one week’s notice. He challenged the enforceability of his employment agreement’s termination provisions, arguing that they improperly restricted him to statutory entitlements.

Termination clauses in issue (excerpts)

“Termination for Cause: The Company may terminate your employment at any time for Cause without notice, pay in lieu of notice, severance, benefits continuance or other compensation or damages of any kind, unless expressly required by the ESA in which case only the minimum statutory entitlements will be provided.”

“Definition of ‘Cause’: For all purposes in this letter, ‘Cause’ means any wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the company and that constitutes ‘cause’ under the ESA.”

“Termination Without Cause: After your probationary period concludes, in the absence of Cause, the Company may terminate your employment at any time and for any reason by providing you with only the minimum statutory amount of written notice required by the ESA or by paying you the minimal amount of statutory termination pay in lieu of notice required by the ESA, or a combination of both, as well as paying statutory severance pay required by the ESA, providing benefits continuance for the requisite minimum statutory period under the ESA and all other outstanding entitlements, if any, owing under the ESA.”

In contrast to the lower court in Baker, the lower court in Li upheld the termination clauses, emphasizing that the agreement repeatedly anchored entitlements to ESA minimums and defined “Cause” by reference to the ESA “wilful misconduct” standard. Reading the agreement as a whole, the lower court emphasized that:

The contract repeatedly and expressly tied both “for cause” and “without cause” terminations to ESA standards;
The definition of “Cause” was expressly aligned with the ESA “wilful misconduct” standard;
Unlike in Dufault and Baker, the agreement did not misstate the ESA or omit required categories of entitlements; and
Courts should not invalidate otherwise compliant agreements merely because they restrict employees to statutory minimums, provided the drafting is clear and accurate.

As a result, the plaintiff was limited to ESA entitlements and denied common law reasonable notice.

Issues on appeal

The appeal in Li raised similar issues in Baker, including:

Whether courts may uphold termination clauses that clearly and consistently defer to ESA minimums when read as a whole;
The extent to which “at any time” and “for any reason” language is fatal when coupled with detailed ESA compliance wording elsewhere in the contract; and
How appellate courts should reconcile seemingly divergent trial level authority on termination clause enforceability.

Appeal decision

The Ontario Court of Appeal dismissed the employee’s appeal. The Court upheld the without cause provision because it repeatedly confirmed that the employee would receive no less than the minimum entitlements required by the ESA. The Court of Appeal held that on a plain reading, it was clear that the employer and employee agreed that the employee would receive their ESA entitlements on termination of employment, and therefore there was no reason to hold the clause unenforceable. The phrases “at any time” and “for any reason” were not contrary to law, as they simply restated an employer’s right to terminate the employment relationship, and did not suggest that the employer could do so unlawfully.

The Court declined to revisit Waksdale, because it found the termination provisions in both contracts were enforceable.

Practical takeaways for employers (post appeal)

The decisions clarify that courts should not invalidate termination clauses by straining to find hypothetical ESA inconsistencies. The focus is on whether the clause, read contextually, objectively preserves ESA minimum standards.

The Ontario Court of Appeal decision in Baker and Li clarifies when “ESA-only” termination language will be enforced. Employers reviewing or drafting termination provisions should consider:

Ensuring that the contract complies with ESA minimums in all termination scenarios (both without cause and for cause).
Using clear language showing an objective intention to comply with the ESA.
Not relying on “at any time” or “for any reason” as permission to terminate unlawfully.
Ensuring with cause clauses preserve ESA entitlements unless the ESA wilful misconduct standard is met.

Bottom line: employers may use termination clauses to limit employees to ESA minimums, but only if the agreement, read as a whole, clearly preserves ESA entitlements in all circumstances, and does not purport to authorize terminations or forfeitures prohibited by employment standards, health and safety, human rights, or other protective statutes.

Armed with this new guidance from the Court of Appeal, now is the time to review the termination provisions in your employment contracts.

CCAA vesting orders and Crown royalty arrears: Alberta Court of Appeal confirms finality

Tue, 04 Aug 2026 00:00:00 Z

In Alberta (Energy and Minerals) v Spartan Delta Corp,¹ the Court of Appeal held that Alberta Energy’s claims for both pre-filing and post-filing royalty arrears under leases sold subject to a CCAA vesting order were barred by operation of the joint, but not several, liability created under the Mines and Minerals Act, RSA 2000, c M-17 (MMA) and the wording of the vesting order.

Spartan has important implications and provides much-needed clarity respecting the liability exposure of co-lessees to oil and gas leases.

How the Bellatrix CCAA sale led to Crown royalty arrears claims

This appeal is rooted in the CCAA proceedings surrounding Bellatrix Exploration Ltd. (Bellatrix). Bellatrix was an oil and gas company that held interests as a co-lessee in various Crown petroleum and natural gas leases (the Leases). Canadian Natural Resources Limited (CNRL) was the other co-lessee in the Leases.

During the CCAA proceedings, Bellatrix sold its interests in the Leases to Spartan Delta Corp. (Spartan). The sale to Spartan was approved under an Approval and Vesting Order (the Vesting Order) granted by the Court and the Leases were transferred free and clear of all claims save for limited permitted encumbrances. Bellatrix remained liable for any royalty arrears that arose in the period between the commencement of the CCAA proceedings and the closing date of the sale of the Leases to Spartan in June 2020. An $8.5 million holdback was retained by the CCAA monitor to cover any post-filing claims. The CCAA proceedings were terminated in summer 2022.

Under the MMA, there is a 5½-year period in which royalty amounts are subject to recalculation by Alberta Energy. In November 2024, more than four years after the closing of the sale of the Leases, Alberta Energy issued notices to Spartan and several co-lessees, including CNRL, demanding payment of both pre-filing and post-filing royalty arrears. Spartan, CNRL and the monitor sought relief under the Vesting Order precluding the claims.

What the Alberta Court of Appeal decided on CCAA vesting orders

A. Why pre-filing royalty arrears were barred

The Court of Appeal held that Alberta Energy was not entitled to the pre-filing arrears.

The Court of Appeal held that liability under an MMA lease is joint, not joint and several. Unlike joint and several liability, where each party individually assumes an identical obligation, if joint liability is extinguished for one party it is extinguished for all.

Having determined that the extinguishment of Bellatrix’s liability for pre-filing arrears would extinguish the liability of any co-lessee, the court turned to the wording of the Vesting Order. On the plain language of the Vesting Order, the court found that royalty arrears were intended to be among the claims expunged when Bellatrix’s interests in the Leases were transferred free and clear to Spartan.

In the result, the court held that the Vesting Order barred the claims for pre-filing royalty arrears.

B. Why post-filing royalty arrears were barred

For the post-filing arrears, the Court of Appeal emphasized that Alberta Energy had notice of the holdback but did not claim from it during the CCAA process. Rather, as the CCAA proceedings had concluded, Alberta Energy had informed the monitor that Bellatrix’s royalty deposit was sufficient and that the estate could be closed.

The Court of Appeal found that the CCAA process provided a mechanism for the recovery of post-filing royalty arrears, and Alberta Energy did not use that mechanism or attempt to create a mechanism for possible future royalty adjustments.

In this context, the court held that Alberta Energy’s post-CCAA collection efforts undermined the integrity and finality of the CCAA process and offended fundamental principles of fairness. The court emphasized the “single proceeding” model for insolvency proceedings in its reasons.

Key takeaways for oil and gas co-lessees in CCAA proceedings

The Court of Appeal’s decision demonstrates the intended finality and certainty of CCAA approval and vesting orders and reinforces the importance for any affected stakeholder to participate in settling the terms of the order. The decision also provides a practical demonstration of the effect of the court’s related holding that the MMA creates only joint liability for co-lessees to Crown mineral leases. Provided that the vesting order is appropriately drafted, solvent co-lessees are provided with certainty that historical arrears are extinguished.

Click carefully: Canadian Securities Administrators Staff Notice on cybersecurity practices

Fri, 31 Jul 2026 00:00:00 Z

The Canadian Securities Administrators (CSA) published Staff Notice 33-322 – Review of Registered Firms’ Cybersecurity Practices and Additional Guidance (the Staff Notice) on July 15, 2026, following a focused review of 73 registered firms’ cybersecurity practices. The message is not especially surprising: cybersecurity is a core business risk, and registered firms are expected to have practical, documented and regularly refreshed controls that fit their size, complexity and operations.

Practical takeaways

Right-size your cyber security program. Smaller and mid-sized firms may not need bank-sized machinery, but they do need to cover the key risks and be able to show their work.
Make cybersecurity part of the compliance calendar: policy review, training, risk assessment, vendor review, incident response testing and backup testing should all be on the list.
Keep evidence. The CSA repeatedly focuses on documentation, including reviews, training records, risk assessments, vendor due diligence, testing and follow-up.
Treat third-party incidents as your problem too. If a provider holds either firm or client data, its breach may quickly become your own regulatory, contractual and client-communications issue.
Do not wait for a breach to find out who is supposed to do what. Test the incident response plan while everyone is calm and the phones are not ringing.

As set out in the Staff Notice, cybersecurity incidents are both a business risk to firms and a risk to the confidential client data held by firms. In other words, “we thought IT had it covered” is unlikely to be an acceptable response.

Five expected cybersecurity practices

1. Policies that match reality. Firms should have written cybersecurity policies and procedures that cover the obvious trouble spots: electronic communications, firm and personal devices, remote access, data security and encryption, software updates, vendor oversight, employee training, accountability and incident reporting. As with many other policies, the CSA expects those pertaining to cybersecurity to be reviewed at least annually and to align with the firm’s actual procedures. In our experience, policies, controls, governance and reporting must be assessed against real-world expectations, and work with the firm’s crisis communication, business continuity, disaster recovery and escalation procedures. In addition, incident playbooks need to have practical decision trees, notification triggers, evidence preservation and documentation protocols. About those passwords…

2. Training that sticks. Tailored cybersecurity training should happen at the time of onboarding a new employee, and at least annually after that, with more frequent refreshers where the firm’s risk profile calls for it. Training should cover phishing and social engineering, confidential information, passwords, device security, and when and how to escalate. Firms should keep records of who attended and when, and what was covered. Documented phishing simulations are all but expected, with repeat clickers subject to targeted follow-up.

3. Risk assessments with actual controls. Firms should conduct and document cybersecurity risk assessments at least annually. The assessment should identify critical assets and confidential data, vulnerabilities (both internal and external), likely threats, potential consequences and whether the firm’s controls are sufficient. CSA staff expect that these risk assessments are not only documented, but that they evidence that a firm has considered all of the specified areas. Firms should not forget about risks and controls related to access rights: role-based access controls, the principle of least privilege, timely removal of access and periodic reviews are squarely on the CSA’s radar. Firms that use third-parties to conduct these risk assessments are expected to address any missing elements set out in the assessment and how any concerns will be addressed. Baseline controls to consider for areas of risk include multi-factor authorization, VPNs, encryption, scheduled systems backups, email filtering, software patching and updating, suspicious cyber activity logs and secure data disposal. Staff note that cybersecurity audits and penetration testing, while not mandatory, are effective practices.

4. Vendor oversight that is more than “they’re big, so are probably fine.” Every firm that was part of the review used third-party service providers with access to systems or data. The CSA expects meaningful due diligence before onboarding all third-party service providers, and periodically afterward, with documentation supporting those efforts. Firms should understand how providers protect data, where data is stored, how access is controlled, how incidents are reported, and how responsibilities are divided in cloud environments. We often advise firms to strengthen contractual requirements and update items such as cybersecurity controls, breach notification, audit rights, sub-contracting and data handling. System and Organization Controls (SOC) 2 or similar reports are useful, where available, but they still need to be reviewed.

5. An incident plan that has been tested before the incident. Firms should have a written incident response plan with a clear definition of a cybersecurity incident, a description of the different types of cyber attacks a firm might face, procedures for attacks on third-party service providers holding firm data, and specifics on roles and responsibilities for notifications, escalations and so on. Firms are expected to regularly test this plan, whether through tabletop exercises or simulations. Well thought-out tabletop exercises entail designing a realistic ransomware or cyber incident scenario that unfolds across technical, executive and board-level decision points. Backup recovery testing should also be documented. While cyber insurance is not required, the CSA notes it can be helpful, both financially and by providing operational assistance when faced with a security breach.

How we can help

AI in Canadian health care: From pilots to real-world implementation

Thu, 30 Jul 2026 00:00:00 Z

Artificial intelligence has entered a new phase in Canadian health care. BLG recently hosted health care leaders, hospital representatives, technology companies, and industry stakeholders at its Artificial Intelligence in Canadian Health Care Symposium in Toronto.

Discussions throughout the symposium revealed a clear shift in how health care organizations are thinking about AI. A year ago, many conversations focused on experimentation and use cases. As of 2026, attention is increasingly turning to implementation, governance, procurement, accountability and scale. A common theme emerged throughout the day: AI has entered a new phase in the sector.

Artificial intelligence is moving from experimentation to implementation

The conversation is no longer whether AI can be used. AI is already being tested, evaluated, and deployed across clinical, operational, and administrative settings. The more pressing question is how health care organizations can deploy, govern, and scale these tools in a way that is safe, trusted, operationally sustainable, and legally defensible.

For hospitals, health authorities, health care companies, insurers, and health technology vendors, the next 12 to 24 months are likely to be defined less by technological capability and more by governance, accountability, procurement, privacy, and implementation discipline.

AI adoption is accelerating, but scale is lagging

Health care organizations across Canada are increasingly exploring AI tools for documentation, workflow efficiency, patient flow, triage, diagnostic support, imaging review, and operational decision-making. AI is no longer confined to research environments or isolated pilots.

However, the widespread deployment of AI across health care systems remains relatively limited.

Many organizations have successfully identified promising use cases and conducted pilot projects. Far fewer have successfully integrated AI into day-to-day operations in a manner that is scalable, repeatable, and trusted by clinicians, patients, and organizational leadership.

This implementation gap is becoming one of the most significant challenges facing health care organizations. The barriers are rarely technical alone. More often, organizations struggle with governance structures, procurement models, privacy obligations, accountability frameworks, implementation planning, and organizational readiness.

The result is that health care organizations increasingly find themselves asking not whether AI works, but whether they can confidently operationalize it within the realities of the Canadian health care system.

Why this matters now

The timing of this conversation is important.

Across Canada, health care organizations continue to face significant workforce pressures, administrative burden, clinician burnout and access-to-care challenges. As a result, many organizations are evaluating AI not as a technology initiative, but as a potential operational tool to help address real constraints within the health care system. This urgency is one reason why discussions around implementation, governance and accountability have become so important.

Against that backdrop, AI is increasingly being viewed as a potential tool to reduce documentation burdens, support clinical workflows, improve operational efficiency, and assist decision-making.

Yet health care is not simply another industry adopting a new technology.

AI deployment in health care may affect patient care, clinical judgment, privacy rights, institutional accountability, and public trust. Decisions about implementation therefore carry different implications than they might in other sectors.

This is one reason why governance has become such a central theme in discussions about health care AI.

Governance is becoming a precondition to scale

A recurring theme throughout the symposium was that governance is no longer an optional consideration addressed after deployment.

Increasingly, governance is becoming the bridge between successful pilots and sustainable implementation.

Health care organizations are being required to answer a series of fundamental questions:

Who approves the deployment of an AI system?
What evidence is required before implementation?
Who is accountable when issues arise?
How should systems be monitored over time?
When should a system be paused, retrained, modified, or discontinued?
How should incidents, near misses, and unexpected outcomes be documented and managed?

Governance is therefore becoming less about policy development and more about establishing operational structures that support the responsible use of AI across an organization's lifecycle.

Organizations that fail to address these questions may find it difficult to move beyond isolated use cases, regardless of the underlying technology's capabilities.

Privacy and data governance remain foundational

No discussion of health care AI can occur without addressing privacy and data governance, something ever more timely now as Canada recently introduced Bill C-36, An Act to enact the Protecting Privacy and Consumer Data Act (PPCDA), which would replace the Personal Information Protection and Electronic Documents Act (PIPEDA) as our federal private-sector privacy regime; BLG published in-depth guidance on the proposed changes.

AI implementation frequently engages questions involving personal health information, de-identification, consent, vendor access, cybersecurity, secondary use of data, and re-identification risk.

As health care organizations pursue more sophisticated AI initiatives, they are increasingly being asked to balance innovation objectives against statutory obligations and public expectations.

Importantly, governance considerations extend beyond compliance. Public trust remains a critical factor in successful AI adoption. Health care organizations must be able to explain how data is being used, what safeguards are in place, and how accountability is maintained throughout deployment.

Trust is not simply a communications issue, it is increasingly becoming an operational requirement.

The standard-of-care conversation is beginning

One of the more interesting discussions throughout the symposium involved the evolving relationship between AI and the standard of care.

Historically, concerns have focused on the risks associated with overreliance on AI-generated outputs. Clinicians remain responsible for exercising professional judgment, and AI does not transfer accountability for clinical decisions.

However, health care organizations should also be mindful of a different question that may emerge as AI adoption matures.

As certain tools become more accurate, more reliable, and more widely accepted within clinical practice, questions may eventually arise regarding whether failure to consider certain widely accepted AI-supported tools creates a different category of risk.

While Canadian law has not yet provided definitive answers, organizations should anticipate increased attention to how AI intersects with professional obligations, clinical decision-making, and institutional risk management.

This issue is likely to become increasingly important as AI moves from experimentation to broader adoption.

AI procurement and contracting are becoming strategic issues

Another key takeaway from the symposium was that many AI risks are ultimately managed or created through contractual arrangements.

Health care organizations often focus on the functionality of a proposed tool. Equally important, however, are the terms governing how that tool will be deployed, maintained, updated, monitored, and supported over time.

Organizations should carefully consider:

allocation of liability;
privacy and security obligations;
data ownership and permitted uses;
implementation responsibilities;
performance expectations;
audit and reporting rights;
model updates, functionality and retraining obligations;
service interruptions and incident response; and
governance and monitoring requirements.

As AI systems continuously evolve, procurement arrangements increasingly need to address lifecycle management rather than simply software acquisition.

This makes contracting a strategic component of AI governance, not merely an administrative exercise.

Five practical questions for health care organizations

As health care organizations evaluate AI initiatives, leadership teams should consider:

What problem are we trying to solve?
What governance structure will oversee implementation and ongoing use?
How will privacy, data governance, and cybersecurity risks be addressed?
What contractual protections are required to manage risk appropriately?
How will the organization evaluate performance, monitor outcomes, and respond to issues after deployment?

Organizations that can answer these questions effectively will be positioned to move from experimentation toward sustainable implementation.

Why health care AI requires a multidisciplinary approach

The issues associated with health care AI do not fit neatly within a single legal or operational discipline.

Few health care AI initiatives involve a single issue or practice area. Questions involving AI frequently engage health law, privacy, cybersecurity, technology procurement, regulatory compliance, governance, insurance, litigation risk and enterprise risk management simultaneously.

As a result, organizations increasingly require advice that integrates multiple perspectives rather than addressing individual issues in isolation.

At BLG, our Health Care, Cybersecurity & Privacy, Technology, Corporate Commercial, Regulatory, and Litigation teams work together to help health care organizations assess AI initiatives from multiple angles, whether evaluating governance frameworks, negotiating procurement arrangements, assessing privacy obligations, developing implementation policies, or managing operational and clinical risk.

Looking ahead

If there was one overarching takeaway from BLG's Artificial Intelligence in Canadian Health care Symposium, it was this: AI has moved from innovation to implementation.

The organizations that succeed over the next 12 to 24 months will not necessarily be those that adopt AI first. They will be the organizations that can govern it, contract for it, explain it, monitor it, and stand behind it once it becomes part of day-to-day operations.

As health care organizations move from experimentation to operational deployment, the ability to govern, monitor and manage AI will increasingly distinguish successful initiatives from unsuccessful ones. BLG will continue working with hospitals, health care organizations, technology companies and other sector participants as they navigate the legal, regulatory, governance and operational challenges that accompany this next phase of AI adoption.

Reach out to any of the authors or key contacts below to discuss how AI governance, procurement, privacy or clinical risk considerations may affect your organization.

Please also sign up for BLG’s AI x Health Care newsletter that aims to provide periodic updates on the latest AI in health care news.

McCarthy v. Bison Transport: Ontario court upholds just cause dismissal

Thu, 30 Jul 2026 00:00:00 Z

In McCarthy v. Bison Transport Inc., 2026 ONSC 3729, the Ontario Superior Court of Justice upheld a termination for just cause arising from an employee’s second failed drug test. The decision highlights the importance of clear workplace policies, consistent enforcement, and the limits of the duty to accommodate in the absence of an actual or perceived substance-dependency disability.

Key takeaways for employers on just cause dismissal

McCarthy v. Bison Transport Inc. confirms that employers in safety sensitive industries may rely on breaches of drug and alcohol policies as grounds for just cause termination, provided those policies are clearly communicated to employees, consistently enforced and impose consequences proportionate to the breach.

Employers may rely on a positive drug test to support termination where an employee knowingly violates a valid workplace policy.
The duty to accommodate does not apply where there is no actual or perceived substance-dependency disability.
Where an employee has, or is perceived to have, a substance-dependency disability, employers must accommodate to the point of undue hardship.
Clear documentation, signed acknowledgements and prior warnings can help employers show employees understood the policy and the consequences of breaching it.
Good faith, transparent termination processes can help reduce the risk of aggravated and punitive damages.

Background: failed drug tests and workplace policy enforcement

Mr. McCarthy worked for Bison Transport, a federally regulated employer, for four years as a long-haul driver. When he was hired, Mr. McCarthy attended mandatory training and signed an acknowledgement confirming his understanding that violations of Bison Transport’s Drug and Alcohol Policy (the Policy) could result in disciplinary action, including termination.

In November 2014, Mr. McCarthy failed a random drug test administered in accordance with Bison Transport’s Drug and Alcohol Testing Procedures. Bison Transport placed Mr. McCarthy on an unpaid leave of absence and required him to complete a return-to-work program, including educational programming and testing requirements. Later that month, Mr. McCarthy returned to work, undergoing further random drug testing, which he passed. Following his return to work, Mr. McCarthy signed a written warning expressly advising that any future failed drug or alcohol tests could result in his immediate termination.

In October 2017, Mr. McCarthy failed a second drug test. During a subsequent meeting, he again acknowledged the Policy and his understanding that a second violation could lead to his termination. Bison Transport terminated his employment for cause with immediate effect.

Mr. McCarthy commenced a wrongful dismissal action. The Ontario Superior Court of Justice dismissed his claim, holding that his termination was justified under the Policy, which was found to be a reasonable one for employees in safety sensitive positions.

The Ontario Superior Court of Justice’s reasoning: policy clarity, good faith and evidentiary proof

A clear and consistently enforced workplace policy can support termination for just cause

Bison Transport argued that it had just cause to terminate Mr. McCarthy’s employment after he violated its Policy by failing a second drug test while employed in a safety sensitive position.

The Court agreed. In its decision, the Court reaffirmed that an employer relying on a breach of a corporate policy as grounds for termination must prove that the policy was well-known to the employee, that it was consistently enforced, and that it imposed consequences proportionate to the implications of the breach.

The evidence showed that the Policy had been clearly communicated to and understood by Mr. McCarthy and that it was consistently enforced by Bison Transport. The Court also noted that Mr. McCarthy had acknowledged, following his first failed drug test in 2014, that a second failed test could result in his immediate termination. Further, the Court found that the Policy itself was reasonable given the safety sensitive nature of Mr. McCarthy’s position.

Finally, the Court found no evidence that Mr. McCarthy had, or was perceived to have, a substance addiction or dependency issue that would have triggered Bison Transport’s duty to accommodate. The Court concluded that, given the “uncontradicted evidence” that Mr. McCarthy neither suffered from nor was perceived to suffer from a drug-related disability, Bison Transport had no obligation to accommodate him and was justified in terminating his employment for cause following his second failed drug test.

Honest and transparent termination processes can limit an employer’s damages exposure

Mr. McCarthy sought damages for breach of contract and breach of the Canadian Human Rights Act, as well as aggravated and punitive damages.

Having found that Mr. McCarthy was not wrongfully dismissed, the Court briefly considered the damages that would have been awarded had his claim succeeded. In doing so, it rejected his claim for damages under the Canadian Human Rights Act, emphasizing that there was no evidence that he suffered from a disability or was perceived to have one.

The Court also dismissed Mr. McCarthy’s claims for aggravated and punitive damages, finding no evidence to support the allegation that Bison Transport engaged in unfair, bad-faith or otherwise deliberate unlawful behaviour during his termination. In contrast, Bison Transport was found to have acted honestly and transparently throughout the process, motivated by legitimate public safety concerns. The Court concluded that, even if Mr. McCarthy had been wrongfully dismissed, Bison Transport's conduct during the termination process did not warrant an award of aggravated or punitive damages.

What McCarthy v. Bison Transport Inc. means for Ontario employers

Employers in safety sensitive industries may rely on workplace policies, including drug and alcohol policies, to justify termination for just cause. To do so, however, employers must ensure their policies are clear, well-communicated to employees, consistently enforced, and proportionate to the breach.
Employers should maintain complete and accurate records of policy documents, employee training, signed acknowledgements, warnings, testing results, and other documentation showing that employees understand applicable policies, procedures and consequences.
Random drug and alcohol testing may be permissible in safety sensitive workplace environments, particularly where the testing is connected to legitimate safety concerns and implemented through a reasonable workplace policy.
If human rights issues are engaged (for example, in the drug and alcohol context if the employee has or is perceived to have a drug or alcohol dependency), employers must remain mindful of the duty to accommodate to the point of undue hardship. On the other hand, recreational drug use alone, without a dependency, does not trigger an employer’s duty to accommodate.
Employers can reduce the risk of aggravated and punitive damages by handling disciplinary and termination decisions honestly, transparently and in good faith.

BLG’s Labour and Employment group can help

If you have questions about just cause dismissal or any other labour and employment matter, BLG's Labour & Employment Group provides strategic advice to employers across Canada. Reach out to the authors or key contacts for guidance tailored to your organization.

SCC confirms: You have a constitutional right to judicial review on all issues

Thu, 30 Jul 2026 00:00:00 Z

In Democracy Watch v. Canada (Attorney General), the Supreme Court of Canada confirmed that the Constitution guarantees the availability of a legality review for all aspects of an administrative decision. Privative clauses purporting to oust the courts from this supervisory role are unconstitutional.

The Supreme Court held that general political oversight of the Conflict of Interest and Ethics Commissioner (the Commissioner) by Parliament does not provide an adequate alternative remedy for judicial review of the Commissioner’s decisions. The Supreme Court declared a partial privative clause purporting to preclude judicial review of the Commissioner’s decisions on questions of fact and law to be unconstitutional.

Key takeaways

Judicial review is available for all aspects of an administrative decision: Legality review of both questions of fact and law is part of the superior courts’ core supervisory jurisdiction protected by sections 96 to 101 of the Constitution Act, 1867. The Court declined to endorse the view that reasonableness review under Vavilov is the constitutionally guaranteed minimum.
Partial privative clauses are unconstitutional: Legislatures cannot constitutionally oust the courts’ core supervisory jurisdiction through privative clauses, even partial ones. Privative clauses that cannot be read as constitutionally compliant should be struck down.
An adequate alternative remedy must provide for a legality review and a commensurate remedy: While a court has discretion to decline to consider the merits of a judicial review application based on an “adequate alternative remedy”, the alternative forum must provide for a legality review of the impugned decision and offer a remedy commensurate with that which would have been available on judicial review.
General political oversight is not an adequate alternative to judicial review: Though Parliament has a general oversight role over the Commissioner, this political oversight did not provide the remedy available on judicial review to Democracy Watch, namely, consideration of the legality of the Commissioner’s report.

Background

The Commissioner issued a report on May 14, 2021, finding that then-Prime Minister Justin Trudeau had not contravened the Conflict of Interest Act, S.C. 2006, c. 9 (the COIA), in relation to two WE Charity funding decisions. Democracy Watch applied to the Federal Court of Appeal for judicial review of the Commissioner’s report, alleging errors of fact and law. The Attorney General of Canada brought a motion to strike Democracy Watch’s application, in part on the basis that the privative clause in s. 66 of the COIA prohibits judicial review of the Commissioner’s decision on questions of fact and law, limiting review to questions of jurisdiction alone.

A full panel of the Federal Court of Appeal allowed the Attorney General’s motion on the basis that Democracy Watch had adequate alternative remedies available to it, namely, political oversight by the Standing Committee on Access to Information, Privacy and Ethics, which receives annual reports from the Commissioner on the administration of the COIA. Relying on Canada (Auditor General) v. Canada (Minister of Energy, Mines and Resources), in which the Supreme Court held that the Auditor General had an adequate remedy to address grievances with the Governor in Council’s decisions under the Auditor General Act through a Parliamentary reporting mechanism, the Federal Court of Appeal determined that Parliament’s political oversight of the Commissioner under the COIA provided an alternative remedy in this case. In a minority opinion, Chief Justice de Montigny also would have found that the privative clause in s. 66 barred judicial review, though the majority did not agree that the privative clause was enforceable.

Supreme Court of Canada decision

The Supreme Court allowed Democracy Watch’s appeal. In a unanimous decision written by Chief Justice Wagner, the Supreme Court held that there was no adequate alternative remedy available to Democracy Watch, and that the Constitution requires legality review of all aspects of administrative decisions, including on questions of fact and law. Section 66 of the COIA, which purported to oust review on certain issues, was therefore unconstitutional and declared to be of no force and effect to the extent it bars judicial review on questions of fact and law.

A political process to enforce the COIA is not an adequate alternative remedy

The Supreme Court held that the Federal Court of Appeal erred by treating political oversight by Parliament through the Commissioner’s annual reporting obligation as an adequate alternative remedy. While the courts have discretion to decline to hear the merits of an application for judicial review where there is an adequate alternative remedy, an alternative forum is only adequate if it provides for a legality review of the administrative decision, and if a commensurate remedy can be ordered.

The Supreme Court distinguished Auditor General, in which the Auditor General himself sought judicial review but had access to an alternative political remedy, from the situation of Democracy Watch, which brought an application for judicial review based on public interest standing and has no other recourse under the COIA. Parliament’s political oversight does not provide Democracy Watch with any right to a legality review of the Commissioner’s report. Additionally, s. 47 of the COIA provides that the Commissioner’s conclusions in the challenged report are final and may not be altered by anyone. As such, the Supreme Court of Canada observed it was “hard to see” what political remedy Parliament could offer Democracy Watch. The only way for Democracy Watch to obtain legality review of the Commissioner’s report was through the courts.

The Constitution guarantees legality review on questions of fact and law

The Supreme Court also affirmed that the Constitution guarantees legality review of all aspects of an administrative decision, including questions of fact and law. Pursuant to the judicature provisions in ss. 96–101 of the Constitution Act, 1867, the courts play a constitutional supervisory role over the administrative state, through judicial review of exercises of public power. This role is fundamental to the rule of law, which requires that all legal powers be exercised in accordance with their limits. The Supreme Court’s emphasis on the importance of judicial review to the rule of law follows its prior decisions which reiterated the constitutional nature of the right to seek judicial review, including Yatar v. TD Insurance Meloche Monnex.

Though in Crevier v. Attorney General of Québec, the Supreme Court had observed that a privative clause cannot shield an administrative decision from judicial review on questions of jurisdiction, the Supreme Court found that this does not mean that judicial review on questions of fact and law can be so shielded. Rather, the Court concluded that Crevier must be understood in its proper historical context—including the courts’ evolving understanding of what constitutes a “jurisdictional question”, and the changes in the applicable standard of review. Crevier never intended to permit privative clauses to shield unreasonable findings of fact or law from judicial review.

However, the Court declined to endorse the view from certain parties and interveners that the reasonableness review as defined in Vavilov is the constitutionally guaranteed minimum seeing as the common law standards of review can be and have been modified over time, leaving that issue for another day.

Accordingly, legislation that purports to oust the courts’ supervisory role is unconstitutional. The Supreme Court held that s. 66 of the COIA, which purports to oust judicial review on questions of fact and law, could not be read in a constitutionally compliant manner, and therefore declared it to be of no force and effect.

The Court’s decision in Democracy Watch will be relevant in the upcoming appeal in Canadian National Railway Company v. Alberta Pacific Forest Industries Inc. (42092), set to be argued in November, addressing the constitutionality of s. 18.5 of the Federal Courts Act, which ousts the Federal Courts’ jurisdiction to hear a judicial review application where the matter may be appealed to the Governor in Council. BLG is counsel for CN in the appeal.

What CIRO is doing: Enforcement report for 2025-2026

Tue, 28 Jul 2026 00:00:00 Z

On July 22, 2026, the Canadian Investment Regulatory Organization (CIRO) released its enforcement report for the 2026 fiscal year, from April 1, 2025, to March 31, 2026 (the Report), which can be found here. The Report covers enforcement activities and priorities for both investment and mutual fund dealers over the past year and notes that most integration priorities have now been completed. CIRO “continues to modernize its regulatory approach by integrating systems, policies and processes to strengthen regulatory effectiveness.”

Key CIRO enforcement trends for investment and mutual fund dealers

We have excerpted some important findings from the Report and believe these trends will continue in the year ahead:

CIRO focuses on dealer supervision, gatekeeping and compliance systems:
1. CIRO continues to focus on cases involving system issues, dealer supervision and gatekeeping. While there are still individual misconduct cases, there is a noticeable shift toward scrutinizing firms’ compliance systems with a focus on preventing misconduct, not simply responding to it.
CIRO pursues fewer enforcement proceedings with higher fines:
1. Year over year, proceedings commenced and concluded have decreased, but sanctions and disgorgement have significantly increased. This means CIRO is prosecuting fewer cases but pursuing higher-value proceedings.
CIRO harmonizes MFDA and IIROC enforcement systems:
1. The Report emphasizes that the MFDA and IIROC systems have merged and are operating as one system.

CIRO enforcement activity in 2026 focuses on investor protection and market integrity

The Report highlights that in 2026, CIRO hearing panels imposed more than $15 million in sanctions. The Report also notes that suspensions and permanent bars were imposed, predominantly against individuals, and that CIRO continued to pursue disgorgement orders. The cases advanced focused on the effectiveness of supervision and internal controls, as well as the obligation of regulated entities and individuals to act as gatekeepers to the capital markets.

CIRO also continued to refer cases to the Canadian Securities Administrators (CSA). In the 2026 fiscal year, 86 market-related cases were referred, including 32 manipulation cases, nine insider trading cases and 45 other Securities Act violations.

This year, the Report focuses on cases involving the protection of investors from unfair, improper or fraudulent practices, improving industry standards and promoting market integrity:

Against firms, the Report noted several decisions related to breaches of supervisory obligations and a lack of due diligence in the opening and operation of accounts.
Against individual regulated persons, the Report drew attention to decisions relating to discretionary trading, misappropriation of client funds and unauthorized transfers.

CIRO enforcement statistics show higher sanctions and changing complaint trends

The Report includes a detailed summary of statistics on sanctions imposed in 2026, the fine collection rate and the number of complaints, investigations and enforcement proceedings.

In 2026, there were a total of nine decisions against firms, compared with seven decisions in 2025 and 10 decisions in 2024. The quantum of monetary sanctions against firms more than doubled in 2026, reversing the decline seen between 2024 and 2025. Dealers were collectively ordered to pay a total of $4,097,500 in fines in 2026, up from $2,400,000 in 2025. Dealers were also ordered to disgorge a total of $4,305,790, a nearly sevenfold increase from $623,925 in 2025.

As for individuals, total fines ordered increased from $4,992,523 in 2025, in connection with 50 decisions, to $6,266,999 in 2026, in connection with 39 decisions. The quantum of disgorgement decreased from $1,718,059 in 2025 to $958,684 in 2026, though this amount remains higher than the $427,997 in disgorgement in 2024. There was also a decrease in the number of suspensions, conditions and permanent bars compared with 2025.

The number of Complaints and Settlement Reporting System (ComSet) complaints increased substantially, from 3,833 in 2025 to 6,426 in 2026. However, CIRO attributed the increase to several large mutual fund dealer members filing service-related and other events in ComSet that were not previously reported in the Member Event Tracking System (METS) and noted that the additional events did not raise regulatory concerns or increase the number of enforcement cases opened.

Notably, 2026 saw a year-over-year decrease in enforcement proceedings, both commenced and concluded, continuing the trend from 2024 to 2025. The majority of concluded proceedings were settlement hearings, with the firms or registered individuals involved agreeing to the imposed sanctions.

Increased scrutiny for regulated firms

CIRO’s 2025-26 enforcement report signals a continued focus on stronger supervision, effective compliance systems and meaningful consequences for misconduct. Regulated firms should review their internal controls, supervision practices and gatekeeping obligations to ensure they are prepared for increased scrutiny in the year ahead.

The clean economy ITC labour requirements: How they work, new CRA guidance and some residual issues

Mon, 27 Jul 2026 00:00:00 Z

NOTE: For a print-friendly version of this document that includes visuals and tables, please download and print the .pdf file.

Canada’s clean economy investment tax credits (ITCs) constitute a major tax policy expenditure supporting Canada’s efforts to achieve a net-carbon-zero economy by 2050. These ITCs, which are explained and summarized here, are often a critical element in the financial viability of many carbon capture, energy generation, battery storage and other clean economy projects.

While the details of the different clean economy ITCs vary somewhat, they generally follow a more or less common format:

eligible taxpayers, generally taxable Canadian corporations, incur expenditures that qualify for a particular clean economy ITC (“qualifying expenditures”), generally being the cost of specific tangible property designated as ITC-eligible, such as a wind turbine;
qualifying expenditures generally include the full cost of acquiring and installing ITC-eligible property and putting it into active service, but generally exclude “preliminary work activity” such as front-end design or engineering work; and
for each taxation year, the eligible taxpayer claims an amount of the particular clean economy ITC equal to total qualifying expenditures for that year, reduced by any “government assistance” received or receivable by the taxpayer, multiplied by the ITC rate for that particular clean economy ITC. This is done by completing and filing the prescribed form applicable to that particular clean economy ITC by the deadline permitted for so doing. Prescribed forms and other information can be found on the Canada Revenue Agency’s clean economy ITC webpage. The amount of ITC the taxpayer is entitled to is credited to the taxpayer’s CRA account and either reduces its taxes owing or is paid to the taxpayer.

Taxpayer’s $ ITC entitlement = ITC rate × $ taxpayer’s qualifying expenditures

When it comes to the ITC rate, the taxpayer has a choice to make when claiming the ITC and completing the required prescribed form (except for the Clean Technology Manufacturing ITC, to which the labour requirements do not apply). If a taxpayer elects to meet the “labour requirements” set out in s. 127.46 ITA, it may claim the particular clean economy ITC at the “regular tax credit rate.” This means the full ITC rate specified in the legislation, such as 30 per cent for the Clean Technology ITC, 15 per cent for the Clean Electricity ITC and so on. Otherwise, the taxpayer may claim only the “reduced tax credit rate,” being 10 percentage points lower than the “regular tax credit rate,” viz., 20 per cent for the Clean Technology ITC, five per cent for the Clean Electricity ITC and so on. It is not uncommon on major clean economy projects for the difference between the regular and reduced ITC rate to amount to tens of millions of dollars, or more on the largest projects.

If a taxpayer elects to meet the labour requirements (which consist of a “prevailing wage requirement” and an “apprenticeship requirement”) but does not in fact meet them, there are two possible outcomes as regards the ITC rate:

if the CRA determines that the taxpayer failed to meet those requirements “knowingly or in circumstances amounting to gross negligence” (the K/GN Standard), the taxpayer effectively suffers a 15 per cent ITC rate reduction, i.e., what would normally be a 30 per cent rate for the Clean Technology ITC essentially becomes 15 per cent instead, a catastrophic result for many clean economy projects; or
otherwise, the taxpayer gets the regular tax credit rate but must pay a per diem tax in ss. 127.46(6) or (7) to the CRA and top-up payments to any underpaid employees.

Hence, the K/GN Standard constitutes a fork in the road for establishing the consequences of labour requirements non-compliance.

The discussion that follows describes some of the interpretive and practical issues associated with the labour requirements, and reviews the conclusions reached by the CRA’s Income Tax Rulings Directorate (Rulings) in CRA document 2025-1081341E5, dated April 28, 2026 (the New CRA Guidance). In the New CRA Guidance, Rulings answers questions about a situation where the taxpayer has engaged a contractor whose employees (1) are not covered by an eligible collective agreement and (2) are paid less than what the labour requirements prescribe to be the compensation necessary to comply with the “prevailing wage” element of the labour requirements.

The New CRA Guidance makes the following interpretive determinations:

in a situation where no eligible collective agreement applies to covered workers who have been paid less than the prevailing wage, the taxpayer can correct this deficiency, i.e., pay these workers the shortfall to bring them up to the prevailing wage, any time before the taxpayer prepares and files their ITC claim for the relevant taxation year and be in full compliance with this element of the prevailing wage requirement. As a result of being in compliance, the per diem tax in s. 127.46(6) will not be applicable, and the late payment of these workers will not prevent the taxpayer from attesting to having met the labour requirements or risk transgressing the K/GN Standard if the taxpayer elects to meet the labour requirements and claim the regular tax credit rate;
in cases where the per diem tax in s. 127.46(6) does apply, it is computed with reference to the number of days of work for which the relevant worker was not paid the prevailing wage, viz., “each day” means “each day of work for which the worker was short-paid,” not “each day such shortfall remains unpaid” or any other interpretation;
a taxpayer who has actual knowledge of a prevailing wage requirement deficiency cannot remedy it so as to come into compliance by paying the top-up penalty described in s. 127.46(13) to the CRA;
a taxpayer who has actual knowledge of a prevailing wage requirement deficiency for a particular taxation year, elects to meet the labour requirements and claims the regular tax credit rate for that year risks transgressing the K/GN Standard and the very adverse consequences that entails, and should instead claim only the reduced tax credit rate for that year;
a taxpayer may claim the reduced tax credit rate in one taxation year without thereby disentitling itself from claiming the regular tax credit rate in other years, viz., the reference to “each installation taxation year” in s. 127.46(2) should not be interpreted as requiring a taxpayer to elect to meet the labour requirements for every installation taxation year in respect of any particular clean economy ITC; and
where a taxpayer does transgress the K/GN Standard in respect of a particular taxation year, the adverse implications of that are limited to that particular taxation year, viz., the reference in s. 127.46(9)(a) to being “not entitled to the regular tax credit rate” is limited to that taxation year (referred to in s. 127.46(9) as the “claim year”).

This article goes on to address an apparent legislative gap in the rules relating to the K/GN Standard that is problematic where an ITC claimant knows, or strongly suspects, some element of the prevailing wage requirement has not been met for one or more covered workers, and is practically unable to remedy the situation in a way that meets the definition of “compliance” within the meaning of the statute. For example, where a covered worker is an employee of a contractor or subcontractor retained by the taxpayer to work on the project, i.e., the taxpayer has no direct relationship with the relevant employee, the taxpayer may have no practical ability to ensure that any shortfall is paid to the employee if the contractor becomes unco-operative, goes out of business or loses contact with the employee.

Read literally, the rules as drafted would appear to prevent such a taxpayer from claiming the regular tax credit rate for fear of being found to have “knowingly or in circumstances amounting to gross negligence failed to meet those requirements” if they claim the regular tax credit rate. Such a taxpayer would thus be forced into claiming only the reduced tax credit rate because the compliance deficiency, no matter how small, they are aware of is one they do not have the ability to fix. The imposition of a 10 per cent ITC rate reduction for the entire amount of the taxpayer’s clean economy ITC claim for the year seems profoundly disproportionate and unfair in such circumstances.

Fundamentally, some mechanism is needed for allowing a taxpayer who is aware of a compliance deficiency and is willing to address it to do so in a way that is considered to constitute “compliance” with the labour requirements, allowing the taxpayer to claim the regular tax credit rate without fear of transgressing the K/GN Standard. For example, deeming self-reported compliance deficiencies not to meet the K/GN Standard would encourage taxpayers trying to meet the policy objectives of the labour requirements to do so rather than opt out of them and claim the reduced tax credit rate, a lose-lose outcome.

I. The labour requirements: Overview

The labour requirements are intended to “incentivize companies to create good jobs”. They are modelled on similar requirements that exist under comparable U.S. tax credit legislation, although they are used in the U.S. for other purposes and American taxpayers have decades of experience in dealing with them. The labour requirements have two distinct elements:

the “prevailing wage requirements”, which require “covered workers” to be adequately compensated for the “preparation or installation” of ITC-eligible property at the taxpayer’s work site (herein, P&I Work); and
the “apprenticeship requirements”, which require the taxpayer to make reasonable efforts to ensure that apprentices registered in Red Seal trades (or equivalent provincially registered trade) work at least 10 per cent of the hours worked during the year by “covered workers” who are Red Seal workers performing P&I Work at the taxpayer’s project site. For this purpose, a safe harbour rule deems the taxpayer to have met this requirement where it takes the prescribed actions.

“Covered workers”

A key concept of both labour requirements is “covered workers”, defined as an individual:

who is an employee (whether of the taxpayer or someone else, such as a contractor retained by the taxpayer or sub-contractor of such contractor) engaged in P&I Work;
whose duties at the taxpayer’s work site are primarily manual or physical; and
who is neither an administrative, clerical or executive employee nor a “business visitor to Canada” as described in section 187 of the Immigration and Refugee Protection Regulations.

The “covered worker” definition raises various interpretive questions. For example, the scope of what constitutes P&I Work is a matter of some judgment. As a general rule, it seems logical to presume that the scope of P&I Work would not include activities that are excluded from ITC eligibility. For example, one would think that activities excluded from eligibility for the CCUS ITC as “preliminary CCUS work activity” generally should not be considered to be “preparation or installation” of CCUS ITC-eligible property, by virtue of being “preliminary to the acquisition, construction, fabrication or installation of” such property.

To some degree, this is supported by a careful reading of the ITC legislation and, in particular, the “covered worker” definition, which refers to the preparation or installation “of” ITC-eligible property. Some looser connection between the preparation/installation work and the ITC-eligible property could have been used, such as preparation or installation activities “relating to” or “in respect of” ITC-eligible property. The choice was made to limit activities that are in-scope of the labour requirements as P&I Work to those with a closer, more direct link between ITC-eligible property and the in-scope activities created by the use of the preposition “of.”

In this regard, CRA document 2025-1081921E5, dated February 25, 2026, is interesting. It considered the case of a very large property described in Class 57(a) to be used in a carbon capture project. This property required a large hole to be excavated, and pilings installed in the hole in order to create a concrete foundation to permanently support the ITC-eligible property. The foundation constituted a Class 57(f) property¹ so as to be itself be ITC-eligible, leading Rulings to conclude as follows:

As a result, Canco would be subject to the labour requirements for the preparation or installation of the Foundation (a specified property), provided that Canco elects to meet the labour requirements under subsection 127.46(2). In our view, this would include the excavation of the hole into which the Foundation will be placed, the installation of the pilings and the pouring of the concrete to construct the Foundation. All of these activities are part of the installation of the Foundation and therefore would constitute the “preparation or installation of specified property” for purposes of the labour requirements in section 127.46.

Similarly, it will not always be clear whether a particular worker’s P&I Work duties are “primarily manual or physical in nature.” For example, a foreman directly supervising the activities of those who are engaged in manual P&I Work may not meet this test in many cases, depending on their actual duties, while a lead hand who is herself operating machinery while advising less-experienced workers often will. Presumably, the key distinction is how frequently a worker’s duties involve hands-on activity versus supervising those engaged in such work. This would be consistent with CRA document 2025-1070641E5, dated Oct. 2, 2025, where Rulings states: “It is our view that the phrase ‘manual or physical in nature’ as it appears in the definition of ‘covered worker’ within the Labour Requirements refers to those duties that involve physical exertion (including using tools or machines to perform the physical labour) as opposed to mental exertion.”

There is also CRA guidance as to what constitutes the taxpayer’s work site, being the geographic location where activities are potentially in-scope of the labour requirements. In CRA document 2025-1070641E5, Rulings stated as follows:

In our view, a work site will only be a designated work site of an incentive claimant if the work site is at the disposal of the incentive claimant, based on a textual, contextual and purposive analysis of section 127.46. This could include a work site that the incentive claimant owns, rents or to which the incentive claimant otherwise has legal access, provided that it has control over the work site and can access it at its own discretion.

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The prevailing wage requirements

The prevailing wage requirements consist of three distinct components: a compensation element (s. 127.46(3)(b)(i)), an attestation element (s. 127.46(3)(b)(ii)) and a notice element (s. 127.46(3)(b)(iii)). First, the compensation element mandates that all covered workers be compensated for their P&I Work either (1) in accordance with any eligible collective agreement applicable to that worker or (2) if no such eligible collective agreement applies, in an amount no less than the non-overtime wages and benefits specified in the eligible collective agreement that most closely aligns with the covered worker’s experience level, tasks and location. It is unclear whether the text is to be read literally as creating a substantively broader requirement when an eligible collective agreement applies, i.e., the taxpayer becomes non-compliant if any term of that eligible collective agreement isn’t fully met. To date, the CRA has not provided any guidance on this point, although from a tax policy perspective it seems counterintuitive to hold employers governed by an eligible collective agreement to a more stringent standard for ITC purposes than other employers.

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In addition, the notice element requires the taxpayer to meet a job site notice requirement, while the attestation element requires the taxpayer to attest that it has (1) in fact met the compensation element of the prevailing wage requirement for its own employees and (2) taken reasonable steps to ensure the employers of any other covered workers, i.e., contractors, subcontractors and others, have done likewise. The CRA has provided guidance online as to what “reasonable steps” means. The New CRA Guidance includes further commentary on how a taxpayer can demonstrate that “reasonable steps” have been taken.

The attestation element is not an attestation to having actually met the prevailing wage requirements. Instead, it requires the taxpayer to attest to having in fact met the prevailing wage requirements as regards its own employees, but only to having “taken reasonable steps to ensure that any covered workers employed by any other person” have been compensated in accordance with the required standard.

It is also important to understand that while the apprenticeship requirements can be definitively met by making “reasonable efforts” to achieve a specified result,² the same is not true of the prevailing wage requirements. To comply with the prevailing wage requirements, one must in fact achieve the prescribed results: reasonable efforts do not suffice.

There is thus a gap between what a taxpayer must attest to as part of meeting the prevailing wage requirements and what the taxpayer must actually achieve in order to meet them and thereby comply with the prevailing wage requirements. Specifically, while meeting the attestation element of the prevailing wage requirements requires only “reasonable steps” of the taxpayer as regards the employees of contractors and subcontractors, meeting the compensation element demands that all covered workers have in fact been compensated as required. In many cases, this is not always entirely within the taxpayer’s control.

There are two principal implications from the fact that making “reasonable efforts” to comply with the compensation element of the prevailing wage requirements is insufficient to have complied with the prevailing wage requirements:

if the “normal” compliance deficiency rules apply (i.e., the taxpayer’s actions do not meet the K/GN Standard), the applicable penalty/remediation provisions effectively hold the taxpayer strictly liable for any deficiency in paying the prevailing wage to all covered workers, not just the taxpayer’s own employees. Simply making “reasonable efforts” towards complying with the prevailing wage requirements is not enough to avoid the consequences of failing to actually meet them; and
a taxpayer who has taken reasonable steps to prevent a compliance deficiency as to the compensation element of a contractor’s covered employees but who is aware a deficiency exists (1) can truthfully make the necessary attestation, but (2) risks the consequences of s. 127.46(9) if it claims at the regular tax credit rate while having knowledge of the contractor’s compliance deficiency. Put another way, making reasonable efforts to ensure that contractors meet the compensation element of the prevailing wage requirements may not be good enough to claim the regular tax credit rate without transgressing the K/GN Standard if the taxpayer knows of, or perhaps strongly suspects, that a compliance deficiency exists.

II. Labour requirements compliance

As noted, taxpayers claiming clean economy ITCs have a choice. A taxpayer can choose not to elect to meet the labour requirements and simply claim the relevant ITC at the reduced tax credit rate. Alternatively, if a taxpayer elects to meet the labour requirements and is determined not to have fully complied with them, the consequences depend on whether the taxpayer’s actions are considered to have met the K/GN Standard or not.

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Non-compliance: Normal circumstances

In “normal” circumstances where the K/GN Standard is not met, the consequences of non-compliance are much less severe. The taxpayer’s entitlement to the regular tax credit rate remains undisturbed. However, a taxpayer who has not complied with the apprenticeship requirements is liable to pay, as additional Part I tax, an additional $50³ for each hour of work that was required to be performed by apprentices registered in Red Seal trades on P&I Work for the year in order to meet the statutory target but was not, under s. 127.46(7). A taxpayer that has not complied with the prevailing wage requirements faces two sanctions:

s. 127.46(6), which obligates the taxpayer to pay, as additional Part I tax, “an amount equal to $20⁴ for each day in the installation taxation year on which the covered worker was not paid the prevailing wage” (the s. 127.46(6) per diem tax); and
ss. 127.46(11)-(14), which applies where the CRA has notified the taxpayer of a compliance deficiency and which obligates the taxpayer to either make up any deficiency in the compensation element of the prevailing wage requirements (plus interest) to the short-paid employee (a top-up amount) or pay 120 per cent of that amount to the CRA as a penalty.

Amounts paid as additional tax or penalty are non-deductible, while penalties are potentially eligible for CRA relief under s. 220(3.1) in appropriate circumstances. Top-up amounts are treated as salary and wages and so are deductible to the payer when paid, but are excluded from being eligible for the relevant clean economy ITC under s. 127.46(14).

The wording of the per diem tax in s. 127.46(6) reads as follows:

(6) Unless subsection (9) applies, if an incentive claimant claims a specified tax credit at a regular tax credit rate in a taxation year but does not meet the prevailing wage requirements in respect of a covered worker for one or more days in an installation taxation year in respect of that specified tax credit, there shall be added to the tax payable under this Part for the installation taxation year by the incentive claimant an amount equal to $20 for each day in the installation taxation year on which the covered worker was not paid the prevailing wage.

There is some degree of interpretive uncertainty as to the scope of “each day in the installation taxation year on which the covered worker was not paid the prevailing wage.” Specifically, this phrase could be read as describing each day of work for which a particular worker received less than the prevailing wage, or potentially as each day during the year where the shortfall for any such underpaid work date remained outstanding and unpaid. The New CRA Guidance resolves this question, indicating that the former is the correct interpretation in the answer to Question 2.

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Non-compliance: Knowingly or in circumstances amounting to gross negligence

Alternatively, if the taxpayer is determined to have failed to comply knowingly or in circumstances amounting to gross negligence, ostensibly on any element of the labour requirements and in any amount, it effectively suffers a 15 per cent ITC rate reduction, i.e., what would normally be 30 per cent for the Clean Technology ITC effectively becomes 15 per cent. The maximum ITC claim allowed is the reduced tax credit rate, and a penalty amount equal to another five per cent ITC rate reduction applies, thus making the consequences of claiming the full rate where the K/GN Standard has been met much worse than simply claiming the reduced tax credit rate.

The framing of one-third of the adverse consequence as a penalty rather than a further reduction in the applicable tax credit rate in theory allows the CRA to waive it under s. 220(3.1), although presumably the scope for such relief will be limited given the “knowingly or grossly negligent” threshold for when this penalty applies. Logical cases for penalty relief would include ones where the amount of K/GN non-compliance was fairly minimal, or where the taxpayer self-reports after having made good-faith remediation efforts. The CRA’s policies on discretionary penalty relief are set out in IC07-1R1.

The phrase “knowingly or in circumstances amounting to gross negligence” as used in s. 127.46(9) is almost identical to the standard prescribed in s. 163(2) for penalties for false statements or omissions. As such, prima facie, one would expect the jurisprudence developed under that latter provision to be equally applicable to interpreting the K/GN Standard established in s. 127.46(9).

In Canada v. Paletta Estate (2022 FCA 86),⁵ the Federal Court of Appeal had occasion to review what the K/GN Standard entails and what differentiates it from “normal” negligence:

[65] Neglect under subparagraph 152(4)(a)(i) refers to a lack of reasonable care. The duty of reasonable care is met if the taxpayer has “thoughtfully, deliberately and carefully assesse[d] the situation and file[d] on what he believe[d] bona fide to be the proper method”; in other words, “in a manner that the taxpayer truly believe[d] to be correct” (Regina Shoppers Mall Ltd. v. Canada, [1990] 2 C.T.C. 183, 90 D.T.C. 6427 (F.C.T.D.), aff’d (1991), 126 N.R. 141, 91 D.T.C. 5101 (F.C.A.); see also Canada v. Johnson, 2012 FCA 253, 435 N.R. 361, [2013] 1 F.C.R. D-2). This test is not disputed by the parties. The Court may also draw inferences of negligence from an omission to verify the validity of a taxpayer’s belief (Robertson v. Canada, 2016 FCA 303, 2016 D.T.C. 5131, at paragraphs 5 and 6).

[66] In contrast, subsection 163(2) requires that the false statement be made knowingly or in circumstances amounting to gross negligence. This burden can be met either directly or constructively, through a demonstration of wilful blindness (Wynter v. Canada, 2017 FCA 195, 2017 D.T.C. 5114 (Wynter), at paragraph 16):

In sum, the law will impute knowledge to a taxpayer who, in circumstances that suggest inquiry should be made, chooses not to do so. The knowledge requirement is satisfied through the choice of the taxpayer not to inquire, not through a positive finding of an intention to cheat.

[67] Wynter teaches that although wilful blindness and gross negligence often converge, they are conceptually different. Rennie J.A., writing for this Court, explains this difference as follows (Wynter, at paragraphs 18 and 19):

Gross negligence is distinct from wilful blindness. It arises where the taxpayer’s conduct is found to fall markedly below what would be expected of a reasonable taxpayer. Simply put, if the wilfully blind taxpayer knew better, the grossly negligent taxpayer ought to have known better.

Gross negligence requires a higher degree of neglect than a mere failure to take reasonable care. It is a marked or significant departure from what would be expected. It is more than carelessness or misstatements. The point is captured in the decision of this Court in Zsoldos v. Canada (Attorney General), 2004 FCA 338 at para. 21, 2004 D.T.C. 6672:

In assessing the penalties for gross negligence, the Minister must prove a high degree of negligence, one that is tantamount to intentional acting or an indifference as to whether the law is complied with or not. (See Venne v. R. (1984), 84 D.T.C. 6247 (Fed. T.D.), at 6256.)

[68] It can be seen from this that subsection 163(2) imposes a higher threshold with the result that conduct warranting the reopening of statute-barred years pursuant to subparagraph 152(4)(a)(i) will not necessarily justify the imposition of a penalty under the former (see for example Van der Steen v. The Queen (1984), 2019 TCC 23, 2019 D.T.C. 1024; see also Venne v. The Queen, 84 D.T.C. 6247, [1984] C.T.C. 223 (F.C.T.D.)). The opposite is however true; conduct that justifies the imposition of a penalty under subsection 163(2) will necessarily meet the threshold contemplated by subparagraph 152(4)(a)(i).

The CRA’s interpretation of these concepts can be found in the relevant portion of the CRA’s Income Tax Audit Manual (Chapter 28), which discusses the terms “knowingly” and “gross negligence”:

28.4.2 Knowingly or under circumstances amounting to gross negligence

It is vital to understand the meaning of the term “knowingly or under circumstances amounting to gross negligence” to apply a gross negligence penalty.

Knowingly, as used in subsection 163(2) of the ITA, implies that a taxpayer knew or ought to have known that the amount of tax paid was less than should otherwise have been paid for the purposes of the ITA or that the amount of refund or rebate claimed was greater than the amount that the person was eligible to receive for the purposes of the ITA. Knew implies that a taxpayer deliberately or intentionally acted in such a manner, while ought to have known does not mean actual knowledge, but means that the taxpayer had in effect the means of knowledge.

Gross negligence, as used in subsection 163(2), covers a set of facts which clearly indicates either that the taxpayer knew or ought to have known that an offence was committed under this subsection or that the taxpayer acted so carelessly or so negligently that the way in which the taxpayer handled their affairs amounted to gross negligence (that is, negligence of conspicuous magnitude). The set of facts typically fall in the categories of “(a) the magnitude of the omission in relation to the income declared, (b) the opportunity the taxpayer had to detect the error, (c) the taxpayer's education and apparent intelligence, (d) genuine effort to comply.” [Lauzon v The Queen, 2016 TCC 71, para 29, and 2016 FCA 298] “Gross negligence may be established where a taxpayer is wilfully blind to the relevant facts in circumstances where the taxpayer becomes aware of the need for some inquiry but declines to make the inquiry because the taxpayer does not want to know the truth” [Strachan v The Queen, 2015 FCA 60, para 4] and “consequently, the law will impute knowledge to a taxpayer who, in circumstances that dictate or strongly suggest that an inquiry should be made with respect to his or her tax situation, refuses or fails to commence such an inquiry without proper justification.” [Panini et al v The Queen, 2006 FCA 224, paragraph 43].

Go to 28.4.18, Other gross negligence penalties, for a list of court cases that discuss “knowingly” and “gross negligence.”

The factors cited by the CRA as relevant to determining whether the K/GN Standard has been met include the following:

28.4.4 Specific factors to consider when imposing gross negligence penalties

To determine if gross negligence penalties should be applied, consider (not an exhaustive list):

materiality of the false statement or omission
taxpayer’s history of contact with the CRA
taxpayer’s knowledge of tax matters
nature of the false statement or omission
taxpayer’s involvement in preparing the return
misinterpretation of the legislation
books and records
number of sources of taxable income
disclosure of other sources of taxable income
taxpayer’s history of compliance
signature on the return

The burden the CRA must discharge in order to support a K/GN finding has been described by the courts as a “heavy”⁶ one, and “the imposition of gross negligence penalties is to be applied in the clearest cases with the [CRA] being required to prove intent or reckless misconduct, otherwise taxpayers should be given the benefit of the doubt.”⁷ However, because the sanctions contained in s. 127.46(9) for being found to have breached the K/GN Standard are so severe, and will likely also create serious adverse non-tax implications, e.g., under relevant financing agreements, taxpayers can be forgiven for having a very low willingness to risk the CRA applying s. 127.46(9).

One of the questions posed in the New CRA Guidance was whether a taxpayer who was aware of a compliance deficiency beyond its ability to remedy at the time its ITC claim was filed could claim the regular tax credit rate, on the basis that it was ready and willing to correct the deficiency but simply could not do so. Not surprisingly, Rulings’ response (in the answer to Questions 1 and 2) was that the taxpayer could not claim the regular tax credit rate without risking the application of the K/GN consequences of s. 127.46(9):

If Canco knows that it did not meet one or more of the Labour Requirements at the time that it claims its CCUS tax credit for its 2025 taxation year, then it should not elect under subsection 127.46(2) in respect of that claim. If it does, Canco could be subject to the gross negligence penalty in subsection 127.46(9), if the Minister determines that it elected to meet the Labour Requirements and knowingly failed to meet those Labour Requirements.

This conclusion was further reiterated in the answer to Question 3:

The hypothetical facts state that, at the time of making its CCUS tax credit claim for Canco's 2025 taxation year, the three covered workers were not compensated in accordance with subparagraph 127.46(3)(b)(i). Therefore, at that time, Canco is aware that it has not complied with all of the Labour Requirements and should not elect under subsection 127.46(2) in respect of that specified tax credit or it could be subject to the gross negligence penalty in subsection 127.46(9).

Canco may decide to wait to make its claim for the CCUS tax credit for the 2025 taxation year until the prevailing wage requirements are met.

In fairness, there is not really much other answer Rulings could have provided, given the text of the statute and the K/GN jurisprudence. The response referenced the CRA’s further comments on s. 127.46(9) made at the 2025 Canadian Tax Foundation Round Table, memorialized as CRA document 2025-108081, which described a K/GN determination as “a question of fact that can only be determined after an examination of all the relevant facts and circumstances.” In this previous statement, the CRA indicated that while an “inability to substantiate that covered workers employed by others were compensated in accordance with subparagraph 127.46(3)(b)(i) should not, in and of itself” support a finding that the K/GN Standard had been met, the failure to take reasonable steps to ensure such compliance could support such a finding, and that in such circumstances “the gross negligence penalty under subsection 127.46(9) should generally apply.”

The further question was asked whether such a taxpayer could pre-emptively pay the CRA the shortfall penalty described in s. 127.46(13) in order to come into compliance and legitimately claim the regular tax credit rate. The answer to this suggestion was also “No”:

The “top-up penalty” in subsection 127.46(13) that you referred to in your question is only applicable if Canco receives a notification from the Minister specifying that it did not meet the prevailing wage requirements for a designated work site for a taxation year, pursuant to subsection 127.46(11). This is referred to as a Corrective Measure, and it is initiated by the CRA. There is no mechanism available to Canco to voluntarily pay the top-up penalty without having received this notification from the Minister.

This would also seem to be an accurate interpretation of the statute, as strictly speaking the procedure described in s. 127.46(13) is a sanction for non-compliance, and its text does not characterize payment as constituting compliance with the labour requirements. This then leaves a taxpayer with knowledge of a compliance deficiency that it cannot remedy in the unsatisfactory position of either claiming the reduced tax credit rate, which is bad, or claiming the regular tax credit rate and risking the consequences of s. 127.46(9), which is worse.

Non-compliance: Common problems

In practice most issues associated with labour requirements compliance arise from the compensation element of the prevailing wage requirement. Common problem areas include the following:

failing to correctly determine that a worker’s duties are primarily manual or physical, such that someone who was thought not to be a “covered worker” in fact is;
determining the scope of P&I Work too narrowly for one or more workers, such that more work and/or workers are in-scope of the labour requirements than originally thought; and
for a covered worker to whom no eligible collective agreement applies, incorrectly determining the regular wages and benefits applicable under the closest comparable eligible collective agreement.

This could occur for either the taxpayer’s own employees or, more typically, employees of a contractor or subcontractor, in respect of whom the taxpayer has less information and control and where the employer, i.e., not the taxpayer, generally has less incentive to achieve labour requirements compliance since it does not bear the cost of failure, subject to contractual allocation of consequences. For example, where a covered worker is an employee of a contractor or subcontractor retained by the taxpayer to work on the project, i.e., the taxpayer has no direct relationship with or information about the relevant employee, the taxpayer may have no practical ability to ensure that any shortfall is paid to the employee.

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On large ITC-eligible projects with hundreds or thousands of covered workers and dozens of contractors, subcontractors and sub-subcontractors, the reality is that there will very often be situations where the taxpayer knows or has very good reason to think someone has been paid less than the prevailing wage. Taxpayers can try to remedy this, but there will not always be a solution offering reasonable certainty that compliance can be achieved. For example, contractors or subcontractors go out of business or become non-co-operative over contractual disputes, or their covered workers move away, sometimes without leaving contact information. This is often simply the on-the-ground reality. In such circumstances, the taxpayer’s ability to claim the regular ITC rate by electing into the labour requirements and in fact meeting the prevailing wage requirement is effectively frustrated by the inability to actually meet that requirement for literally each and every in-scope worker the taxpayer knows has, or believes may have, been underpaid.

One such potential compliance concern relates to when covered workers are paid the prevailing wage. Particularly on larger projects with numerous contractors and subcontractors, prevailing wage shortfalls arising from any of the foregoing reasons (or others) are virtually inevitable. If a taxpayer discovers a particular covered worker has been paid less than she should have been, can this be corrected in such a manner as to be considered compliant with the compensation element of the prevailing wage requirements?

There is no time specified in s. 127.46 by which the required compensation must be paid to the covered worker. Hence, at least in cases where no eligible collective agreement applies to the covered worker, so long as the required amount of compensation has been paid to the covered worker by the time the taxpayer files its ITC claim, it can truthfully attest to having met (past tense) the compensation element of the prevailing wage requirement. This was confirmed in the New CRA Guidance, where Rulings states in its Response to Questions 1 and 2:

Canco can elect to meet and attest that it met the Labour Requirements at the time that it makes its claim for the CCUS tax credit for its 2025 taxation year, provided that, at the time of making the claim, the three short-paid covered workers were compensated in accordance with the applicable Compensation Requirement above, based on the hypothetical facts.

This determination is both consistent with the text of the statute and the tax policy underlying the labour requirements: incentivizing employers to create good jobs that pay the prescribed level of wages. Given the severe potential consequences for non-compliance with the labour requirements, there is no apparent policy reason to find employers non-compliant if they pay the required wages but do so past an arbitrary deadline. The same tax policy would seem to be applicable in cases where an eligible collective agreement does apply, although the CRA has not expressed a view on this.

Non-compliance: Electing the reduced rate vs. s. 127.46(9) consequences

A taxpayer with actual knowledge or strong suspicion of a labour requirements deficiency has the unenviable choice of either claiming the reduced tax credit rate or claiming the regular tax credit rate and taking their chances that the CRA considers their circumstances to have met the K/GN Standard such that the punitive consequences of s. 127.46(9) apply. Both alternatives raise interpretive questions which the New CRA Guidance addresses.

Can one elect the reduced tax credit rate in one year and the regular rate in another?

A taxpayer considering whether to choose not to meet the labour requirements in a particular year and simply claim the reduced tax credit rate will want to understand the consequences of doing so. Specifically, if the choice to opt out of labour requirements compliance for one year has consequences in other years, this would greatly diminish the viability of doing so.

The operative labour requirements rule in s. 127.46(2) reads as follows:

(2) Despite sections 127.44, 127.45, 127.48 and 127.491, the applicable rate for each specified tax credit of an incentive claimant is the reduced tax credit rate unless the incentive claimant elects in prescribed form and manner to meet the prevailing wage requirements under subsection (3) and the apprenticeship requirements under subsection (5) for each installation taxation year in respect of the specified tax credit.

Paraphrasing, this provision establishes the reduced tax credit rate as the taxpayer’s applicable ITC rate unless the taxpayer elects to meet the labour requirements “for each installation taxation year”. A literal reading of this provision raises some concern that unless a taxpayer elects to meet the labour requirements for every installation taxation year in respect of any particular clean economy ITC, the applicable ITC rate for that particular ITC will be the reduced tax credit rate for every such year. Put another way, the legislative text does not make explicit that electing into the labour requirements in respect of a particular year only impacts that year, and that not electing for one year does not affect other years.

Fortunately, the New CRA Guidance provides a definitive interpretation that this is indeed the case, a common-sense result that is very helpful to have clarified. This is provided in the last sentence of the response to Question 4:

Response to Question 4

Since the subsection 127.46(2) election is made with a claim for a specified tax credit, and the hypothetical facts strongly suggest that Canco will not meet the Labour Requirements in 2025 (specifically the Compensation Requirement), Canco should not elect, and should claim the CCUS tax credit for the 2025 taxation year at the reduced tax credit rate. However, the hypothetical facts state that Canco will meet the Labour Requirements in 2026 and in 2027, therefore Canco can elect under 127.46(2) when it makes its claims for the CCUS tax credits for its 2026 and 2027 taxation years.

This response effectively reads the legislation as inferring the words “for any particular installation taxation year” after the words “the applicable rate”, and the reference to “each” installation taxation year as “that” installation taxation year. Interpreting the provision in a textual, contextual and purposive manner, it is eminently logical to conclude that electing to meet the labour requirements (or not) and claim the regular (or reduced) tax credit rate is a year-by-year exercise. In this manner, a taxpayer who cannot (or chooses not to) meet the labour requirements in one year is not disincentivized from trying to meet them (and thereby claim the regular tax credit rate) in other years.

Does a “knowingly/gross negligence” finding in one year affect other years?

As noted, the consequences of being found to have been non-compliant in a manner that reaches the K/GN Standard are severe. The text of s. 127.46(9) reads as follows:

(9) If an incentive claimant has claimed a specified tax credit at the regular tax credit rate in a taxation year (referred to in this subsection as the “claim year”) but has failed to meet the prevailing wage requirements or the apprenticeship requirements for an installation taxation year in respect of that specified tax credit and the Minister determines that the incentive claimant knowingly or in circumstances amounting to gross negligence failed to meet those requirements, then

(a) the incentive claimant is not entitled to the regular tax credit rate, and is entitled to not more than the reduced tax credit rate, for the specified tax credit; and

(b) the incentive claimant is liable to a penalty for the claim year equal to the amount determined by the formula

50 per cent × (A − B)

where

A is the amount of the specified tax credit claimed by the incentive claimant at the regular tax credit rate for the claim year, and
B is the amount that the incentive claimant would have been entitled to claim as a specified tax credit at the reduced tax credit rate for the claim year.

Unlike in paragraph (b) where the penalty is explicitly stated to be “for the claim year”, the disentitlement to the regular tax credit rate in paragraph (a) makes no reference to any particular year. This raises the question of whether denial of the regular tax credit rate applies to more than the particular year in which the K/GN Standard was found to have been met.

Once again, the New CRA Guidance interprets the legislation in a textual, contextual and purposive manner to clarify that the disentitlement to the regular tax credit rate should be read as referring only to “the claim year.” This is contained in the response to Question 5:

Response to Question 5

Assuming that the conditions of subsection 127.46(9) only apply to Canco for its claim for the CCUS tax credit for its 2025 taxation year (not the other claim years), the implications imposed under subsection 127.46(9) will only apply to its 2025 claim year (not the other claim years).

This is demonstrably the right answer, and the certainty it provides is helpful.

III. The labour requirements: Problems and suggestions

A taxpayer claiming clean economy ITCs to which the labour requirements apply has basically two choices:

forego meeting the labour requirements, and claim at the reduced tax credit rate (i.e., for the Clean Technology ITC, at the 20 per cent rate instead of the regular 30 per cent rate); or
decide to meet the labour requirements, invest the time and effort required to pursue compliance with them, and then formally elect to meet them for the year and claim the regular tax credit rate, on the basis that while compliance may not be perfect there are no compliance deficiencies that meet the K/GN Standard, so that the worst-case scenario is entitlement to the regular tax credit rate but possible per diem taxes and/or top-up payments.

As the law presently stands, a taxpayer who knows or has good reason to believe non-compliance exists with some element of the labour requirements and who nonetheless elects to meet them risks a result worse than claiming at the reduced tax credit rate.

Do the existing rules create the optimal incentives?

Some of the most common compliance problems highlight an important policy issue. It is very much in the interests of both taxpayers seeking clean economy ITCs and governments encouraging labour requirements compliance that any deficiencies that taxpayers become aware of be “curable,” in the sense of taxpayers having some avenue for taking corrective steps that both meet the relevant tax policy objectives and are deemed to constitute “compliance” with the labour requirements generally and the compensation element of the prevailing wage requirements specifically. If taxpayers are left in the position of finding compliance deficiencies that they are ready and willing to fix but that either:

they are practically unable to fix, for reasons outside their control; or
if fixed in a substantive sense, do not technically constitute full “compliance” with the labour requirements,

whatever time and effort they have spent trying to comply with the labour requirements is potentially for naught:

if such a taxpayer elects to meet the labour requirements and claims the regular tax credit rate, the danger is that the CRA applies s. 127.46(9) on the basis that the taxpayer did so “knowing” that it did not pay 100 per cent of the full amount required to be the “prevailing wage”, or paid it but in some way not within the legislative definition of “compliance”; and
alternatively, such a taxpayer must absorb the cost of claiming the reduced tax credit rate on the taxpayer’s entire qualifying expenditure for the year.

The problem is that the application of s. 127.46(9) is binary: it either applies to the taxpayer’s entire claim for a particular clean economy ITC in a given year, or it doesn’t apply at all. As a result, a taxpayer who knows, or perhaps merely suspects, that any amount of non-compliance with the labour requirements has occurred and remains unremedied at the time the ITC claims form is completed takes the risk that s. 127.46(9) will apply to their entire clean economy ITC claim for the year. Put simply,

the cost of suffering either a 10 per cent or 15 per cent reduction in the taxpayer’s ITC claim for the year bears no relationship (and may be completely disproportionate) to the degree of labour requirements non-compliance; and
no legislative safety valve exists for a taxpayer who wants to correct a known or suspected compliance deficiency but cannot, for whatever reason.

There is no explicit discretion within the legislation for the CRA to waive or ignore situations where, despite making good-faith efforts to achieve 100 per cent compliance, at the time the taxpayer makes its ITC claim it knows or has very good reason to believe compliance has been less than perfect, e.g., some number of covered workers have been paid something less than the prevailing wage for some number of work days. While a particular CRA auditor ultimately reviewing the claim might exercise such discretion, the consequences of that not happening are so severe as to make it completely impractical to claim the regular tax credit rate and risk s. 127.46(9) applying in the hope of that discretion. Moreover, most clean economy ITC-eligible projects of any size are going to be audited by an accounting firm that will force a taxpayer in such circumstances who claims the regular tax credit rate to report an uncertain tax position or a reserve in their financial statements, which will be completely unacceptable to lenders and other stakeholders. As such, many taxpayers in this position who cannot know with confidence that all labour requirements non-compliance they know of, or they believe is likely to exist, can somehow be remedied will simply forego trying to remediate any non-compliance and just claim at the reduced tax credit rate.

This is a lose-lose outcome for taxpayers and government alike if the result is that no matter how much time and effort the taxpayer has put in towards achieving full compliance, a fairly de minimis amount of known non-compliance can effectively disentitle a taxpayer from millions or tens of millions of dollars of clean economy ITCs, by forcing claims at the reduced tax credit rate. On a larger project, such situations can easily occur, which can in turn incentivize a taxpayer at the outset of a project to not bother incurring the cost and effort of trying to achieve labour requirements compliance at all, and just accept the reduced tax credit rate, a result that benefits no one and does not achieve the policy objectives of the labour requirements.

Suggested legislative improvements

Taxpayers who know or suspect they have a compliance issue and want to fix it deserve to be treated differently from those who don’t care or who make minimal compliance efforts and claim the regular tax credit rate anyway. Viewed within the overall tax policy context of wanting to provide fiscal support to green economy projects while generating well-paying jobs in Canada, it seems unfair, and counterproductive, to deny the regular tax credit rate to taxpayers who become aware of a compliance deficiency before they file their ITC claims and are willing to remedy it, but cannot do so in a way that constitutes compliance within the meaning of s. 127.46.

There are at least two ways in which the labour requirements could usefully be amended to better achieve the government’s underlying tax policy objective of encouraging taxpayers to pursue labour requirements compliance on clean economy projects while providing taxpayers with greater certainty and fairness:

provide a mechanism to remedy known or suspected compliance deficiencies before the time the taxpayer makes its ITC claim for the year that is deemed to bring the taxpayer into labour requirements “compliance”, so as to allow the taxpayer to claim the regular tax credit rate without fear of s. 127.46(9) applying; and
eliminate the all-or-nothing consequences facing taxpayers legitimately trying to address compliance deficiencies, and make the consequences of non-compliance meeting the K/GN Standard proportionate to degree of non-compliance.

As to the first point, effectively what is required is some mechanism whereby a taxpayer who has made reasonable efforts to achieve full compliance and finds itself at a dead end can take action that is deemed to constitute compliance with the prevailing wage requirements. For example, the U.S. version of the prevailing wage requirement in 26 CFR § 1.45-7 includes such relief in some cases. Specifically, the following rule in § 1.45-7(c)(1)(v) applies:

Special rule for laborers and mechanics who cannot be located. A taxpayer will be deemed to have paid a correction payment, under this paragraph (c)(1), to a laborer or mechanic who cannot be located if the taxpayer can establish that correction payments have been made. A taxpayer may establish that correction payments have been made by demonstrating compliance with the applicable State unclaimed property law and all Federal and State withholding and information reporting requirements with respect to the payments.

In its simplest form, such a mechanism could be an addition or appendix to the ITC claims form whereby the taxpayer self-reports any known compliance concerns with the compensation element of the prevailing wage requirements, much like a disclosure schedule for representations and warranties in a share purchase agreement operates. If considered necessary or desired, such mechanism could include paying estimated amounts to the CRA or a trusted third party, although this may not really be needed given the existing consequences for “normal” non-compliance. In either case, self-reported compliance concerns would be deemed to be outside the scope of s. 127.46(9), and the “normal” sanctions for non-compliance (i.e., the s. 127.46(6) per diem tax and s. 127.46(11) obligation to pay top-up amounts) could be made applicable. This seems like a simple and costless way in which the government can incentivize taxpayers to do the right thing and pursue labour requirements compliance without penalizing those who have taken reasonable steps towards compliance (the attestation element of the prevailing wage requirement already establishes this baseline) but are aware of potential deficiencies.

Such action would go a long way towards relieving the risk of disproportionately adverse consequences from conduct that is found to reach the K/GN Standard. However, the binary, all-or-nothing nature of s. 127.46(9) remains potentially draconian, and this seems needlessly punitive. Gross negligence penalties in s. 163(2) based on the same K/GN Standard apply on an issue-by-issue basis, rather than to the taxpayer’s entire tax owing for the year. Some consideration could usefully be given to limiting the scope of s. 127.46(9) to something more proportionate to the scope of the taxpayer’s knowing or grossly negligent conduct, either by expressly amending the consequences of that provision to that effect or at least creating a statutory authority within its text to give the CRA discretion to reduce its impact in appropriate circumstances. Not all conduct meeting the K/GN Standard is equal and ensuring that the crime fits the punishment is a reasonable and appropriate result that does not dilute the deterrence effect on those who are truly bad actors seeking to take advantage of a relatively generous tax expenditure program.