Category Archives: FATCA Lawsuit

With sadness and gratitude, we announce that Ginny Hillis (Canadian Ginny) has withdrawn as a plaintiff

cross-posted from adcsovereignty wordpress blog

August 24, 2017

UPDATE UPDATE for Canadian FATCA IGA Lawsuit in Federal Court: Plaintiff Change

This update is to let you know that for health reasons, Ginny, one of our three Plaintiffs, has withdrawn as a Plaintiff in our Canadian FATCA IGA legislation.

We are so grateful to Ginny for having been being a part of our team for so many reasons. Her good humour, wit, and wise counsel based upon her experience as an attorney has helped us get through many difficult days during the litigation. She was one of the very few who never had any doubts whatsoever about taking on the personal risk and hardships of being a Plaintiff in a lawsuit against the power of her own government. She provided a service not only to us, but to the entire community worldwide harmed by compliance of their own countries with the foreign FATCA law.

Plaintiffs Gwen and Kazia, the ADCS Board, and our supporters are indebted to Ginny for the sacrifices she and her family have made and we all wish her the very best.

ADCS Board

John’s Summary of the Summary Trial

John Richardson has done summaries of both days of the Summary Trial.

John’s Thoughts on Day One.

John’s Thoughts on Day Two.

john’s Morning After Hangover

From Day One Observations:

First – the Judge

My subjective impressions …

I have always felt that both “listening to” and “deciding” this case would be a nightmare for a single judge. That said, I am very pleased with the Justice Martineau. I say this for the following reasons:

He is working hard (and I thing gets it) to understand that FATCA affects Canadians who happen to also be U.S. citizens. He understands (I think) that the primary impact of FATCA is Canadian citizens and residents.
He is working hard (and I think he gets it) that the effect of U.S. “Extra-Territorial Taxation” is to subject Canadians to U.S. taxation which could result in double taxation (a point that is flatly denied by the Government lawyers).
He is (I think) a Judge who is experienced in a number of areas of law and understands that this is NOT JUST an issue of taxation (the Government lawyers are trying to paint a picture of FATCA being just one more treaty in the sea of “information exchange”).
My impression of him (rightly or wrongly) is that he is an intelligent man who attempts to be fair.
He clearly has spend considerable time learning about the broad issue AND he is seeking to learn more!

Some objective facts …

The lesson from John L. LeCarre’s “Russia House” – You can learn a lot by the questions that are asked …

russiahouse

For me, the most interesting part of the day was actually at the beginning. Justice Martineau began by asking the lawyers to explain where, in the Constitution of Canada, the Government of Canada received the authority to enter into the IGA. In others words what precise section of S. 91 of Canada’s Constitution allowed the Government to do this at all.

This was interesting to me for two reasons:

A. It demonstrated that he recognizes that there are constitutional limits on what the Government of Canada can do; and

B. It recognized the issue of whether the FATCA IGA could bind provincial credit unions (at least this is what I think he was getting at).

In any case, it’s very encouraging that Justice Martineau addressed the question of:

What allows the Government of Canada to enter into the IGA at all?

Second, Team Arvay …

Joe Arvay and David Gruber did a superb job. The issue in this “Summary Trial” is whether the FATCA IGA can be authorized/justified under the existing Canada U.S. Tax Treaty. To this end, Team Arvy had to explain:

A. That the FATCA IGA was subject to and limited by the terms of the Canada U.S. Tax Treaty (the Government is arguing that the FATCA IGA should be used to interpret the tax treaty); and

B. That the terms of the Canada U.S. Tax Treaty do NOT extend to authorizing the kind of information exchange required by the FATCA IGA.

I believe that they made the argument about as well as it could be made (this does NOT mean that the Judge will agree). But, the argument was well made. What impressed me most about Mr. Arvay’s discussion of the FATCA IGA, was that his description “hit the sweet spot” of:

explaining just enough so that the issue could be understood; but
NOT explaining so much that the issue could NOT be understood.

Lessons from Warren Buffett – You may recall Warren Buffett’s saying that:

Warrenbuffett

He would ensure that his children had enough money so that they could do anything, but not have so much money that they couldn’t do anything.

Joe Arvay and Warren Buffett both understand the “just enough, but not too much principle”.

Third, The Government lawyers …

Although our cause is just, the case is legally complex and the legal arguments are difficult. We all know that we begin with a presumption that the FATCA IGA will be upheld. Sorry, but that’s just reality. Anybody with a U.S. place of birth who lives outside the United States is now subject to oppression and persecution. It is incumbent on those who are oppressed and persecuted to reclaim their dignity, reclaim their rights and reclaim their freedom. That’s just the way it is.

The Government could have selected a better legal team. My impression is that the Government lawyers do NOT understand the broader implications of FATCA, that FATCA is an issue that affects ALL Canadians, that FATCA burden’s Canada’s sovereignty and most importantly that:

FATCA is simply wrong!

Remember:

“It’s not a sprint. It’s a marathon.”

This will be appealed. It will continue for a long time. That said, this group of “government lawyers” has the capacity to “snatch defeat out the jaws of victory.”

We will see.

Fourth, the observers …

It’s significant that there are people there. There are people watching. It’s shows that people care. It makes it clear to Justice Martineau that his decision will affect the real lives, of real people in real ways.

This can never be a bad thing!

Conclusion, so far so good …

From Day Two:

I note that commenters at the Isaac Brock Society continued to offer their “play by play”. For the most part the comments are interesting, accurate and reflect the mood of what was taking place. There were two moments when the language/suggestions/statements of the Government of Canada lawyer – resulted in audible commentary (laughter/snickering) from the audience. They were:

The suggestion that that Canada nobody forced Canada to sign the IGA, that it was signed voluntarily. “Nobody had a gun to Canada’s head”. Incidentally as part of this submission the lawyer argued that Canada received significant benefits under the IGA. Q. What significant benefit? A. Well, clearly the agreement of the USA to not impose the 30% FATCA sanction. As I was listening to this, I remembered the scene from the Godfather, when Don Carleone informed somebody that “either his brains or his signature would be on the contract“. But, hey this is what passes for diplomacy in the FATCA world.
Explaining that Eritrean citizenship taxation was offensive only because Eritrea was using its tax revenues to finance its military and prosecute wars. As you know, the United States does NOT UNDER ANY CIRCUMSTANCES use taxes to finance it’s military. Obviously the United States military must be financed through “local bake sales of brownies, coffee and cookies”. But no matter.

Part 1 – General – the bottom Line …

In yesterday’s post I outlined my thoughts on Day 1. This included a discussion of the lawyers on both sides and most importantly Justice Martineau. Justice Martineau continued to be the “star of the hearing”.

Through his questions (which were an attempt to understand and explore the issues), he really forced the lawyers on both sides to explain the Canada U.S. Tax Treaty, the IGA, how the IGA related (or not) to the Treaty, and aspects of U.S. citizenship taxation. Interestingly, on two separate occasions his questioning resulted in the Government lawyer agreeing that “FATCA was necessary to enforce citizenship taxation (paraphrase)”. At one point Justice Martineau seemed to be asking himself the question of whether Article XXV of the Canada U.S. Tax Treaty (the non-discrimination section) contemplated “dual citizenship”. In what appeared to be a “learning process” (on his part), Justice Martineau asked about about the treatment of “joint bank accounts” where one of the account holders was NOT a U.S. citizen. In other words, he appeared to appreciate that the primary impact of FATCA in Canada was on Canadian citizens who were resident in Canada.

The Canada U.S. Tax Treaty is called “The Convention Between Canada and the United States of America – With Respect to Taxes on Income and Capital”. Note that the purpose of the treaty is related to “Taxes on Income and Capital”. Allow me to remind you that Team Arvay was arguing that the IGA was NOT authorized by and was outside the scope of the Tax Treaty. (More on this later.)

Part 2 – What do I think Justice Martineau’s decision might be?

What cannot be known

I don’t know. Our “summary trial” represented the first anti-FATCA court hearing. The result will be appealed. The issue will go on for a long time. No matter who wins or loses, an appeal is certain. Justice Martineau’s decision may or may not affect the disclosure of information to the IRS. That I cannot know.

What is clearly known

Regardless of his decision, Justice Martineau is likely to write a comprehensive decision that explores the facts and the issues. His decision will be reviewed on appeal and the contents of his decision will be a major part of the review.

I am confident that even if the Government wins round 1 (and I am not suggesting I believe this will happen), Justice Martineau’s decision is likely to include certain “findings”, “observations” and “arguments” that will be very helpful to ALL anti-FATCA and anti-CBT litigants going forward.

This means that the result of the August 4, 5 “Summary Trial Battle” will play a major role in winning the “FATCA and CBT Wars!”.

After the two day hearing it was amply clear that FATCA, CBT, the IGA are example of U.S. territorial overreach IN THE EXTREME and a clear interference with the fiscal sovereignty of Canada.

The end of the Summary Trail, clearly represented the “End of the beginning”.

Part 3 – A real surprise – the possibly most significant part of the day …

Remembering that:

The Canada U.S. Tax Treaty is called “The Convention Between Canada and the United States of America – With Respect to Taxes on Income and Capital”. Note that the purpose of the treaty is related to “Taxes on Income and Capital”. Allow me to remind you that Team Arvay was arguing that the IGA was NOT authorized by and was outside the scope of the Tax Treaty. (More on this later.)

Assuming that the IGA is authorized by the Canada U.S. Tax Treaty and that the scope of the Tax Treaty is “Taxes on Income and Capital”, then one would think that the disclosure of information should be restricted to (think Article XVII) to information that “may be relevant”, to the calculation of taxes.

Justice Martineau raised the reasonable question of “what else all the banking information could be used for?” At this moment, our good friend Mr. FBAR made a “Cameo Appearance” at the hearing. As you know:

Taxes are under Title 26 of the laws of the United States.

FBAR is under Title 31 of the laws of the United States.

It was as though the lawyers, the judge and the audience had their collective “OMG” moment. The thought appeared to be:

Could it be true, yes could it be true, that the forced disclosure of the banking information of those “accused of being U.S. citizens”, could be used to impose FBAR penalties? Could this really be true? Well, Jonathan Lachowitz notes that this very week, the United States reaffirmed its commitment to Mr. FBAR”. (And moving back to FATCA, see also Mr. Lachowitz’s recent article and comments on the proposed FATCA SCE (Same Country Exemption).

Or to put the question more generally:

Question: Could the information disclosed under the Canada U.S. Tax Treaty (which would now include the FATCA IGA) be used for purposes beyond “Taxes on Income and Capital”?

Answer: Yes, in fact former Senator Carl Levin, in a letter written to the IRS on January 11, 2012 urges the IRS and Treasury to use “FATCA” information for all purposes. Yes, it’s true. Here is the letter:

CarlLevin

This was reported at the Maple Sandbox Blog, which notes the following excerpt from Senator Levin’s letter:

Although FATCA is structured to address offshore tax abuse, offshore account information has significance far beyond the tax context, affecting cases involving money laundering, drug trafficking, terrorist financing, acts of corruption, financial fraud, and many other legal violations and crimes. Given the importance of offshore account disclosures, FATCA guidance and implementing rule should create account FATCA forms that are not designated as tax return information but, like FBARs, may be provided to law enforcement, regulatory, and national security communities upon request. FFIs are not, after all, U.S. taxpayers, and will not be supplying tax information on behalf of their U.S. clients; they will instead be providing information about accounts opened by U.S. persons. The U.S. Supreme Court has long held that bank account information is not inherently confidential but is subject to inspection by law enforcement and others in appropriate circumstances. Foreign account information is too important to a wide range of civil and criminal law enforcement and national security efforts to be designated as tax return information bound by Section 6103’s severe restrictions on access.

Justice Martineau (without knowing about Senator Levin) asked the reasonable question:

Would the use of FATCA disclosed information for purposes beyond “Taxes on Income and Capital” be a breach of the IGA agreement?!!!

This is a fascinating problem.

In other words – a possible U.S. Government breach of the FATCA IGA:

Assume that the FATCA induced information “may be relevant” to “Taxes on Income and Capital”; but that
The information is actually used to assess FBAR penalties (which are outside Title 26)

Is the use of the FATCA information to assess FBAR penalties outside the scope of the IGA and therefore a breach of the U.S. Canada IGA?

Justice Martineau asked the Government lawyer this very question, to which the Government lawyers responded with (you can’t make this up):

“Justice, I feel sorry for you having to resolve this issue.”

In conclusion …

The most important thing about the ADCS-ADSC.ca “Summary Trial” is that it happened. It is continuing. It is a true milestone. It is my hope that it will motivate people in other countries to organize their own lawsuits. It sends a strong message. It has reminded the Government of Canada (and I hope) governments around the world that:

if governments do NOT protect their citizens from outside forces, that those citizens must and will protect themselves from their governments

I am perplexed about why the lawyers and the audience had an OMG moment at the judge’s question. I have believed all along the information will be used for purposes other than taxes–as per Levin’s demands. I think anyone who has been following this would think the same.

UPDATED August 8, 2015
From John’s Morning After Hangover

The “Summary Trial” hangover – Friday morning August 7/15

Yup my head hurts. I have a splitting headache. I don’t feel well. I can’ eat. I am not going to be able to work today. But, my “hangover” is not from too much alcohol. It’s from listening to and thinking about too much law. Too many statutes. Too many stupid arguments. Too much “splitting hairs”. Too many poorly written statutes. Too much uncertainty over what statue applies to who and when. It’s just too much. But, that’s what law is and what legal arguments are about.

This week I sat with about 20 people in a courtroom in Vancouver listening to a bunch of high priced lawyers and a judge (largely through written statements) talk about and try to apply law. I’m not even sure what I was doing there or what events in my life brought me there. After all, I was 1 of about 20. (There may be a reason there were only 20 people there.)

It begins in August 1977

So, in August 1977 I was just about to start law school. (It’s true. My classmates were Archimedes and Plato. Both passed law school.) I wanted to become a lawyer. I had respect for law. I clearly assumed that somehow law reflected standards of basic morality. During that time (like most law students) I was interested in ONLY what the law was and how it could be used. I didn’t care: how it was made, the values it reflected. I certainly didn’t appreciate how law (although in some cases a force of good) could be used to institutionalize evil. I had never thought about politics and how laws were made. It never occurred to me that in many cases, laws were made because people could help themselves by hurting others (the Canadian banks come to mind). Of course, I didn’t know anything about “place of birth taxation” and couldn’t have anticipated FATCA.

What law schools don’t teach …

A. The nature of the law making process

Government is by definition “force”. Political systems are NOT defined by WHETHER government is force. Rather they are defined by “WHO” exercises the force of government. In a democracy the coercive force of government is exercised (at least in theory) by democratically elected representatives. Of course (and we are seeing this today in Canada) a majority will use its majority to forcibly impose its will on a minority. (It’s the forcible imposition of the majority will on the minority that is the reason that we have a Charter of Rights.)

B. What law is

Law (at least statute) is a forceful legislative expression of the the objectives of governments. Once the law is made, the reasons for the law are no longer considered. The debate (if there ever was one) is over. What matters is:

“It’s the law.”

C. The effect of “It’s the law” or “There otta be a law”

Once a government makes a law the “issue is settled”. For example, lawyers will say: there’s no reason to discuss “citizenship taxation”. It’s the law. Canadian laws to facilitate FATCA have been made. FATCA is the law.

To put it another way, a way to stop discussion of a topic is often to pass a law. Once the law has been passed, what else is there to discuss? Furthermore, the framework of a law necessarily defines how any discussion of the law is to take place. The principles underlying the law are almost never discussed.

For example

Consider the following law:

“All U.S. persons in Canada must obey all U.S. laws.”

Prior to this law being enacted, there may be some discussion about whether the U.S. should have the right to control Canadian residents. People may or may not express their views on this issue. They may ask, “is this good policy”? If it is “good policy”, is it sufficiently important that “there otta be a law”.

Once, the law has been enacted, there is NO longer discussion about whether the law is a good idea. The terms of the law clarify that the only thing that matters is whether someone is a “U.S. person”.

Therefore, the passing of a law could be (and often is) a “diversionary tactic” to obscure the real issues. Laws operate to prescribe the terms of the discussion. Nowhere was this more apparent than in the “Summary Trial” on August 4 and 5, 2015.

What I witnessed on August 4 and 5 2015 would be described to a non-lawyer as follows …

What I saw (I think) was:

The Government of Canada, was spending money belonging to Canadian taxpayers to defend it’s “God Given” right to, to trade one million Canadian citizens into “U.S. Tax Slavery” in return for the United States to NOT attack Canada’s banks. Oh, and the Government of Canada is also agreeing to let the U.S. come back every year with new criteria for deciding which Canadian citizens they want to make U.S. taxpayers.

I have no doubt that this characterization will offend a certain “calibre of mind”, but I challenge you to identify a single word of this characterization that is incorrect.

The growing disconnect between law and morality …

The above tweet references an excellent post at the Isaac Brock Society.

We have entered a world where:

All laws have legal force, but only some laws have moral force.

What strikes me as I endure my “law induced” hangover is:

1. how the legal arguments at the Vancouver “Summary Trial” obscured an accurate characterization of what was really going on (see above); and

2. Obscured the truly evil intent of FATCA, CBT, FBAR, etc.

(To be clear, Justice Martineau – in a “breath of fresh judicial air” – did try to understand these issues. The Government lawyer did NOT want to discuss “what was really going on”. The Government lawyer’s main argument was” “It’s the law.”)*

But, hang in I maintain that we will win:

Today the Government of Canada is hiding behind “It’s the law” – but we will win because …

It’s very simple. At the end of the day, FATCA, CBT, FBAR, etc. are moral issues. They are just plain wrong. They trample the human spirit and impede human progress.

Don’t think about law and drive!

John Richardson

*Trish Moon in a comment to an earlier post, notes that:

I don’t think anyone should have the impression that anyone could possibly understand the issues as well as expats-so the OMG moment was more about the lawyers and the judge. Justice Martineau was truly impressive. He asked such relevant questions-and my impression was that he was not terribly thrilled with the defendants’ lawyer. I did not come away from this with any idea that J. Martineau fell for the idea that the IGA was a great deal for Canada. This would be hard to convey but he was affected by our presence in the courtroom. He got that this was about people – Canadians. I don’t mean he had a bias but more like he seemed to sense the big picture in spite of the nitpicking about whether the IGA was a treaty, how to read the Treaty, etc…

‹ @ADCSovereignty reaches “milestone” – End of #FATCA summary trial means the “End of the beginning”

FATCA Summary Trial Filing

GINNY AND GWEN’S MOTION RECORD FOR AUGUST 4-5 SUMMARY TRIAL IS NOW POSTED ON OUR ADCS WEBSITE. SEE VOLUME 1, VOLUME 2, VOLUME 3, AND VOLUME 4.

We argue that the FATCA IGA enabling legislation is contrary to sections of the Income Tax Act and the Canada-US Tax Treaty. These are “technical” arguments that we feel are appropriate for a summary trial. Charter considerations could not be used in the summary trial (but would be used in the full trial if required).

We say:

“The Tax Treaty Issues [raised in the summary trial] are discreet and distinct from the other issues raised by the plaintiffs. The plaintiffs’ other grounds of complaint involve division of powers and Charter breaches. These issues are factually and legally distinct from the operation of the Canada-US Tax Treaty and its relationship to the Impugned Provisions. As a result, the matters addressed in this motion [the summary trial] will not be re-litigated in the Charter and division of powers aspect of the plaintiffs’ claim.

The Tax Treaty Issues will need to be adjudicated even if they are not decided summarily. If this Court finds against the plaintiffs on this summary trial motion, the range of issues to canvass at [full] trial will nevertheless be significantly narrowed. If the plaintiff prevails [there are many “depending ons”] in respect of its claims in this motion, it will likely be unnecessary to proceed with the other issues raised by the plaintiffs.”

The motion includes a request for:

An order in the nature of a permanent prohibitive injunction preventing the disclosure of taxpayer information to the United States by the Minister of National Revenue and her authorized representative(s) where:
a. the taxpayer information relates to a taxable period in which the tax payer was a citizen of Canada;
b. the taxpayer information is not shown to be relevant for carrying out the provisions of the Tax Treaty Act or the domestic tax laws of Canada or the United States; or
c. the disclosure of the taxpayer information subjects United States nationals resident in Canada to taxation and requirements connected therewith that are more burdensome than the taxation and requirements connected therewith to which Canadian nationals resident in Canada are subjected.

Our summary trial will be heard at Federal Court, 701 West Georgia Street, Vancouver, British Columbia, commencing on Tuesday, August 4, 2015 at 9:30 a.m. for a maximum duration of two days.

UPDATE On May 8, 2015, the Arvay-Gruber team filed the comprehensive Memorandum of Fact and Law.

Canadian FATCA Lawsuit Amended

The Canadian FATCA lawsuit has been amended and strengthened by lawyers Joseph Arvay and David Gruber.

From the Desk of John Richardson, ADCS-ADSC Amendments to Statement of Claim provides an explanation of the changes and a link to the amended Statement.

John has concisely explained the amendments in plain English.

UPDATE: Thanks to RecalcitrantExpat for providing this direct link from ADCS to the Amended Statement Of Claim.

As Calgary411 posted:

So announcements are not lost in the sites of IsaacBrockSociety and MapleSandbox where so many topics are discussed, http://adcsovereignty.wordpress.com/ (Alliance for the Defence of Canadian Sovereignty “From The Desk” of the ADCS-ADSC Board of Directors) is the dedicated site for all future announcements regarding the Canadian litigation.

We at Maple Sandbox join John in wishing all our Canadian and international friends a Happy Thanksgiving. We are thankful for your support, determination and especially your donations to http://adcs-adsc.ca/

Please keep them coming. Together we can do this.