Filtered Insights

U.S. steel and aluminum tariffs update: Relief, more of the same or more extreme industrial policy?

Wed, 13 May 2026 00:00:00 Z

The world of tariffs used to be sedate and boring. There were times in the Times Before when glaciers appeared more agile than trade policy. Those days, of course, are gone. We can hope not for ever; we can look into the horizon and pine for a Return to the Mundane. For now, change is the order of the day. Rapid, dizzying, change – it’s difficult to keep up; even more so to inform.

And so here we are, with some delay, yet again talking steel and aluminum, yet again talking section 232; yet again talking changes in the US tariff structure.

April 23, 2026.

On that day, the United States Department of Commerce (the DOC) issued a notice setting out procedures under which certain Canadian and Mexican producers of steel and aluminum may seek partial reductions of Section 232 tariffs.

Relief from what?

From changes introduced earlier in April resulting in an expansion of the Section 232 regime earlier in the month.

The new procedures do not restore country‑wide exemptions or roll back the April 2 tariff increases. Instead, they introduce a targeted, discretionary process that links tariff relief to commitments to expand or establish production capacity in the United States. There is that.

Reminder: What was the regime after the Times Before but before the recent changes?

In the Times Before there were no “national security” tariffs on steel and aluminum. There was a global trading order with “bound tariffs”, negotiated and agreed under the umbrella of the World Trade Organization and subject to dispute settlement and multilateral monitoring. In North America, we had the North American Free Trade Agreement that actually prohibited increasing ordinary tariffs.

In 2018, the United States impose wide-ranging tariffs on steel and aluminum under the guise of “national security” interests. And then Canada, the United States, and Mexico negotiated a new free trade agreement imaginatively called the “Canada-United States-Mexico Agreement”, or “CUSMA” for short, which generally prohibited the imposition of new ordinary tariffs. CUSMA entered into force in 2020.

All good thing and all … but we’re going too fast.

When they were first introduced in 2018, the Section 232 tariffs were applied primarily to base metal products, such as steel slabs or aluminum ingots, and a limited set of downstream derivative articles.

In many cases, duties were assessed only on the value of the metal content incorporated into a finished good.

The regime was tightened in 2025. How? Well, through higher tariff rates and the elimination of many exemptions. On top of all of that, a stakeholder‑driven derivative inclusion process allowed interested parties to request that additional downstream products be brought within the scope of the Section 232 tariffs over time.

“Sometimes it snows in April”

The April 2 Proclamation introduced several structural changes.

First, Section 232 tariffs now apply to the full customs value of covered products, regardless of the proportion of steel, aluminum, or copper they contain. This change substantially increases effective tariffs on many finished and semi‑finished goods.

Second, tariff rates were recalibrated. A 50 per cent ad valorem tariff now applies to most steel and aluminum articles and certain copper products, while other specified copper articles and selected derivatives are subject to 25 per cent tariffs. Limited preferential treatment remains for articles made entirely with U.S.‑origin metals and, in narrow circumstances, UK‑origin products.

Third, the derivatives inclusion process was eliminated – but not derivative inclusion as such. Rather, authority to expand coverage is now centralized, with the DOC and the U.S. Trade Representative empowered to add products on a rolling basis without stakeholder petitions. This could well become the subject of public choice dissertations many years hence.

What now?

That brings us to April 23, 2026, and the DOC notice.

Good news! Canadian and Mexican steel and aluminum producers may apply for reductions of applicable Section 232 duties, subject to several important limitations.

Now, relief is not automatic and must be requested through a formal application process.

On the one hand, it is conditional. Applicants must commit to making investments that result in new or expanded steel or aluminum production capacity in the United States.

On the other hand, there's a catch. Even where relief is granted, tariffs may not be reduced below 25 per cent, preserving a substantial residual duty burden.

On the third hand – indulge us – the mechanism is also narrowly targeted. It is principally directed at CUSMA‑qualifying supply chains, with a particular focus on producers supplying U.S. automotive and medium‑ and heavy‑duty vehicle manufacturers (MHDVs). The process does not represent a general reduction in tariffs and is unlikely to be available for many exporters whose products fall outside these supply chains.

What does that mean, specifically?

The following features are required for steel or aluminum producers to be eligible for relief:

operate production facilities in Canada or Mexico;
supply, directly or indirectly, U.S. manufacturers of automobiles, automobile parts, medium‑ and heavy‑duty vehicles (MHDVs), or MHDV parts; and
commit to new U.S. production capacity for primary steel or primary aluminum used in key products (automobiles, automobile parts, MHDVs, and MHDV parts).

In addition, only imports that:

qualify for CUSMA preferential treatment; and
were melted and poured (for steel) or smelted and cast (for aluminum) in Canada or Mexico

are eligible for relief.

The DOC may reduce existing Section 232 steel and aluminum tariffs by up to half for qualifying imports tied to new U.S. production commitments. Any adjusted tariff, however, may not fall below 25 percent and is limited to quantities corresponding to the producer’s newly committed U.S. production capacity. The relief is also granted for a fixed period of time as determined by the DOC, with its duration tied to the scope of the project, the applicant’s progress against committed milestones, and the national‑security benefits associated with the investment.

Applications may be submitted project‑by‑project, starting April 23, 2026. The Required documentation (certified by a senior officer) primarily includes:

proof of eligibility and supply relationships;
detailed project description and investment plan;
production details (NAICS, HTSUS, capacity, supported U.S. products);
project costs, suppliers, contractors, and raw materials;
mandatory milestones (land purchase, construction, equipment, first production, etc.);
a project management plan and quarterly reporting commitment; and
designation of a single importer of record.

The DOC reviews each application to make sure it is complete, credible, and consistent with the program requirements. Where an application is approved, the DOC notifies U.S. Customs and Border Protection of the company’s eligibility, the effective start date for the tariff adjustment, the applicable quarterly volume limits, and the authorized importer of record. Eligible imports may then enter the United States at a reduced tariff rate, subject to those quarterly caps.

Once approved, companies are required to submit quarterly reports to the DOC on the shipment information for any imports benefiting from the adjustment, including the required melt‑and‑pour or smelt‑and‑cast certifications.

If a company fails to substantially meet its committed project milestones, The DOC may suspend or terminate the tariff relief. In such cases, previously imported goods may be liquidated or reliquidated at the full Section 232 tariff rates. However, where a company brings its project back into compliance and resumes meeting its commitments, tariff relief may be reinstated.

What next?

For importers and exporters, the introduction of a conditional relief mechanism does little to soften the immediate impact of the revised regime. Products previously (prior to April 2, 2026) exposed to limited tariffs may now face substantial duties assessed on full product value, while relief, where available, comes with investment commitments and a high residual tariff floor.

Downstream and fabricated products, including those outside traditional metals chapters of the tariff schedule, remain at heightened risk. Supply chain strategies based on metal content thresholds are unlikely to mitigate exposure. Additionally, increased emphasis on origin tracing, smelting and casting documentation, and CUSMA qualification is expected as enforcement tightens.

The Section 232 regime remains dynamic. While the April 23 notice introduces a narrow path for tariff reduction in specific circumstances, U.S. authorities retain broad discretion to expand coverage further or recalibrate relief mechanisms. For businesses engaged in cross‑border trade involving steel, aluminum, or copper, whether directly or through finished goods, these developments underscore the importance of proactive compliance, supply chain planning, and strategic assessment of long‑term tariff risk.

BLG is there to help

BLG’s International Trade and Investment group continues to monitor the situation closely. If you have any questions about the tariff developments impacting your organization, please reach out to one of our lawyers below. Our multidisciplinary team can help you navigate the new regulatory landscape, maximize opportunities, and ensure compliance across all major industries.

Québec’s AMF lays out its expectations for the use of AI

Tue, 12 May 2026 00:00:00 Z

The Autorité des marchés financiers (AMF) has recently published its Guideline for the Use of Artificial Intelligence (the Guideline) aimed at the financial sector, which will come into force in about a year, on May 1, 2027.

This Guideline is the first to be issued by a provincial financial sector regulator on the use of artificial intelligence. It adds to the growing number of regulatory expectations from other financial sector regulators, including Guideline E-23 from the Office of the Superintendent of Financial Institutions and Staff Notice and Consultation 11-348 from the Canadian Securities Administrators (CSA).

The Guideline is primarily aimed at ensuring that financial institutions establish governance and risk management mechanisms for artificial intelligence systems (AISs) throughout their entire lifecycle.

Who does this Guideline apply to?

The Guideline applies to all financial institutions that use AISs and are subject to supervision and oversight by the AMF. This includes authorized insurers, financial services cooperatives, authorized trust companies and other authorized deposit institutions in Québec.

The Guideline defines an AIS as:

a machine-based system that, for explicit or implicit objectives, infers, from the input it receives, how to generate outputs such as predictions, content, recommendations, or decisions that can influence physical or virtual environments.

It also notes that “different AISs vary in their levels of autonomy and adaptiveness after deployment.”

This definition is based on internationally recognized governance and risk management principles, and draws substantially on the definition developed by the OECD, as well as CSA Staff Notice and Consultation 11-348.

What are the AMF’s key expectations?

Governance

Under the Guideline, the board of directors plays a crucial role in sound AI governance. The board is expected to proactively:

ensure that senior management promotes a corporate culture focused on the responsible use of AI;
be regularly apprised of trends, risks and changes arising from AISs that could alter the institution’s risk profile; and
ensure that the collective competency of the board is sufficient to understand the risks, particularly when the AISs are used to carry out critical operations.

Senior management, meanwhile, must ensure adequate oversight of AISs (including governance, risk management and control, AIS knowledge and validation adapted to the technologies in use).

The AMF also expects that a member of senior management will be accountable for all AISs within the institution. It further specifies that AISs must be under the responsibility of the model owners throughout their entire lifecycle. Model owners are the individuals or teams who select the model to be used and coordinate its development, implementation and deployment.

Risk management

The AMF expects financial institutions to rigorously manage material risks associated with AIS use across the institution so that it has a holistic view of such risks.

In this regard, the Model Risk Management Guideline also requires institutions to establish and maintain a centralized AIS inventory. AIS-related models must be subject to an overall risk assessment, the results of which must be reported periodically to key stakeholders, including model owners, managers of teams using or validating them, and senior management.

Risks to consider include non-compliance with personal information protection legislation when using client or employee information, bias or discrimination in automated decisions affecting clients’ rights and obligations, and misalignment between the institution’s ethical positions and AIS outcomes.

The Guideline also emphasizes that financial institutions must select and use AISs that provide significant support in meeting the financial institution’s needs and produce reliable outputs suited to their intended use. This applies to the data, systems and technological tools used by financial institutions for support in meeting operational needs, making decisions or assessing risks.

Risk assessment

Financial institutions must manage AISs using a risk-based classification. Each AIS must be assigned a risk rating and updated regularly. The risk assessment process described in the Guideline resembles the data risk matrix exercises that many institutions have conducted in recent years.

The Guideline sets out several factors to consider in the risk assessment, including an estimate of the potential operational impact, the level of the AIS’s autonomy and the associated compliance risks. A provisional risk rating should be assigned during the initial assessment and may be revised once complete information is available.

This risk-based approach should allow for adjustments to validation and documentation activities, the requisite level of approval, the nature and frequency of monitoring activities, and the risk rating review schedule. Commensurate with the institution’s risk appetite, risk ratings should also be used to adjust the constraints placed on AISs, the level of monitoring, and the controls and mitigating measures for managing residual risks.

That said, institutions retain discretion in determining risk ratings, which are intended to be an internal management tool.

AIS lifecycle

Financial institutions must establish governance mechanisms and documents, such as policies, processes, procedures and controls, to support the expectations for each stage of an AIS’s lifecycle in a manner commensurate with the risk rating. In particular, they must:

document their organizational needs and rationale for using an AIS (and reassess when the AIS needs to be revalidated);
ensure the quality of the data used, both during training and while the AIS is in use (primary and secondary data, private and public data, real and synthetic data, and structured or unstructured data);
include the AIS’s risk rating and explainability requirements (and, where necessary, cybersecurity targets) in its selection criteria. These requirements may be adjusted based on the AIS’s intended purpose, its level of autonomy, applicable regulatory requirements and potential impacts;
conduct assessments tailored to the objectives and risk (e.g., output explainability, cybersecurity, timeliness of methods and review of third-party components);
regulate the use of higher-risk AISs (or those for which the information is incomplete) through mitigating measures and restrictions commensurate with the institution’s risk appetite;
monitor integration, performance and use, and establish standards for risk level-based monitoring.

Finally, when an AIS involves the processing of personal information, the institution must conduct a privacy impact assessment (PIA) in accordance with the requirements of the Act respecting the protection of personal information in the private sector (the Private Sector Act). See our recent publication, Québec’s Private Sector Act: Compliance guide for organizations, for more information.

Fair treatment of clients

The Guideline also addresses fair treatment of clients by reference to the AMF’s Fair Consumer Practices Guideline, and sets out additional expectations tailored to the use of AISs.

In this regard, it emphasizes the importance of identifying and mitigating risks of discrimination and bias. Institutions should develop a list of factors and surrogate variables that may not be used because they would be discriminatory given the intended use of each AIS. They should also communicate such lists to stakeholders in a timely manner.

Transparency

With respect to client communication, institutions should inform clients when they enter into any dynamic method of communication (whether written, audio, video or other) with an AIS and advise them that they can request to speak with an individual acting on behalf of the institution. For example, this requirement could apply to the use of a voice chatbot in a call centre that interacts with clients, answers their questions or handles their requests.

Any content generated with the help of an AIS should be accompanied by a notice to that effect. Finally, where clients are subject to a decision made or recommended by an AIS, the institution should explain the decision in clear and easy-to-understand language.

What are the first steps to ensure compliance?

BLG’s attorneys have prepared a checklist of practical steps to help you meet the AMF’s expectations.

1) AIS inventory

Establish a centralized inventory of all AIS (in production, testing/piloting or development) and keep it updated.
Identify “critical operations” and use cases where an AIS may influence decisions, recommendations or content with significant impact.

2) Governance and accountability

Designate a member of senior management to be accountable for all AISs.
Designate model owners (per AIS) who cover the entire lifecycle.
Ensure that the board of directors is regularly apprised of evolving trends, risks and material changes resulting from the use of AISs that could potentially alter the financial institution’s risk profile.
Identify training needs for the board of directors and senior management regarding the AISs in use and their associated risks, especially when the AIS supports critical operations.

3) Risk management and classification

Identify, document and update the significant risks associated with AISs on an institution-wide basis.
Establish a consistent methodology for assigning a risk rating to each AIS (including a provisional risk rating when information is incomplete).
Schedule periodic reviews of risk ratings and mitigation measures.
Communicate the results of comprehensive risk assessments periodically to key stakeholders (AIS owners, managers and senior management).

4) AIS lifecycle

Document organizational needs and the rationale for using an AIS.
Implement data quality requirements during training and in use (accuracy, bias, relevance, etc.).
Include explainability requirements (and, where necessary, cybersecurity targets) into selection and procurement criteria.
Tailor assessments to the objectives and risk level of each AIS (e.g., output explainability, cybersecurity, timeliness of methods, review of third-party components).
Regulate the use of higher-risk AISs (or those for which the information is incomplete) through mitigating measures and restrictions commensurate with the institution’s risk appetite.

5) Personal information and privacy

Conduct a privacy impact assessment (PIA) when an AIS involves processing personal information, in accordance with applicable regulations.
Regulate access to, retention of, traceability of and deletion of data used by AISs.

What changes were made to the final version of the AMF’s Guideline?

For those familiar with the draft Guideline, the BLG team has identified the most significant changes made in the final version and compiled them in a Q&A format.

Does the Guideline apply to all uses of AISs?

Yes. The AMF’s new Guideline explicitly states that it now applies to any use of AISs, including situations that do not involve the handling of client records.

What expectations have been removed compared to the draft Guideline?

Risk management function: The AMF previously stated that it expected the risk management function to play a role in AIS validation, the development of a risk taxonomy and the management of sources of risk. In the final version, however, the AMF does not assign a specific role to this function.
Internal audit: The AMF no longer refers to internal audit in the final version of the Guideline.
Web scraping: The previous version stated that secondary data obtained through web scraping had to adversely affect an AIS’s risk rating. However, all references to web scraping have been removed from the Guideline.
Ongoing monitoring: While maintaining the general expectation of ongoing monitoring, the AMF has removed the list of specific elements that should be subject to ongoing AIS monitoring.

What new expectations were added?

Monitoring standards: The AMF states that it now expects standards for risk level-based monitoring of AISs to be established. These monitoring standards will serve as guideposts for the monitoring of AISs with features that present unique challenges, such as autonomous AISs or AISs with dynamically adjusted models.

What expectations were modified?

Validation process: The AMF now recommends conducting different assessments for the AIS validation process, including an explainability assessment, an analysis of the timeliness of AIS-related processes and a review of AIS components sourced from a third party. Assessments of bias analysis and correction, as well as discrimination analysis, have been removed.

The authors would like to thank Marianne Bellavance, student-at-law, for her contributions to this article.

Canada’s proposed Financial Crimes Agency: A new era of financial crime enforcement

Tue, 12 May 2026 00:00:00 Z

On April 27, 2026, the federal government introduced Bill C-29, An Act to establish the Financial Crimes Agency. If enacted, the legislation will create a new, stand alone federal law enforcement body dedicated to investigate complex financial crimes, contribute to the recovery of the proceeds of crime, and participate in international efforts to counter financial crimes.

The proposal reflects growing concern that existing enforcement frameworks have struggled to keep pace with increasingly sophisticated, transnational, and technology driven financial misconduct.

Overview

The introduction of Bill C-29 is part of the federal government’s broader effort to disrupt money laundering networks, combat organized crime and online fraud, and strengthen the recovery of illicit assets, with a stated focus on “serious and complex financial crimes”.

Scope: The Bill defines “financial crime” broadly to capture any offence involving financial assets – including digital assets – or financial services or markets. This includes, but is not limited to, money laundering, serious fraud, capital markets misconduct, sanctions related offences and crimes involving proceeds of crime. It also includes any conduct that adversely affects or has the potential to adversely affect the security or integrity of Canada’s economy or financial system, or of any financial market in Canada.

Structure: The Financial Crimes Agency (the FCA) would operate under the oversight of the Minister of Finance and be led by a Commissioner, who would be a peace officer throughout Canada. Employees of the FCA may be designated as investigations officers or police officers, depending on their role.

Investigative powers: The FCA would be authorized to initiate investigations on its own initiative or at the request of domestic or foreign law enforcement bodies and public agencies. The Attorney General of Canada would retain authority to prosecute proceedings arising from FCA investigations, preserving the traditional separation between investigative and prosecutorial functions within the Canadian criminal justice system.

The Bill also contemplates circumstances in which the federal Attorney General may assert jurisdiction over matters investigated by the FCA, particularly where the underlying conduct is national or transnational in scope.

Collaboration: Bill C-29 contemplates that the FCA will have the authority to enter into contracts, agreements or other arrangements to facilitate information-sharing or cooperation in the investigation of financial crimes. The Bill also proposes amendments to several statutes, which will facilitate the sharing of information with the FCA in support of its investigative and enforcement mandate.

The proposed FCA shares some similarities with the Canada Revenue Agency’s Criminal Investigations Program (CIP), a specialized enforcement function responsible for investigating serious tax evasion and tax fraud. As with the Canada Revenue Agency’s criminal investigations, the FCA is expected to focus on matters with systemic importance and strong deterrent value, rather than routine non compliance.

Practical impact

Although Bill C-29 remains at an early stage of the legislative process, its introduction signals a clear policy shift toward more centralized, better resourced and more assertive enforcement of financial crime in Canada. This will materially change the landscape for the investigation and enforcement of financial crime in Canada. Likely impacts include:

increased investigative activity in areas such as fraud, money laundering, sanctions compliance, corruption, and financial market misconduct;
earlier escalation to criminal investigations, including in matters that may previously have proceeded through regulatory, administrative or civil channels; and
greater coordination among law enforcement and regulatory bodies, including FINTRAC, securities regulators, the RCMP and international partners.

As investigative tools expand and coordination between agencies deepens, organizations operating in regulated, capital markets, financial services, real estate, technology, gaming, cryptocurrency and cross border sectors face materially elevated enforcement risk. Further, as seen in CRA criminal investigations and other regulatory-enforcement contexts, enforcement risk often crystallizes well before charges are contemplated. Initial interactions with investigators, responses to information requests and internal communications can have lasting legal and strategic consequences.

Accordingly, organizations may wish to review their internal controls and reporting mechanisms and ensure that senior management and internal teams understand how to appropriately respond to investigative inquiries and document production requests.

Can provincial courts decide tax matters? Alberta clarifies Income Tax Act jurisdiction

Mon, 11 May 2026 00:00:00 Z

The recent decision of the Court of King’s Bench of Alberta in 2585929 Alberta Ltd (Re), 2026 ABKB 75 discusses when the jurisdiction of provincial courts can extend to matters relating to the Income Tax Act.

Key takeaways

The Tax Court of Canada has the exclusive jurisdiction to hear and determine references and appeals to the Court on matters arising under the Income Tax Act.
Provincial courts can interpret provisions of the Income Tax Act if it is necessary to decide an issue properly before the Court but cannot directly decide tax matters.

Case overview and background facts

A group of related companies (AMI) experiencing financial difficulties filed a notice of intention to make a proposal under the Bankruptcy and Insolvency Act to restructure their liabilities.

The Court issued a reverse vesting order, which allows a distressed company to transfer unwanted assets and liabilities to a new corporation (ResidualCo). This allows the distressed company to be acquired and continue its business, while ResidualCo is then usually wound down or makes an assignment into bankruptcy.

AMI transferred assets and liabilities to ResidualCo in exchange for promissory notes owing from AMI to ResidualCo. Subsequently, all the shareholders of AMI exchanged their shares for shares of ResidualCo. The result is that the creditors and shareholders of AMI become the creditors and shareholders of ResidualCo.

The shares of AMI owned by ResidualCo were then cancelled in contemplation of AMI being purchased by a third party. The reverse vesting order states that these shares were cancelled for no consideration to ResidualCo.

AMI was then acquired for almost $22 million, received by ResidualCo (the distributable proceeds) and distributed to the former creditors and shareholders of AMI (now the creditors and shareholders of ResidualCo).

Issues

The fundamental issue underlying this case is that ResidualCo wanted clarification as to the tax consequences of the reverse vesting order. Specifically, ResidualCo sought a declaration for an interpretation of the reverse vesting order under which the distributable proceeds were received by ResidualCo not directly as taxable income, but rather, as proceeds of disposition of the AMI shares that were cancelled.

Such an interpretation of the reverse vesting order would create favourable tax outcomes for ResidualCo but would appear to be in conflict with the plain reading of the reverse vesting order that the shares of AMI owned by ResidualCo were cancelled for no consideration.

ResidualCo also sought declarations related to their tax analysis. Specifically, ResidualCo sought advice and direction on how to determine the appropriate holdback amounts when distributing funds to equity claimants under the bankruptcy proceeding.

The Court was concerned with the threshold question of whether the Court of King’s Bench of Alberta had the jurisdiction to decide such matters.

Decision summary

In relation to the declaratory relief sought by ResidualCo, Justice Barbara Johnston ultimately concluded that the Court of King’s Bench of Alberta:

had the jurisdiction to grant such relief regarding the interpretation of the reverse vesting order, but ultimately declined to grant it; and
did not have the jurisdiction to grant such relief regarding the direct tax questions posed by ResidualCo.

The Tax Court Act gives the Tax Court of Canada the exclusive jurisdiction to hear and determine references and appeals on matters arising under the Income Tax Act. However, Justice Johnston noted that there was “no extant reference or appeal” in this case. No notice of assessment had been issued, and no return had been filed for ResidualCo. On this basis, the Court distinguishes several cases in which provincial courts declined jurisdiction and refused to provide declaratory relief where tax matters were at issue.

The Court fundamentally characterized ResidualCo’s application as applying to the Court for an interpretation of the reverse vesting order, rather than for a direct determination of tax issues. On this basis, the Court found that the Tax Court did not have exclusive jurisdiction and that the Court did have the jurisdiction to grant the declaration.

However, the Court declined to grant the declaration for the following three reasons:

Evidence: There was a lack of evidence that the parties intended for the reverse vesting order to be interpreted in the manner now put forth by ResidualCo.
Public interest: The Court raised concerns that declaring an interpretation correct in advance of filing tax returns may not be in the public interest (e.g. because it may result in provincial courts doing the specialized work of the CRA and Tax Court in an unsystematic manner and lead to taxpayer confusion).
Timing: The Court raised concerns about the timing of the application. Professional advisers were engaged in the reverse vesting order structure, but this application now comes almost two years after the reverse vesting order was issued, with the applicant now seeking this declaration which essentially reads in language that was not argued when the reverse vesting order was initially granted.

The Court declined to grant the declaration related to ResidualCo’s tax analysis on the basis that it did not have the jurisdiction to do so. ResidualCo wanted the Court to confirm issues such as whether certain shares are taxable Canadian property, and what the paid-up capital of those shares would be for income tax purposes. Ultimately, these determinations are not within the jurisdiction of the Court of King’s Bench of Alberta. The Court stated that to make such determinations would be, in effect, an advance tax determination.

Provincial courts can interpret provisions of the Income Tax Act if it is necessary to decide an issue properly before the Court, but in seeking these specific declarations, ResidualCo was instead squarely asking the Court of King’s Bench of Alberta to decide a tax issue.

Implications

This decision leaves open the possibility that a taxpayer could successfully obtain declaratory relief from a provincial court regarding the tax consequences of an order issued by a Court where the facts are suitably on the taxpayer’s side (e.g. better evidence, timing, and public interest considerations). This may lead to litigants attempting to seek tax advice from provincial judges by seeking such declaratory relief and framing such attempts as a necessary corollary of an issue “properly” before the Court.

If such relief were granted in this case, it would have directly determined the figures used on ResidualCo’s tax returns. Justice Johnston agreed that ResidualCo in effect sought to “have the court declare their interpretation of the [reverse vesting order] correct in order to assert a resulting tax consequence”. In such cases, it would create jurisprudential clarity if provincial courts would simply decline jurisdiction. However, it would also restrict the flexibility for provincial court judges to deal with complex fact patterns, especially in areas which commonly interface with tax issues (such as bankruptcy proceedings).

Given the existing jurisdictional muddiness between the Tax Court and the Federal Court, a clearer and more principled doctrine may be required to avoid further confusion for both taxpayers and civil litigants in provincial court.

No sponsor, no problem: TSXV drops sponsor requirement for listing transactions

Thu, 07 May 2026 00:00:00 Z

The TSX Venture Exchange (TSXV) has removed its longstanding requirement for issuers to engage a sponsor in connection with listing transactions effective March 31, 2026. Previously, sponsors would conduct due diligence and provide a report to the TSXV as part of its review process. The change affects transactions such as reverse takeovers, qualifying transactions and direct listings.

What you need to know

The TSXV has eliminated its requirement for issuers to engage a sponsor in connection with listing transactions, effective March 31, 2026.
TSXV Policy 2.2 and all related sponsorship forms and guidance have been removed from the TSXV Corporate Finance Manual.
Issuers are no longer required to prepare or file a sponsor report as part of the TSXV review process.
The change is expected to reduce transaction costs and simplify execution for certain types of transactions.
The TSXV will continue to review transactions and disclosure and may request additional information or supporting materials as part of its process.

Background

Under the prior TSXV framework, a sponsor (typically an investment dealer) was required for many new listing applications on the TSXV, including in connection with reverse takeovers, qualifying transactions and changes of business. In practice, the sponsor acted as an independent diligence gatekeeper for the TSXV. The sponsor’s role typically involved, among other things:

Conducting a comprehensive due diligence review of the issuer and the issuer’s business, including a review and assessment of its business plan and the overall suitability of the issuer for listing and compliance with TSXV requirements;
A review and assessment of the directors and management of the issuer and their compliance with exchange requirements and continuous disclosure obligations pursuant to applicable securities laws;
An assessment of the proposed transaction and the consideration proposed to be paid and/or issued under the transaction, together with an assessment as to whether such consideration and the share structure would be reasonable; and
An assessment of the working capital of the issuer and whether the issuer will have sufficient funds to fund operations.

The sponsor would prepare and file a Sponsor Report which summarized the sponsor’s diligence, identified deficiencies or concerns, and provided a recommendation to the TSXV. The process was iterative and often involved multiple rounds of comments and follow-ups with the TSXV, the issuer and its advisors. As a result, sponsorship could add meaningful cost, timing and coordination complexity to a transaction.

Although the requirement remained in place until March 31, 2026, the TSXV had signaled for some time that it intended to move away from the requirement. In a 2016 notice to issuers, the TSXV indicated its intention to eliminate the requirement for sponsorship and, in certain contexts, was already amenable to waiver applications.

Comparison to other exchanges

The TSXV’s removal of the sponsor requirement brings it more closely in line with the Canadian Securities Exchange and Cboe Canada, which both do not require sponsorship and rely on a disclosure-based review model. By contrast, the Toronto Stock Exchange continues to require sponsorship in certain circumstances. In those cases, the sponsor performs a diligence and reporting function like the former TSXV regime.

Practical considerations for issuers

The removal of the sponsor requirement is expected to reduce transaction costs and streamline execution, particularly for those transactions that historically required sponsorship. Issuers will no longer need to prepare sponsor-related deliverables, which should simplify transaction timelines and reduce coordination with third parties. However, issuers should not expect a reduced level of scrutiny. The TSXV continues to exercise broad discretion in its review process and may request additional disclosure or supporting materials where appropriate. In the absence of a formal sponsor, issuers and their advisors may also expect the practical burden of addressing TSXV comments to shift more directly to the issuer and its counsel.

Looking ahead

Market participants will be watching closely to see how the TSXV conducts its review process in practice following the formal elimination of the sponsor requirement, including whether its approach differs from that taken historically in transactions where a waiver would previously have been granted. This change is consistent with the TSXV’s broader efforts to streamline its processes and modernize its framework.

Overhauling EU customs system

Thu, 07 May 2026 00:00:00 Z

The European Union (EU) has agreed on the largest overhaul of its customs system since 1968 (see our Insight in July). While the reforms will be rolled out over time, the direction of travel is already clear: responsibility for customs compliance is increasingly shifting toward e-commerce platforms.

This reform will reshape how goods enter the EU market, with notable implications for international exporters – particularly Canadian businesses.

A fundamental re-think of who bears responsibility

Under the new framework, e-commerce platforms are no longer treated as neutral intermediaries sitting between sellers and consumers. Instead, they will increasingly be treated as “importers for distance sales”, with direct responsibility for customs compliance.

Platforms will be required to report sales to EU consumers through a new, centralised EU Customs Data Hub – often as soon as the transaction takes place. That real-time reporting allows customs authorities to assess risk and intervene before goods even reach the EU border.

This marks a sharp departure from the current model, where responsibility for customs duties and compliance has largely been pushed down the supply chain – to individual consumers.

That model, in the EU’s view, no longer reflects commercial reality.

Centralisation, at last

At the heart of the reform is centralisation.

The EU will establish a new EU Customs Authority (EUCA), based in Lille, France. While national customs authorities will continue to operate and conduct their own national risk analysis, the EUCA introduces EU-level coordination and oversight.

The EUCA will:

Oversee the EU Customs Data Hub;
Conduct EU-wide risk analysis; and
Promote consistent application of customs rules across Member States

In practice, this is expected to mean fewer national divergences, more coordinated enforcement, and increased scrutiny of platforms that show repeated or systematic non-compliance.

One data hub to replace many systems

The EU Customs Data Hub is the operational centrepiece of the reform.

Today’s customs processes rely on fragmented, transaction-based reporting to multiple systems at different stages of importation. That fragmentation has limited authorities’ ability to conduct meaningful, system-wide risk analysis.

The Data Hub is designed to change that. It will provide a single-entry point for customs data, regardless of where goods enter the EU.

The rollout will be phased:

2028: Data Hub operational for e-commerce imports
2031: Extended to other businesses
2034: Becomes the mandatory customs entry point across the EU

As part of a legislative proposal (which has not yet been formally adopted), Member States would also be able to develop their own digital applications to access and use Data Hub information for national customs purposes. To speed up rollout, Member States may choose to entrust the EU Customs Authority with both the finances and the mandate to build these applications. Where that occurs, the EU Customs Authority would develop shared applications for use across all Member States, including through the development of open-source code applications under the EU’s Share and Reuse Framework.

The end of de minimis

If the Data Hub changes how information is collected, the removal of the de minimis threshold changes who pays.

The long-standing exemption from customs duties for parcels valued under €150 will be eliminated. Low-value goods will no longer move through the EU customs system duty-free by default.

To bridge the gap before the Data Hub is fully operational, interim measures will apply:

From July 1, 2026: a €3 customs duty on goods under €150
By Nov. 1, 2026: an additional €2 handling fee per parcel

The intent is clear – address volume and scale, particularly in the e-commerce sector, and level the playing field between online platforms and traditional retailers.

Enforcement has teeth

The reform is not just about new obligations – it is about enforcement.

Member States will be able to impose financial penalties based on the value of goods imported in the preceding year:

1 per cent – 4 per cent for initial infringements
3 per cent – 6 per cent for repeated non-compliance

Authorities may also designate platforms as high-risk operators, withdraw access to simplified customs procedures, or – in cases of systematic non-compliance – temporarily restrict access to the EU market altogether.

Repeated issues across a platform’s seller base are likely to attract particular attention.

What this means for e-commerce operators

While full implementation will stretch well into the next decade, the direction is unmistakable. E-commerce operators importing goods into the EU will be expected to:

Pay or guarantee applicable customs duties at the point of sale;
Ensure the accuracy and completeness of customs data provided by sellers;
Maintain an EU customs presence, either by being established in the EU or by acting through an EU-based representative holding recognised customs status (such as AEO or trust-and-check trader status); and
Ensure compliance with EU product and safety legislation across their platforms

As part of the reform, e-commerce operators will increasingly be required to rely on EU-based representatives holding recognised customs status. Two such designations are central to the new framework: Authorised Economic Operator (AEO) status and trust-and-check trader status.

AEO status is an EU designation for trusted traders that signal a high level of compliance and reliability across the supply chain. Under the Union Customs Code, applications are open to economic operators established within the EU customs territory that can meet the standards set out in Article 39. In practical terms, AEO status is reserved for operators that are able to demonstrate to customs authorities that their customs-related activities are supported by robust processes and controls. Once granted by one Member State, AEO status is recognised by customs authorities across all EU countries.

The reform also introduces a new category of trust-and-check traders, reserved for the most transparent and compliant operators. Businesses in this category are expected to provide, amongst other things, comprehensive information on the movement and compliance of goods. In return, qualifying operators may benefit from simplified customs procedures, particularly in relation to temporary storage and transit.

What is next?

Early-stage obligations, including interim charges, begin in 2026. Implementation will proceed on a phased basis, with major milestones extending through 2034. The legislative text still awaits final legal review and publication, but the policy decisions have been made.

BLG’s International Trade and Investment group continues to monitor these developments closely and is available to assist clients in assessing compliance risks, navigating platform-level obligations, and preparing for the phased implementation of the EU Customs Data Hub.

For more information, please reach out to the key contacts below.

Re-investing in Canada’s sport system: The spring economic update 2026 in context

Fri, 01 May 2026 00:00:00 Z

On April 28, 2026, the Honourable François-Philippe Champagne tabled the federal government’s spring economic update 2026 (Update). The Update included what the government described as a “generational investment” in sport: $755 million over five years and $118 million in ongoing funding to support Canada’s sport system.

The announcement follows comments made by Prime Minister Mark Carney in March 2026, in which he said that the federal government would examine and revamp funding for Canadian athletes, alluding to enhanced support from the grassroots to high-performance sport.

The Update includes new investments for national sport organizations (NSOs), strengthened support for athletes, and funding to promote the hosting of sporting events.

Investments in sport from the playground to the podium

A key investment announced in the Update is the renewed funding for national sport organizations (NSOs). The Update allocates $660 million over five years and $110 million ongoing for NSOs, explicitly noting that federal funding levels have remained largely unchanged since 2005. The Update links this funding increase to growing participation in children and youth nationwide.

The Update also provides $45 million over five years and $8 million ongoing to support athletes training and competing at the highest levels, including enhanced mental health supports linked to “robust safe sport measures and frameworks.”

In addition, the federal government announced $50 million over five years to support the hosting of sporting events in Canada, with funding tied to legacy projects that support communities and grassroots sport after events conclude.

These investments were broadly welcomed across the sport sector as long-overdue reinvestments following years of funding pressures. Athletes characterized the funding as a sign that long-standing concerns about affordability and under-resourcing are being heard and acknowledged.

The Canadian Olympic Committee (COC) and the Canadian Paralympic Committee (CPC) publicly applauded the announcement, describing it as a landmark investment in sport and a turning point for Canada’s sport system, with the potential to strengthen alignment and deliver better support for athletes from grassroots to high performance.

In a jointly released statement, AthletesCAN, the association of Canada’s national team athletes, the COC Athletes’ Commission, and the CPC’s Athletes Commission celebrated the investment, and viewed this as an opportunity to modernize and better align the sport system to serve Canadians more effectively.

Fresh on the heels of the Future of Sport in Canada Commission

These funding announcements come just over a month after the Future of Sport in Canada Commission released its final report in March 2026.

The Commission put forward 98 calls to action to improve safe sport and the sport system in Canada, including calls for urgently increasing funding for NSOs (call to action 81) and increasing support for athletes (call to action 88), as well as continued investments to promote participation in sport and physical activity (call to action 84).

While the scale of investment is significant, key details remain unresolved. It is not yet clear what conditions will attach to additional funding for NSOs, or whether the federal government will adopt the Commission’s call to impose conditions to improve safe sport and the sport system, including the latter’s mandatory adoption and compliance with the Canadian Sport Governance Code and safe sport requirements.

As noted in the Update, these new investments respond to some of the Commission’s findings, while the government signalled that work is ongoing to consider all of the Commission’s calls to action.

What Canada’s spring economic update 2026 means for the sport sector

Beyond immediate relief for NSOs and athletes, the Update signals a dual focus on strengthening high‑performance sport and growing participation.

Notably, NSOs are expected to make changes to their programming to invest in sport at all levels, and encouraged to work with private-sector partners who share the goal of increasing sport participation. This could mean that more Canadians will have access to sport.

The Update also signals heightened expectations for the sport sector. Funding is explicitly tied to the delivery of a “strong and safe sport system,” reinforcing the Commission’s message that safety and governance are not optional add-ons.

Looking ahead

The Update responds to some of the Commission’s most immediate calls to action: increasing funding for NSOs and strengthening direct support for athletes. However, many calls to action on safe sport, governance reform, and broader system transformation remain outstanding.

Whether future budgets and policy decisions build on this initial response will be central to determining whether Canada’s sport system undergoes the deeper transformation envisioned by the Commission.

After Sunrise: Federal approval and CER conditions on the Westcoast Energy expansion

Thu, 30 Apr 2026 00:00:00 Z

Background

Last week, the Canadian federal government approved the Sunrise expansion project, a roughly $4 billion expansion of the Westcoast Energy natural gas pipeline system in British Columbia (Project). The Project consists primarily of new pipeline loops, compressor station upgrades, and associated electrical facilities. The aim was to increase transportation capacity on the existing system and address anticipated capacity shortfalls in southern BC and the U.S. Pacific Northwest. Sunrise, among other things, was planned to respond to liquefied natural gas (LNG) exports from the West Coast.

The Project was subject to a lengthy public hearing before the Commission of the Canada Energy Regulator (CER), which included extensive participation by Indigenous nations, landowners, governments, non-governmental organizations and industry stakeholders.

The CER decision

In January 2026, the CER issued a Commission Report recommending that a certificate be issued authorizing construction and operation of the Project under the Canadian Energy Regulator Act (CER Act). The Commission concluded that the Project is required by present and future public convenience, as well as necessity. However, approval is subject to compliance with 47 binding conditions.

Several aspects of the decision are particularly notable

The Commission found that the Crown’s duty under section 35 of the Constitution Act, 1982 was met through the CER hearing process, supplemental Crown consultation and the conditions. The decision expressly considered the United Nations Declaration on the Rights of Indigenous Peoples Act and recent Federal Court jurisprudence. This reflects the evolving legal framework for Indigenous consultation. Many of the conditions imposed by the Commission required Indigenous participation in construction and post-construction monitoring, as well as ongoing reporting. These conditions reinforce the CER’s role as a lifecycle regulator for projects.

While the Commission granted several exemptions sought by the proponent, it denied a requested exemption from the detailed route process for one power line component citing concerns raised by Indigenous intervenors. This demonstrated that exemptions under section 214 of the CER Act are not automatic and turn on context-specific public interest considerations.

The Commission further found there was a demonstrated need for additional natural gas transportation capacity in northeast British Columbia. This was on the basis of a forecasted supply shortfall on the existing West Coast system beginning later this decade, particularly as LNG export facilities and upstream production expand. Without the Project, the Commission concluded that the system would be unable to reliably meet expected demand. This could result in constrained production and compromised reliability of the energy system.

The Commission emphasized the Project’s substantial economic benefits, including employment and GDP contribution over both the construction and operation phases. The Project is expected to create more than 18,000 jobs, generate approximately $1.7 billion in labour income and contribute over $3.3 billion to GDP nationally. These benefits were considered significant and durable, particularly in northern British Columbia and Indigenous communities.

While acknowledging that the Project would result in adverse environmental effects, the Commission determined that these effects would not be significant after mitigation and the imposition of conditions. The decision relied on a mitigation hierarchy requiring avoidance, minimization, restoration, and offsets (where necessary). Detailed conditions addressed sensitive features such as wetlands, old-growth forests, species at risk and greenhouse gas emissions.

Balancing all factors, the Commission concluded that the Sunrise expansion project was in the Canadian public interest, subject to certain conditions. These conditions were central to the recommendation and reflected the Commission’s view that approval was only justified if accompanied by strong, ongoing oversight.

The Federal Government’s approval of the project

Following receipt of the CER’s report, the Federal Government approved the Sunrise expansion project and directed the issuance of a certificate. In doing so, the government was required to consider the CER’s recommendation, the proposed conditions, and the broader public interest.

The federal approval explicitly relied on the Commission’s conclusion that the Project satisfied the statutory public-interest test under the CER Act. The government accepted the finding that the Project addressed a real and time-sensitive capacity constraint in Canada’s natural gas transportation system. It additionally recognized that the Project would support both domestic supply reliability and access to export markets.

The government also considered the Project’s role in supporting Canada’s broader energy and economic objectives, including enabling upstream production tied to LNG exports. While recognizing that natural gas is a fossil fuel, the approval reflected the Government’s position that natural gas will continue to play a transitional role in Canada’s energy mix, including displacing higher-emission fuels. The Project was therefore seen as compatible with national economic interests.

In granting approval, the government acknowledged the Project’s contribution to greenhouse gas emissions. However, the government also accepted the Commission’s finding that emissions were quantified, manageable and subject to mitigation and monitoring. The Project was approved on the basis that it did not undermine Canada’s climate objectives when assessed alongside federal emissions-reduction policies and the imposed conditions.

Rather than reopening the consultation process, the federal approval relied on the Commission’s conclusion that the duty to consult had been met. Outstanding concerns could be addressed through ongoing accommodation mechanisms that were embedded in the conditions. The government placed particular weight on requirements for Indigenous monitoring, capacity funding, socio-economic participation, and adaptive management. These features were viewed as essential to creating project oversight that is aligned with reconciliation.

Ultimately, the federal government concluded that the benefits of the Project outweighed its burdens and that any concerns were appropriately managed through conditions and ongoing regulatory supervision.

Considerations for future projects

The Sunrise CER report offers important guidance for proponents, Indigenous communities, and intervenors involved in future energy projects regulated at the federal level:

Early and sustained engagement with Indigenous nations and other stakeholders can meaningfully influence project design and regulatory outcomes.
Future projects will need to establish system-wide need using credible demand forecasts and evidence of capacity constraints. Applications are stronger where proponents can explain why existing infrastructure cannot meet anticipated demand.
Decision-makers continue to give weight to employment, GDP contribution, and regional economic impacts. This is especially true where benefits are quantifiable, realistic in scope and supported by enforceable commitments.
Adverse environmental effects, including greenhouse gas emissions and cumulative impacts, do not preclude approval. However, environmental effects must be transparently quantified, mitigated and managed through monitoring over the lifecycle of the project.
Enforceable conditions are increasingly the primary mechanism through which impacts are justified and managed. Proponents should expect detailed conditions governing environmental protection, Indigenous participation and socio-economic outcomes.

BLG lawyers Alan Ross, KC and Logan Hale were counsel for an intervening party on the CER proceeding. If you have any questions about this Insight or would like to discuss any other regulatory concerns, please do not hesitate to reach out to the key contacts below.

Social, family, and affordable housing: Montréal’s new real estate development rules

Thu, 30 Apr 2026 00:00:00 Z

Since April 1, 2021, residential projects of at least 450 m² (about 5 units or more) in Montréal have been subject to the By-law for a Diverse Metropolis (the BDM). The purpose of the BDM was to increase the number of social, family, and affordable housing units in Montréal by requiring developers to either incorporate these types of units into new projects or make a financial contribution.

Now, five years after the BDM was implemented, the City of Montréal has substantially amended the by-law with the Règlement modifiant le Règlement visant à améliorer l’offre en matière de logement social, abordable et familial (20-041-16) (French only) (By-law 20-041-16), which took effect on April 1, 2026.

These amendments significantly simplify the rules and introduce more flexibility to strike a better balance between social diversity objectives and the economic realities of real estate development. But what does that concretely mean for real estate projects?

Changes to the BDM: Smaller scope, fewer financial obligations

By-law 20-041-16 significantly raises the threshold for when the BDM applies. While it previously applied to residential projects larger than 450 m², it now applies only to projects larger than 18,000 m². In other words, as of April 1, 2026, most residential projects are now exempt from the BDM.

By-law 20-041-16 sets out a complex transitional regime for ongoing residential projects based on their stage of completion:

Agreements entered into under the BDM since Jan. 1, 2026, can be amended to adjust financial contributions and guarantees, and any excess amounts paid will be reimbursed.
Residential projects of 18,000 m² or less for which the City of Montréal issued a building permit before Feb. 16, 2026 are still governed by existing agreements, and certain pre-amendment provisions of the BDM still apply. However, provided that the residential floor area remains 18,000 m² or less, no additional requirements may be imposed if the residential floor area, number of units, or project location are changed. In addition, affordable housing commitments cannot be withdrawn, nor can guarantees be released. Financial contributions must also be paid.
If an agreement has been entered into for a project of 18,000 m² or less but no permit was issued before Feb. 16, 2026, the owner of the residential project site can, until May 31, 2026, notify the City in writing that the agreement remains valid and enforceable. If such notice is not issued, or if the owner wishes to terminate the agreement and notifies the City thereof in writing, the agreement will be terminated. The City will then take the necessary next steps (for instance, reimbursing any financial contributions or reconveying the property).
If no building permit was issued before Feb. 16, 2026, for a residential project that is subject to an agreement and larger than 18,000 m², the City will reimburse any financial contributions already made and, where applicable, reconvey the units intended as affordable housing. However, if a permit has been issued, no refund will be provided, and the financial contribution must be paid for that permit.

Once an agreement sets the financial contributions payable instead of building social, family, or affordable housing, those amounts are no longer indexed annually. This means, for instance, that the financial contribution specified in an agreement entered into since Jan. 1, 2025, can be reduced, but not increased. If a developer has already paid an amount higher than specified, the surplus will be refunded.

Finally, By-law 20-041-16 eliminates the separate category of affordable housing, which now falls into the category of off-market housing. Affordable housing commitments may therefore be withdrawn from existing agreements, and any financial contributions already paid may be claimed under certain conditions.

The requirements for affordable housing and social housing have now been consolidated. Twenty per cent of the residential floor plan for private-sector residential projects subject to the amended BDM must be set aside for off-market housing. This new rule came into effect on April 1, 2026, and should not affect existing agreements, except where transitional provisions allow for amendments.

How Montréal’s new amendments to the BDM affect developers

Overall, these recent amendments to the BDM aim to encourage residential development and facilitate partnerships between private companies and non-profit organizations. By reducing the financial burden on developers, the City of Montréal aims to make residential projects more affordable.

Repealing the section on affordable housing offers greater flexibility for future real estate projects, encouraging developers to build off-market housing units rather than simply taking the financial hit.

The 2026 amendments to the BDM also help developers meet the BDM’s social diversity objectives by loosening funding requirements and giving developers more flexibility in financing their projects to encourage the construction of off-market housing.

Finally, by capping and fixing financial contribution requirements, the new BDM seeks to reinvigorate Montréal’s real estate market, especially for smaller projects which are no longer subject to the BDM.

BLG can help

If you have any questions about how these regulatory changes will be implemented or how they might affect your projects, the Municipal Law Group at our Montréal office can help you make the most of this new framework.

The authors would like to thank Blanche Proulx for her contributions to this article.

Misrepresentation of academic qualifications is just cause

Thu, 30 Apr 2026 00:00:00 Z

The Alberta Court of King’s Bench recently released its decision in Tudor v Accurate Screen Ltd., 2026 ABKB 237 (Tudor v Accurate). In the decision, Justice Yamauchi dismissed Mr. Tudor’s claim against his former employer Accurate Screen for wrongful dismissal and held that Accurate Screen had just cause to terminate the employment relationship after it had discovered an intentional misrepresentation of academic qualifications Mr. Tudor’s resume. Justice Yamauchi held that “Embellishing one’s academic qualifications is not a mere error in judgment. It goes to the very heart of one’s moral compass and ultimately their abilities.”

The facts

In March of 2023, Accurate Screen issued a job posting for the role of Vice President of Business Development. The job posting stated that an undergraduate degree in Business Administration, or a related field, was required and ideally, an applicant would also possess an MBA. After seeing the job posting, Mr. Tudor submitted a resume. On that resume, Mr. Tudor stated that he was currently in the process of completing an MBA at the University of McGill.

At the time Mr. Tudor submitted the resume to Accurate Screen, he did not have an undergraduate degree in business administration. Further, despite representing that he would be completing an MBA program in November 2023, at the time, Mr. Tudor was not enrolled in any MBA courses, he was not in the process of completing any MBA courses, and he had not taken any MBA courses. Mr. Tudor had only made an online account with the University of McGill by registering as a customer.

During his employment Mr. Tudor was asked to work on a forecasting project, which required the use of statistical and quantitative analysis. During Mr. Tudor’s work on the forecasting project, Accurate Screen began to have concerns regarding Mr. Tudor’s abilities related to statistical and quantitative analysis.

As a result, Accurate Screen’s President began to investigate Mr. Tudor’s education. This involved several meetings, during one of which, Mr. Tudor told Accurate screen’s president Mr. Hilsenteger that he had taken “a couple of courses, a couple of years ago”. This was also untrue.

As a result, Accurate Screen terminated Mr. Tudor with cause.

The decision

In assessing the nature and extent of the misconduct, Justice Yamauchi determined Mr. Tudor knowingly falsified his employment application with the express intention of deceiving his soon to be employer, Accurate Screen. Justice Yamauchi stated that “At the time he penned the resume, Mr. Tudor was not enrolled in any MBA courses, he was not in the process of completing any MBA courses, he had not taken any MBA courses, and he had not even applied for entry into an MBA programme. The representation in the Resume was not an innocent misrepresentation.”

In considering the surrounding circumstances, Justice Yamauchi determined that an executive level employee must be patently honest with their employer. Mr. Tudor was not. As a secondary consideration, Justice Yamauchi determined that if Mr. Tudor had the educational qualifications he held himself out to have, he would have possessed the skills to complete the forecasting project that had been assigned to him.

When assessing whether termination was a proportionate response, Justice Yamauchi rejected Mr. Tudor’s argument that Accurate Screen should have conducted a deep dive into Mr. Tudor’s qualifications. He also ruled that further training would not be the answer to a lack of the educational qualifications and skills through same Mr. Tudor was supposed to have based on his resume.

Having been satisfied that termination was a proportionate response, Justice Yamauchi dismissed Mr. Tudor’s action for wrongful dismissal. Just cause is a high bar, and Justice Yamauchi’s decision to dismiss Mr. Tudor’s claim speaks to the unique circumstances of the case. The decision offers an employer peace of mind that and they would be entitled to rely upon the representations made to them by a job applicant. Justice Yamauchi’s decision is important because had Mr. Tudor been successful employers would have been left with minimal recourse after having discovered any misrepresentations to them in the hiring process.

Takeaways

Honesty is the foundation upon which every employment relationship is built. When an employee is dishonest, it erodes the trust that makes a productive employment relationship possible. That is the reason that the courts have recognized that dishonesty may justify termination for cause.

While proving just cause is difficult, this case confirms that the misrepresentation of academic qualifications may lead to a breakdown of the employment relationship. However, even in cases where academic qualifications have been misrepresented, a consideration of all of the surrounding circumstances is necessary to determine whether an employer has just cause.

BLG was counsel to Accurate Screen in its successful defence to Mr. Tudor’s claim.

Employees on leave during an asset acquisition: What Brandt v. Morasse means for employers

Wed, 29 Apr 2026 00:00:00 Z

Employees on leave can be out of sight, but shouldn't be out of mind

In Brandt Tractor Ltd. v. Morasse, 2026 ONSC 992, the Ontario Divisional Court upheld findings of discrimination where an acquiring employer systematically excluded employees on leave from its hiring process during an asset transaction. While the transaction occurred on an expedited timeline and the acquiring employer applied its approach identically to all employees on leave (regardless of the reason for leave), the Court confirmed that these factors do not insulate an employer from human rights liability.

Key takeaways

Brandt v. Morasse is a clear reminder that human rights obligations do not pause during business transitions. Employers involved in acquisitions, mergers, or restructurings must ensure that employees on protected leaves are meaningfully considered when making employment-related decisions.

A purchaser cannot outsource its human rights obligations to a predecessor, hide behind a tight timeline, or rely on a uniformly applied discriminatory policy; there will be a cost to doing so. For Brandt, it was over $50,000 in damages, mandatory training for its HR team, and ongoing litigation exposure. That expense is avoidable, but it requires employers to account for human rights considerations in transaction planning from the outset.

Background: When an acquiring employer excludes employees on leave from hiring

Ms. Morasse was an employee of Nortrax Canada Inc. for five years. She was on maternity leave when Nortrax sold substantially all of its assets to Brandt in a transaction that was completed, from beginning to end, in fewer than three months.

Brandt hired all but 30 of Nortrax’s 650 employees. Notably, neither Ms. Morasse nor any of the Nortrax employees who were on leave during the asset transfer were contacted, interviewed, or offered positions by Brandt. Instead, while at home on maternity leave, Ms. Morasse was notified that her employment with Nortrax was terminated because Brandt “[did] not have a position available” for her.

The Human Rights Tribunal of Ontario (HRTO) found that Brandt discriminated against Ms. Morasse based on sex and family status. Brandt sought judicial review to set aside the Tribunal’s decision.

Ultimately, the Divisional Court upheld the findings made by the HRTO as reasonable.

The Divisional Court's reasoning: Upholding human rights obligations in an asset acquisition

Successor status does not shield employers from liability

Brandt argued that the Tribunal erred in keeping it as a named party because it was never Ms. Morasse’s employer, and therefore could not be liable. The Divisional Court rejected that argument.

The Court agreed with the Tribunal’s reasoning that, while prior cases had limited the ability to add successor employers to human rights proceedings, those decisions involved successors that entered the picture years after the alleged discrimination had occurred, and thus, had no involvement in the underlying events. This case was materially different.

The evidence showed that Brandt was directly involved in the hiring decisions that excluded Ms. Morasse. Brandt obtained Nortrax’s HR files, consulted with local managers, and participated in a “heavily cooperative process” to decide which employees would receive offers. Further, Ms. Morasse’s termination letter expressly confirmed that her employment with Nortrax was ending precisely because Brandt did not offer her a position. In the circumstances, Brandt could not credibly be characterized as a successor with “nothing to do” with the complaint.

The Court emphasized that “Brandt’s status as a successor organization played no role in the determination that it was a proper party. Rather, it was Brandt’s own allegedly discriminatory conduct in its hiring process that grounded that determination.”

Knowledge of protected status may be inferred

Brandt argued that it did not know Morasse was on maternity leave, and therefore her protected status could not have influenced the hiring decision. The Court rejected this on two independent grounds:

Brandt “knew or ought to have known” that a policy excluding all employees on leave from the interview process would disproportionately affect individuals on protected leaves. Given its access to HR files and active role in selecting hires, Brandt could not avoid liability by “turning a blind eye” to the discriminatory impact of its policy; and
More significantly, Brandt admitted in oral evidence that it chose not to interview Ms. Morasse because she was on a leave of absence and was “not immediately available.” This admission contradicted Brandt's assertion that the decision was grounded solely in business reasons and established a clear sequence of events: Ms. Morasse was on maternity and parental leave, her exclusion from the interview process therefore flowed directly from her protected leave, which resulted in no offer from Brandt, and ultimately, the termination of her employment by Nortrax.

The Court held that this admission established a clear nexus between Ms. Morasse’s maternity leave and the adverse impact. In doing so, the Court reiterated that the protected ground need only be a factor, not the sole factor, in the decision that led to the adverse impact.

Identical treatment is not the same as equal treatment

Finally, Brandt argued that its policy was non‑discriminatory because it was applied uniformly to all employees on leave. The Court rejected this submission, reiterating that identical treatment can still result in inequality if it has a disparate impact on protected groups. The fact that the policy was framed in neutral terms and applied consistently did not insulate it from scrutiny.

Further, since Brandt had expressly admitted that Ms. Morasse was excluded from the interview process because she was on leave, and therefore unavailable to be interviewed, the causal link between the policy and the protected ground was direct and explicit. As a result, the uniform application of the policy did not shield Brandt from liability.

What Brandt v. Morasse means for employers

Where a successor employer is directly involved in hiring decisions or works closely with the predecessor in selecting employees, it may be held liable for discriminatory outcomes.
Employees on protected leave must be actively considered by employers in decision-making processes. Excluding them simply because they are on leave creates significant risk exposure, regardless of intent.
A uniformly applied rule will not withstand scrutiny if it disproportionately affects individuals on protected grounds. Courts will focus on impact, not just consistency.
Where information about an employee’s protected status is accessible and the employer is involved in the decision-making process, knowledge may be inferred. This is particularly the case where the information within the employer’s knowledge (in this case the knowledge that the employee is on leave) should cause the employer to question whether a protected ground is engaged.
In the context of acquisitions or restructurings, time pressure does not justify excluding or failing to consider employees on protected leave.
Discrimination does not require that a protected ground be the sole or primary reason for the decision. It is sufficient if it played any part in the adverse impact.

Canada’s AML Shift: Preparing for Universal Enrolment, Higher Penalties and FINTRAC Enforcement

Wed, 29 Apr 2026 00:00:00 Z

Amendments to Canada’s Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), summarized in our previous bulletin, Canada’s New Border Bill to Combat Money Laundering, and introduced by Bill C-12, An Act respecting certain measures relating to the security of Canada’s borders and the integrity of the Canadian immigration system and respecting other related security measures (Bill C-12), received royal assent on March 26, 2026. The amendments substantially increase administrative monetary penalties (AMPs), introduce universal enrolment, requiring all reporting entities subject to the PCMLTFA to register with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), and raise overall compliance expectations, fundamentally changing how businesses must approach anti-money laundering risk and enforcement.

Universal Enrolment: All reporting entities must register with FINTRAC

While not yet in effect, Bill C-12 sets out the universal enrolment framework that will require all reporting entities subject to the PCMLTFA to apply and enrol with FINTRAC in a prescribed form for a prescribed period. Bill C-12 also provides a renewal process for such enrolment. Future regulations will provide more clarity as to the substance and manner in which the enrolment framework will be implemented.

The enrolment framework represents an expansion of the existing registration requirements which are currently only applicable to domestic and foreign money service businesses. Once in force on a date that is to be set by Order in Council, all reporting entities will be required to abide by the new requirements, which incorporate ongoing obligations such as notifying FINTRAC of any change in information within 30 days after the day on which the reporting entity becomes aware of the change or obtains the new information.

AML Compliance Programs

As summarized in our previous bulletin, reporting entities must ensure their compliance programs are “reasonably designed, risk-based and effective.” This compliance standard requires anti-money laundering and anti-terrorist financing policies to be tailored to the specific risk and operations of the reporting entity – simply copying and pasting FINTRAC guidance or using generic templates is not sufficient. Compliance programs must be functional and defensible, particularly considering heightened enforcement powers and compliance expectations.

Significant AMPs and FINTRAC Enforcement

Bill C-12 increases AMPs that FINTRAC may impose for contravention of the PCMLTFA by a factor of forty. Minor violations can result in penalties up to $40,000, serious violations up to $4,000,000, and very serious violations up to $20,000,000. For multiple violations, cumulative penalties are capped at the greater of $20 million or 3 per cent of a reporting entity’s gross global revenue (where revenue exceeds $20 million). For individuals, the cap is the greater of $4,000,000 or 3 per cent of their gross global income from the prior year.

Bill C‑12 also amends the criteria FINTRAC considers when determining the amount of an AMP for violations that do not have a fixed penalty amount. Additionally, FINTRAC will be required to consider the ability of the individual or entity to pay the AMP.

Bill C-12 implements transitional provisions for violations that will determine whether the pre-Bill C-12 AMP framework, or the Bill C-12 AMP framework will be applied. If the violation is committed before March 26, 2026, the pre-Bill C-12 AMP framework is to be considered. If the violation is committed after March 26, 2026, the Bill C-12 AMP framework would apply.

Bill C‑12 is accompanied by a shift in FINTRAC’s enforcement approach, reflected in both supervisory guidance and updated AMP policy. As summarized in our bulletin, Changes to FINTRAC Supervision Model and Penalty Policy, FINTRAC signalled a more assertive and outcomes‑focused approach to supervision. Taken together with the increased AMPs, these developments underscore the importance of demonstrably risk‑based and defensible compliance programs.

Further to the passing of Bill C-12, on April 13, 2026, FINTRAC published a modernization update, Modernization and upcoming changes impacting reporting entities, setting out a centralized roadmap detailing how and when the resulting legislative and regulatory changes will apply to reporting entities under the PCMLTFA. FINTRAC will be updating its AMP policy and developing accompanying guidance to assist reporting entities subject to the PCMLTFA in complying with their applicable obligations when the amendments come into force.

Next Steps

Regulations containing the substance of the legal requirements are expected to be published in spring 2026. Bill C-12 will come into force using a phased implementation approach, as detailed in the FINTRAC roadmap published in its above-referenced modernization guidance. Reporting entities must ensure readiness for each stage once the new obligations take effect.

Contact us

For more information on these updates to Canada’s anti-money laundering and anti-terrorist financing legislation, please reach out to the key contacts below or any lawyer from BLG’s Banking & Financial Services Group.

Ten tax takeaways from Canada’s spring economic update 2026

Wed, 29 Apr 2026 00:00:00 Z

On April 28, 2026, The Honourable François-Philippe Champagne, minister of Finance and National Revenue, presented Canada’s spring economic update 2026 (Economic Update). BLG is pleased to highlight its key income tax proposals.

Business tax measures

1. Employee ownership trust capital gains exemption: Made permanent

Employee ownership trusts (EOTs) provide a business succession alternative for many private company owners approaching retirement. Although introduced in 2023, the legislation permitting EOTs was not passed into law until June 2024.

Individuals (other than trusts) are provided with an exemption from taxation on up to $10 million in capital gains realized on the sale of a business to an EOT or worker cooperative corporation, subject to certain conditions. This exemption was to expire at the end of 2026. The Economic Update will make this $10 million exemption permanent. Given that it can take many months or years for business owners to plan for a sale to an EOT, this announcement is welcome news. For more information on EOTs, see Employee ownership trusts: Business succession alternative for private businesses in Canada.

2. Carbon capture, utilization and storage tax credits: Extended to enhanced oil recovery (EOR)

Over the past few years, Canada has enacted a number of “clean economy” investment tax credits (ITCs) to support Canada’s transition to a net-zero economy (see Canada's clean economy ITCs) for a detailed overview of these tax credits).

The carbon capture, utilization & storage (CCUS) investment tax credit allows taxpayers who undertake a qualified CCUS project to claim investment tax credits of up to 60 per cent on qualifying expenditures relating to the capture, transportation, use or storage of CO₂ that is the subject of an “eligible use.” Currently, the only “eligible uses” of captured CO₂ are storage in a dedicated geological formation or use in concrete production.

The Economic Update designates enhanced oil recovery (EOR) as a new “eligible use” of captured CO₂ so long as the invested CO₂ remains permanently stored, effective April 28, 2026. Capture and transportation equipment of a qualified CCUS project that stores CO₂ through EOR will be eligible, as will equipment that injects and stores CO₂ through EOR (unless all or substantially all of the use of the equipment is to produce oil).

While the effective ITC rates associated with the storage of CO₂ through EOR will be only half that of the ITC rates applicable to other eligible uses of CO₂ (that is, 30 per cent maximum rather than 60 per cent maximum), this still constitutes significant tax support for a major segment of the Canadian economy and helps put the Canadian industry in a better competitive position with its U.S. counterpart. The additional details on equipment eligibility stated to be pending from Natural Resources Canada will be very important in determining the exact parameters of this initiative.

3. Accelerated CCA for low‑carbon LNG facilities

Last fall, Budget 2025 proposed to reinstate accelerated capital cost allowances (CCAs) for eligible liquefied natural gas (LNG) equipment and related buildings for low-carbon LNG facilities. The Economic Update proposes how this measure will be implemented.

The accelerated CCA rate would be 50 per cent for Class 47 liquefaction equipment, and 10 per cent for Class 1 non-residential buildings used in LNG facilities. In addition, LNG facilities would be able to take advantage of the enhanced first-year accelerated investment incentive deduction for certain capital property.

To claim accelerated CCA rates for eligible assets for a particular LNG facility, that facility would first need to be certified by the minister of Energy and Natural Resources, which would entail submitting a one-time report to the minister of Energy and Natural Resources. Based on the expected emissions intensity of an LNG facility, as determined from the report, the minister of Energy and Natural Resources would certify whether the LNG facility qualifies for the measure.

For certified LNG facilities, the accelerated CCA rates would be available for eligible assets acquired on or after Nov. 4, 2025, and up to the end of 2034.

4. Base CPP contribution rate reduction

To provide relief for employees and employers, the rate of the base contribution to the Canada Pension Plan (CPP) is currently 9.9 per cent (4.95 per cent by each of employer and employee). The rate will be reduced by 0.4 per cent to 9.5 per cent starting from Jan. 1, 2027.

5. Prioritized advance income tax rulings

Taxpayers often request binding advance income tax rulings from the Canada Revenue Agency (CRA) before implementing major transactions to confirm the anticipated tax treatment of a proposed transaction. The CRA will give priority to advance income tax ruling requests relating to:

large-scale nation-building projects;
projects of national importance; and
investments that enhance productivity and strengthen critical sectors of Canada’s economy.

Personal tax measures

6. Easier access to the disability tax credit (DTC)

The DTC is an important tax benefit for individuals suffering from disabilities, and DTC eligibility is a requirement for other programs (such as the Canada Disability Benefit). Currently, a qualified medical practitioner must not only certify that an individual suffers from a disability, but also provide details confirming that the impairment is severe and prolonged, significantly impacting the individual’s activities of daily living. Completing the required forms can be a time-consuming and onerous process for the medical practitioner.

To alleviate the burden on qualified medical practitioners, a streamlined DTC application process will be available for individuals commencing in 2026 with certain listed medical conditions. For individuals suffering from other (non-listed) conditions, a medical practitioner would continue to be able to certify DTC eligibility as before.

The list of medical professionals who may certify eligibility has also been expanded to include podiatrists. For an adult under their care for property matters, provincial or territorial public guardians, trustees, and curators will be able to certify, on the DTC application form, that the individual has a valid certificate of incapacity (or equivalent document) issued by a healthcare professional in accordance with applicable provincial or territorial laws for determining decision-making capacity; for matters under the Indian Act, Indigenous Services Canada, as well as Crown-Indigenous Relations and Northern Affairs Canada, will also have that possibility.

Where such a certification is provided, a qualified medical practitioner would no longer be required to certify the individual’s impairment for their DTC application. The CRA will continue to have the authority to request additional information to confirm eligibility in all cases.

7. Expanded labour mobility deduction for tradespeople

Currently, an eligible construction worker can deduct up to $4,000 per year in relocating expenses (travels, meals and lodging). One condition required to qualify for such a deduction is that the worker must relocate, for a limited period, to a temporary lodging place that is at least 150 kilometres closer to a temporary worksite than their ordinary residence.

The Economic Update will increase the annual deduction limit to $10,000 per year (with annual indexation thereafter), and the temporary lodging place will only need to be at least 120 kilometres closer to a temporary worksite than their ordinary residence. This measure will apply to 2026 and subsequent taxation years.

8. Extension of time to repay under Home Buyers Plan

Withdrawals from a registered retirement savings plan (RRSP) are generally taxable. A notable exception for this is for withdrawals of up to $60,000 from a RRSP under the Home Buyers’ Plan (HBP) for the purpose of buying a home. Under the HBP, withdrawals must be repaid over a period not exceeding 15 years, starting the second year following the year the first withdrawal was made.

Budget 2024 temporarily increased the grace period under the HBP during which homeowners are not required to start repaying their withdrawals, from two to five years for participants making a first withdrawal between Jan. 1, 2022, and Dec. 31, 2025. To address continued affordability concerns, the Economic Update proposes to extend that five-year grace period for participants making a first withdrawal up to the end of 2028.

Other announcements

9. Consultation in the charitable sector

The Economic Update recognizes that both the charitable sector and non-governmental organizations are an important driver for the Canadian economy, create well-paying jobs, and supplement the social safety net.

With advances in technology and digitization, the Economic Update announces that the government will seek to modernize the regulatory framework for charities in 2026-27. The government will first initiate a consultation from key stakeholders and relevant agencies in the charitable sector to gather feedback and align with best practices adopted by other G7 countries.

10. Confirmed intention to proceed with previously announced measures

The government confirmed its intention to proceed with a large number of previously announced tax measures. A full list can be found on the government of Canada’s website.

BLG can help

If you have any questions on the impact of the proposed changes in the spring economic update 2026, please reach out to BLG's Tax Group or any of the key contacts below.

Anti-SLAPP and malicious prosecution: Section 137.1 in the context of an alleged sexual assault

Mon, 27 Apr 2026 00:00:00 Z

In Emma Joyce Jansen et al v. J.T et al, 2026 ONSC 1304, the Superior Court of Justice for Ontario considered the test under section 137.1 of the Courts of Justice Act (CJA) in the context of an action for malicious prosecution involving a complaint of sexual assault by a minor.

Key takeaways

In motions under section 137.1 of the CJA, the motion judge does not conduct a deep dive into the record; instead, they conduct a limited weighing of the evidence.
In determining whether the expression relates to a matter of public interest, there is no qualitative assessment of the expression; it does not matter whether it is valuable or vexatious.
An allegation of sexual assault on a child by a person in a position of trust relates to an issue of public interest, and is plainly worthy of protection.
Generally, the complainant who reports a sexual assault will not be considered the entity who initiates the prosecution for the purposes of an allegation in malicious prosecution.

The case: Sexual assault complaint and acquittal lead to malicious prosecution claim

In 2022, the defendant, J.T., made a complaint to the Durham Regional Police Service alleging that the plaintiff, who was a teacher’s aide at the time, sexually assaulted them. Following these allegations an investigation ensued, and the plaintiff was charged with sexual assault and sexual interference.

At her criminal trial, the plaintiff was acquitted, with the trial judge finding J.T.’s evidence to be “fabricated or contrived,” while the plaintiff’s evidence was found to be “reliable and credible.” Following her acquittal, the plaintiff commenced an action against multiple defendants, including allegations for malicious prosecution against J.T.

In response to the plaintiff’s claim, J.T. brought an anti-SLAPP motion under section 137.1 of the Courts of Justice Act.

Court ruling: Anti-SLAPP motion granted under section 137.1

J.T.’s motion was granted, with the plaintiff’s claim and associated crossclaims being dismissed against them.

The function of section 137.1 of the CJAis to screen out lawsuits that unduly limit expression on matters of public interest through the identification and pre-trial dismissal of such actions.

The framework for a motion to dismiss under section 137.1 was established by the Supreme Court of Canada in 1704604 Ontario Ltd. v. Pointes Protection Association, 2020 SCC 22:

There is a burden on the moving party (the defendant in the action) to satisfy the judge that:
1. the proceeding at issue arises from an expression made by the moving party; and
2. the expression relates to a matter of public interest.
Once that is established, the burden shifts to the responding party (the plaintiff in the action) to satisfy the judge that:
1. there are grounds to believe that the proceeding has substantial merit;
2. the moving party has no valid defence; and
3. the public interest in permitting the proceeding to continue outweighs the public interest in protecting the expression.

The Court rejected the plaintiff’s argument that J.T.’s statements were not in the public interest because they were false and misleading. The Court noted that there has been considerable jurisprudence confirming that reports about alleged sexual abuse to the police and regulatory bodies are expressions on a matter of public interest.

The section 137.1 framework: Burden shifting and public interest

The burden then shifted to the plaintiff to provide grounds to believe the proceeding against J.T. for malicious prosecution had substantial merit. The tort of malicious prosecution requires that the proceedings were initiated by the defendant. The Court highlighted that the general rule is that the police officer who laid the charge is considered to have initiated the prosecution. There are exceptions to that rule, and a complainant who reported an event to the police can be found to have initiated a prosecution.

Citing the Court of Appeal’s decision in Konstan v. Berkovits, 2024 ONCA 510, “the question is whether, through knowingly supplying misinformation or withholding evidence, or through other wrongful conduct, the complainant compromised the police investigation and/or the independence of the decision by police to lay charges.”

The Court noted that while J.T. did make a report of sexual abuse to the police, “the police did more than merely accept J.T.’s allegation at face value.” The police conducted an investigation and told J.T. that whether charges would be laid would be the decision of the police, and not J.T.’s decision. Because J.T. did not initiate the prosecution, the plaintiff’s malicious prosecution claim lacked substantial merit. This finding alone was sufficient to grant the section 137.1 motion and dismiss the plaintiff’s claim against J.T.

Nevertheless, the Court went on to consider the final step on a motion under section 137.1: whether the public interest in allowing the action to continue due to the harm suffered by the plaintiff outweighs its deleterious effects on expression and public participation.

With respect to the harm suffered by the plaintiff, the Court described the causal link between J.T.’s complaint and the harm to the plaintiff as “tenuous,” since J.T did not initiate the prosecution. Furthermore, unlike other cases where “vindictive adults” made a complaint to police, J.T. was a child when the complaint was made.

The Court found no evidence that J.T. had motive to make a false complaint, nor did they publicize this complaint. The Court also found that permitting the plaintiffs’ action to continue against J.T. would have a chilling effect on victims of sexual assault, and would fly in the face of changes in the law relating to the investigation and prosecution of sexually based offences.

The Court was also critical of the plaintiffs’ strategic decision to commence the claim shortly after J.T.’s eighteenth birthday, which required them to undertake their own defence, rather than be provided with a court-appointed litigation guardian.

Alberta's proposed Expedited 120-Day Approvals Act (Bill 30)

Wed, 22 Apr 2026 00:00:00 Z

Background

In March 2026, Alberta’s Premier and Minister of Energy and Minerals attended CERAWeek, one of the world’s leading energy conferences, where they signaled the Government of Alberta’s intention to accelerate the regulatory approval process and position the province as a reliable alternative to unstable global energy sources. Shortly thereafter, on April 14, 2026, the Government of Alberta tabled Bill 30, the Expedited 120-Day Approvals Act (Bill 30).

Regulatory approvals have long been identified as a source of uncertainty and delay for major projects in Alberta. If passed, Bill 30 will give the provincial cabinet the ability to fast-track regulatory approvals for certain major projects, with the primary goal of accelerating major project development in the energy, mining, and industrial sectors.

Key features of the Expedited 120-Day Approvals Act

At the heart of Bill 30 is the concept of a qualified project. Qualified project designation unlocks the Act's core benefit: a mandatory maximum timeline of 120 business days for decisions to be made on all required project approvals.

To apply for qualified project designation, a proponent must provide certain information to the Minister, including the following:

a description of the project and its anticipated timeline;
the minimum capital spending threshold;
a list of required approvals;
the status of any required environmental impact assessment reports under the Environmental Protection and Enhancement Act; and
the status of any planned, ongoing, or completed consultations with Indigenous communities.

Notably, Bill 30 does not alter or circumvent any Indigenous consultation or environmental impact assessment required for a project. Instead, the status of these activities will be explicitly considered as part of the application process. Applicants will have to demonstrate that environmental impact assessment and Indigenous consultation processes have reached an appropriately advanced stage before a project can be expedited under the proposed legislation.

Factors considered for designation

When deciding whether to approve or deny an application for qualified project designation, the Minister may consider a broad range of factors, including:

whether the project strategically aligns with the Government's priorities, goals and outcomes;
whether the project is of strategic importance to Alberta's economy through increased economic activity, investment, jobs, and Government revenue;
whether the project benefits outweigh any residual impacts;
whether the project’s minimum capital spending threshold exceeds $250 million; and
whether the project advances national and provincial security by recognizing provincial autonomy.

Approval, continuance or rescission of designation

If a proponent’s application is approved, an order will be issued designating the project as a qualified project and identifying all required approvals. These orders will trigger the mandatory 120-business day timeline within which all listed approval decisions must be made.

While Bill 30 mandates that approval decisions be made within 120 business days, it does not mandate all approvals be granted. Proponents should not treat designation as a shortcut past substantive regulatory requirements, but rather as a mechanism to impose decisional discipline on regulators.

Notably, the proposed legislation does not currently contemplate any enforcement mechanisms applicable to regulators that fail to make approval decisions within the mandated timeline. If enacted, future regulations made under the legislation may introduce accountability measures or procedural consequences to backstop the timeline requirements, but such regulations are not guaranteed.

Bill 30 also contemplates the possibility that additional approval requirements may arise following the initial qualified project designation and allows for a continuation of the designation where necessary.

However, proponents should be aware that designation is not irrevocable. If the project is materially affected by extraordinary circumstances, the qualified project designation can be rescinded. Bill 30 does not define "extraordinary circumstances," leaving this up to ministerial discretion.

Conclusion

Ultimately, the Government of Alberta expects the acceleration of project approvals to lead to increased investments, bolstered production, and greater access to international markets.

While introducing Bill 30 in the Alberta Legislature, Minister Brian Jean indicated that in the past year approximately $12 billion in capital investments from Canadian-based energy companies has been lost to the United States as a result of uncertain and inefficient approval processes. This piece of legislation is intended to signal the province’s commitment to getting important major projects built in Alberta.

BLG will continue to monitor the progress of Bill 30 as it receives further consideration by the Alberta legislature and will provide further updates as they become available. Our infrastructure, construction, and major projects lawyers are available to answer questions about how Alberta’s Bill 30 may affect those in the industry.

Reach out to any of the key contacts below for assistance.

Lease remedies clauses can limit prospective rent claims after termination

Tue, 21 Apr 2026 00:00:00 Z

More than 50 years after Highway Properties Ltd. v. Kelly, Douglas and Co. Ltd. established the modern framework for commercial landlord remedies, Canadian courts are revisiting how far those remedies extend in current leasing disputes.

This past March the Ontario Court of Appeal in Highbury Narrows Ltd. v. LAF Canada Company considered whether specific provisions of a lease limit a landlord’s ability to recover prospective rent after termination. In Highbury, the Ontario Court of Appeal determined that this commercial landlord’s right to claim future rent after terminating a lease was limited due to the specific provisions in its lease. The lease gave the landlord two distinct options following tenant default: terminate the lease or keep it in force and recover rent as it became due. The Court held that, on the specific wording, the claim for future rent ceased to be available once the landlord terminated.

What you need to know

This is a remedies case first and foremost. The decision does not suggest that claims for future rent are no longer possible. Rather, it confirms that remedy determination begins with analysis of the actual lease provisions agreed upon by the parties.
Election is determinative. The lease gave the landlord two paths following tenant default: terminate the lease, or keep the lease alive and recover rent as it came due. As a result of the landlord proceeding with termination, the Court held the second path, pursuit of future rent, was no longer available.
General “law and equity” language may not be enough. The Court rejected the argument that a general reservation of “other remedies available at law or in equity” preserved a claim for future rent where the more specific lease wording pointed the other way.
Landlords should consider their business strategies when acting on a default. Is the landlord’s primary goal to obtain vacant possession of the premises, or to receive the future rent for the balance of the term.

Background

Highbury Narrows Ltd., the landlord, sued LAF Canada Company, the tenant, and LA Fitness International, LLC, as indemnitor, for default to pay rent under its lease. After terminating the lease, the landlord sought further remedies, including the arrears, future rent for the balance of the term, pool-removal costs and post-termination maintenance-related amounts.

Key facts

The Tenant defaulted in rent payments under a commercial lease. After default, the Landlord terminated the lease and sought arrears, prospective rent for the remainder of the term, pool-removal costs, maintenance-related expenses, signage-related expenses and costs.
Section 19.2 of the lease provided that, upon default, the Landlord had the option either to: (A) terminate the lease and the Tenant’s rights, or (B) keep the lease in effect and recover rent and other charges “as they become due”. Section 19.3 reinforced that if the Landlord did not elect termination, it could recover rental as it became due or relet the premises without terminating the lease.

The motion judge interpreted these provisions as limiting the Landlord, on termination, to rent and expenses due at the date of termination plus a fixed penalty amount, and not prospective rent. The Court of Appeal upheld that interpretation.

The decision in brief

The Court read the lease as creating a deliberate distinction between termination remedies and continuation remedies. If the landlord terminated, it was limited to the amounts the lease specifically made available on termination. If the landlord kept the lease in force, it could continue to recover rent as it became due. On that reading, the lease did not preserve a claim for prospective rent after termination, despite its general reference to other remedies available at law or in equity. The Court stated this general language was not without meaning: it could still capture other remedies, such as injunctive relief or distress, even though it did not preserve a future-rent claim here.

The Court also confirmed that Highway Properties did not create an automatic right to future rent in every commercial lease dispute. It established that such a claim may be available, depending on the specific working of the lease.

Why this matters now

Commercial landlords, tenants and their advisors should keep Highbury in mind when assessing post-default remedy options. The decision reinforces that the Courts will closely examine the remedial structure set out in the lease and will hold parties to what was negotiated and agreed upon by the parties.

This update also comes at a time when the commercial lease remedies are under active judicial consideration. On February 18, 2026, the Supreme Court of Canada heard Aphria Inc. v. Canada Life Assurance Company, et al. and reserved judgment on whether a commercial landlord that refuses to accept a tenant’s repudiation and keeps the lease alive must mitigate its losses. We previously wrote on the Court of Appeal decision in July 2025. The Supreme Court’s decision in Aphria is expected in fall 2026. Together, Highbury and Aphria underscore that remedy selection, lease drafting and post-default strategy remain central issues in commercial leasing disputes.

Practical takeaway

Highbury is a reminder to carefully review the lease as part of your business strategies when considering your remedies after a tenant defaults.

Riddle v. ivari: SCC rules on the annulment of a declaration of death in life insurance claims

Mon, 20 Apr 2026 00:00:00 Z

On April 10, 2026, the Supreme Court of Canada (SCC) clarified procedural rules and provided guidance on the evidentiary burden for seeking the annulment of a declaratory judgment of death. The Court confirmed that the declaratory judgment of death, also called a declaration of death, is a fiction that has to yield to evidence of the return of a person, and explained what this return meant within the meaning of the Civil Code of Québec (CCQ). The Court also confirmed the rules pertaining to service to declared deceased individuals of proceedings for annulment of their own declaratory judgement of death.

Context

One day, Ms. Riddle’s husband told her that he was leaving on a business trip to Toronto – and he never returned. Evidence later revealed that Ms. Riddle’s husband had left the country to ultimately flee to Iran. Eight years after this date, as provided by the CCQ, Ms. Riddle requested a declaratory judgment of death to the Superior Court, and although ivari opposed in its capacity of life insurer of Ms. Riddle’s husband, the Court issued such declaratory judgment of death.

ivari therefore filed its own originating application in annulment of the declaratory judgment of death; ivari did not serve its proceedings to Ms. Riddle’s husband, presumably deceased.

The trial judge and the Court of Appeal both concluded that ivari had met the burden of proof of establishing the return of Ms. Riddle’s husband.

Ruling

While considering that the failure to serve the proceedings upon Ms. Riddle’s husband constitutes a breach of the guiding principles of Canadian law, which should not be trivialized, the Court unanimously found that the failure to serve in this case did not compromise the integrity of the judicial process, nor create prejudice that would warrant for the nullity of the decisions.

The Court confirmed that the underlying principles to the notion of service are associated with universal fairness and the rights of being heard, both of which cannot be disregarded by applying the principle of proportionality (Article 18 C.C.P.). Ultimately, the Court explained that the breach of the obligation to serve will be sanctioned in relation to the context of the breach, and of the consequence of the failure for the parties as well as the judicial process itself. In most cases, the breach of service will undermine the integrity of the judicial system, but not in this case, given the absence of prejudice of the presumably deceased.

Invited by Ms. Riddle to pronounce that the person seeking the annulment of the declaratory judgment of death needs to provide certain and unquestionable proof that the person presumed death is currently alive, the Court rather confirmed that unless another burden of proof is indicated by the Québec legislator (in the Code or Statutes), the applicable burden of proof to civil proceedings remains the balance of probabilities. Qualifying the return as “a person’s active and physical reappearance in a particular place,” the Court found that the trial judge had correctly considered the evidence that Ms. Riddle’s husband was alive after the pronouncing of the declaratory judgment of death.

Takeaway

Riddle v. ivari serves as a good reminder to Québec practitioners regarding the rules of service of proceedings. The ruling also clarifies the concept of return under the CCQ, and the evidentiary burden to establish this return in the context of proceedings in annulment of a declaratory judgment of death.

DIY with OEO: But first, read the updated CIRO Guidance

Fri, 17 Apr 2026 00:00:00 Z

After an extensive, two-stage consultation by the Canadian Investment Regulatory Organization (CIRO), on March 12, 2026 the self-regulatory agency published the updated Guidance on Order Execution Only (OEO) account services and activities (the Updated OEO Guidance). The Updated OEO Guidance replaces the previously published 2021 Guidance Note 3400 21 003 and addresses the evolving needs of the growing do-it-yourself (DIY) investor population.

For context, BLG’s Sept. 3, 2025 bulletin summarized CIRO’s proposed overhaul of the OEO model, which sought to refine the overly broad recommendation prohibition, expand the permissible scope of decision‑making supports, and introduce principles‑based safeguards to protect investors. The Updated OEO Guidance aligns closely with those proposals, now formally adopting a principles‑based framework and confirming that OEO dealers may offer a broader suite of factual, educational, and tool‑based supports – so long as they avoid endorsing specific investment actions.

Data sovereignty and the CLOUD Act: What Canadian organizations should know

Mon, 13 Apr 2026 00:00:00 Z

Data sovereignty has re-emerged as a central concern for Canadian organizations navigating an increasingly complex geopolitical and regulatory environment. At present, the underlying concern involves the power of U.S. government authorities, through the 2018 U.S. Clarifying Lawful Overseas Use of Data Act (CLOUD Act), to access the personal information of Canadians. At its core, the issue of data sovereignty raises a practical and pressing question: to what extent can foreign governments access personal information about Canadians when that data is processed using global infrastructure?

While often framed as a question of where data is stored, data sovereignty is better understood as a question of control, which is shaped by legal jurisdiction, corporate structure, and service provider relationships. As reliance on cloud computing and AI services grows, and as tensions between Canada and the United States sharpen policy debates around cross-border data flows, organizations are being forced to reassess long-standing assumptions about data residency, risk, and compliance.

This BLG Insight examines the legal and practical dimensions of data sovereignty, including the impact of U.S. lawful access laws, and offers guidance on how Canadian organizations can assess and manage these risks.

Key takeaways

As of 2026, decision-makers across Canada should remember what follows as they address data sovereignty in a changing legal and geopolitical landscape:

Data sovereignty is about control, not just location. Storing data in Canada does not, by itself, prevent access under foreign laws; who controls the data matters more than where it is located.
U.S. law remains a central risk factor. Under the CLOUD Act, U.S. authorities may compel U.S.-based companies — or foreign subsidiaries under U.S. control — to produce data, even if that data is stored in Canada and relates to non U.S. persons.
Corporate structure and operational control are critical. A Canadian entity that is wholly owned and managed in Canada will generally fall outside the scope of the CLOUD Act, but Canadian subsidiaries operating under meaningful U.S. parent control may still be subject to U.S. lawful access obligations.
A risk-based approach is required, focusing on legal exposure, data sensitivity, and operational realities. Organizations should assess exposure to foreign laws together, rather than applying blanket localization rules.
PIAs are increasingly expected. In Québec in particular, transferring personal information outside the province triggers a legal obligation to conduct a PIA that evaluates, among others, the applicable foreign legal framework.
Transparency is mandatory. Organizations must clearly inform individuals when personal information may be processed outside Canada and could be accessed by foreign courts or authorities.
Data minimization and retention limits reduce exposure risk. Collecting only necessary data, favouring encrypted, de identified or anonymized datasets, and securely destroying data once no longer required significantly limits exposure to foreign access.

Legal considerations relevant to data sovereignty

The term “data sovereignty” means ensuring that data collected, stored, or otherwise processed in Canada remains primarily subject to Canadian law. For organizations considering data sovereignty, the main question is not simply where data is stored (often referred to as “data localization”), but how the jurisdiction, corporate structure, and operational control collectively influence the lawful access risks posed by foreign governments.

The applicability of the CLOUD Act is a critical component of this analysis. The CLOUD Act permits U.S. authorities to compel the production of data that is within the “possession, custody or control” of a covered entity. A covered entity includes U.S. based companies and foreign companies subject to U.S. jurisdiction. A covered entity may also be a foreign subsidiary of a U.S. parent company, where the parent exercises substantial control over the subsidiary’s operations and retains sufficient possession, custody, or control over the data. In a nutshell, a U.S. company, or a foreign subsidiary operating under U.S. control, may be compelled to produce data even if that data is stored in Canada.

This means that the jurisdiction in which a company is incorporated may influence data sovereignty, but only in light of the specific factual circumstances involved. For instance, an entity incorporated in Canada that is wholly owned and managed in Canada will generally fall outside the scope of the CLOUD Act. By contrast, if a Canadian subsidiary operates under the direct control of a U.S. parent company, such as via integrated systems or shared management, U.S. lawful access requirements may still apply, regardless of the physical location of the data.

Canadian privacy regulators have consistently cautioned against relying solely on data localization to address data sovereignty risks. Instead, they emphasize the need to implement reasonable security safeguards based on context and to adopt a risk-based approach, weighing exposure to foreign laws like U.S. surveillance alongside cybersecurity threats and data sensitivity.

How to manage your data sovereignty risks

In light of the above considerations, Canadian organizations should adopt a proactive and risk-based approach to managing data sovereignty, which might include some of the following measures:

Risks assessment

Privacy regulators also recommend assessing the risks that could jeopardize the integrity, security, and confidentiality of users’ personal information processed by service providers operating outside of Canada to limit personal information risk exposure to foreign government access. A privacy impact assessment (PIA) is a critical tool to determine where data is processed, stored, and who has access to it. As part of this exercise, organizations should map data flows and identify service providers that may be subject to foreign legal regimes.

Québec has led the way in Canada and requires organizations entrusting a person or body outside Québec with the task of collecting, using, communicating, or keeping such information on their behalf to conduct a PIA. The PIA must especially consider the legal framework applicable in the jurisdiction in which the information would be transferred, including the personal information protection principles applicable in that jurisdiction, in light of generally recognized principles regarding the protection of personal information inspired by the OECD Privacy Guidelines, the U.S. Federal Trade Commission’s Fair Information Practice Principles (FIPPs), Canada’s federal Personal Information Protection and Electronic Documents Act (PIPEDA), and the European Union’s General Data Protection Regulation (GDPR); see Cross-border transfers of personal information outside Québec: Requirements for businesses.

Transparency

Be transparent and inform users of risks about personal information handling practices, especially that their personal information may be processed in other jurisdictions and that it may be accessed by the courts, law enforcement, and national security authorities of other countries. This is a requirement under Canadian personal information protection laws that has always been emphasised by privacy regulators. In practice, this might involve updating privacy policies and vendor disclosures to clearly address cross-border processing and lawful access risks.

Data minimization and retention

Limitations to data collection and retention can also serve as effective data sovereignty safeguards to mitigate risk exposure. Data minimization is a fundamental principle of Canadian personal information protection laws that can significantly reduce privacy and cyber risks (see Less is more – Data minimization and privacy/cyber risk management).

When collecting and retaining only personal information that is strictly necessary, access by foreign governments would be limited solely to data stored. Data minimization is not only a question of volume, but also of the nature of the data. As a result, organizations should consider using encrypted, aggregated, deidentified, or anonymized datasets whenever possible to reduce identification risks. In addition, information should only be retained for the legally and effectively required periods of time, and then promptly, securely destroyed to limit the timeframe during which personal information may be accessed.

Conclusion

In an era of cross-border cloud infrastructure and geopolitical uncertainty, data sovereignty for Canadian organizations is ultimately about control, not just physical location. A practical response is therefore risk-based: understand and document data flows, assess exposure through PIAs, require clear transparency to individuals, and reduce the amount and identifiability of data through minimization, retention limits, and strong safeguards. Taken together, these measures can help organizations manage sovereignty risk while continuing to benefit from global technology services.

Seizing opportunity in the Canadian M&A market amid cross-border trade policy uncertainty

Fri, 10 Apr 2026 00:00:00 Z

Despite early optimism, 2025 was a mixed year for Canadian M&A. The aggregate value of deals rose by over 70 per cent to approximately C$530 billion between 2024 and 2025. However, the overall number of deals dropped around 8 per cent, from 2,673 deals in 2024 to 2,454 deals in 2025.¹ A key constraint facing the M&A market, and one that persists in the early part of 2026, is the uncertain outlook for the Canada-U.S. trade relationship. The U.S. administration’s position on the future of the Canada-U.S.-Mexico Agreement (CUSMA) remains unclear. The U.S. currently has a range of sector-specific tariffs in place, including 10 per cent on most non-CUSMA products, 50 per cent on steel and aluminum, 50 per cent on copper, 25 per cent on autos, 10 per cent on non-CUSMA compliant potash and energy products, and 35 per cent on softwood lumber. There is a looming possibility that these tariffs could be increased or that new trade policy changes could result in negative impacts on additional industries. M&A success in this environment requires Canadian businesses and their counsel to place increased emphasis on trade-related considerations during the dealmaking process.

This article outlines key processes and deal terms that should be top of mind when negotiating M&A deals in the current environment.

Key takeaways

Canadian M&A deal value surged 70 per cent to C$530 billion in 2025, while deal volume declined 8 per cent to 2,454 deals.
U.S. tariffs ranging from 10 to 50 per cent across multiple sectors and ongoing CUSMA uncertainty now demand heightened focus on cross-border exposure throughout the deal lifecycle
Buyers need forensic analysis of targets' supplier networks, customer dependencies, country of origin compliance, and contractual mechanisms for absorbing trade-related cost shocks
Parties must explicitly define whether trade policy changes constitute material adverse change, including objective criteria for "material," duration requirements, and alignment with interim operating covenants to avoid inadvertent breaches
Three emerging mechanisms shield deal value beyond closing: trade impact indemnities for unquantifiable risks, earnouts that defer payment until trade uncertainty resolves, and minority equity retentions that align vendor interests with post-closing performance
Success hinges on thoughtfully negotiating who bears trade policy risk at each deal stage, from signing through post-closing integration, rather than accepting standard boilerplate provisions

Due diligence

In the current environment, purchasers and their counsel conducting due diligence should have a heightened focus on the target’s exposure to trade policy risk, including a thorough assessment of the target’s suppliers, customers, and business partners, and an assessment of their compliance with the applicable country of origin laws. Particular attention should be paid to whether these parties are located, or have relevant operations, in jurisdictions where shocks from changes to trade policy are likely. Such changes – including new tariffs, non-tariff barriers, or the termination of a free trade agreement – may materially impact the target’s economics and the overall deal value.

Purchasers and their counsel should also review the target’s key contracts for provisions that address changes to the parties’ rights and obligations in the case of impacts from trade policy changes, including whether such provisions result in renegotiation and/or termination rights and, if so, the threshold for triggering such rights. They should also determine whether there are mechanisms in the contracts allocating any increased costs resulting from policy changes, which party bears the burden of the increased costs, whether there is a limit on the extent of their liability, or whether the terms may be renegotiated.

Deal protections

Representations and warranties

Purchasers should insist that vendors include representations and warranties regarding the target’s key contracts in the purchase agreement and ensure that they are indemnified for any inaccuracies. Purchasers’ counsel should be attentive to whether the representations are qualified, and if so, the nature of the qualification (e.g., knowledge, materiality, and scope). In a purchase agreement with an interim period between signing and closing, it is a common closing condition to include a bring-down of the representations and warranties, which requires vendors to certify that the representations and warranties remain true and accurate at the time of closing. Here as well, purchasers’ counsel should be attentive to any further qualifications, particularly where such qualifications in the bring-down certification are in addition to a qualified representation or warranty. To the extent that trade policy changes during the interim period render any particular representation and warranty inaccurate, then vendors may be unable to satisfy the bring-down condition and purchasers may be able to walk away from the deal.

Interim operating covenants

An interim operating covenant governs how the target must be operated between signing and closing.² It typically imposes a general obligation on the target to operate in the ordinary course, along with specified obligations (such as preserving business relationships) and prohibitions (such as selling or transferring assets above a threshold). The purpose of the interim operating covenant is twofold: first, to ensure that the business the purchaser bargained for at signing is essentially the same as the business it acquires at closing; and second, to minimize the moral hazard of the vendor acting in its own interest at the purchaser’s expense during the interim period. Interim operating covenants are relevant in the context of unforeseen trade policy changes because such changes may prompt the target to take mitigating steps (such as cutting production, terminating employees, changing suppliers, or ending customer contracts) that may be a breach of the interim operating covenant.

Canadian courts have generally accepted that reasonable, temporary measures taken in response to external shocks do not constitute a breach.³ However, these decisions have been highly fact specific. It is therefore important to recognize the inherent tension between purchasers (who typically want a narrower scope of permitted actions) and vendors (who tend to want greater operational flexibility) and to negotiate the scope of the covenant accordingly. The parties may also consider requiring the vendor to obtain the purchaser’s consent before taking measures in response to trade policy changes that fall outside the negotiated scope of the covenant. Thoughtfully managing the tension created by divergent priorities of purchasers and vendors is essential to achieving an informed and balanced allocation of risk for trade policy changes during the interim period.

Material adverse change clauses

A material adverse change (MAC) clause is a common closing condition. It enables the purchaser to walk away from the deal if there has been a MAC in the interim period between signing and closing. In Fairstone, the court defined a MAC as “an unknown event that substantially threatens the overall earnings potential of the target in a durationally-significant manner.”⁴Typically, the MAC clause will include a carve out whereby certain events are excluded from the definition. The general practice is for the vendor to retain business-specific risks while the purchaser assumes systemic risks.⁵

When negotiating the MAC clause in the current environment, the parties need to determine whether impacts from changes to trade policy during the interim period will be allocated to the vendor (by including them in the general definition of a MAC), the purchaser (by carving them out), or whether trade risks will be shared through a tailored allocation. The parties also need to specify objective criteria for determining whether a change is “material” and “adverse,” such as measurable financial or operational metrics, and include an explicit duration requirement to clarify how long a trade-related impact must persist before it constitutes a MAC. Finally, it is imperative to align the risk allocation between the MAC clause and the interim operating covenant, ensuring that systemic risks carved out from the MAC clause (such as trade policy changes) do not inadvertently reappear as breaches of the interim operating covenant.

Reverse break fees

A reverse break fee is a negotiated payment that the purchaser pays to the vendor in the event that the purchaser causes the transaction not to close. The fee is typically payable only where the reason for not closing is outside the vendor’s control (such as the purchaser failing to obtain financing or the requisite board or shareholder approvals, or the occurrence of a MAC). Where the purchaser is unable to close, the reverse break fee compensates the vendor for the lost time, expenses, and opportunity costs associated with the failed transaction. Vendors and their counsel should carefully consider the inclusion of a reverse break fee as a means of managing transactional risk arising from trade policy changes that prevent a deal from closing, along with the specific mechanics and the quantum of the fee.

Post-closing risk sharing

Given that cross-border trade uncertainty is likely to persist in the medium term, parties and their counsel should also be attentive to the risk of post-closing trade policy changes impacting the target.

Trade impact indemnities

A trade impact indemnity is a specialized indemnity under which the vendor agrees to compensate the purchaser for losses, costs, or liabilities incurred by the target as a result of post-closing trade policy changes. It provides a practical solution where the trade‑related risk is potential and difficult to quantify at the time of signing the purchase agreement, such that a purchase price adjustment would be impractical. It also allows the parties to preserve their negotiated purchase price, while ensuring that the vendor receives full value for the target unless a trade policy change occurs which triggers the indemnity. Key considerations when drafting the indemnity include defining trigger events (such as new tariffs, duties, or sanctions), determining the scope of indemnification (including any exclusions), setting the duration of the indemnity, and establishing any baskets (whether a true deductible or tipping) or other limits on the quantum of indemnification.

Earnouts

An earnout is a provision that defers part of the purchase price until the post-closing period, making it contingent on the satisfaction of specific post-closing conditions. An earnout will often be based on financial metrics of the target for the post-closing period such as revenues, net profits, or operating cash flows, each of which could be impacted by trade policy changes that have a material impact on the business. Earnouts can therefore provide an additional mechanism for allocating this post-closing risk and require the purchaser to pay full value for the target business only if the success of the target business post-closing is not adversely affected by trade policy changes. Key considerations when drafting an earnout include defining clear earnout metrics, providing the vendor with clear information about the results of the target business relevant to the earnout metrics and audit rights, and tailoring the duration of the earnout to the time horizon in which the parties anticipate the trade risk to persist.

Minority equity retentions

A minority equity retention requires the vendor and/or certain key employees of the target to retain an equity interest in the target business post-closing. This can reduce the purchaser’s exposure to any post-closing trade policy changes by sharing the downside (and the upside) of the target business with the vendor and other key employees. Where vendors or certain key employees remain in senior management positions and hold an equity interest at the target business post-closing, it incentivizes them to navigate post-closing trade policy changes in a manner consistent with the interests of the purchaser as a shareholder. A minority equity interest can be structured as an equity rollover where the vendor reinvests a portion of their proceeds into the purchaser or a new entity created to hold the target business. It can also be structured so the vendor simply retains a minority equity stake in the target business post-closing. In any minority equity retention, the parties and their counsel should consider the rights and obligations of the parties as shareholders of the target business post-closing, including entering into shareholder agreements containing negotiated buy/sell rights which may be exercisable by the purchaser to acquire the target’s shares from the vendor and the key employees after a negotiated period in which no adverse trade policy changes have occurred.

Takeaway

Addressing trade policy risk in Canadian M&A transactions is critical to minimizing uncertainty and preserving deal value. By incorporating robust due diligence, tailored purchase agreement provisions, and appropriate post-closing mechanisms, parties can effectively mitigate these risks and safeguard their strategic objectives.

For more information on cross-border trade policy, successfully conducting M&A in the current environment, or any of the other topics referenced in this article, please reach out to any of our authors below or your usual BLG contact.

This article was prepared with the assistance of Deva Middleton, articling student.