Alberta Court Of Appeal Finds Alberta Local Beer Preferences Unconstitutional

In this Update

On December 2, 2019, the Alberta Court of Appeal issued a decision rendering unconstitutional portions of Alberta government mark-ups charged on the sale of beer to retailers. This decision applies the Supreme Court of Canada's recent Comeau decision to strike down discriminatory government actions that violate interprovincial trade provisions under the Constitution Act, 1867 by favouring local and Western Canadian producers. The Court's analysis of whether the mark-ups are a tax is discussed. Overview

Alberta has had a longstanding desire to protect and promote its local brewing industry. In 2015, Alberta enacted a mark-up regime that favoured brewers based in the provinces of the New West Partnership (Alberta, B.C., and Saskatchewan). The mark-up regime was implemented through the Alberta Gaming, Liquor and Cannabis Commission (the Commission).1 On January 18, 2016, the 2015 Mark-up was enjoined on the basis that the court found that the applicants had made out an arguable case that it was unconstitutional and that irreparable harm was likely to occur. Following that decision, Alberta enacted a new mark-up regime that applied equally to all brewers, introducing a grant program that favoured only Alberta brewers at the same time. Both the 2015 and the 2016 regimes were held to be unconstitutional by the Court of Queen's Bench.2

Four issues were raised: (1) whether the mark-ups violate section 121 of the Constitution Act, 1867; (2) whether the mark-ups are a tax and violate section 53 of the Constitution Act, 1867; (3) whether Steam Whistle and Great Western (the Producers) are entitled to restitution; and (4) the scope of the declarations of constitutional invalidity.

The Court of Appeal upheld the trial judge's decision which concluded that the higher mark-up on beer imported from other provinces was an unconstitutional interprovincial trade barrier that violated section 121 of the Constitution Act, 1867. The mark-ups were found to be a "proprietary charge" and not a tax, and therefore did not violate section 53 of the Constitution Act, 1867. As a result, the Producers were not entitled to restitution under the Kingstreet analysis, which only allows for restitution for money paid under an invalid tax, not other invalid government charges.

This decision will require all provinces to reconsider the manner in which they support local businesses. On one hand, it may serve as a limit to provinces' ability to protect nascent industries, on the other, it has the potential to...