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 …
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:
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!
“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:
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 “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”

11 thoughts on “John's Summary of the Summary Trial

  1. Thank you John for your excellent and comprehensive summary and annotation. This should be must reading by all.

  2. I just did an update to the post to add John’s Mornng After Hangover.
    All very interesting reading and a glimpse into the hearing that only a few were able to attend.

  3. Is there a reason why the recent comments links rarely lead to the comment in question? The results seem to be random.

    1. @Duke: I am not having a problem with the Comments link. 

      Is is anyone else having a problem with it?

      i will ask Outraged to look into it.  Thanks for the alert.

    2. Yes, I have the same problem. When I click on Duke’s comment in the “Comments” on the right side of the page, I am directed to the top of the main post with only Ginny’s one comment there. If I go to the top right-hand of the main page and click on the post itself, I get all of the comments.
      (This occurs on some other posts as well (perhaps not all — haven’t taken the time to see if that is so) as I have found the work-around to get to the comment I want to see. It would be helpful if it could be fixed easily. Thanks, Lynne and Outraged and Duke for pointing it out.)

    3. It’s been like that for quite awhile. Whenever I link from Recent Comments I automatically delete everything past the title in the URL bar and then reload. That gets me to the latest comment. It’s something I do at Brock too. WordPress has some glitches … just like my whole life.
      RE: John’s summaries — love ’em!

    4. I will check into this, but it’s working for me, at least on this post. Whichever comment I pick, I’m taken to. However, I’ll see what I can do. I am camping right now so it may not be fixed immediately.

    5. @ Outraged Canadian
      Hmmm … it worked right today. Honestly, recent comments really were “hiding” before. It must be an intermittent thing. Not to worry … enjoy your camping.

    6. I just tried it on a different computer but with the same browser (Firefox).
      On this computer, it clicking on the link does not take me to the comment. It takes me to the top of the thread.
      There is still no problem with my laptop or my IPad.

  4. Thank you Lynne for applying to get a copy on CD of the hearing proceedings, and asking if it can be posted on Youtube.
    If the Cons and Justice Dept. have nothing to fear than they should have no objection to all the world seeing their performance in the hearing.

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