Tesla Motors Canada ULC v. Ontario

In July 2018, Ontario authorities announced the cancellation of an incentive program for electric car owners. Thus, the progressive conservatives who came to power in Ontario put an end to the program of providing benefits for the purchase of electric vehicles. Only those who ordered cars through dealerships before September 10 could get benefits. However, Tesla sells cars directly, without dealers – therefore, customers, according to the government’ decision, could not count on a discount. Many Ontario residents who bought the Tesla Model 3 canceled the order.

Naturally, Tesla Motors Canada, Canadian division of Tesla, Inc. decided to sue the government of Ontario. According to the company, by canceling the incentive program for owners of electric cars, the authorities unfairly treated drivers. The lawsuit stated that after the provincial government decided to terminate the program in July, hundreds of Tesla customers were left without the discount they had counted on when ordering cars.

This decision hit the company itself – Tesla sales fell in Canada, and Ontario residents began to be wary of electric cars. The company asked the Ontario Supreme Court to overturn a “completely unfounded” government decision that did not explain its actions. In a lawsuit filed with the Ontario High Court, Tesla Canada, a licensed Ontario electric vehicle dealer, indicated that its customers lost financial incentives to buy electric cars, unlike those who purchase them from other companies.

Tesla Canada’s management fairly claimed that the provincial authorities “intentionally and without sufficient justification” (Tesla Motors Canada ULC v. Ontario) deprived its customers of many opportunities without providing any warnings or the chance to propose any changes. Obviously, the decision had no legal grounds and represents a ‘bright’ example of arbitrariness at the level of local government. Tesla faced an egregious incident – the company attempted to communicate with the Ministry of Transportation after receiving notification about termination of subsidy for it, but the government never responded.

Tesla Motors Canada has won a lawsuit against the government of Ontario in connection with these compensation payments for electric cars. “We are pleased with the court’s decision to cancel the Ontario government’s plan to switch to another system as unfair and illegal,” the Tesla spokesman said in a statement on August 27 (Tesla Decision – A Charged Exchange). Ontario High Court Judge Frederick L. Myers ruled that the decision to exclude Tesla from the compensation program following the cancellation of a provincial environmental project was made without any good reason, which caused the company to incur losses (Tesla Motors Canada ULC v. Ontario).

Myers canceled the provincial government’s order as being made for an improper purpose, as a result of which the Tesla automaker “was deprived of at least some fair process to resolve the situation” (Tesla Motors Canada ULC v. Ontario). The ruling requires the government to review the program to include Tesla or to provide adequate justification for the exclusion of the company.

It should be noted that the foregoing legal precedent occurred after Ford decided to abandon the Electric and Hydrogen Vehicle Incentive Program (EHVIP), designed to encourage owners of cars with electric and hydrogen engines. The program was launched by the previous liberal government and offered a discount of up to CAD 14,000 for cars with electric and hydrogen engines. The decision clearly shows that there is real rule of law in Canadian court system, which cannot be said about the government. Tesla Motors provided a high enough evidence, and the court intervene in government decision-making, abolishing it.

Speaking about the possible reasons for the decision of the Ontario authorities, we should first turn to the features of the constitutional structure and political process in Canada. The current political system in Canada, also known as the Westminster system, was enacted by the British Parliament through the British North America Act 1867 (today known as the Constitution Act 1867). However, the features of the Confederation, as well as the distribution of powers were unilaterally determined by the fathers of the Confederation in Canada. In 1931, the Westminster Statute of Canada was recognized legally and received the name “Dominion,” like other British colonies.

Only in 1982, Canada was gifted with its own constitution, for which neither consultation nor the approval of the British Parliament was required. Canadian policy is in constant development; the public service is influenced by the government as one of its active branches (McMillan, 2017). In addition, the Canadian Charter of Rights and Freedoms continues to be mentioned in judicial decisions on legislation, which leads Canada to constitutional democracy rather than a parliamentary system.

At the present stage, conservatism continues to occupy a significant place in the socio-political life of the countries of Europe and America, which, like liberalism with social democracy, is flexible, adaptable to new realities, takes into account the trends of the time, and also seeks to maximize its electoral base. In this regard, the period of modern history of Canada is essentially unique, primarily in terms of the further development of conservatism in this country.

In particular, the constant competitive struggle of the Liberal and Progressive-Conservative, and then Conservative parties, carried out exclusively by parliamentary, peaceful, and reformist methods within the framework of a bipartisan system, the victory of conservatives in the general elections of 2006, 2008, and 2011, the era when Mulroney’s conservative offices were in power in 1984-1993, as well as the triumph of Diefenbaker in the 1958 parliamentary elections, etc. by themselves, testified to the effectiveness of a conservative ideology, its strength and durability.

For a long time, Canadian conservatives, united in the Progressive Conservative Party of Canada, were perceived only as a tribute to tradition, a vestige of the past and sometimes almost synonymous with reactionary trends in the country’s socio-political history. Such an opinion has sufficient grounds, given the rather high level of arbitrariness and the lack of understanding and acceptance of modern global trends in socio-political development.

An important place is occupied by documents testifying to the internal development of the Progressive Conservatives Party, and, above all, its charter. In this regard, one article is especially interesting, prohibiting discussion of the issue of changing the leader of the party during its period in power. In turn, this had a decisive influence on the entire period of the board of the conservative cabinet of Mulroney, who, not restrained by the fear of premature resignation of his head, systematically pursued the party’ policy in various areas of government.

Conservatives tried to position themselves precisely as a centrist nationwide conservative party that would meet the interests of voters not only in the Canadian West, but also in Ontario and the Atlantic provinces of Canada. Key in this regard was the expression “national coalition of citizens,” by which the conservatives hoped to draw the attention of voters in Ontario and the Atlantic provinces of Canada.

In particular, it was indicated that the Conservative Party will be guided by the following principles: a belief in the equality of all Canadians, as well as in a sovereign and united Canada, governed in accordance with the constitution, the rule of law, and parliamentary institutions (McMillan 26-28). Based on the foregoing, the conservatives expressed confidence in the inviolability of the constitutional monarchy, parliament, and democracy.

The last stage in the preparation of the union of the Progressive Conservative Party of Canada and the Canadian Conservative Reform Alliance was in the period from October to December 2003, when as a result, on December 12, the two parties merged (Morton & Snow, 2018). Thus, Canadian politicians, representing a pro-conservative ideology, found the wisdom, opportunities and strengths to unite both political parties, which, of course, met both their interests and the aspirations of voters.

As the Canadian politicians boldly noted in this connection, this was a historical agreement, which, in the recent history of Western countries, can only be compared with the event of the Berlin Wall destruction in 1989 (McMillan, 2017). The main provisions of the conservative program were the establishment of fiscal conservatism, which could interest the voter in the era of mass consumption and post-industrial society, when namely the economic factor, and not ideological, as in the era of the Cold War, determines the nature and dynamics of the development of any society, including Canadian.

However, during one of the election campaigns, conservative J. Gallant compared abortion to the terrorist attacks of September 11, 2001, implying the same destructive nature of it (Morton & Snow, 2018). This was an expression of the populism that the Conservative Party “inherited” from the Reform Party. The conservatives did not disdain the methods of black PR either – in particular, they issued a press release emphasizing that the leader of the Liberal Party, P. Martin, supports child pornography (Morton & Snow, 2018).

It is not surprising that the principles of sustainable development, a green economy and the associated social, legal and political processes are not among the priorities of Canadian conservatives.

Meanwhile, the transition to electric cars is a contribution to the decarbonization program aimed at protecting the environment from harmful emissions. In 2018, global electric vehicle sales exceeded all expectations. Over a year, more than two million electric cars were purchased and there is a tendency towards further growth in sales of such vehicles (Hertzke et al., 2019). Currently, the number of electric vehicles in the world is only about half a percent of the global number. By 2040, the situation should radically change. According to analysts, the world will have about 1 billion 68 million electric passenger cars, 40 million commercial electric cars, and 500 million units of public transport (Hertzke et al., 2019).

Incentive programs for the purchase of electric vehicles are successfully operating in a number of countries, as part of the implementation of the principle of moving towards a green economy through green finance. In the 2019 Canadian budget, it was proposed to allocate $300 million over three years, starting in 2019-2020, as an incentive for the purchase of electric vehicles and hydrogen cars with the price up to $45,000 (City of Toronto Electric Mobility Strategy Assessment Phase). The government also proposed exempting owners of electric vehicles taxes in the first year of using a vehicle in order to encourage taxis and bus owners to switch to environmentally friendly transport.

It should be noted that the electrification of public transport has been going on all over the world for several years and the number of electric buses in the world already totals about 400 thousand cars (Hertzke et al., 2019). Investing in environmentally friendly and efficient public transport also contributes to secondary employment. For example, Ford Motor announced that it needs thousands of engineers qualified in the production of high-power batteries used in electric vehicles (Hertzke et al., 2019). It can also be stated that “green” finances represent the basis of the concept of low-carbon (“green”) economic growth due to the fact that they lie in the spectrum of intersection of key areas of development (Ioannides & Wall-Reinius, 2015):

• Financial industry;
• Environmental improvement;
• Economic growth.

In this context, green finances are similar to sustainable development, where, in our opinion, it is also necessary to find a balance of interests in social, environmental, and economic factors of development, and the interests of business, society and government, both for the present and for future generations. Green finance is the link that really enables the transition to a green economy.

The start of Tesla Model 3 mass deliveries to Canada helped bring overall electric car sales in the country to a new record level. Now it is 8% of all new cars sold in Canada (Hertzke et al., 2019). Perhaps, the figure does not look very impressive, but it is much larger than in the markets of many other developed countries. However, the government of conservatives in Ontario decided to intervene in this process, guided by a number of still unknown narrow-corporate principles that are unacceptable to public authorities.

Tesla rightly argued that the government “unlawfully targeted it without any rational basis” and that it was “being demonized for purposes that are outside the legitimate reach of the laws that govern electric car subsidies in Ontario” (Tesla Motors Canada ULC v. Ontario). The judge Myers called such actions of the government’s “arbitrary” and “egregious” (Tesla Motors Canada ULC v. Ontario). The conclusion included Myers’ statement that the government “singled out Tesla without providing the company “any opportunity to be heard or any fair process whatsoever” (Tesla Motors Canada ULC v. Ontario). Such cases in a highly developed country, one of the flagships of world development, are bewildering.

Significantly, protests are under way in Canada this year in solidarity with the indigenous people of Wetsoveten, British Columbia, who are trying to counter the construction of a $6 billion gas pipeline through their territory. Demonstrators demand that the Canadian police leave the territory of Wetsoveten and refuse to protect the property of the pipeline company. Obviously, momentary economic interests are of much greater importance to the conservative government of Canada than the principles of sustainable development and even Canada’s international reputation.

Many accusations against Prime Minister Trudeau were related to the fact that he allegedly does not pay enough attention to the climate issue, which is very worrying for Canadians. A flurry of criticism struck Trudeau when his government supported the Trans Mountain pipeline project, which activists called non-environmental. In September 2019, Greta Tunberg accused Trudeau of inaction to prevent climate change.

Earlier, Attorney General and Justice Secretary Jody Wilson-Reybold resigned. She stated that Trudeau allegedly pressured her to influence the results of a corruption investigation against SNC-Lavalin, one of the world’s largest engineering and construction companies. The company was accused of giving bribes to Libyan officials for ten years from 2001 to 2011, when Muammar Gaddafi was in power in Libya.

According to the ex-Prosecutor General, Trudeau persuaded her for several months that the trial of the company will have a lot of negative consequences, in particular, the loss of jobs by many Canadians, and this, in turn, will cost Trudeau and his party of votes (McMillan, 2017). Against the background of the same story with possible political interference by Trudeau in court cases, Finance Minister Jane Philpott also left her post in March. Thus, the policy of unjust preference is characteristic of the conservative government in Canada.

It should be said that progressive conservatives played a significant role in the transformation of the bipartisan system at the federal level. Along with the liberals, they, in the rank of the national party, for a considerable period of time formulated the main directions of the country’s domestic and foreign policy. Namely, their leader, J. MacDonald, headed the first parliamentary majority government after the formation of the federation. The party has repeatedly sought to convince voters of its reliability, political literacy, and clear commitment to the proposed program settings. This, in turn, allowed the conservatives to form a government of the parliamentary majority.

At the same time, according to the memoirs of Campbell, the leader of the progressive conservative party from June 13 to December 13, 1993, the first woman of the Canadian Prime Minister, they are an important source for describing the election campaigns and policies of the conservatives.

While not taking responsibility for the crushing defeat of his party in the 1993 general elections, Campbell at the same time details the ill-conceived training of her supporters, her own incompetence in a number of issues of a socio-economic and political plan, a poorly organized advertising campaign in support of the party, and relatively late publication election manifesto and insufficient explanation of its most relevant provisions to voters (qtd. in Morton & Snow, 2018). It seems that the above-mentioned incompetence is typical for Canadian conservatives today.

In contrast to the developed European countries, which for many centuries have been monolithic political systems with deep sociocultural foundations, Canada is a relatively new state entity. The process of development of its statehood and ideology, as well as the formation of public institutions of power in the 18-19 centuries, was strongly influenced by France, Great Britain, and the USA, which predetermined a number of specific features of Canadian democracy generated by the influence of each of the above countries.

However, although, to some extent, each of these countries determined the unique political development of Canada, their joint influence contributed to the appearance of that specific feature, which ultimately became evident feature of the political culture in Canada, combining elements of a commitment to democracy, and at the same time nationalism, simultaneously populism and the lack of consideration of the opinion of the population in decision-making, etc.

The importance of France, the USA, and Great Britain affected not only the shaping of the ideological attitudes of Canadian society, but also its public institutions. The greatest influence was made by the British tradition, which, putting order above individual freedom, assigned the state the role of guarantor of the society’ stability. Huge geographical spaces, the proximity to the USA, and the constant danger of losing independence both in political and economic terms – all this contributed to the increasing role of the state. The Tesla case study is a good example of a government demonstrating its “strength” and authority.

The Prime Minister’s policy on social equality and multiculturalism raised questions against the background of the plight of Canadian Natives and refugees. The fact that the Trudeau Cabinet of Ministers maintained gender and national balance in its staff did not brighten the fate of descendants of indigenous Canadians imprisoned for crimes caused by low levels of social security in the regions. In 2017, Justin Trudeau’s Christmas holiday on a private island in the Bahamas was hotly discussed in parliament – he spent $133,000 from the Canadian treasury.

Trudeau explained that the owner of the island is his friend and that the prime minister’s family did not get to the place of rest on a private plane, but on a helicopter (Morton & Snow, 2018). However, it turned out that this was not true; Canadians and opposition politicians resented in unison. The “monarchical” ways of the Conservatives damage not only the country’s political reputation, but also its investment attractiveness. The case with Tesla will undoubtedly serve as an “alarm bell” for investors.

In addition to the presence of this factor, Canada’s institutional structure was characterized by a high degree of decentralization. Canada for the first time tried to combine the parliamentary model with federalism. The result was a combination of strong central authority and provincial subsystems, which had considerable autonomy. Provincial governments were sometimes as legitimate as the federal ones. The Canadian federal system faces challenges in the functioning, which were largely determined by the regionalism of the mass consciousness. This situation existed in most Canadian provinces. The factor of regionalism had a cardinal influence on the activities of political parties in Canada.

On the one hand, the national party system in this country could not fulfill its prescribed role in society if it did not take into account regional differences. On the other hand, this contributed to the manifestation of arbitrariness in the actions of the provincial authorities, which the American company Tesla experienced. Naturally, it also contributed to the nature of the decision made by the Ontario authorities.

Thus, there is evident fact that the general public needs to intervene in assessing the Government of Canada activities and the appropriate activities of the province’s government, primarily assessing the level of its social responsibility. A government that grossly violates the interests of foreign companies operating on its territory, as well as, for the sake of narrow corporate short-term interests, is not paying attention to sustainable development, preserving the environment and the interests of future generations, can hardly count on a large-scale adherence of national business to the CSO principles. Moreover, Canada’s reputation on the international arena and its investment attractiveness, to a significant extent, depends on the absence of cases such as the above-described case of Tesla Motors.

References

City of Toronto electric mobility strategy assessment phase (2018). Pollution Probe and The Delphi Group. Web.

Hertzke, P., Müller, N., Schaufuss, P., Schenk, S., & Wu, T. (2019). Open interactive popup expanding electric vehicle adoption despite early growing pains. McKinsey.

Ioannides, D. & Wall-Reinius, S. (2015). Sustainable mobility in the periphery: Are electric vehicles the answer? Review of international literature on electric vehicles and ideas for further research. ETOUR.

McMillan, T. (2017). Not my party: The rise and fall of Canadian Tories, from Robert Stanfield to Stephen Harper. Nimbus Publishing.

Morton, T. & Snow, D. (2018). Law, politics, and the judicial process in Canada. University of Calgary Pres.

Tesla Decision – A Charged Exchange Between Government and Private Enterprise: Tesla Motors Canada ULC v Ontario (Ministry of Transportation) (2018). Singleton Reynolds. Web.

Tesla Motors Canada ULC v. Ontario (Ministry of Transportation). 2018 ONSC 5062. Court File No. DC 497/18.