[IP] The Impact Of The USA PATRIOT Act In Canada
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Subject: The Impact Of The USA PATRIOT Act In Canada
Mondaq
The Impact Of The USA PATRIOT Act In Canada
03 November 2005
Article by Ms Karen Jackson
The USA PATRIOT Act—short for the "Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism Act of
2001"—is intended to facilitate the fight against terrorism. As
originally
passed, sixteen key provisions of the Act were set to expire at the
end of 2005, but
in late July the U.S. House of Representatives and the U.S. Senate
voted to
renew them. Since the House and Senate bills are not identical, the
form of the
final legislation—which will likely include some minor amendments to the
Act—still has to be worked out by a congressional Conference Committee.
The Act has expanded U.S. government surveillance powers, raising
privacy
concerns well beyond America’s borders. In Canada, these concerns
centre on the
possibility that personal data entrusted to U.S.-based service
providers (and
other entities), or even their Canadian affiliates, may be subject to
production orders on the basis of U.S. anti-terrorism legislation.
Since the legislation now appears set to remain in place for the
foreseeable
future, it is important that Canadian businesses consider whether USA
PATRIOT
Act issues might affect them. This update briefly outlines the relevant
provisions of the legislation and analyzes its possible effects north
of the border.
In particular, we consider the case of a British Columbia public service
union that went to court in 2004 and 2005 in an effort to prevent the
B.C.
government from outsourcing certain Medicare-related administrative
functions to an
affiliate of a U.S. firm. The union argued, in part, that the
outsourcing would
expose certain personal health care information to disclosure under
the USA
PATRIOT Act.
The Foreign Intelligence Surveillance Act
The USA PATRIOT Act generally extends existing powers rather than
creating
entirely new ones. The Foreign Intelligence Surveillance Act, or
FISA, dates
from 1978 and originally gave U.S. officials the authority to gather
intelligence, by electronic means only, on foreign agents in the U.S.
and abroad. In 1994,
FISA was extended to allow secret physical searches of homes and
offices.
Central to the FISA process is the Foreign Intelligence Surveillance
Court (the
"FISA Court") comprised of U.S. federal judges who exclusively hear
Justice
Department requests for warrants relating to foreign intelligence
investigations.
The FISA Court conducts its hearings in camera and almost never
publishes its
rulings. There is provision for appeal to a Foreign Intelligence
Surveillance
Court of Review, which sat for the first time as recently as 2002.
Those served with a FISA court order are prohibited from disclosing
that they
have been the subject of the order or of an ensuing search.
Disclosure of the
existence of a National Security Letter—discussed below in relation to
section 505 of FISA—is also prohibited.
The USA PATRIOT Act
In its original form, FISA was an information and evidence gathering
tool to
be used against agents of foreign governments, rather than a
prosecutorial
tool to be used in criminal investigations against U.S. citizens. The
USA PATRIOT
Act introduced four important changes that make it easier for the
Justice
Department to obtain FISA warrants:
* Search and surveillance authority more widely available (s.218)
* This is one of the most significant changes. Before the USA
PATRIOT
Act, physical searches and electronic surveillance could only be
conducted under
FISA if their purpose was solely foreign intelligence gathering. The USA
PATRIOT Act amended FISA to allow the FISA Court to authorize
physical searches and
electronic surveillance where foreign intelligence gathering is a
significant
purpose, not necessarily the only purpose. This may make it easier to
obtain
FISA Court warrants generally. Threshold lowered (s.215)
* This change makes it easier to obtain warrants with respect to
those
under suspicion of involvement in terrorism not associated with a
specific
foreign government. Prior to the USA PATRIOT Act, a FISA order
required specific
evidence that the individual who was the subject matter of records
being sought
was either a foreign power or an agent of a foreign power. By
amending section
215, the USA PATRIOT Act reduced this threshold to a demonstration
that the
records are sought for an authorized investigation to obtain foreign
intelligence information not concerning a U.S. person or to protect
against
international terrorism or clandestine intelligence activities.
Subject-matter scope
broadened (s.215)
* The USA PATRIOT Act significantly expands the subject matter
over which
orders may be granted under section 215 of FISA. Previously, FISA
Orders were
limited in scope to certain business records held by public carriers and
accommodation, physical storage or vehicle rental facilities; this
has been
expanded to include "any tangible things" without restriction
regarding the types of
organizations holding such tangible things. The July 2005 legislation
discussed above would impose new sunset clauses on section 215: 10
years in the case
of House Bill H.R.3199 and 4 years in the case of Senate Bill S.1389.
While
these and other differences between the bills have yet to be
reconciled by the
congressional Conference Committee (in keeping with U.S. legislative
procedure), it appears highly likely at the time of writing that
section 215 will remain
in place for at least four more years.
* National Security Letter regime expanded (s.505)
The USA PATRIOT Act expands the circumstances under which the
FBI can
issue National Security Letters to compel the disclosure of customer
information and also expands the range of potentially affected
industries. Previously,
the FBI was entitled to issue a National Security Letter to compel
financial
institutions, phone companies or Internet service providers to disclose
information about their customers upon the demonstration of specific
facts in support
of the letter. The USA PATRIOT Act has lowered this evidentiary
threshold to
establishing relevance to an authorized intelligence investigation. In
addition, the list of entities subject to the security letters has
been expanded to
include travel agencies, real estate agents, the U.S. Postal Service,
jewellery
stores, casinos and car dealerships.
The British Columbia Proceedings
While the USA PATRIOT Act has received publicity worldwide, its
potential
extra-territorial effects became a major issue in Canada when the
British
Columbia Government and Service Employees’ Union ("BCGEU") raised the
spectre of FISA
production orders in connection with a B.C. government proposal to
outsource
certain administrative and billings-related aspects of the province’s
Medicare
and Pharmacare plans. The government had selected a Canadian
subsidiary of
U.S.-based Maximus, Inc. as its service provider.
The BCGEU filed a complaint with the B.C. Privacy Commissioner,
arguing that,
if the outsourcing went forward, the USA PATRIOT Act could
potentially be
applied to compel disclosure to the U.S. government of confidential
information
concerning British Columbians. After a public input process, the Privacy
Commissioner produced a report concluding that a FISA Court order
might indeed
require a U.S. corporation to produce records held in Canada by a
Canadian
subsidiary, notably where a person within the U.S. has the legal or
practical ability
to obtain the records. A determination of "legal ability" in this
context
would likely depend on the U.S. definition of "control" which (as the
Privacy
Commissioner noted) has been found on the basis of corporate
relationship alone,
including a U.S. corporation’s ability, directly or indirectly, to
elect a
majority of the directors of a foreign corporation.
The Privacy Commissioner proceeded to make sixteen recommendations,
including
amendments to legislation, introducing a government litigation policy to
prevent disclosure of personal information, obtaining assurances from
the U.S.
government that the USA PATRIOT Act will not be used to obtain personal
information in Canada and requiring close monitoring of contract
performance.
The B.C. legislature then amended the Freedom of Information and
Protection
of Privacy Act (FOIPPA) and, over the BCGEU’s objections, concluded the
outsourcing agreement with Canadian subsidiaries of Maximus in late
2004. In that
agreement, the subsidiaries were structured as a chain of wholly-
owned Canadian
business corporations descending as follows from the U.S. parent:
* Maximus, Inc. (U.S. parent)
* Maximus Canada Inc. (Canadian corporation)
* Maximus BC Health Inc. (B.C. corporation)
* Maximus BC Health Benefit Operations Inc. (B.C. corporation)
The structure was described as follows by the Court:
In order to isolate [Maximus BC Health Inc. and Maximus BC Health
Benefit
Operations Inc.] from Maximus Canada and Maximus Inc. (U.S.A.) the
Master
Services Agreement provides that the shares of Maximus BC Health Inc.
will be held in
trust by a trust company operating in the Province of British
Columbia. The
beneficial interest in those shares is to be held by Maximus Canada.
The trust
provision in the contract is one of the default remedies that the
Province has
in relation to a breach or prospective breach by Maximus. In the
event such
an event occurs or will occur or is likely to occur, the trust
company, who
holds legal title to the shares, will deliver the shares to the
Province of
British Columbia who will be able to take ownership and act
accordingly. In the
event the default or anticipated default is resolved, the process is
to be
reversed.
The agreement further stated that at all material times Maximus BC
Health and
Maximus BC Health Benefit Operations "are under the policy guidelines
and
oversight of the Province of British Columbia."
On March 23, 2005, the Supreme Court of B.C. rejected the BCGEU’s
petition
for various declarations and an order quashing the agreement. Mr.
Justice Melvin
found that section 30 of FOIPPA required only that a public body make
"reasonable" security arrangements and that this requirement,
together with the
requirement in section 30.1 that a public body’s information be
stored in and
accessible only from Canada, had been met. It is not surprising that
the Court
found that the Maximus contract complied with FOIPPA, given that
FOIPPA had been
amended with the contract in mind.
The judgment also considered the application of the Charter of Rights
and
Freedoms to the situation. Melvin J. held that the right to privacy
found in
section 7 of the Charter is not absolute. Where parties have taken
"all reasonable
steps" to ensure confidentiality, any minor risk of disclosure that
might
remain is not a breach of anyone’s Charter rights. In this case
FOIPPA and the
contract itself contained provisions adequate to reduce the risk to an
acceptable level. These included FOIPPA’s whistle-blowing protections
(s. 30.3) and its
provisions ensuring that records are kept in private and within
Canada (e.g.
s. 30.1) as well as the following contractual provisions:
* A trust provision providing that if a risk of disclosure
occurs the
Province obtains the shares and operates the system until the risk
disappears.
* Restrictions on use and control of electronic equipment by
employees.
* A $35M penalty for breach of confidentiality.
* A provision stating that all of the information remains the
property of
the Province.
* A contractual non-disclosure of data provision.
* A provision that Maximus agrees that it is subject solely to
the laws
of B.C. and Canada.
Going Forward
It is likely that, absent any clear agreement between the Canadian
and US
governments, there will continue to be a relatively small but
nonetheless
significant risk that personal information maintained by Canadian
affiliates of U.S.
corporations could be subject to disclosure under FISA. The existence
of such
a risk might discourage some Canadian organizations, especially
governmental
authorities, from outsourcing functions that include access to personal
information to U.S.-based or U.S.-affiliated service providers. The
Maximus decision
suggests some measures that might potentially reduce this risk.
The risk of losing contracts because of the outsourcer’s concerns about
disclosure under FISA must be weighed, of course, against the
economic and
informational benefits of maintaining seamless digital networks and
the possibly
prohibitive costs of segregating Canadian data from access and
control by U.S.
entities. The Maximus ruling is helpful, but the result appears to
have depended
on Maximus’ commitment to segregate its Canadian data in Canadian
locations
controlled by Canadian subsidiaries.
In considering the application of the USA PATRIOT Act to personal
information
under their control, Canadian organizations should bear the following
in mind:
* Historical evidence suggests that the risks associated with,
and injury
resulting from, USA PATRIOT Act disclosures may not be significant:
* While the USA PATRIOT Act has received a great deal of
publicity, the
U.S. government already had the ability, under FISA, to obtain personal
information about non-residents (albeit not as much and not as easily
as is now the
case). The thousands of warrant requests approved between 1978 and
2001 might
have included some that referred to Canadians, but their use does not
appear to
have created any significant difficulties for businesses based in
Canada.1
Even if an organization can succeed in removing its data from the
reach of the
USA PATRIOT Act, it will not necessarily be secure against exposure to
security-related investigations.
Canada has comparable legislation to the USA PATRIOT Act.
Introduced in
response to the 2001 terrorist attacks, Canada’s Anti-terrorism Act
expanded
the intelligence gathering and surveillance powers of CSIS, the Canadian
intelligence and security agency. While a warrant is required by CSIS
for
surveillance activities or the seizure of information, the warrant
application is heard
in private by specially designated judges, much as is the case under
FISA.
Various privacy oversight officials have voiced concern about or
opposition to a
number of the changes effected by the Anti-terrorism Act.
* In addition, subsection 7(3)(c.1) of PIPEDA, Canada’s federal
privacy
legislation, makes an exception for disclosure to "government
institutions"
where (i) such an institution has "indicated that it suspects that the
information relates to national security, the defence of Canada or
the conduct or
international affairs" or (ii) where "the disclosure is requested for
the purpose of
enforcing any law of Canada, a province or a foreign jurisdiction,
carrying
out an investigation…or gathering intelligence for the purpose of…any
such
law." USA PATRIOT Act concerns will arise for many Canadian
organizations whether
or not they provide any information to an external service provider.
* To create greater efficiencies, many organizations share common
networks with affiliated American organizations. Personal information
residing on
such shared networks will potentially be accessible to U.S.
authorities under
FISA, even if such personal information does not belong to the American
organizations which have access to the networks. For licensing and
information sharing
purposes, creating an isolated network for Canadian personal
information may
be extremely costly. Also, while the B.C. decision suggests that
isolating
Canadian data may be of value in avoiding the application of the USA
PATRIOT Act,
it is still too early to say with confidence that this view will
prevail in
the courts of the other Canadian provinces and territories. If
organizations
possess only non-sensitive personal information, the financial and
logistic
consequences of implementing measures to mitigate or reduce the possible
application of the USA PATRIOT Act may not be warranted.
When considering the possible application of the USA PATRIOT
Act, each
organization should consider the sensitivity of the personal
information in
its possession and whether such personal information would likely be (i)
relevant in connection with intelligence gathering activities related
to national
security; and (ii) of concern to the subject individuals if it was
disclosed in
connection with intelligence gathering activities related to national
security.
1 It is estimated that between 1979 and 2001 more than 14,000 warrant
requests were made to the FISA Court, of which all but five were
approved. Stephen J.
Schulhofer, "No Checks, No Balances: Discarding Bedrock Constitutional
Principles" in Richard C. Leone and Greg Anrig Jr., eds., The War on
Our Freedoms:
Civil Liberties in an Age of Terrorism (New York: Public Affairs
Press, 2003)
74 at 81.
The content of this article is intended to provide a general guide to
the
subject matter. Specialist advice should be sought about your specific
circumstances.
Specific Questions relating to this article should be addressed
directly to
the author.
© Mondaq® 1994-2005.
All Rights Reserved
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