Sierra Club of Canada

Why the CANDU Case was dropped

Elizabeth May recounts how after six years, SCC had no choice but to reluctantly drop the case

This article first appeared in the Summer 2003 edition of Sierra Club Activist News

In January 1997, Sierra Club of Canada took a principled stand for the integrity of the environmental assessment process by filing a Federal Court challenge against the Chrétien Government. In November 1996, it approve a $1.5 billion loan guarantee to grease the sale of two CANDU reactors to China. In contravention of a plain reading of the Canadian Environmental Assessment Act (CEAA), the decision was not subject to any environmental review. In a late night Cabinet meeting in November of 1996, an emergency amendment to CEAA had been passed to ensure that any mega-project receiving federal funding outside of Canada would be exempt from review.

In all the years I have worked in Ottawa, no behind-the-scenes deal had yielded as many leaks, as many civil servants disgusted by political expediency trampling environmental requirements. We filed our action for judicial review naming the Ministers of Finance and International Trade, both of whom had had to sign off on the $1.5 billion loan guarantee which was granted to the Export Development Corporation (EDC). EDC, in turn, raised money on the international money market on the strength of the guarantee, to give $1.5 billion to the Chinese nuclear agency for it to use to pay AECL. Bottom line: if China doesn’t re-pay the loan, Canadian taxpayers lose $1.5 billion. It was the largest external loan in the history of Canada and it received no environmental assessment, nor any other review for accountability.

Eighteen months into the case, Atomic Energy of Canada Limited (AECL), a Crown corporation receiving massive taxpayer subsidies, decided it too should be part of the SCC legal challenge. Perhaps AECL’s interest in the case was piqued by a leaked Record of a Cabinet meeting from the spring of 1997 in which, it was reported, the Cabinet reviewed the planned financing scheme for a possible sale of CANDU reactors to Turkey. It was proposed that EDC be given a loan guarantee for $1.5 billion – an identical scheme to that used for China. The Cabinet discussion turned to the possibility, raised by the Sierra Club of Canada law suit, that this money laundering without environmental review was illegal. In the Cabinet session, the Department of Justice advised that the government’s case was not strong and that SCC might win. Cabinet decided that if Turkey bought CANDU’s it would run a “shadow” assessment which it could then attempt to convert to a public review, if SCC won the case. In the event, Turkey decided against going nuclear.

AECL was granted intervener status with “party-like” rights, meaning that is would use its very deep pockets – pockets so deep they might be a good place to put the tons of high level nuclear waste for which there is no known disposal plan – to drag SCC through as many preliminary procedural matters as possible. The reasons were transparent: we had a strong case and delays meant it could get the reactors built, while trying to bankrupt SCC through a lengthy court battle.

AECL insisted on cross-examining me for three days on my affidavit. (My favourite question: were we being funded by AECL’s competitors?) AECL insisted it needed to introduce evidence of environmental review in China, but could only introduce such information if it was confidential and could never be referenced by the lawyers or the judge. Since our case was about the requirements under Canadian law, whatever occurred in China was irrelevant. The idea that the courts should bow to China’s totalitarian government and deny Canadians access to environmental information from China was repugnant.

Here, perhaps, we made a big mistake. It seemed a non-controversial point that AECL should not be able to introduce irrelevant information from China and enforce a code of silence in Canadian courts. We said “no.”

AECL appealed to the Federal Court Trial Division. The Trial Division agreed with SCC. AECL appealed to the Appeal Division, which also agreed with us. AECL appealed to the Supreme Court of Canada. The Supreme Court ruled that “AECL’s right to a fair trial” outweighed our Charter Rights and the interests of Canadians in an open court. It also ordered costs against SCC for all three court actions.

So, we owed AECL over $70,000. We were years from having the case heard and AECL refused to allow the next procedural step for the hearing of the case on its merits, until we paid over $70,000 to a Crown Corporation which last year received over $200 million in direct subsidy. The reactors in China are nearly completed; one has already gone critical. The EDC Act has been amended (in what insiders refer to as the “Sierra Club amendment”) to include a rather feeble environmental assessment process.

AECL offered to drop its right to the $70,000 if SCC dropped the case. It is a source of great sadness for us to relinquish our right to have the issue heard on the merits. It has been more than six years; with our own court costs so far at well over $100,000, and giving up is something we never do.

In this case, however, the national board of SCC believes we could not risk bankruptcy to fight a case that could still be delayed by AECL for years. We have dropped the court challenge. AECL has dropped its demand for costs. And a political scandal is removed from any possibility of exposure in the courts.

SCC wishes to thank our legal team. Franklin Gertler of Montreal took the case in January of 1997 and stayed with it. He was joined by Tim Howard of Sierra Legal Defense Fund. Both lawyers put a great deal into the case and we appreciate their highly professional commitment.

If nothing else, the case draws attention to the extreme obstacles to raising matters in the public interests in Canadian courts. It also underscores the need for a complete review of AECL’s financing, its questionable record of overseas sales, resulting in nuclear proliferation, and for a full national debate about the merits of nuclear energy and its stranglehold on public process.

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