Can government end “green” contracts? YES, says Queens law prof
Killing green energy contracts
More from Special to Financial Post
Hudak’s Ontario Conservatives can easily and legally negate the giveaways the Liberals had lavished on renewables developers
Tim Hudak says the Ontario Conservatives, if elected, will cancel lucrative wind and solar contracts put in place under the Liberals’ green energy program. Can he do so without racking up huge compensation costs?
The answer is yes – if he does it the right way.
The wrong way is to direct the Ontario Power Authority to simply terminate existing contracts, which have robust compensation clauses. The liabilities would dwarf the $1.1-billion paid out by the Liberals for cancelled gas plants.
The right way is to legislate: to enact a statute that declares green contracts to be null and void, and the province to be free from liability. The compensation clauses in the contract will be rendered inoperative if the statute says so.
Statutes can override iron-clad provisions in a contract because that is the nature of legislative supremacy: Legislatures can pass laws of any kind, as long as they are within their jurisdiction and do not offend the constitution. Legislating on electricity production is clearly a provincial power, as are “property and civil rights.”
Since the Canadian constitution does not guarantee property or contract rights, there are no obvious constitutional limitations on a provincial legislature’s ability to change any contract as it likes. Unlike the U.S. Constitution, in Canada there is no constitutional right to compensation for property expropriated by government.
Courts interpret ambiguous statutes as implicitly requiring compensation be paid to the owner of expropriated property. But if the statute is clear that no compensation shall be paid, the words of the statute govern. Where a statute and a contract are in conflict, the statute prevails. Although unilateral and retroactive changes to established contracts might seem to offend the rule of law, the Supreme Court of Canada has said that prospectivity is not a constitutional requirement for legislation.
What about NAFTA? Could a U.S. or Mexican firm with a cancelled green energy contract in Ontario seek compensation for discriminatory expropriation under Chapter 11? If government action singled out a specific party’s contract for termination, it could well be characterized as discriminatory. But if Hudak’s statute cancelled large numbers of contracts for a public policy objective and treated domestic and foreign firms similarly, then NAFTA protections are unlikely to apply.
So, done the right way, a new PC government could indeed rip up green energy contracts with no liability. …
Read the full story and comments here.
Bruce Pardy is Professor of Law at Queen’s University.
Editor’s note: This is one approach to the idea of whether the contracts can be cancelled; another is that they are simply not fulfilled. Under the Environmental Protection Act (section 47), it is clearly stated that the Director of the Ministry of the Environment has the power to choose NOT to approve a Renewable Energy project, and even to rescind an approval, if it is in the “public interest.”
Wind Concerns Ontario wrote to the Minister of Energy Mr Bob Chiarelli some months ago on this topic, citing legal precedents; we received an acknowledgement but have received no response to our questions on this issue