Legal incoherence and the extra-constitutional law of regulatory takings

• Author: Russell Brown
• Position: Faculty of Law, University of Alberta, Edmonton, Canada

1 Introduction

Canada is rare among western developed states for its lack of constitutionally entrenched property rights ( Bauman, 1992 ; Christie, 2007 ; van der Walt, 1999 ). This lacuna is the product of a number of factors. Until 1982, Canadians' individual liberties were generally seen as being effectively protected through a variety of unwritten sources of constitutional law ( Weinrib, 2001 ). Moreover, Canadian political culture, from its inception, was characterized by a high degree of deference to the state's interest in orderly development. As Edward Blake, MP (then Canada's Leader of the Opposition) once famously stated in the Canadian House of Commons (1882) :

I am a friend to the preservation of the rights of property […] but I believe in the subordination of those rights to the public good […] I deny that the people of my Province are insensible to or careless about the true principles of legislation. I believe they are thoroughly alive to them, and I am content that my rights of property, humble though they are, and those of my children, shall belong to the Legislature of my country to be disposed of subject to the good sense and right feeling of the people of that Province.

By the 1980s, furthermore, when Canadians' individual liberties were codified in a written Canadian Charter of Rights and Freedoms, the regulation of property use was widely seen as an essential and legitimate planning tool that ought not, in the public interest, to be confined by hard and fast constitutional rules ( Bauman, 1992 ).

At the same time, the Canadian legal experience also demonstrates that the absence of written constitutional limits upon a state's power to expropriate does not preclude the development of extra-constitutional restrictions, including those prescribed in customary international law, international treaties and declarations, Foreign Investment Protection and Promotion Agreements (FIPAs) and (in the Anglo-American tradition) the common law. Even more typically, protection against an uncompensated expropriation – that is, the forcible acquisition by the state of title to privately held property for public purposes – is furnished in Canada by expropriation statutes enacted at the federal, provincial and territorial levels of government. These statutes adopt a conventional scheme, which generally states rules for establishing market value, paying disturbance damages and compensating for ancillary losses and interest [¹].

My focus in this paper, however, is not upon expropriation, but upon a distinct (if related) concept known in US jurisprudence as the “regulatory taking.” Whereas an expropriation entails the state taking actual title to the land in question in order to confine such land to a public use, a regulatory taking contemplates the imposition of restrictions upon privately held land by way of public regulation. In other words, a regulatory taking contemplates the landowner retaining title, while having to confine his or her use of the land to such residual uses that the regulation might permit. Of course, regulated land use is commonplace in modern civil society, and most instances of restricted land use (such as municipal zoning) are not typically viewed as triggering a regulatory taking. The normative concern which the concept of a regulatory taking addresses is where the regulation is so broad in its scope that it effectively denudes the property of all reasonably anticipated private uses. This recognizes that, from a landowner's perspective, there is a threshold of restrictiveness beyond which the regulation – while falling short of an actual expropriation (because title rests with the landowner – is tantamount to an expropriation. This is because the land has been effectively reserved to a public purpose, albeit without the legal nicety of taking title. As such, the regulation, while leaving title with the landowner, has gone “too far” by freezing out all private use. Ziff (2005, p. 341) explains:

At some point, admittedly hard to locate, excessive regulation must be seen as equivalent to confiscation. If property is a bundle of rights, then state action that removes the ability to exercise those rights leaves merely the twine of the bundle [bare title], but little else.

In short, this paper focuses not upon state action, which entails acquisition of title (that is, an expropriation), but rather upon a regulatorily achieved stripping of a landowner's rights of use and enjoyment of property (that is, a regulatory taking).

That distinction clarified, there remains to be drawn a further distinction going to Canadian law's respective responses to an expropriation and a regulatory taking. As I have already observed, a comprehensive (if extra-constitutional) legal regime governs expropriations in Canada. A comprehensive Canadian jurisprudence of regulatory takings has, however, been slow to develop. Perhaps, because of the deferential political culture to which I have already referred, an extra-constitutional jurisprudence of the citizen-state relationship regarding regulation of property use has not acquired the judicial interest – or, as a consequence, the doctrinal rigour – of its constitutional counterparts. My objective in this paper is to demonstrate that both these phenomena – extra-constitutional restrictions, and the concomitant absence of doctrinal rigour – pose the risk of incoherence in the law, the former in an “external” sense, and the latter in an “internal” sense. In doing so, I will also describe the jurisprudence governing public authority liability in Canada for regulatory takings in order to show how these risks have, in Canadian law, materialized into actual, legal incoherence.

2 Explaining “incoherence” and defending coherence

Before proceeding further, I have two preliminary tasks: explaining what I mean by “external” and “internal” incoherence, and defending my ascription of significance to coherence.

By external incoherence, I mean the positive doctrinal contradiction between two discrete areas of law. For example, were tort law to allow subcontractors to sue an owner for negligent tendering of the prime contract (to which the subcontractor would not be a party), tort law and contract law, taken together, would be incoherent. This is because tort law's allowance of such a suit would fail to cohere to contract law and its doctrine of privity (indeed, this very reasoning has recently been affirmed, and on precisely this sort of claim, at the Supreme Court of Canada) [²]. A problem I will identify in this paper is that Canadian regulatory takings law has introduced incoherence to Canadian law by contradicting another field of Canadian law. Specifically, I will reference the distortional interplay between the law of regulatory takings and (in particular) the law governing international investor protections – a phenomenon which, as I will show, conceivably transcends the Canadian experience and might arise in any jurisdiction where protections from regulatory takings are extra-constitutional.

External incoherence, then, contemplates multiple areas of law governing mutually distinct legal classifications of activity in ways that work at cross-purposes, thereby effecting mutually contradictory results. The internal aspect of incoherence, in contrast, refers to distortion within a single, discrete area of law, and arises where a self-appointed foundational principle fails to explain areas that are central to its experience ( Neyers, 2000, p. 176 ; Smith, 2004, pp. 11-3 ). My point here, in short, will be that, in Canada, one aspect of regulatory takings law contradicts another aspect of regulatory takings law. Specifically, I will show how an absence of doctrinal rigour in Canadian law has resulted in the concept of regulatory takings being confused with that of actual expropriation (also known in Canada as the de jure taking).

Even presupposing, however, both the risk of external and internal incoherence and the actual emergence of both aspects of incoherence in Canadian regulatory takings law, it might still be asked whether coherence matters and, if so, why it matters. I suggest that coherence is a value to be privileged in the law generally, and in the law of regulatory takings specifically, for two reasons.

First, coherence has a justificatory function ( Weinrib, 1995, pp. 38-46 ). As such, it furnishes an account of the law's fundamental doctrinal features with reference to justificatory considerations that are intrinsic to one another. In the case of regulatory takings, the conditions upon which a landowner can seek compensation for the state's interference with use and enjoyment of property are explicable on their own terms. Landowners can see for themselves that adjudication occurred on the basis of an overarching principle and ex ante fixed goalposts, and not on some arbitrary basis.

Coherence also, I suggest, renders regulatory takings law intelligibly by making its doctrinal features readily accessible and understood by reference to a core principle. This intelligibility rationale has obvious affinities with the justificatory rationale, because both ascribe value to an internal standpoint from which we can understand and scrutinize the secondary doctrines of regulatory takings law, how they interrelate with each other and how they are then refined into tertiary rules designed to account for specific circumstances. While, however, the intelligibility rationale as a practical matter ensures coherent regulatory takings doctrine because it entails the development of secondary doctrines and rules in a way that is referable to a core principle, the justificatory rationale is...