Product Liability

Nearly four years after the Canada-United States-Mexico Agreement (the “CUSMA” or the “Agreement”) came into force, U.S. President-elect Donald Trump announced on November 25, 2024, that he would impose 25% tariffs on all products entering the U.S. from Canada and Mexico, starting on the first day of his presidency, that is, January 20, 2025. Mr. Trump added that the tariffs would remain in effect until Canada and Mexico strengthened their border policies, which he blames for the increase in illegal immigration and the trafficking of devastating drugs in the United States. As a reminder, under the current provisions of the CUSMA, most products made in Quebec and Canada can be sold on U.S. markets without tariffs applying. President Trump has repeated his intention to implement such customs tariffs on several occasions since his announcement at the end of November. However, no real measure has yet been taken to impose these customs tariffs. Still, should he choose to go ahead with his threat, there appears to be several legislative provisions on which his administration could rely to implement these tariffs. His administration could invoke the CUSMA’s essential security exception, which allows a party to the Agreement to apply any measure deemed necessary to protect its essential security interests, the national security exception in the Trade Expansion Act of 1962, which President Trump’s first administration used in 2018 to introduce tariffs on U.S. imports of certain steel and aluminum products, or the provisions of the National Emergencies Act. Needless to say, the announcement sent shockwaves through the political and business communities in Canada and Quebec what with the close commercial ties that the U.S. has with Canada, including with Quebec. In the first quarter of 2024 alone, Quebec’s merchandise exports to the U.S. reached CAN$21.2 billion, which accounts for nearly 74.6% of the province’s international merchandise exports and makes the U.S. Quebec’s main trading partner on the world stage. The imposition of 25% tariffs would therefore significantly affect Quebec businesses. It would make them less competitive on the U.S. market, on which they rely heavily to export their products. The measure could be particularly detrimental to the Canadian forestry industry, which is already severely affected by tariffs of nearly 15% on lumber. The U.S. economy would also be considerably affected by such protectionist tariffs. While in the short term, tariffs could benefit certain domestic manufacturers and producers, in the longer term, they are likely to harm the U.S. economy as a whole. Many U.S. manufacturers would face higher costs of inputs, and established supply chains would be disrupted, in particular in the automotive and steel industries. To continue to make profits, many U.S. companies could be forced to pass on the additional costs to their end consumers by raising the prices of their products, which would undoubtedly result in another wave of inflation. Worth mentioning also are the retaliatory measures that the Canadian government may want to implement in response to such tariffs, which could affect certain parts of the U.S. economy. Although the CUSMA provides for dispute resolution mechanisms, they are unlikely to lessen the impact of the measures that the Trump administration is considering in the short term, as a final decision under these mechanisms could take a long time to be issued. The new U.S. administration could use the announcement made on November 25 as leverage in future CUSMA renewal negotiations, the preparatory discussions for which are slated to begin next year, or in negotiations for a separate trade agreement between the U.S. and Canada that would exclude Mexico. Canadian businesses would do well to encourage their various trade associations to take steps to lobby both American decision-makers and their corporate customers in the U.S. and remind them of the harmful effects that the announced tariffs may have on American businesses. While we wait for a more detailed announcement with information concerning specific tariff exemptions in particular, we suggest that businesses choose their future trading partners with great care. In an increasingly protectionist global economic context, a strategy involving the diversification of trading partners is the best way for businesses to offset the risks associated with a particular country’s tariff policies. The Comprehensive Economic and Trade Agreement signed by Canada and the European Union in 2017, which our firm helped to negotiate, may prove to be an interesting solution in this respect. Our team of commercial law and tax professionals is available to help you find solutions to the issues arising from this announcement. With our expertise, we can assist you in your commercial negotiations and help you develop strategies to mitigate the impact that the announced tariff increase may have on your business.

On November 7, 2024, Bill C-244, An Act to amend the Copyright Act (diagnosis, maintenance and repair)1 received royal assent, adding a new exception to the provisions governing technological protection measures (TPM) in the Copyright Act (CA). This legislative amendment adds section 41.121 to the CA, making it legal to circumvent TPMs for product maintenance, repair and diagnosis. What it means The new section 41.121 is expected to have a limited impact on the Canadian repair market. Although repairers can now circumvent TPMs to diagnose, maintain or repair a customer’s device, it is still forbidden for repairers to use the services of a TPM circumvention specialist, and specialized circumvention equipment is still prohibited. Furthermore, the absence of a fair dealing exception in this amendment poses ongoing risks of copyright infringement for these purposes. A number of questions remain unanswered, including the scope the courts will assign to the terms “maintenance” and “repair.” Does upgrading a device with improved technology fall within the definition of maintenance, or are repairers restricted to servicing devices according to original specifications? For example, if a connected device becomes obsolete after a new security standard is adopted, would replacing its software constitute maintenance? In short, the adoption of Bill C-244 represents but a small step toward the right to repair goods, and it serves as a prime example of how reconciling property rights with intellectual property rights can be challenging. Amendments made by C-244 Section 41.121, as introduced by C-244, has three paragraphs: Diagnosis, maintenance and repair 41.121 (1) Paragraph 41.1(1)(a) does not apply to a person who circumvents a technological protection measure for the sole purpose of maintaining or repairing a product, including any related diagnosing, if the work, performer’s performance fixed in a sound recording or sound recording to which the technological protection measure controls access forms a part of the product. For greater certainty (2) For greater certainty, subsection (1) applies to a person who circumvents a technological protection measure in the circumstances referred to in that subsection for another person. Non-application (3) A person acting in the circumstances referred to in subsection (1) is not entitled to benefit from the exception under that subsection if the person does an act that constitutes an infringement of copyright. Under the new section, the protection afforded to TPMs is set aside for maintenance and repair purposes, including the related diagnosing. Subsection 41.121(2) adds that the exception also applies to a person, such as a professional repairer, who repairs a product for another person. Subsection 41.121(3) further adds that the exception applies only to situations where there is no copyright infringement; for example, copyright infringement would be a person circumventing TPMs to repair a product, but taking advantage of the situation to make an illicit copy of a computer program. Bill C-244 reintroduced certain provisions of Bill C-272,2 which had been tabled in September 2020 but abandoned after the 2021 federal election. However, unlike the original text, the amendment passed on November 7, 2024, does not allow a person to manufacture, import or distribute TPM-circumvention devices to be used to perform repairs. It is rather limited to making the act of circumvention itself legal. Origin of the problem Bill C-272 was partly introduced in response to the decision in Nintendo of America Inc. v. King,3 which had considerably dampened the TPM-containing-device repair industry. In that case, the Federal Court awarded Nintendo of America Inc. $11.7 million in statutory damages following the circumvention of its TPMs, with $20,000 awarded for each of the 585 affected games, and an additional $1 million in punitive damages. Technological Protection Measures (TPMs), also known as digital locks or digital rights management (DRM) technologies, are mechanisms used to safeguard copyrights and sensitive information in the digital domain. They regulate access to or the copying, alteration and redistribution of digital content, such as audio and video files, software and e-books. TPMs can take various forms, including access codes, passwords, encryption keys, watermarks, digital signatures, encryption methods, and integrated hardware-based protections. These measures may be embedded in the files themselves, or in the devices that read, store or distribute them. DVD encryption and video game cartridge protections are well-known examples. The World Intellectual Property Organization (WIPO) first proposed a framework for protecting TPMs in 1996, anticipating that increased internet usage might escalate copyright infringement.4 In 1999, the United States ratified the framework by passing the Digital Millennium Copyright Act (DMCA), followed by Canada’s enactment of the Copyright Modernization Act5 in 2014. This legislative amendment introduced section 41.1 and related provisions to the Copyright Act (CA), prohibiting the circumvention of TPMs. Today, TPMs are ubiquitous, appearing in cars, tractors, medical implants, printer cartridges, game consoles, and various electronic devices. The $11.7 million award to Nintendo of America Inc. pursuant to this provision had a chilling effect on the repair industry.6 In response to the Nintendo decision, Bill C-272 proposed exceptions to the prohibition on circumventing TPMs for diagnosis, maintenance, and repair activities, as specified in paragraph 41.1(1)(a) of the CA. It also included an exception for the manufacture, importation, or distribution of products designed to circumvent TPMs for these purposes, addressing the restrictions noted in paragraph 41.1(1)(c) of the CA. Harmonization with the Canada-United States-Mexico Agreement The scope of the new section 41.121 introduced by Bill C-244 was significantly narrowed to prevent conflicts with the Canada-United States-Mexico Agreement (CUSMA). Article 20.66 of CUSMA requires member countries to enforce three categories of prohibitions related to TPMs: a prohibition on offering TPM circumvention services, a prohibition on the manufacture, import, or distribution of devices intended for TPMs circumvention, and a prohibition on the act itself of circumventing TPMs. Paragraph 5 of Article 20.66 specifies certain exceptions to these prohibitions, particularly for purposes such as interoperability, encryption research (security), and government activities (most of which are addressed under sections 41.11 and following of the CA), but it does not include an exception for the repair of goods. The exception provided in section 41.121 was thus limited to the third CUSMA category which involves the prohibition on circumventing TPMs themselves, as outlined in paragraph 41.1(1)(a) of the CA. As such, the prohibitions on offering TPM circumvention services, and manufacturing, importing or distributing TPM circumvention devices, set out in paragraphs 41.1(1)(b) and 41.1(1)(c), respectively, remain unchanged, even if the purpose of circumvention is to repair a device. Introduction of ambiguous wording Legal professionals may recognize that the changes made to the definitions in section 41 present new challenges. In an attempt to clarify how the new provision’s application, the legislator has added two conflicting expressions to the definitions of “circumvent” and “technological protection measure,” which may not have been necessary. Before After Technical protection measures and information on the rights mechanism Definitions 41 The following definitions apply in this section and in sections 41.1 to 41.21. circumvent means, a)        (a) in respect of a technological protection measure within the meaning of paragraph (a) of the definition technological protection measure, to descramble a scrambled work or decrypt an encrypted work or to otherwise avoid, bypass, remove, deactivate or impair the technological protection measure, unless it is done with the authority of the copyright owner; and Technical protection measures and information on the rights mechanism Definitions 41 The following definitions apply in this section and in sections 41.1 to 41.21. circumvent means, a)        (a) in respect of a technological protection measure within the meaning of paragraph (a) of the definition technological protection measure, to descramble a scrambled work or computer program, or decrypt an encrypted work or computer program or to otherwise avoid, bypass, remove, deactivate or impair the technological protection measure, unless it is done with the authority of the copyright owner; and b)        … b)        … technological protection measure means any effective technology, device or component that, in the ordinary course of its operation, a)        controls access to a work, to a performer’s performance fixed in a sound recording or to a sound recording and whose use is authorized by the copyright owner; or technological protection measure means any effective technology, device or component that, in the ordinary course of its operation, a)        controls access to a work, including a computer program, to a performer’s performance fixed in a sound recording or to a sound recording and whose use is authorized by the copyright owner; b)        … b)        … In the first instance, the legislator specifies that definition applies to “a work or computer program,” which suggests that a computer program is not considered a work. However, the second definition uses the phrase “a work, including a computer program,” implying the opposite. These clarifications were unnecessary, since the definition of “work” already includes literary works, and section 2 of the CA expressly states that literary works include computer programs. It is unfortunate that the text was adopted in its current form despite the numerous comments on this issue during parliamentary reviews.7 Striking a balance between property rights and intellectual property rights The debates surrounding these legislative changes illustrate the inherent challenges in striking a balance between the reduction of property rights, including the right to repair goods, and the promotion of intellectual property rights. For example, the Entertainment Software Association of Canada has advocated for excluding game consoles from the new exception.8 Paul Fogolin, the association’s Vice President of Policy and Government Affairs, argued that broadly opening the right to repair goods could jeopardize the video game industry by making it almost impossible for rights holders to pursue legal action against those tampering with their protection measures.9 Charles Bernard, Lead Economist for the Canadian Automobile Dealers Association,expressed concerns about increased auto theft risks.10 Catherine Lovrics, Chair of the Copyright Policy Committee, Intellectual Property Institute of Canada, anticipated cybersecurity risks.11 Several industry stakeholders believe that making documents, software, parts, and tools available for repair could elevate the risk of cyberattacks. Industry representatives in the United States have highlighted similar risks. For instance, the Association of Equipment Manufacturerssuggests that enabling the circumvention of TPMs could compromise emission controls on equipment, potentially leading to violations of environmental laws and risks to human life.12 Others have raised concerns about product liability issues.13 According to Apple and Panasonic, today’s electronics are too complex for non-specialists to repair and, thus, broadening the right to repair could compromise consumer safety.14 Concerns about safety, security, and liability are certainly legitimate; however, it is also valid to question whether intellectual property law is the appropriate vehicle to address these issues. During review of C-244, Shannon Sereda, Director of Government Relations, Policy, and Markets for Alberta Wheat and Barley Commissions, highlighted the potential difficulties farmers face when they cannot swiftly repair their equipment. She argued that “[t]he current legislative environment in Canada supports equipment repair monopolies by allowing OEMs to prohibit the bypassing of TPMs.”15 Anthony D. Rosborough, a researcher in the Law Department of the European University Institute, corroborated this viewpoint, stating that TPMs “function principally to protect technologies, rather than works or the rights of authors.” In his view, the industry sometimes relies on copyrights for what should be more appropriately protected with patents or trade secrets.16 The relaxation of TPM rules in Canada aligns with similar measures already implemented in the United States. On October 28, the Librarian of Congress renewed a series of exceptions to section 1201 of the Digital Millennium Copyright Act (DMCA), including provisions that allow the circumvention of certain protection measures for repairs.17 These exceptions are subject to renewal every three years and have so far been renewed twice since 2018.18 Over the past few years, the United States has taken several steps to promote the right to repair goods. In May 2021, the Federal Trade Commission (FTC) filed a detailed report19 on anti-competitive practices related to the right to repair. On July 9, 2021, shortly after the report was released, the U.S. President issued an Executive Order to combat such practices and encourage the development of a third-party or owner repair market.20 Since then, multiple states have enacted laws supporting the right to repair.21 On January 8, 2023, John Deere pledged to enable independent repairers to service its equipment.22 Apple Inc., historically opposed to expanding the right to repair, shifted its stance in 2022 by launching a self-service repair program and publicly supporting California’s new right-to-repair law.23 Last year, WIPO reported that 40 states had introduced legislation in favour of the right to repair.24 Here in Canada, the adoption of Bill C-244 represents another step in establishing the right to repair goods. This measure builds on another federal bill, C-59,25 which also received assent last June and amended the Competition Act to empower courts to compel suppliers to sell diagnosis or repair tools. At the provincial level, Quebec became the first province to enact right-to-repair legislation last year. 26 In the coming months, it remains to be seen whether the new section 41.121 of the Copyright Act (CA) will unlock the repair market. For the moment, the measure strikes us as somewhat timid.27 Parliament of Canada, LEGISinfo: C-244: An Act to amend the Copyright Act (diagnosis, maintenance and repair), Parliament of Canada, online: https://www.parl.ca/legisinfo/en/bill/44-1/c-244. Parliament of Canada, LEGISinfo: C-272, An Act to amend the Copyright Act (diagnosis, maintenance and repair), Parliament of Canada, online: https://www.parl.ca/legisinfo/en/bill/43-2/c-272. Nintendo of America Inc. v. King, 2017 FC 246, [2018] 1 FCR 509. WIPO Copyright Treaty, December 20, 1996, article 11, online: https://www.wipo.int/wipolex/en/treaties/textdetails/12740. Copyright Modernization Act, S.C. 2012, c. 20, assented to on 2012-06-29, online: https://laws-lois.justice.gc.ca/eng/AnnualStatutes/2012_20/FullText.html; Canada Gazette, Vol. 146,No. 23 – November 7, 2012, SI/2012-85 Order Fixing Various Dates as the Dates on which Certain Provisions of the Act Come into Force, P.C. 2012-1392, October 25, 2012, online: https: //canadagazette.gc.ca/rp-pr/p2/2012/2012-11-07/html/si-tr85-fra.html. Graham J. Reynolds, “Of Lock-Breaking and Stock Taking - IP, Climate Change, and the Right to Repair in Canada,” in 2023 101-1 Canadian Bar Review 32, 2023 CanLIIDocs 1144, p. 54, online: https://canlii.ca/t/7n4cj. Committee on Industry and Technology, 5 December 2022, Catherine Lovrics, Open Parliament, online: https://openparliament.ca/committees/industry/44-1/49/catherine-lovrics-2/; Committee on Industry and Technology, 15 February 2023, Viviane Lapointe, Open Parliament, online: https://openparliament.ca/committees/industry/44-1/59/viviane-lapointe-5/; Committee on Industry and Technology, 15 February 2023, Andy  Fillmore, Open Parliament, online: https://openparliament.ca/committees/industry/44-1/59/andy-fillmore-6/; Committee on Industry and Technology, 15 february 2023, Patrick Blanar, online: https://openparliament.ca/committees/industry/44-1/59/patrick-blanar-1/. Entertainment Software Association of Canada, Bill C-244 – An Act to amend the Copyright Act (diagnosis, maintenance and repair), online: https://www.ourcommons.ca/Content/Committee/441/INDU/Brief/BR12209146/br-external/EntertainmentSoftwareAssociationOfCanada-e.pdf. Committee on Industry and Technology, February 8, 2023, Paul Fogolin, online: https://openparliament.ca/committees/industry/44-1/57/paul-fogolin-1/. Committee on Industry and Technology, February 8, 2023, Charles Bernard, online: https://openparliament.ca/committees/industry/44-1/57/charles-bernard-1/. Industry and Technology Committee, December 5, 2022, Catherine Lovrics, online: https://openparliament.ca/committees/industry/44-1/49/catherine-lovrics-2/. Emma Fillman, “Comprehensive Right to Repair:The Fight Against Planned Obsolescence in Canada,” (2023) 32 Dalhousie J Legal Stud 123, p. 145. online https://digitalcommons.schulichlaw.dal.ca/djls/vol32/iss1/5/. Irene Calboli, “The right to repair: Recent Developments in the USA,” World Intellectual Property Organization Magazine, August 2023, online: https://www.wipo.int/wipo_magazine_digital/en/2023/article_0023.html. Emma Fillman, “Comprehensive Right to Repair:The Fight Against Planned Obsolescence in Canada,” (2023) 32 Dalhousie J Legal Stud 123, pp. 142 and following, online https://digitalcommons.schulichlaw.dal.ca/djls/vol32/iss1/5/. Committee on Industry and Technology, February 8, 2023, Shannon Sereda, online: https://openparliament.ca/committees/industry/44-1/57/shannon-sereda-1/. Committee on Industry and Technology, February 8, 2023, Anthony D. Rosborough, online: https://openparliament.ca/committees/industry/44-1/57/anthony-d-rosborough-1/. Copyright Office, Library of Congress, Exemption to Prohibition on Circumvention of Copyright Protection Systems for Access Control Technologies, Federal Register, October 28, 2024, online: https://www.federalregister.gov/documents/2024/10/28/2024-24563/exemption-to-prohibition-on-circumvention-of-copyright-protection-systems-for-access-control. Copyright Office, Library of Congress, Exemption to Prohibition on Circumvention of Copyright Protection Systems for Access Control Technologies, Federal Register, October 26, 2018, online: https://www.federalregister.gov/documents/2018/10/26/2018-23241/exemption-to-prohibition-on-circumvention-of-copyright-protection-systems-for-access-control. Federal Trade Commission, Nixing the Fix: An FTC Report to Congress on Repair Restrictions, May 2021, online: https://www.ftc.gov/system/files/documents/reports/nixing-fix-ftc-report-congress-repair-restrictions/nixing_the_fix_report_final_5521_630pm-508_002.pdf. The White House, Executive Order on Promoting Competition in the American Economy, July 9, 2021, online: https://www.whitehouse.gov/briefing-room/presidential-actions/2021/07/09/executive-order-on-promoting-competition-in-the-american-economy/. X, Jon Campbell, December 29, 2022, online: https://twitter.com/JonCampbellNY/status/1608327624526548993; Colorado General Assembly, Consumer Right to Repair Agricultural Equipment, April 25, 2023, online: https://leg.colorado.gov/bills/hb23-1011; Minnesota Legislature, Minnesota Session Laws, 93rd Legislature, Chapter 57 – S.F. No. 2744, online: https://www.revisor.mn.gov/laws/2023/0/Session+Law/Chapter/57/; Sidley, “California Becomes Third U.S.State to Join the Right-to-Repair Movement,” October 24, 2023, online: https://www.sidley.com/en/insights/newsupdates/2023/10/california-becomes-third-us-state-to-join-the-right-to-repair-movement. John Deere, Memorandum of Undestanding, January 8, 2023, online: https://www.fb.org/files/AFBF_John_Deere_MOU.pdf. The Verge, “Surprise:Apple now supports California’s right to repair,” August 23, 2023, online: https://www.theverge.com/2023/8/23/23843506/apple-california-right-to-repair-sb-244. Irene Calboli, “The right to repair: Recent Developments in the USA,” World Intellectual Property Organization Magazine, online: https://www.wipo.int/wipo_magazine_digital/en/2023/article_0023.html. Parliament of Canada, LEGISinfo: C-59: An Act to implement certain provisions of the fall economic statement tabled in Parliament on November 21, 2023 and certain provisions of the budget tabled in Parliament on March 28, 2023; Parliament of Canada, online:https://www.parl.ca/legisinfo/en/bill/44-1/c-59. Québec National Assembly, Bill 29, An Act to protect consumers from planned obsolescence and to promote the durability, repairability and maintenance of goods, online: https://www.assnat.qc.ca/en/travaux-parlementaires/projets-loi/projet-loi-29-43-1.html. The author would like to thank Laura Trépanier-Champagne for her work in supporting the writing of this publication.

Greenwashing is a form of marketing that misrepresents a product, service or practice as having positive environmental effects,1 thereby misleading consumers and preventing them from making an informed purchasing decision.2 Several initiatives have been launched around the world to counter this practice. In California, a law requires business entities to disclose information in support of environmental claims.3 In France, ads featuring environmental claims such as “carbon-neutral” and “net zero” must include a quick response (QR) code that links to the studies and data supporting such claims.4 Within the European Union, a proposal for a directive was published with a view to possibly banning generic terms like “environmentally friendly.”5 In South Korea, the Korea Fair Trade Commission proposed an amendment to its Guidelines for Review of Environment-Related Labeling and Advertising that would simplify the process of issuing fines to businesses engaged in greenwashing.6 The Parliament of Canada seemingly followed suit by tabling Bill C-597 on November 30, 2023, which introduces a provision into the Competition Act8aimed at improving the means to fight greenwashing. Amended on May 28, 2024, Bill C-59 finally received royal assent on June 20, 2024, date on which it partially came into force. Because the provision will apply to “any person,” all businesses will be subject to it, regardless of their size or legal form. Amendments to the Competition Act regarding environmental claims The Competition Act now allows9 the Commissioner of the Competition Bureau (the “Bureau”) to inquire into10 the conduct of a person who promotes 1) a product by making an environmental claim or warranty11 or 2) any business interest by making representations about the environmental benefits of a business or business activity. Claim concerning a product or service Insofar as a business or person is unable to demonstrate a product’s benefits for protecting the environment or mitigating the environmental and ecological effects of climate change, the Commissioner of Competition will be entitled to apply to a court for an order requiring such business or person to (i)cease promoting the product on the basis of a non-compliant environmental claim or warranty, (ii)publish a corrective notice and (iii)pay an administrative monetary penalty12 of up to, for a legal person, the greater of $10 million and three times the value of the benefit derived from the deceptive conduct, or, if that amount cannot be reasonably determined, 3% of the legal person’s annual worldwide gross revenue. The penalty for each subsequent offence could be as high as $15 million. A “product” within the meaning of the Competition Act may be an article (real or personal property of every description) or a service.13 This new provision expressly requires any person or business to base their environmental claims on “an adequate and proper test”.14 A “test” within the meaning of this Act consists in an analysis, verification or assessment intended to demonstrate the result or alleged effect of a product. It does not necessarily have to be a scientific method nor do the results need to meet a test of certainty, as the courts have generally interpreted the term “proper” to mean fit, apt, suitable or as required by the circumstances.15 With regard to misleading claims, the courts16 have clarified the nature of the criteria that must be considered to determine whether a particular test is “adequate and proper.” Thus, an adequate and proper test depends on the claim made as understood by the common person. The test must also meet the following criteria: It must be reflective of the risk or harm which the product is designed to prevent or assist in preventing. It must be done under controlled circumstances or in conditions which exclude external variables or take account in a measurable way for such variables. It must be conducted on more than one independent sample wherever possible (e.g., destruction testing may be an exception). The results need not be measured against a test of certainty, but must be reasonable given the nature of the harm at issue and establish that it is the product itself which causes the desired effect in a material manner. It must be performed regardless of the size of the seller’s organization or the anticipated volume of sales.17 Representations accompanying product that come from a person outside Canada are deemed to be made by the person who imports the product into Canada.18 General claims about a company’s activities While Bill C-59 was initially intended to cover only environmental statements, warranties or guarantees regarding products, the assented version of the bill provides that any representation made regarding the benefits of a business or business activity for protecting or restoring the environment or mitigating the environmental and ecological causes or effects of climate change are subject to a Bureau inquiry.19 As an example cited by the Bureau, a company’s claims about being “carbon neutral” or that it commits to becoming so within a certain number of years20 would constitute “representations of the benefits of a business or business activity in mitigating the causes of climate change.” The company making such claims must be able to demonstrate that they are based on “adequate and proper substantiation” obtained using an “internationally recognized methodology”.21 The Competition Act does not specify which internationally recognized methods may be used for this purpose. Should the substantiation the company uses be inadequate, improper or obtained using a method that is not recognized internationally, it will be subject to the same consequences as those mentioned in the previous section.22 Regardless of whether the claims concern a product or service or a business activity, the persons concerned are allowed to defend themselves under the Competition Act by establishing that they exercised due diligence.23 What impact will these amendments really have? Notwithstanding the proposed legislative amendment, the Competition Act already covers false or misleading representations with respect to green advertising.24 The current provisions already prohibit making representations to the public that are false or misleading in a material respect.25 In recent years, several complaints of greenwashing have been lodged with the Bureau on that basis, prompting it to open a number of investigations. Some have led to major settlements involving companies having made representations regarding their products.26/27/28/29 In all of these cases, the heavy burden of establishing that the business’s environmental claim was false or misleading fell on the Bureau. The proposed amendments to the Competition Act would change this by shifting the burden of proof onto businesses. The onus would therefore be on them to demonstrate that their product benefits the environment in some way or mitigates the environmental and ecological effects of climate change or that its claims are based on adequate and proper substantiation obtained using an internationally recognized method. These new legislative provisions now confirm what was already a general standard since 1999, and they ease the Bureau’s burden of proof. In addition to the Competition Act, other laws applicable in Quebec provide a general framework for greenwashing, such as the Consumer Protection Act.30Under this Act, no merchant, manufacturer or advertiser may, by any means whatsoever, make false or misleading claims to a consumer, which implicitly includes greenwashing.31 To determine whether a representation constitutes a prohibited practice, the general impression it gives, and, as the case may be, the literal meaning of the terms used therein must be taken into account. In particular, it is prohibited to falsely ascribe particular advantages to a product or service, or to claim that a product has a particular feature or ascribe certain characteristics of performance to it.33 Offences are subject to criminal34 and civil35 penalties. Private remedies Another new measure to combat greenwashing in the Competition Act is the possibility for any person (individual, organization, competitor, etc.) to apply directly to the Competition Tribunal for an order against a business making environmental claims or representations about a product, service or activities without adequate substantiation.36 In the first version of Bill C-59, only the Commissioner of Competition could institute such proceedings before the Tribunal.37 However, the Competition Tribunal must first give leave to make such an application.38 The Tribunal’s power to give leave is largely discretionary, meaning that the Tribunal may grant it if it deems that it is in the public interest to do so.39 This new measure will come into force in one year on June 20, 2025.40 Best practices It is crucial for a company to adopt and display a realistic image of its environmental impact based on credible data and facts. Making sure that claims are legally compliant is not all that’s at stake. A business’s failure to do the above is likely to seriously harm not only its reputation, but also its relationship with its stakeholders. Thus, before claiming to be “green,” businesses must consider the following questions. Are the real motivations behind the business’s sustainability commitments clear, legitimate and convincing? Is sustainable development an integral part of the business strategy? Is it applied when addressing key business issues and taking new actions? Does the company have a sustainable development policy that is credible and based on relevant issues? Was it developed collaboratively with and approved by its Board of Directors? Has the company set specific, clear, measurable and achievable objectives and targets? Considerations for public companies As concerns public companies subject to continuous disclosure obligations under Canadian securities legislation (“reporting issuers”), these considerations are set against a backdrop of increasing pressure from investors, including institutional investors, and others for greater transparency on climate-related issues. Although climate-related disclosure requirements for Canadian reporting issuers are still relatively limited, many issuers choose to voluntarily disclose such information, for example in sustainability reports. Reporting issuers must pay particular attention to their communications, which could constitute greenwashing within the meaning of the Competition Act and give rise to the penalties and other consequences mentioned above. This is another risk to add to reporting issuers’ liability in the secondary market for misrepresentation and failure to make disclosures within prescribed time limits. As far as climate issues are concerned, the risk arises in particular from overestimating or inadequately disclosing how activities contribute to protecting the environment or how they mitigate the environmental and ecological effects of climate change. The current move towards standardized methodologies and frameworks and the forthcoming adoption of binding rules on climate-related disclosures should help to limit greenwashing in this context. In the meantime, reporting issuers can reduce the risk of greenwashing by following a well-established international methodology and by including disclaimers for forward-looking statements adapted to the risks and uncertainties inherent to the climate-related information they provide. Conclusion The new provisions of the Competition Act are already having an impact. As a precaution, some companies have removed ads, promotional documents and websites containing claims that certain activities were undertaken specifically to mitigate the causes of climate change. Parliament’s message could not be clearer: Shifting the burden of proof onto businesses means closing the door on an era when products, services and business activities could be marketed as green in the absence of tangible evidence. Definition of the Autorité des marchés financiers: 8 questions and answers about carbon credits and related concepts | AMF (lautorite.qc.ca). Definition of the Competition Bureau: Environmental claims and greenwashing (canada.ca). Assembly Bill No. 1305: Voluntary carbon market disclosures, California, 2023. Read it here: Bill Text – AB-1305 Voluntary carbon market disclosures. Décret no 2022-539 du 13 avril 2022 relatif à la compensation carbone et aux allégations de neutralité carbone dans la publicité, Journal officiel de la République française, 2022. Read it here: Légifrance – Publications officielles – Journal officiel – JORF n° 0088 du 14/04/2022 (legifrance.gouv.fr). Proposal for a Directive of the European Parliament and of the Council amending Directives 2005/29/EC and 2011/83/EU as regards empowering consumers for the green transition through better protection against unfair practices and better information, Council of the European Union, Brussels, 2022. Read it here: pdf(europa.eu). Read it here: KFTC Proposes Amendment to Review Guidelines Regarding Greenwashing – Kim & Chang (kimchang.com). An Act to implement certain provisions of the fall economic statement tabled in Parliament on November 21, 2023 and certain provisions of the budget tabled in Parliament on March 28, 2023, 44th Parliament, 1st Session. Read it here: Government Bill (House of Commons) C-59 (44-1) – First Reading – Fall Economic Statement Implementation Act, 2023 – Parliament of Canada. The Bill is currently at second reading in the House of Commons. R.S.C. 1985, c. C-34. These provisions came into force on June 20, 2024. This power to make inquiry would be available, as the Competition Act already provides, upon receipt of a complaint signed by six persons who are not less than 18 years of age or in any situation where the Commissioner has reason to believe that a person has contravened section 74.01 of the Competition Act (see R.S.C. 1985, c. C-34, ss. 9 and 10). An Act to implement certain provisions of the fall economic statement tabled in Parliament on November 21, 2023 and certain provisions of the budget tabled in Parliament on March 28, 2023, 44th Parliament, 1st Session, section 236. Read it here: Government Bill (House of Commons) C-59 (44-1) – First Reading – Fall Economic Statement Implementation Act, 2023 – Parliament of Canada; section 236 of this Act adds paragraphs b.1 and b.2 to subsection 74.01(1) of the Competition Act. Competition Act, R.S.C. 1985, c. C-34, article 74.1. Competition Act, R.S.C. 1985, c. C-34, subsection 2(1). An Act to implement certain provisions of the fall economic statement tabled in Parliament on November 21, 2023 and certain provisions of the budget tabled in Parliament on March 28, 2023, 44th Parliament, 1st Session, para. 236(1). Read it here: Government Bill (House of Commons) C-59 (44-1) – First Reading – Fall Economic Statement Implementation Act, 2023 – Parliament of Canada The Commissioner of Competition v. Imperial Brush Co. Ltd. and Kel Kem Ltd. (c.o.b. as Imperial Manufacturing Group), 2008 CACT 2, paras. 122 et seq. Competition Act, R.S.C. 1985, c. C-34, section 74.09: “courts” means the Competition Tribunal, the Federal Court and the superior court of a province. The Commissioner of Competition v. Imperial Brush Co. Ltd. and Kel Kem Ltd. (c.o.b. as Imperial Manufacturing Group), 2008 CACT 2. Competition Act, R.S.C. 1985, c. C-34, subsections 74.03(1) and (2). An Act to implement certain provisions of the fall economic statement tabled in Parliament on November 21, 2023 and certain provisions of the budget tabled in Parliament on March 28, 2023, 44th Parliament, 1st Session, section 236. Read it here: Government Bill (House of Commons) C-59 (44-1) – First Reading – Fall Economic Statement Implementation Act, 2023 – Parliament of Canada; paragraph b.2 of section 74.01 of the Competition Act was added by amendment adopted on May 28, 2024. Letter from Anthony Durocher and Bradley Callaghan to the Honourable Pamela Wallin dated May 31, 2024. Read it here: BANC_Follow-up_CompetitionBureau_e.pdf (sencanada.ca). An Act to implement certain provisions of the fall economic statement tabled in Parliament on November 21, 2023 and certain provisions of the budget tabled in Parliament on March 28, 2023, 44th Parliament, 1st Session, section 236. Read it here: Government Bill (House of Commons) C-59 (44-1) – First Reading – Fall Economic Statement Implementation Act, 2023 – Parliament of Canada. Competition Act, R.S.C. 1985, c. C-34, article 74.1. Competition Act, subsection 74.1(3). Louis-Philippe Lampron, “L’encadrement juridique de la publicité écologique fausse ou trompeuse au Canada : une nécessité pour la réalisation du potentiel de la consommation écologique?” Revue de Droit de l’Université de Sherbrooke, Vol. 35, No. 2, 2005, p. 474. Read it here: A:\lampron.wpd (usherbrooke.ca). Competition Act, R.S.C. 1985, c. C-34, paragraph 74.01(1)(a). Amanda Stephenson, Des groupes écologistes misent sur la Loi sur la concurrence(Environmental groups banking on the Competition Act), October 1, 2023, La Presse. Read it here: Des groupes écologistes misent sur la Loi sur la concurrence | La Presse. Brenna Owen, Un groupe accuse Lululemon d’« écoblanchiment » et demande une enquête (A group accuses Lululemon of “greenwashing” and calls for an investigation) February 13, 2024, La Presse. Read it here: Un groupe accuse Lululemon d’« écoblanchiment » et demande une enquête | La Presse. Martin Vallières, “Gare aux tromperies écologiques” (Beware of greenwashing), January 26, 2022, La Presse. Read it here: Écoblanchiment | Gare aux tromperies écologiques | La Presse; Keurig Canada to pay $3 million penalty to settle Competition Bureau’s concerns over coffee pod recycling claims – Canada.ca. The Commissioner of Competition v. Volkswagen Group Canada Inc. and Audi Canada Inc., 2018 Competition Tribunal 13. Consumer Protection Act, CQLR c. P-40.1, ss. 219, 220 and 221. Definition of the Competition Bureau: Environmental claims and greenwashing (canada.ca). Richard v. Time Inc., 2012 SCC 8, paras. 46 to 57. Consumer Protection Act, CQLR c. P-40.1, ss. 220 and 221. Consumer Protection Act, CQLR c P-40.1, ss. 277 to 279: Fines range from $600 to $15 000 in the case of a natural person and $2 000 to $100 000 in the case of a legal person. Offenders convicted a second time are liable to fines twice as high as those prescribed. Id. at ss. 271 to 276: Consumers may request that the contract be annulled, that the merchant’s obligation be performed or that their obligation be reduced, among other things. For civil matters only; An Act to implement certain provisions of the fall economic statement tabled in Parliament on November 21, 2023 and certain provisions of the budget tabled in Parliament on March 28, 2023, 44th Parliament, 1st Session, subsection 254(1). See subsection 103.1(1) of the Competition Act, R.S.C. 1985, c. C-34, effective before June 20, 2024. An Act to implement certain provisions of the fall economic statement tabled in Parliament on November 21, 2023 and certain provisions of the budget tabled in Parliament on March 28, 2023, 44th Parliament, 1st Session, subsection 254(1). Id. at 254(4). An Act to implement certain provisions of the fall economic statement tabled in Parliament on November 21, 2023 and certain provisions of the budget tabled in Parliament on March 28, 2023, 44th Parliament, 1st Session, section 272.

Recently,1 Justice Isabelle Germain of Quebec’s Superior Court ruled on a case involving insurance fraud in the matter of Paul-Hus v. Sun Life Canada, compagnie d’assurance-vie2. This ruling illustrates that applicants must answer the insurer’s questions honestly; should an applicant try to mislead the insurer, he will have to face the consequences. In this case, the plaintiff Daniel Paul-Hus (Paul-Hus) claimed an amount of $150,000 from Sun Life Canada by way of benefits as set out in the serious illness insurance policy taken out by his company (of which he was the sole shareholder and director) in 2015, along with $50,000 for the trouble and inconvenience caused by Sun Life’s refusal to honour its contractual undertakings. Paul-Hus claimed that he suffered from amyotrophic lateral sclerosis (ALS) diagnosed on February 1, 2018. The claim form was submitted by him on August 16, 2018. Sun Life refused his claim since an assessment of his medical records revealed that his prior medical history was inconsistent with the information he had provided during a telephone interview on March 17, 2015. Sun Life considered the contract null and void due to Paul-Hus’s false declarations while filling out the questionnaire he was required to complete when taking out the policy. Essentially, it was Sun Life’s position that Paul-Hus had not answered certain questions correctly in the questionnaire and that, if he had, the insurer would not have issued the serious illness policy. It was brought into evidence that, during the telephone interview of March 17, 2015, Paul-Hus had to answer questions on his lifestyle habits, his current health condition and his prior medical history. Some of the questions in Sun Life’s medical questionnaire sought to ascertain whether Paul-Hus felt weakness in his arm and whether a doctor had ever recommended any tests or if he was awaiting any test results. These questions were answered in the negative by Paul-Hus. However, a review of the file reveals that these answers were inaccurate. The insurance policy was issued on March 17, 2015, while the evidence indicated that Paul-Hus had consulted his neurologist a few weeks before, on February 24, 2015, due to weakness in his left hand, the symptoms having appeared progressively since August 2013. At that time, additional tests were prescribed (cervical and brain imaging, magnetic resonance imaging and numerous blood tests). Nonetheless, in his Originating Application, Paul-Hus asserts that, at the time the policy was issued, he had not noticed or suspected any symptoms of disease and contends that, according to the doctors, the disease had developed suddenly. In her judgment, Justice Germain reiterated the principles governing declarations of risk in the insurance sector, pointing out that false declarations can result in the nullification of the contract.3 However, in this case, the policy had been in force for over two years at the time of the claim for indemnification, so that the insurer was required to prove fraud in order to nullify the contract4 (Paul-Hus’s intention to hide his true health condition). Justice Germain found that Sun Life had discharged the burden of demonstrating Paul-Hus’s fraudulent dealings. In addition to his medical records, Sun Life produced a recording of the telephone interview held on March 17, 2015, as well as a transcription of the interview. In the Court’s view, it was clear that Paul-Hus was under neurological investigation due to weakness in his left arm at the time he was completing the questionnaire. Although in his testimony at trial,5 he claimed not to know that this information could have had an impact on the insurer’s decision, Justice Germain did not side with this version. For Justice Germain, the evidence presented by the insurer demonstrated that it had been Paul-Hus’s intention to deceive Sun Life. This being said, in accordance with the requirements of article 2408 C.C.Q., Sun Life had to demonstrate not only that it would not have covered this risk had it been aware of the new information resulting from the claim, based on its own underwriting standards, but that any reasonable insurer would have refused to issue the serious illness insurance policy under the circumstances. Sun Life also discharged this burden and completed this “evidence of materiality” by presenting the testimony of an underwriting expert. Finally, and in addition to the above, Paul-Hus claimed that he had been diagnosed with amyotrophic lateral sclerosis (ALS), which he was unable to support with evidence. Under cross-examination, Paul-Hus admitted that he had never received any such diagnosis. Instead, he suffered from a lower motoneuron disease, which did not qualify as a “serious illness” under the policy. In conclusion, in the Court’s opinion, the policyholder knowingly misled the insurer and falsified his risk assessment in order to obtain coverage. Moreover, given that Paul-Hus was not insurable for serious illness coverage in the eyes of a reasonable insurer, the Court concluded that the contract should be nullified ab initio and terminated. This decision reminds us of how important it is for policyholders to answer insurers’ questionnaires honestly when making their initial declaration of risk : [TRANSLATION] [55] In the Court’s opinion, Paul-Hus failed to answer the questionnaire sincerely. He did not act as would have a reasonable insured. He was aware of the importance of giving honest answers to the questions asked during the telephone interview. An insurance contract is one requiring the utmost good faith, particularly as far as the assessment of risk is concerned. It is of interest that in this matter, Paul-Hus gave his testimony at the hearing by way of videoconference, which Justice Germain comments as follows: [TRANSLATION] [49] One notes that, while giving his testimony via videoconference at the hearing, Paul-Hus referred to a document, which would be obtained and filed by Sun Life. The document is Sun Life’s letter of refusal of December 28, 2018, which he annotated with the words “good faith” and “answered no in all good faith I was not awaiting anything no results”. It seems odd, to say the least, that he should make the effort to write down these words as a reminder and should feel the need to repeat them several times during his testimony and when cross-examined.   [50] However, it is not enough to repeat that one acted in good faith to justify such omissions. Paul-Hus appealed Justice Germain’s decision. Sun Life filed a Motion to Dismiss the appeal, which was dismissed on January 15th, 20246. We will therefore have to wait and see what happens before the Court of appeal.  To sum up… Insurance contracts are essentially characterized by the risks they cover and by what risks the insurer is willing to tolerate for a given premium. The Civil Code of Québec recognizes two specific instances in which the actual declaration of risk is fundamental: the initial declaration of risk before the contract is drawn up7 and any increase in the risk level during the term of the contract.8 The declaration of risk is essential to the insurer when it comes to accurately determining the extent of the risk and the premium that will be charged if the insurer agrees to provide coverage. As a general rule, the policyholder’s utmost good faith should be in evidence during the initial declaration stage given that this declaration paves the way for the prospective contractual relationship and its various terms and conditions. A policyholder will be deemed to have properly met their obligation “if the representations are such as a normally provident insured would make, if they were made without material concealment and if the facts are substantially as represented.”9 Since Policyholders are responsible for informing the insurer about any relevant factors that might change its risk assessment, i.e., a positive disclosure requirement, it stands to reason that the Civil Code sets out consequences in the event that this requirement is not fulfilled by the policyholder. A policyholder who makes false statements can therefore see his insurance contract nullified ab initio.10 In other words, the contract would be deemed to have never existed because the basis on which it rests, the initial declaration of risk, was flawed. It should also be noted that nullification will only be relative and that the insurer may elect not to assert it. Consequently, the Court, after having heard the evidence, cannot rule ex officio that the contract is null and void. The insurer has two (2) years after the effective date of the contract to request nullification ab initio based on false statements or unwillingness to fully disclose risk.11 Set against that backdrop, the insurer’s burden of proof amounts to demonstrating that the policyholder made false statements or concealed relevant facts. Insurance fraud Once the two (2) year window of opportunity has closed, the insurer faces an additional burden of proof: it must also demonstrate that the policyholder committed fraud.12 Fraud is distinguished from false declarations or concealment. Among other things, it results from the misrepresentation or omission of a fact in the knowledge that, if the truth were disclosed, the insurer would not issue the policy under the negotiated conditions. Therefore, the policyholder must have intentionally deceived the insurer in order to obtain an advantage that would not have otherwise been obtained. Insurers, therefore, have a heavy burden of proof if the two-year threshold has been crossed. This is because fraud cannot be presumed; it must be established on the balance of probabilities. Burden of proof Whether or not the two (2) year period is still running, the insurer must (1) demonstrate that it would not have entered into the contract based on its own underwriting criteria; and (2) that a reasonable insurer in the same circumstances (i.e., dealing with false declarations, concealment or fraud) would have also declined to issue coverage.13 To recap, before the expiry of the two (2) year period, insurers seeking a contract’s nullification ab initio must prove that: The policyholder made false declarations or concealed information when making the initial declaration of risk. The insurer would not have entered into the contract based on its own underwriting criteria if it had been apprised of the concealed information. A reasonable insurer in the same circumstances would have also declined to take on the risk. After the expiry of the two (2) year period following the effective date of the policy, insurers requesting the contract’s nullification ab initio must prove that: The policyholder made false declarations or concealed information when making the initial declaration of risk AND intended to deceive the insurer. The insurer would not have entered into the contract based on its own underwriting criteria if it had been apprised of the concealed information. A reasonable insurer in the same circumstances would have also declined to take on the risk. Judgment handed down on October 3, 2023; the hearing was held on May 25 and 26, 2023. 2023 QCCS 3890; this ruling was appealed from (200-09-010693-239) and the appeal was dismissed on January 16, 2025 (2025 QCCA 41). Art. 2410 C.C.Q. Art. 2424 C.C.Q. Via videoconference.  Paul-Hus v. Sun Life Canada, compagnie d'assurance-vie, 2024 QCCA 46 Arts. 2408 and 2409 C.C.Q. Arts. 2466 et seq. C.C.Q. Art. 2409 C.C.Q. If the false statement deals exclusively with the policyholder’s age, the contract cannot be declared null and void (art. 2410 C.C.Q.) unless the policyholder’s actual age is outside the insurable range established by the insurer (art. 2411 C.C.Q.). Art. 2424 C.C.Q. Civil Code, art. 2424, para. 1 C.C.Q. CGU compagnie d’assurance du Canada v. Paul, 2005 QCCA 315, para. 2 and art. 2408 C.C.Q.