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Legal Guide

Canada has a constitution that distributes law-making powers between different levels of government
and imposes certain limits on the authority of all branches of government. The statute which performs these roles is the Constitution Act, 1867.

The Constitution Act, 1867 establishes a federal system in which the authority to enact statutory laws is divided between a national or federal Parliament, and ten provincial legislatures. While the provinces vary greatly in size and population, each possesses almost identical legislative authority. Other law-making bodies, such as municipal governments and the assemblies of the three northern territories - the Yukon, the Northwest Territories and Nunavut - do not have the same degree of autonomy or permanence. The former are dependent upon a province for their powers and the latter are creatures of ordinary federal statute. In addition, Canada’s aboriginal peoples may have the right to be consulted with respect to matters that affect aboriginal rights and, as a result of agreements or treaties, may exercise limited self-government in certain areas.

The areas of federal and provincial jurisdiction are, by and large, intended to be mutually exclusive. In practice, however, many activities may be regulated to some degree. In the event of an operational conflict between valid federal and provincial legislation, the federal will prevail. The courts serve as referees of the division of powers through their authority to declare any law that is beyond the jurisdiction of the enacting body to be of no force and effect.

There are several subjects on which the federal Parliament may pass laws that are likely to impact business activities, namely:

  • •     the regulation of foreign investment;
  • •     the incorporation of federal companies;
  • •     direct and indirect taxation;
  • •   the regulation of interprovincial and international trade;
  • •     competition (anti-trust) law;
  • •     patents and copyright;
  • •     immigration;
  • •     bankruptcy and insolvency;
  • •     banking and bills of exchange; and
  • •     interprovincial undertakings in the transportation and telecommunication fields.

The provinces may exercise control over certain business activities through their authority to make laws in relation to:

  • •     the incorporation of provincial companies;
  • •     direct taxation within the province; and
  • •     the regulation of trade and commerce within the province.

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