Thursday, 12 September 2013

Good Faith Bargaining and Deference

The Supreme Court of Canada has granted leave in National Gallery of Canada v. Canadian Artists’ Representation, 2013 FCA 64. This has the potential to be a very interesting administrative law case. I think that the majority of the Federal Court of Appeal was wrong and hope that the Supreme Court will favour the approach taken by Pelletier J.A. in his dissent.

There was a long process of negotiation between the National Gallery and the groups representing Canadian artists. At the heart of the issue was compensation for the right to showcase artistic works. More precisely, compensation in the form of minimum fees which would be payable to the artists; individual artists could negotiate a better rate themselves above the floor provided by an agreement between the National Gallery and the artists' groups.

Under the Status of the Artist Act, the Canadian Artists and Producers Professional Relations Tribunal (whose functions have since been transferred) is given a role analogous to a labour relations tribunal. It can certify bargaining units and it can adjudicate on claims that a party has negotiated in bad faith.

The claim here was that the National Gallery negotiated in bad faith. But this is no run-of-the-mill bad faith case. After a change of legal advisers, the National Gallery took the position that the artists' groups were not entitled to negotiate minimum fees. The argument was that these were copyright matters, which fell under the Copyright Act, and outside the Tribunal's jurisdiction. Moreover, because the groups were not authorized by the artists to negotiate copyright no agreement could lawfully be reached. Hence the National Gallery withdrew from negotiations.

The Tribunal concluded that the National Gallery had acted in bad faith in withdrawing. It responded to the copyright point by noting that the definition in the Status of the Artist Act pertaining to "scale agreement[s]" (the sort of agreement at issue here) referred to "minimum terms and conditions for the provision of artists' services and other related matters".

In the Tribunal's view, "the right to use an existing work is a service that the artist who holds the copyright in that work may provide to a producer, and representing artists in this fundamental socio-economic right is an appropriate activity for a certified artists’ association". To put my gloss on this passage: the Tribunal considers the assertion of copyright to be one thing, but negotiations about how copyright can be used in a particular context quite another, which falls within its jurisdiction. As Pelletier J.A. put it in his dissent (at para. 64):
The draft scale agreements, as well as the model contracts, all make it clear that the artists alone determine whether a license is to be granted to a producer.  CARFAC/RAAV simply bargain with producers with a view to ensuring that, if a license is granted, the producer may not pay less for that license than the minimum fee set out in the scale agreement, though the artist may bargain for more. (my emphasis)
The Federal Court of Appeal allowed the National Gallery's application for judicial review on this jurisdictional point.

Without much discussion and using the language of jurisdictional error the majority applied a standard of correctness (see para. 94). The question as to whether scale agreements could include terms relating to copyright was one of statutory interpretation. Noel J.A. held that copyright could not be considered a "service":
[115]      I therefore conclude that matters relating to copyright, including the imposition of minimum fees for the use of existing works, do not come within the parameters of the Act and that therefore, the Tribunal had no authority to compel the parties to negotiate such matters. Beyond this, the National Gallery could not validly agree to a scale agreement affecting copyrights. It follows that the National Gallery’s refusal to pursue negotiations relating to these matters cannot be attributed to a failure to negotiate in good faith.
By contrast, Pelletier J.A. held that the Tribunal's conclusion was reasonable:
[83]           There is nothing surprising in the finding that granting a license to use a work is a service provided by an artist to a producer.  The fact that copyright is property does not preclude a finding that granting another the right to use that property is a service.  One need only think of hotels and car rental agencies as examples of property owners who provide a service by allowing others to use their property.  Thus, the granting of a license is a service provided by the artist, as contemplated by the definition of “scale agreement”.

[84]           Nor is there anything unusual about the fact that representative organizations seek to negotiate the minimum fees and conditions upon which their members will provide services, including licenses to use existing works.  The definition of scale agreement specifically refers to minimum terms and conditions.  Surely, fees are either a term or a condition which an artist may attach to the grant of a license.  The terms of the model contracts quoted above show that fees are indeed one of the terms of the license granted by the artist.
I think Pelletier J.A. is right that the standard is reasonableness. The Tribunal was interpreting "scale agreement", a provision of its home statute. A presumption of deference applies.

The possibility of conflict with the Copyright Act does not justify an interventionist standard of review. The Tribunal certainly looked to the provisions of the Copyright Act (see paras. 44-48). It took the view that the Copyright Act was a statute closely connected with its functions under the Status of the Artist Act. This view is entitled to deference and should not be displaced unless demonstrated to be unreasonable.

The Supreme Court has yet to decide a case post-Dunsmuir in which it has addressed the question of jurisdictional boundaries. Once the presumption of deference for interpretations of decision-makers' constitutive statutes is inserted into the mix, however, it is difficult to see how the key question in this case can be characterized as one relating to jurisdictional boundaries.

Pelletier J.A.'s analysis of the substance of the decision is also persuasive. It will be interesting to see what the Supreme Court says.

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