1989] A Federal Parting ofthe Ways A FEDERAL PARTING OF

1989] A Federal Parting ofthe Ways

CANADA AND AUSTRALIA:A FEDERAL PARTING OF THE WAYS

RICHARD CULLEN*

53

INTRODUCTION

There is no shortage of comparative articles addressing the legal, political,social and economic similarities between Canada and Australia. This is hardlysurprising. Apart from their common British colonial heritage, the twocountries share a number of other features conducive to such comparativestudies. For example: federal political systems; long standing, nationaleconomic affluence; and large, sparsely populated, national territories. Perhapsless common are a11icles primarily stressing differences between the twocountries. This paper is in this latter category.

The thesis advanced is that the real political differences (in a federal structuresense) between Canada and Australia are striking and growing. The aimof this article is to demonstrate that the explanation for this lies, principally,in the significant social, economic, cultural and political variations in eachcountry. In Part 2 of the article, there is a sketch of the extent of someof these underlying, fundamental differences. Part 3 reviews severalperspectives on the Constitutions of Canada and Australia. Part 4 buildson the foregoing by considering the conduct of a range of federal constitutionaldisputes which have unfolded in each country. It considers in particular,and in some detail, the offshore disputes in Canada and Australia. The reasonfor this is that they possess a remarkable comparability. They have occurredover the same recent time span and the focus of disputation - governmentalrights over potential offshore petroleum reserves - has been identical ineach case. In the case of these disputes, the superior courts in each countryhave demonstrated strongly similar approaches. lTltimately, however, theoffshore disputes have been resolved politically and the political-economicresolutions are markedly dissimilar. 1 Finally, Part 5 concludes that Canadaand Australia are now, conspicuously, two increasingly divergent federations.Their respective political structures appear to have been shaped by largelyautonomous (and differing) forces of great strength. Moreover, this processis continuing.

2 REGIONALISM IN CANADA AND AUSTRALIA

A Preamble

For the purposes of this paper, the term regionalism is defined as meaningthe tendency of the constituent entities in a federation to have, or to obtain,develop and sustain, recognisable identities separate from one another andseparate from the central government. A secondary characteristic ofregionalism is its tendency to undermine the growth of powerful national

* LLB (Hons), DJur, Lecturer-in-Law, Monash University, Melbourne. I wish to acknowledgethe assistance of Mr Rick Krever and Professor Peter Hanks in the preparation of this article.The views expressed remain those of the author.

1 In fact the disputes in both Canada and Australia are still far from being completely resolved.The political process remains engaged in addressing the issues in each country: R Cullen,"Bass Strait Revenue Raising: A Case of One Government Too Many?" (1988) 6 Journalof Energy and Natural Resources Law 213.

54 Federal Law Review [VOLUME 18

identities. Clearly, in any federation there will always be an element ofregionalism. A fundamental reason for creating a federation is to allow forregional differences whilst obtaining the benefits of a measure of economicand political integration.

The thesis of this paper is that regionalism offers important explanationsfor the different ways the federal political structures have evolved in Canadaand Australia. Before examining some of these specific legal/ politicaldevelopments, however, the topic of regionalism will be reviewed in a moregeneral way.

B Regional Identification

Some immediate geographic differences between the two countries emergefrom an inspection of an atlas. Canada has ten Provinces and two Territories,whereas Australia has six States and only one substantial Territory.Furthermore, the longest distance between principal population centres inCanada (St. John's to Victoria) is about twice that which occurs in Australia(Brisbane to Perth). Also, two of the Canadian Provinces, Alberta andSaskatchewan, are completely landlocked and neither Manitoba nor Ontariohave direct coastal frontages on to the open sea. In contrast, all the AustralianStates have extensive open sea coastal boundaries. One should also notethat Australia only has a population of approximately 16 million and coversabout 8 million square kilometres while Canada has a population ofapproximately 26 million and covers over 10 million square kilometres.

At the time of federation, in 1901, the Australian Colonies had largelyhomogeneous populations, the whole country was unilinguaI, and, in almostall cases, the constituent members entered federation with exactly the sameborders as they possess to this day. Moreover, the current Australianpopulation recently has been described, with some accuracy, as possessing"linguistic, social and cultural homogeneity unparalleled across so great anarea anywhere else in the world".2 Certainly, when one searches for tangible,regionally based, cultural and social differences in Australia, they are difficultto identify. In truth, the most notable regional variation probably is embodiedin the country's winter sports dichotomy. In Victoria, South Australia, WesternAustralia and Tasmania, Australian Rules Football is followed with religiousintensity, while in New South Wales and Queensland, rugby dominates. Ofless importance today, as an identifying difference, are State railway gauges.Until 25 years ago a trip by rail through the five mainland capitals involvedno less than two separate sections of standard gauge track, one of broadgauge and one of narrow gauge. Today, however, standard gauge lines havepenetrated to all mainland State capitals, though intrastate networks remain 11

incompatible, with one another.

2 C Howard, Australian Federal Constitutional Law (3rd ed 1985) 96.

1989] A Federal Parting ofthe Ways 55

Although somewhat distinctive economies have emerged since the SecondWorld War amongst the Australian States,3 the economies of the formerColonies at the time of federation were more notable for their similaritiesthan their differences. And even today, there are no Australian equivalentsof the regionalised segments in the Canadian economy.

Canada has grown from a confederation of four Provinces in 1867 toa total of ten in 1949. These Provinces tend to cluster (and have done sosince the early days of confederation) into distinct economic regions. Thereliance of the western region on primary and extractive industries, the centreon its industrial base, and the Atlantic Provinces on their mixed (andimpoverished) rural and maritime sectors have long been features of the overallCanadian economy. One commentator has recently gone so far as to describeCanada as the most decentralised country in the world.4 Within the regionsone then finds further differentiation. In the central region, the cultural andsocial differences between Ontario and Quebec are profound. Quebec possessedat confederation, and retains to this day, very significant cultural and languagedifferences vis a vis the rest of Canada. Bilingualism is official policy inCanada and is constitutionally guaranteed.5 The importance of FrenchCanadian nationalism in maintaining the heterogeneity of the Canadianconfederation has been commented on by other writers.6 If you like, Quebechas established and reinforced continually the precept that diversity ratherthan homogeneity is the paradigm for Canadian federalism. Other Provincesmay not have possessed the same cultural and language baseyas Quebecfor asserting diversity but this has not inhibited them in/ (he view thatconfederation was and is as much about maintaining diversit~s about bringingthe country together.

Furthermore, at the extremities, there is the effectiV:e geographic separationof British Columbia and Newfoundland from/the rest of the country.Newfoundland's unique economic and constitutional history together withits characteristic local dialect, described as the most distinctive in NorthAmerica,7 further sets it apart. And it has been said that political regionalismthrives more vigorously in British Columbia than anywhere else in the country.8

3 Victoria has developed a large (and heavily protected) manufacturing base, New South Waleshas the greatest share of heavy industry, Tasmania's economy is dominated by its hydroelectricity system, South Australia has a mixed manufacturing and rural bias, whilst WesternAustralia and Queensland have come to rely heavily on export extraction industries.Nevertheless, the "remarkable resemblance between the economic structures of the variousStates" noted, in 1946, by Professor Greenwood in his book The Future of AustralianFederalism, (1976) 338 has by no means disappeared. In all States the rural sector continuesto be of significant (if diminishing) importance. Thus in 1987-1988 wool was comfortablyAustralia's most significant export. "Boom makes wool our biggest export", Melbourne Herald,15 August 1988.

4 Simpson, "Harmony's umbrella opens again", Toronto Globe and Mail, 18 February 1985.5 See ss 16-23 of the Canadian Charter of Rights and Freedoms.6 CD Gilbert, Australian and Canadian Federalism 1867-1984, (1986) 156; C Martin,

"Newfoundland's Case on Offshore Minerals: A Brief Outline" (1975) 7 Ottawa Law Review34, 56; P W Hogg "The Theory and Practice of Constitutional Reform" (1981) 19 AlbertaLaw Review 335.

7 Wren, "Newfoundland words can harrish a come-from-away", Toronto Globe and Mail, 4January 1986.

8 Cruickshank, "B C's Bennett, native son marks decade in power", Toronto Globe and Mail,11 October 1985.


In the case of Australia it has also been suggested that its isolated positionas a predominantly white enclave adjacent to South East Asia has had aunifying effect within the federation. 9 In contrast, Canada, far from beingisolated, has an extensive land boundary with a huge and influential neighbourand is not far distant from western Europe. The north-south trade whichthis proximity with the United States of America has generated has alsohelped to reinforce provincial identities. For example, Ontario's automotiveindustry is closely integrated with that of the United States'industrial heartland,especially as a result of the Auto-Pact. 1O The western members of theconfederation also have long standing trade links with the United States,for example, in energy resources (particularly in the case of Alberta) andwith respect to forest products and hydro-projects in the case of BritishColumbia. On the east coast, strong historical familial ties link the maritimeProvinces (and Quebec) with the States of New England.

Finally, another political reason for Canada's pronounced regionalism hasbeen strongly argued. A leading Canadian political commentator considersthat the 'first past the post' electoral system in Canada has exacerbated regionaldivision. Simply put, it is said that the arithmetic of that system of voting,when applied to single member constituencies, encourages Canada's mainpolitical parties to build on their respective regional strengths rather thanstrive for even support across the country. Traditionally this has given theProgressive Conservative Party an image, federally, of being most concernedwith representing English-speaking Canada, whilst the Liberal Party hasenjoyed strong support in Quebec, particularly, but very little support, often,in western Canada. The third major party in Canadian politics, the NewDemocratic Party, in turn, has never enjoyed much support in Quebec or,for that matter in the Atlantic Provinces.11

The Australian experience is quite different in this regard, even thoughthere are strong similarities in population distribution; that is, Victoria andNew South Wales account for about the same proportion of the totalpopulation in Australia as Ontario and Quebec do in Canada. The majorpolitical parties maintain a strong presence in all regions and federalgovernments have not been regularly formed in Australia with reliance onsuch localised support as has occurred repeatedly in Canada. I2

Thus it can be seen that there are a number ofgeographic, cultural, historical,political and what might be termed natural market forces at work influencinga tendency towards provincial diversity and assertion of autonomy whichdo not prevail, or prevail only to a lesser extent, in Australia.

9 C D Gilbert, supra n 6, 156.10 Agreement Concerning Automotive Products, 16 January 1965, United States - Canada,

17 UST. 1372 TIAS No. 6093. This agreement, which has been in place for over 20 years,is a bilateral, sectoral, free trade agreement (with safeguards).

11 A C Cairns, "The Electoral System and the Party System in Canada, 1921-1965", and "TheConstitutional, Legal and Historical Background to the Elections of 1979 and 1980" in D EWilliams (ed) Constitution Government and Society in Canada: Selected &says by AlanC Cairns (1988). The Atlantic Provinces comprise Nova Scotia, New Brunswick, Prince EdwardIsland and Newfoundland.

12 It may be that the system of 'preferential' or 'transferable' voting long used in federal electionsin Australia has been a factor in this phenomenon.


C National Identification

Apart from looking at the presence (in the case of Canada) or relativeabsence (in the case of Australia) of forces working towards diversity, weneed also to consider their opposites; forces impelling the development ofnational identities. As one would expect, the differences are here again striking.As has already been noted, the present boundaries of all the Australian Stateswere largely in place by 1861. 13 Thus the Colonies which federated in 1901had all been operating entities for at least 40 years prior to federation.Moreover, all of today's Australian States took part in the drafting of theAustralian Constitution and its ratification by referendums. The accumulatednation-wide vote in favour offederating was of the order of 2.5: 1 and majorities(of varying strengths) were obtained in all six Colonies. 14 Federation certainlywas not achieved without some dissension15 but it was, in the fmal analysis,supported strongly throughout the country. One important explanation forthis, I believe, stems from the rise of a sense of national cOInlnunity whichpre-dated federation by many years. Albinski has noted that, prior to federationin 1901, there was a well developed sense of national community in Australia. 16When one considers that nineteenth century Australia presented a case ofan Anglo-Celtic population occupying (albeit sparsely) an entire continent,as an enclave in South East Asia, it is not surprising that a strong senseof national community emerged well before federation. In a sense, federationinvolved adding some political flesh to a pre-existing national perception.

Furthermore, this sense of national community continued to flourish afterfederation and does so to this day. For example, significant impetus to thesense of nationhood was a critical by-product of the First World War battleinvolving antipodean troops at Gallipoli in Turkey. Although the campaignoccurred far from Australia's shores and was a strategic failure, it helpedpromote the spirit of 'Anzac'17 which served as a powerful national focusin Australia. Its strength in this regard has diminished with the passing oftime but it is by no means spent. 18

The contrast with Canada is clear. Lord Durham, in his famous Reporton the Affairs in British North America said, in 1840, that he expected tofind problems related to disputes between government and people but found,instead, two nations warring in the bosom of a single state. One hundredand forty years later, Professor Smiley still favoured a diagnosis of Canadian

13 C M Hartwell "The Pastoral Ascendency", in G Greenwood (ed) A Social and PoliticalHistory ofAustralia (] 955) 83.

14 H S Albinski, Canadian and Australian Politics in Comparative Perspective (1973) 6.15 The Colony of New South Wales proved to be a stumbling block on more than one occasion,

not because it was against federation, but because it felt it was entitled to special concessionsin the federal settlement. One sticking point, for example, was the location of the nationalcapital. This was resolved by making Melbourne, the capital of Victoria, the temporarycapital of Australia until the new national capital, Canberra, was built on federal territorylocated within New South Wales.

16 H S Albinski, supra n 14, 8 and 31.17 The word is an acronym formed from the term, Australian and New Zealand Army Corps.18 There has been a constant stream of books, plays and films on the ANZAC theme over

the years. ANZAC day, April 25, is still a more significant national day than AustraliaDay. The ANZAC myth remains controversial. In the last decade, for example, feministshave begun to question, again, the war glorification elements in the myth. However, theANZAC theme has never attracted any regionally based controversy and for the majorityit remains a point of significant national focus.


nationhood which characterised it as infirm and in decline, while ProfessorBell preferred to describe it as confused and uncertain. 19 When one looksat Canadian history for national turning points of equivalent significanceto Australia's Gallipoli experience, they are there - but most often theyhave been divisive rather than unifying. The defeat of Montcalm by Wolfeon the Plains of Abraham in 1759; the uprising led by Louis Riel in 1885;a most bitter conscription debate during the First World War;20 and theOctober Crisis in Quebec in 197021 have all been significant historical turningpoints which have undermined rather than aided the forging of an overallsense of Canadian nationhood.

There is one factor, it must be said, which has had a powerful influenceon both inducing a sense of Canadian nationhood and the disruption ofthat development. This is the American influence. North-south trade linksbetween Canadian Provinces and States in the United States have generallyworked to reinforce Canadian regionalism tendencies. Nevertheless, theabsence or much lower occurrence of the distasteful features of Americanlife in Canada and the resentment of American economic and cultural ,dominance have both assisted in the development of a sense of Canadiannationhood. One savant has summarised the Canadian nationhood dilemmain the following way:

In general then, 'nationhood' in Canada has historically been a considerably lessdeveloped and publicly admired notion than in Australia. There are signs, however,that one of the factors seriously responsible for retarding a common sense of nationalidentification, namely the weight of American influences, may now actually becontributing to solidifying it.22

3 THE CONSTITUENT DOCUMENTS

Before examining, in some detail, how the legal and political structuresin each country have been shaped by these influences, a brief outline ofthe general characteristics of the written federal Constitutions of each nationis desirable. Prima facie, one would expect that these documents, settingdown, as they do, an explicit, negotiated political balance, would have beenof fundamental importance in fashioning the subsequent intergovernmentalpolitical boundaries in each country. In practice, it would appear that theyhave been of much less moment, in this regard, than originally anticipated.

The point has been made that, on first acquaintance, the text of the CanadianConstitution gives a marked impression of being more centralist than the

19 D V Smiley, Canada in Question: Federalism in the Eighties (1980) ch 8; D V J Bell,"Regionalism in the Canadian Community", in Fox (ed) Politics: Canada (5th ed 1982)128.

20 Australia also experienced a bitter conscription debate during the First World War. It wasnot regionally focussed, however. Its adverse influence on the Australian sense of nationhoodwas for that reason, inter alia, more limited than the effect of the same debate in Canada.

21 This crisis involved two kidnappings (one of which had a fatal outcome) by the QuebecLiberation Front (the FLQ) and the proclamation, by Ottawa, of a state of war emergencyin what is now seen generally as an over-reaction to the problem. See P W Hogg, ConstitutionalLaw of Canada (2nd ed 1985) 388; and D A Morton, A Short History of Canada (1984)253-256.

22 H S Albinski, supra n 14, 47. One often cited index of the difference between Canada andthe United States is the lower incidence of violence in Canada. The homicide rate in Canadain 1984 was one third that of the United States, for example. "Your fears of murder", TorontoGlobe and Mail, 6 August 1986.


Australian Constitution.23 Such is the apparent extent of Dominion controlthat one scholar has described Canada as a quasi-federal state.24 On theother hand, the Australian Constitution, with its combination of specificpowers for the Commonwealth and the residue remaining for the States,looks like a recipe for decentralisation.25 In the event, judicial interpretationhas reinforced decentralisation of the Canadian confederation andcentralisation of the Australian federation. 26 That is, the two federations havedeveloped contrary to the apparent intentions of their constituent documents.On the occasions when members of the High Court of Australia have offeredopinions on this development they have implied that the constituent documentsare not basically centralist and decentralist in Canada and Australia,respectively. They have emphasised that the Constitution Act 1867 providestwo specific lists of powers, one for the Dominion27 and another for theProvinces, while the Australian Constitution simply enumerates a numberof specific powers for the Commonwealth alone. An excellent example ofthis line of explanation is contained in the judgment of Evatt J in HuddartParker Limited v The Commonwealth.28 His Honour lays emphasis on thecontention that Provincial (but not State) powers thus control and determinethe powers of the central political entity.29 In Actors and Announcers EquityAssociation v Fontana Films;30 Stephen J offers the view that the lack oftwo mutually exclusive lists in Australia has meant that the court has nothad to construe Commonwealth law making powers narrowly according toa 'sole or dominant' character test as has been the practice in Canada. Thisis because the concurrent nature of the distribution of power federally inAustralia means that, subject to the operation of s 109 of the AustralianConstitution,31 a finding of Commonwealth law-making capacity does not,of itself, deny capacity in that general subject area to the States.32

Probably the best known statement by a Canadian judge on the differencesbetween the Australian and Canadian Constitutions, as interpreted, is thatoffered by Rand J in Murphy v Canadian Pacific Railway CO.33 He doesnot advert to the two-list feature as such, but rather concentrates on the

23 C D Gilbert, supra n 6, 2. Canada does not have one single constituent document as itsConstitution. The principal document remains the British North America Act 1867 (UK).In 1982, when the Canadian Constitution was patriated, the Canada Act 1982 (UK), waspassed by the UK Parliament. Schedule B to that Act was the Constitution Act 1982 which,by s 53(2), changed the name of the British North America Act 1867 (UK), to the ConstitutionAct 1867. For further details see P W Hogg, supra n 21, 5 and 831-894. The principalconstituent document for Australia is contained in the Commonwealth of AustraliaConstitution Act 1900 (UK). The Australian Constitution forms s 9 of that Act. Hereinafter,the respective constituent documents will be referred to by self explanatory abbreviations.

24 K C Wheare, Modern Constitutions (2nd ed 1966) 20.25 C D Gilbert, supra n 6, 2.26 Ibid 3.27 From time to time, the terms Dominion and Commonwealth are employed in this paper

to denote the central governments in Canada and Australia respectively. Although theseterms (and especially Dominion) are somewhat dated, they have been retained as an aidto clarity in preference to using the more ambiguous (in this context) terms, Canada andAustralia.

28 (1931) 44 CLR 492.29 Ibid 526-527.30 (1982) 150 CLR 169.31 Infra n 40 and accompanying text.32 Supra n 30, 191-192.33 [1958] SCR 626, 640-641.


concurrent nature34 of most of the Commonwealth powers which he contrastswith the largely mutually exclusive powers of the Dominion and the Provinces.

A more convincing explanation, suggested by one writer, for the way judicialinterpretation has turned the constitutions apparently face about is that itis not the textual differences noted above which have been determinativebut rather the different conceptions held, at the judicial level, of the natureor character of the two variants of federalism. 35 There seems to be considerablemerit in this thesis.

Of course there is an important historical difference in the nature of thefinal forums which have ruled on the two Constitutions. The bulk ofmainstream constitutional cases in Australia have been resolved withinAustralia in the High Court. Section 74 of the Australian Constitutioneffectively curtailed disputes about the balance of governmental powersbetween the States and the Commonwealth from proceeding beyond the HighCourt by providing that such disputes could only proceed to the JudicialConlmittee of the Privy Council if the High Court thought they ought to.36The Canadian experience has been quite different. All constitutional decisionsof the Supreme Court of Canada remained appealable to the JudicialCommittee of the Privy Council until 1949. Many of the Judicial Committeedecisions on Canadian constitutional issues systematically favoured a narrowinterpretation of Dominion powers and a wide interpretation of Provincialpowers. They also aroused much controversy in Canada. However, it hasbeen argued that, in retrospect, these decisions can be seen as consistentwith Canada's strong, historical regionalism tendencies. 37 On the other hand,the consistent augmentation (particularly since 1920) of central authority bythe High Court reflects the relative absence of such tendencies and the greaterpower of a range of centralising forces in Australia.

Recently, the Canadian Constitution has been markedly changed with theintroduction, in 1982 as part of the 'patriation' of the Canadian Constitution,38of the Charter of Rights and Freedoms. It is too early yet to tell what effectsthis will have on the resilience of Canadian regionalism, but a preliminaryview, expressed in the Part next following, is that the impact is likely tobe limited.

One other general aspect of the operation of the two Constitutions alsoneeds to be mentioned. Within any federal political structure, it is necessaryto have a rule as to which level of government is to prevail in the caseof overlapping laws. Inevitably, the rule is that the laws of the centralgovernment (providing they are otherwise valid) are paramount. In the caseof the Australian Constitution, s 109 spells out this rule explicitly. TheCanadian Constitution contains no such explicit provision. The Supreme

34 Although most Commonwealth powers are held concurrently with the States, s 109 of theAustralian Constitution states that in the case of any inconsistency Qf laws, the Commonwealthlaw prevails.

35 C D Gilbert, supra n 6, 6.36 The High Court has allowed only one such dispute to go to the Privy Council: Colonial

Sugar Refining Company Ltd v Attorney-General for the Commonwealth (1912) 15 CLR182.

37 P W Hogg, supra n 21, 89.38 Ibid 1-8.


Court has, however, adopted a rule of federal paramountcy as being impliedeither generally or by certain specific provisions in the Constitution.39

More significantly, the High Court of Australia has shaped the operationof s 109 so as to give maximum effect to Commonwealth laws by adoptinga 'covering the field' test for its operation. This says that when a Commonwealthlaw evinces an intention to cover a particular legislative field then, even whenthat law leaves many matters in the field unattended by specific reference,no State law may intrude into that field. 40 In Canada, the Supreme Courthas declined to adopt this test (the 'negative implication' test as it is knownthere). The federal paramountcy rule in Canada has been formed by thecourt so as to preserve the operation of Provincial laws if at all possible.With this end in view, the Supreme Court also has chosen to define verynarrowly what constitutes a 'direct clash' between laws so that far fewerProvincial laws are placed in jeopardy by the operation of the paramountcyprinciple in Canada than are State laws in Australia.41

4 SOME LEGAL AND POLITICAL RESPONSES TO REGIONALISM

A Limitations on Governmental Regulation of Commerce

In the particular case of two comparable commerce related provisions inthe Canadian and Australian Constitutions one could be tempted to concludethat the textual differences between them have produced profound economicdivergences. The Canadian provision is s 121 of the Constitution Act 1867which provides that:

All articles of the Growth, Produce, or Manufacture of anyone of the Provincesshall, from and after the Union, be admitted free into each of the other Provinces(emphasis added).

The Australian provision is s 92 of the Australian Constitution which statesthat:

On the imposition of uniform duties of customs, trade, commerce, and intercourseamong the States, whether by means of internal carriage or ocean navigation shallbe absolutely free . . . . (emphasis added).

While the Canadian provision almost certainly precludes the applicationof explicit fiscal barriers to interprovincial trade, such as customs duties,42there is considerable authority for the proposition that it does not preventthe erection of non-fiscal constraints.43 Claims that s 121 is directed onlyat Provincial initiatives44 almost certainly are incorrect. The substantiveProvincial regulation of all sorts of commercial activities (with an inevitable,consequent impact on interprovincial trade) affords unambiguous evidence,however, that the Provincial Governments, at least, consider s 121 to havea narrow ambit indeed.

39 Ibid 353-354.40 Ex parte McLean (1930) 43 CLR 472,483 per Dixon J and C D Gilbert, supra n 6, Chapter 8.41 C D Gilbert, supra n 6, 153.42 P W Hogg, supra n 21, 603-604.43 Gold Seal v Attorney-General of Alberta (1921) 62 SCR 424 and Atlantic Smoke Shops

v Conlon [1943] AC 550.44 Such a claim is made in J R S Prichard and J Benedickson, "Securing the Canadian Economic

Union", in M J Trebilcock, J R S Prichard, T Courchene and J Whalley (eds) Federalismand the Canadian Economic Union (1983) 34.


Contrast this position with the impact that s 92 has had in Australia. TheHigh Court has interpreted this provision in such a way as has proscribedall manner of State (and by 1936, Commonwealth)45 legislation imposingfiscal and non-fiscal burdens on interstate trade. In S.O.S. (Mowbray) PtyLtd v Mead,46 Windeyer J said he would not underrate the importance ofs 92 in promoting the economic integration of Australia as a great factorin making Australia united as a nation. It must be acknowledged that, overthe last ten years, the sweeping effects of s 92 have been somewhat reduced.For example, in Clark King & Co Pty Ltd v Australian Wheat Board,47a majority held that an Australian-wide wheat marketing scheme, which clearlyhad a profound effect on interstate trade, nevertheless was not struck downby s 92. Although some of the majority reasoning in this case was shakyand Mason J, a principal author of the doubtful line of reasoning, recantedtwo years later in Uebergang v Australian Wheat Board,48 His Honour stillsuggested that the scheme would likely be valid as an example of reasonableregulation.49 More recently, in Cole v Whitfield5° the High Court, in aunanimous joint judgment, narrowed the effect of s 92 still further. The courtlaid down a new rule to the effect that s 92 prohibits discriminatory fiscaland non-fiscal burdens, of a protectionist kind, on interstate trade (measuredaccording to a practical effects rather than a strict literal test).

Notwithstanding the recent attenuation of its previous impact, s 92 hasproduced a severe curtailing of the ability of any of the States to protecthome grown industries by erecting either fiscal or non-fiscal barriers tocompetitors from other States. (Even under the rule in Cole v Whitfieldit is likely to continue to do so.) As a consequence, interstate trade in mostgoods and services has remained relatively free. The recent trend in itsinterpretation has not been towards allowing the States greater unilaterallatitude, rather the new jurisprudence appears designed to free certain nationalinterstate trade regulation initiatives from the threat of s 92 invalidity.51

It also is strongly arguable that the thrust towards an integrated economy,fostered by the High Court's interpretation of s 92, has overflowed into theinterstate employment sector. Although State professional and tradeassociations set standards for entry into their respective employment sectors,

45 James v Commonwealth (1936) 55 CLR 1 (PC).46 (1972) 124 CLR 529, 575.47 (1978) 140 CLR 120.48 (1980) 145 CLR 266. Mason and Jacobs JJ had argued in the Clark King case «1978)

140 CLR 120 at 193) that the monopolistic scheme had been "the only practical and reasonablemanner of regulation" of the wheat industry. Jacobs J retired from the court before theUebergang case was heard.

49 For procedural reasons, the Uebergang case did not result in a ruling on the validity ofthe wheat scheme.

50 (1988) 62 ALJR 303. The history of s 92 litigation and the impact of the case are discussedat length in R Cullen, "Section 92: Quo Vadis?" (1989) 19 U W A L Rev (forthcoming).

51 In Cole v Whitfield (1988) 62 ALJR 303, 313, the High Court made it clear that theCommonwealth's power in s 5I (i) to regulate interstate trade and commerce is to be readas a plenary not a peripheral power. Moreover, it suggests that the relationship betweens 51 (i) and the newly interpreted s 92 is such that s 92 most likely would not, now, begreatly inhibitive of Commonwealth exercise of its trade and commerce power. And thecourt goes on to add (at 314) that, even when a Commonwealth measure regulating tradeand commerce might, standing alone, be discriminatory, if it were an element in a nationalscheme comprising complementary State and Commonwealth laws, that discriminatoryingredient might well be neutralised. I

1989] A Federal Parting of the Ways 63

qualifications and training acquired in other States receives more ready acrossborder acceptance in Australia than is the case, Province to Province, inCanada. Section 117 of the Australian Constitution, which prohibitsdiscrimination between the residents of different States, is another inhibitingfactor for any association contemplating a residential based qualification forissuance of a licence to practise or work.52 It is true that the High Courthas read the guarantee in s 117 quite narrowly and the case law suggestsa number of strategems to 'get around' it. Nevertheless, it remains an explicitinhibiting factor. Moreover, the remarkable poverty of purposiveresponsiveness in the few decisions to date suggests that the passing of timecan only be corrosive of their durability.53 Moreover, State-biased purchasingprograms are conducted on a less extensive scale than a number of theirProvincial counterparts.54

Finally, the interstate road transport industry is a particularly thriving,largely unregulated (and some would say chaotic) phenomenon of Australiancommerciallife.55 The recently enacted Interstate Road Transport Act 1985(Cth) represents an attempt to bring some order to this industry. It isnoteworthy, however, that it is a national rather than regional initiative. Also,its scope remains heavily qualified by s 92 considerations.56

In contrast, the Provincial Governments in Canada have actively set upa wide range of barriers to trade, which have had at least an indirect effectin enhancing the identity and autonomy of the Provinces. Six separate areasin which Provincial policies or practices restrict mobility of goods have beenidentified: government procurement policies; transportation regulation;agricultural policies; natural resource policies; Provincial liquor policies; andretail sales taxes.57 Many Provincial initiatives in these areas simply could

52 It is arguable, eg, that the case of limited entry schemes to manage State fisheries maycontravene s 117. These schemes favour the participation of intrastate fishermen at the expenseof interstate fishermen who wish to fish the same areas.

53 The relevant cases include: Davies and Jones v Western Australia (1904) 2 CLR 29; LeeFay v Vincent (1908) 7 CLR 389; and Henry v Boehm (1973) 128 CLR 482. There is abody of opinion that the court has seriously misconstrued the section in these cases. See,eg, the discussion in M Coper, Encounters with the Australian Constitution (1988) 313-319.The section is due for a possible reconsideration by the High Court in the pending (atthe time of writing) cases of Re Robertson and Street v Queensland Bar Association. (Referalso, in this regard, to Street v Queensland Bar Association (1988) 62 ALJR 437 and ReRobertson (1988) 62 ALJR 438 dealing with granting of special leave to appeal). See also,infra n 60.

54 See M J Trebilcock, J Whalley, C Rogerson and I Ness, "Provincially induced barriersto trade in Canada: a survey", in Trebilcock et al, supra n 44, 243, where the authors describe,in some detail, Provincial Government procurement policies. All of the Provinces havemechanisms in place for showing at least some bias towards local firms. The maritime Provinces,Newfoundland, Quebec and British Columbia tend to have the most explicitly preferentialregimes.

55 Regulation by the States of interstate transport has been confined, since the mid 1950s,principally to safety concerns such as axle load limits, road worthiness, driver performanceand so on. All serious attempts to tax directly the operations of purely interstate road transportlargely have been abandoned by State Governments. Truck drivers mounted successfulblockades of the main interstate arteries in the late 1970s and early 1980s as part of theircampaign to rid themselves of what they considered to be iniquitous State road taxes. Thecontinuing turbulence in the industry was evidenced by another nationwide interstate highwayblockade in July, 1988.

56 It may be that the new s 92 jurisprudence (supra n 50 and accompanying text) will facilitatea firmer national regulation of the industry than was hitherto thought possible.

57 Trebilcock et aI, supra n 54.

64 Federal lAw Review [VOLUME 18

not be transferred to Australia 'as is' because s 92 almost certainly wouldstrike them down. In particular, the very tight regulation of interprovincialroad transport, important aspects of the operation of Provincial liquormonopolies,58 the sometimes strongly biased Provincial procurement policiesand some marketing schemes would be highly vulnerable to such attack.Furthermore, overtly residence-biased professional and trade licensingschemes, as practised by some Provinces,59 would, if adopted in Australia,be unlikely to survive both s 92 and s 117 of the Australian Constitution.6O

It is suggested that this freedom of the Provinces to practice economicbalkanisation also has contributed significantly to their ability to developand maintain separate identities. This particular opportunity has been deniedthe Australian States (thankfully many would say). It is submitted that, withthe extrinsic forces at work in Canada, even if s 121 had been worded inthe same way as s 92 it is unlikely that it would have grown to dominatenational economic activity in Canada in the way s 92 has done in Australia.It also follows that s 92 does not provide the sole or even the primaryexplanation for the degree of relative economic integration in Australia. Whatit has done, however, is provide an ideal tool to facilitate integration ina climate where the impetus towards regional diversity is considerably weakerthan in Canada.

The Canadian Charter of Rights and Freedoms was proclaimed on 17April 1982. The validity of some of the Provincial economic and socialmanagement practices detailed above doubtless will be called into questionas possibly violating certain Charter provisions. It is too early to speculatein detail about the potential effects of the Charter on the resilience ofregionalism in Canada but it seems clear that the qualified mobility rightsin s 6 of the Charter and the language rights in sections 16 to 23, in particular,should at least help to retard its growth.61 Nevertheless, any effects are unlikelyto undermine the basic strength of regional diversity in Canada, at least

58 In Ontario and British Columbia, for example, locally produced wines have a mark up,for retail sale, only about half that imposed on all other wines imported into the Provincefor resale. Only Manitoba and Prince Edward Island appear to maintain liquor retailingregimes which largely do not treat imported alcoholic beverages in a discriminatory fashion.See Trebilcock et aI, supra n 44, 263-266.

59 D V Smiley, supra n 19, 161.60 This issue currently is being tested with respect to s 92 (and s 117) in two cases pending

(at the time of writing) before the High Court; Street v Queensland Bar Association andRe Robertson. (See supra n 53.) The Full Court of the Supreme Court of Queensland found,in Re Street (1987) 74 ALR 605, that neither s 117 nor s 92 invalidated the then rules ofthe Queensland Bar Association requiring that a barrister be resident in Queensland in orderto be admitted to practise in that State. However, the court dealt with the s 117 argumentin a perfunctory (and inexact) fashion. More importantly, the court's views on the s 92argument were based on the paraphenalia of the 'criterion of liability' test, now rejectedand replaced by the High Court in Cole v Whitfield (1988) 62 ALJR 303 with the substantivediscrimination test. (Supra n 50 and accompanying text.)

61 P W Hogg, supra n 21, 651-652.


in the medium term.62 After all, it is strongly arguable that regionalism forcessome time ago managed to overpower the express centralist intentions ofthe Constitution Act 1867. Moreover, they appear to have kept those centralistintentions largely in check to this day.63 Finally, it needs to be noted thatthe Charter allows both the Provinces and the Federal Government to overridemany of its provisions.64 This provision has already been used in a blanketfashion by Quebec and, more recently, that Province has used the sectionspecifically to protect Quebec's French-only language laws from furtherCharter attack.65

One other aspect of commercial regulation also should be noted. Companyand securities law in Australia has tended over the years to become moreand more centralised and is now almost completely so (by means of aCommonwealth-State, co-operative legislative scheme). Furthermore, it isarguable that the Commonwealth government now possesses the power, byvirtue of s 51(xx) of the Constitution, to legislate unilaterally with respectto all corporate bodies throughout the nation if it so wishes. Section 51(xx)allows the Federal Parliament to make laws with respect to foreigncorporations and trading or financial corporations found within the limitsof the Commonwealth. Such a power may well extend to facilitating theact of incorporation of companies throughout Australia and also to theregulation of most, if not all, corporate activity.66 The Federal Government

62 I am aware that the 'nationalisation' of issues (such as abortion regulation and Sunday tradingand so on) by the Charter may, in due course, lead to a greater homogeneity of Provinciallaws. From this it can be argued that this process of nationalisation and legislative reactionwill lead to the development of an enhanced national consciousness in Canada Should thisoccur (and I do not see it happening to a significant degree quickly) I do not believe thedecline of regionalism is a necessary corollary. There is nothing necessarily incompatiblebetween harmonised Provincial law making in a number of areas and the maintenance ofstrong regional identities, ex-Prime Minister Trudeau's expectations notwithstanding. SeeA C Cairns, "The Canadian Constitutional Experiment" in D E Williams (ed) ConstitutionGovernment and Society in Canada: Selected Essays by Alan C Cairns (1988) ch 8.

63 It is true that, since 1967, the Supreme Court of Canada has been dropping hints as tothe possibility of the Federal Government having wider powers to implement municipally,international treaty obligations than was historically thought to be the case: Reference ReOwnership of Offshore Mineral Rights (1967) 65 DLR (2d) 353, 376; McDonald v VaporCanada [1972] 2 SCR 134, 167-172; and Schneider v The Queen [1982] 2 SCR 112, 134135. However, Ottawa has not seen fit to take up the hints. Constitutional uncertainty aboutthe validity of the hints and more importantly, regional political pressures, likely guaranteethat federal treaty implementation adventures, such as those undertaken in Australia, (seeinfra text at 113-118) are highly improbable in the case of Canada.

64 Section 33 of the Charter of Rights and Freedoms.65 Bill 178, An Act to amend the Charter of the French Language 1988 (Quebec), s 10.66 The wide scope of this power has received recent further endorsement by the High Court

of Australia in The Commonwealth v Tasmania (1983) 46 ALR 625 (the Franklin Damcase). In this case, 3 of the 4:3 majority judges said that the s 51(xx) corporations powergave the Commonwealth the power to regulate all the activities of corporations; not justtheir trading or financial activities: Mason, Murphy and Deane JJ at 710-714, 736 and 813815 respectively. Brennan J, the fourth majority judge, was not prepared to commit himselfon this point but he adopted a very wide reading of what was meant by the term, tradingactivities; 789-790. Legislation to implement a Commonwealth companies and securities regimehas been enacted. See also, the opinion of the former Commonwealth Solicitor-General,Sir Maurice Byers QC supporting, essentially, this wide view of the power in s 51(xx) inReport of the Senate Standing Committee on Constitutional and Legal Affairs; The Roleof Parliament in Relation to a National Companies Scheme (1987) 89.


in Canada is not so placed.67 In fact the regulation of most corporate entitiesand, to a large extent, the regulation of the securities industry, remain inthe hands of the Provinces. This has inhibited the raising of capital on anational basis and facilitated Provincial Government intervention to preventcertain interprovincial corporate amalgamations.68

B The Fiscal Balance

The shift in the federal 'fiscal balance from the States to the Commonwealth(facilitated by the High Court) began in earnest within the frrst decade offederation in Australia. In the Surplus Revenue case69 the High Court heldthat revenue in excess of current Commonwealth requirements could be paidinto trust funds for later Commonwealth use, thus altering its status fromsurplus funds which would otherwise have been distributed to the States.Probably the most immediately significant fiscal turning point in Australiaoccurred, however, when the Commonwealth Government introducedsweeping changes to the income tax system during the Second World War.In 1942, the new Federal Labor Government introduced a legislative schemewhich effectively stripped the States of their income taxing capacity. In whatturned out to be a tactically unwise move, the States challenged the schemeduring the course of the war and the High Court endorsed its operationas a matter of general principle and not just as a defence measure.70 In Canada,the Federal Government was able to secure access to the Provinces' incometaxing capacity, during the last war, in less dramatic fashion. In the Canadiancase, the Provinces voluntarily agreed to rent their powers over income taxto the Federal Government. In truth it would have been difficult for themto resist this arrangement. However, by not forcing a showdown, as theAustralian States did, the prevailing notion of measure being temporary wasnot exposed to any risky scrutiny. By taking the matter to the High Courtand losing, the Australian States effectively lost their continuing credibilityas income taxing entities. No Australian State has imposed an income taxsince the Second World War. The Canadian Provinces, on the other hand,had their income taxing powers returned in full by the early 1960s. Whilstincome tax administration in Canada remains largely centralised, incometaxing power is now decentralised and continues to become more SO.71

On average, the Australian States now depend for almost two-thirds oftheir revenue on disbursements of one kind or another from theCommonwealth Government.72 Although Newfoundland and some of theother maritime Provinces rely on Ottawa for around 50% of their revenue,such a level of dependency is the exception rather than the rule in Canada.Furthermore, the Provinces are able to levy direct retail sales taxes.73 Section

67 P W Hogg, supra n 21, 460-461; 473-475; and ch 22.68 D V Smiley, supra n 19, 162.69 New South Wales v Commonwealth (1908) 7 CLR 179.70 South Australia v Commonwealth (1942) 65 CLR 373 (the First Uniform Tax case).71 P W Hogg, supra n 21, 114-117. See also Part VI of the Federal-Provincial Fiscal Arrangements

and Federal Post-Secondary Education and Health Contributions Act, S C 1977, c 10 withrespect to the transfer of 'tax points' from the Dominion to the Provinces.

72 M Crommelin, "Federal-State Cooperation on Natural Resources: The Australian Experience",in J 0 Saunders (ed) Managing Natural Resources in a Federal State (1986) 295,316.

73 This fiscal measure was endorsed by the Privy Council in Atlantic Smoke Shops v Conlan[1943] AC 550.


90 of the Australian Constitution reserves excise and customs duties (whichterm the High Court has held to include all kinds of sales taxes) exclusivelyfor the Commonwealth. Two recent examples of the power of s 90 to strikedown State revenue raising initiatives may be found in the Pipelines case74

and Gosford Meats v New South Wales.75 The benefits for Provincialautonomy arising from this fiscal independence vis-a-vis the Australian Statesare self-evident.

Generally speaking, the enormous power associated with the FederalGovernment's almost complete fiscal supremacy in Australia is not on explicitday to day display. Rather, it hovers behind a complex network ofintergovernmental arrangements. However, we have a stark reminder fromthe depression years that that power is capable, in the end, of securing thedismissal of a State Government. In 1932 the Federal Government, in effect,garnisheed most of the liquid assets of the New South Wales State Governmentto recover Commonwealth remittances to the New South Wales Government'soverseas lenders. Simply put, this Federal action followed upon the State'sdeclaration that it intended to default on interest payments to overseas lendersin preference to implementing harsh economic measures domestically. TheCommonwealth legislation (the Financial Agreement Enforcement Act 1932(Cth» was enacted pursuant to the national financial agreement concludedbetween the States and the Commonwealth in 1927 and enshrined, in s 105A,in the Australian Constitution in 1929.76 This section makes such agreementsbinding on the Commonwealth and the States.77 The High Court endorsedthe validity of the Federal Government's action in New South Wales vCommonwealth.78 At the height of the crisis, Sir Philip Game, the Governorof New South Wales, intervened and dismissed Jack Lang as Premier ofNew South Wales on the grounds that, in fighting off the garnishee, he wasacting in defiance of the law.79 Today, the villain (or hero) of the piece isremembered most commonly as Sir Philip Game. The major and by farthe most powerful actor in the drama was the Federal Government.80 Andall this occurred prior to the Commonwealth gaining the complete ascendancyit has enjoyed since the Second World War over income tax.

The depression in Canada also produced some unusual financialmanagement initiatives by the Provincial governments of Saskatchewan andAlberta.81 However, the resulting intergovernmental confrontation, althoughit involved the judicial invalidation (and federal disallowance) of certain

74 Hematite Petroleum Pty Ltd v Victoria (1983) 151 CLR 599. In this case the High Courtheld that Victorian Government pipeline licensing fees (albeit at the rate of $50 million perannum) were invalid as being duties of excise.

75 (1985) 57 ALR 417. In this case the High Court concluded that an abattoir's licence fee,calculated by reference to the number of animals slaughtered, was actually an excise dutyand therefore invalid.

76 This formal constitutional change, through s 128 of the Australian Constitution, is the mostprofound change ever achieved by that mechanism.

77 S 105A(5) of the Australian Constitution.78 (1932) 46 CLR 155. See also C Howard, supra n 2, 167-170.79 P H Partridge, "Depression and War", in G Greenwood (ed) Australia: A Social and Political

History (1955) 364.80 Ibid 381.81 P W Hogg, supra n 21, 477-480.


Provincial legislative measures,82 did not generate anything like the successfuluse of naked federal constitutional force the Lang crisis precipitated.

C The Offshore Disputes

(1) Introduction

Like the United States,83 Canada and Australia have had to confront disputesover rights in the offshore since the Second World War. The ingredientscommon to all three disputes have included:

(i) technological developments which made offshore petroleumexploitation feasible;

(ii) known or likely commercially viable offshore petroleum resources ineach case;

(iii) international law developments which clarified and codified the rightsofcoastal nation states to exploit such resources located under a nation'sadjacent continental shelf; and

(iv) federal political structures which, owing to their origins in the 18thor 19th centuries, gave no explicit answer to the question of whetherthe central or regional sovereign political entities ought control theseresources.

Before dealing with the resolution of the problems posed by point (iv), weneed to look briefly at the international law considerations relevant to theoffshore disputes in Canada and Australia.

(2) International Law Background

The two international law concepts of vital importance in the offshoredebate are the territorial sea and the continental shelf. The development ofthe first of these concepts may be traced back many years. Certainly thephenomenon of western European seafaring explorations from the fIfteenthcentury onwards was an important catalyst in the development of aninternational law of the sea.84 By the mid-nineteenth century, the notion thatcoastal states had a territorial sea, which was an exception to the Grotianview that no part of the sea could be counted as the territory of any people,was widely established. So also was the view that the territorial sea wasapproximately three nautical miles in breadth, that being the ultimate rangeof artillery at that time.85

One might have expected that these developments in international lawwould have presented minimal difficulties at municipal law but the EnglishCourt of Crown Cases Reserved was of a different mind. Whilst the court,

82 Ibid 477-480 and 531. The federal power to disallow statutes, which was frequently exercisedby the dominant Federal Government in the early days of confederation, was last used in1943. The better view today is that the power is dormant if not entirely dead: ibid 90.

83 A bitter struggle between a number of coa~tal States and Washington unfolded in the UnitedStates shortly after the Second World War. The legal dispute, as in the case of Australiaand Canada, was resolved, in the courts, and in the Federal Government's favour: UnitedStates v California 332 US 19 (1947); United States v Louisiana 339 US 699 (1950); UnitedStates v Texas 399 US 707 (1950) and United States v Maine 420 US 515 (1975). Thejudicial outcome has been the subject of subsequent legislative modification.

84 D P O'Connell, International Law of the Sea, (1982) ch 1 and D P O'Connell InternationalLaw (1965) i, 524ff give a full account of these developments.

85 D P O'Connell, International Law (1965) i, 526.


in R v Keyn,86 did not take exception to the notion that the territorial seawas not a part of the high seas, the majority demurred at the suggestionthat it formed part of the realm. That, the court found by a small majoritY,87ended at the low water mark. Moreover, although the court did not saythis at the time, according to later commentary this meant that incorporationof the territorial sea within the realm could only be accomplished by legislativeact.88 It is submitted that, although this may have been a tenable argumentin the late nineteenth century, developments in this area had made thislegislative assertion formula redundant by the early twentieth century. Thatis, as a matter of municipal as well as international law, a minimal territorialsea has automatically accrued to coastal states for some time. This viewis not inconsistent with the majority judgments in R v Keyn. 89

International law with respect to the continental shelf has developed muchmore recently. The better view seerns to be that the concept of a continentalshelf and the mechanism of its acquisition did not crystallise as firm municipaland international legal concepts until the early 1950s. By 1958, the Conventionon the Continental Shelfhad provided a mechanism for measuring this offshorezone. It also made it clear that no express claim was required for a coastalstate to acquire what international law regards as sovereign rights over thecontinental shelf.90 Today the legal concept of continental shelf refers to avastly different area of the offshore than that denoted by the geophysicalconcept of continental shelf. The legal concept coincides approximately withthe geophysical notion of continental margin, which latter encompasses thegeophysical continental shelf, continental slope and continental rise.91

(3) Developments to 1967

An early example of the regionalised nature of the offshore dispute inCanada was the 1967 British Columbia Reference.92 By the mid 1960's aclear tension had emerged between British Columbia and Ottawa as to whichlevel of government enjoyed the right to manage offshore exploration.93 Thenational implications of the dispute were recognised by all Provinces, however.That is, it was realised that each coastal Province had essentially the samelegal dispute with the Federal Government over their respective offshore

86 (1876) 13 Cox C C 403.87 The majority was 7:6, however one judge, who would have made the majority 8:6, died

before judgment was handed down, ibid 542.88 H J W Coulson, and U S Forbes, The Law Relating to Waters: Sea, Tidal and Inland

(1880) 10.89 (1876) 13 Cox C C 403; see R Cullen, Australian Federalism Offshore (2nd ed 1988) 45-46.90 The 1958 Convention on the Continental Shelf, Article 2.3.91 R Cullen, supra n 89, 12-16.92 Reference Re Ownership ofOffshore Mineral Rights (1967) 65 DLR (2d) 353. Unlike Australia,

both Provincial and Federal Governments in Canada are able to obtain 'advisory opinions'from their respective superior courts by 'referring' questions to these courts. P W Hogg,supra n 21, 150-151.

93 R Cullen, Federalism in Action: The Canadian and Australian Offshore Disputes Compared,(forthcoming, 1990) Part 3-1.


areas.94 The conduct of the first attempt at a legal resolution of the disputewas focused on the British Columbia offshore, nonetheless. In the 1960s thatarea was felt to hold the greatest promise for offshore oil discoveries andwas the subject of considerable (ultimately unsuccessful) exploration. In theevent, the Federal Government took the deliberate decision to restrict theReference question to the British Columbia offshore.95

The judgment of the court in favour of the Dominion on the questionsof both the territorial sea and the continental shelf is not overly long. Neitheris it particularly lucid or consistent. Its most notorious conundrum arisesfrom the apparent adoption by the court of a legislative assertion formulato obtain offshore rights (at least over the territorial sea) early in the judgment.This formulation was then used to deny all Provincial offshore claims. Itsits uneasily, however, with: (a) the lack of clear evidence of any such assertionby the Dominion; and (b) the apparent holding that the Dominion's offshorerights over the territorial sea accrued, as a matter of municipal and internationallaw, some time between 1917 and 1931. It is submitted that the judgmentis best understood as ultimately endorsing an automatic accrual formula,whilst observing that legislative assertion most probably was the rule untilearly this century, thus denying Provincial (and, in particular, BritishColumbian) claims. It must be conceded however, that other interpretationsare possible, as the extensive literature testifies.96

In Australia similar pressures were operating. Both the States and theCommonwealth claimed rights over all the offshore zones and these claimsintensified as offshore oil exploration grew. However, two additional factorswere at work in Australia. Prior to the late 1960s Australia was producingless than 5% of its own crude oil and no natural gas;97 there was no equivalentto Alberta's oil and gas reserves. Moreover, the exploration work wasproducing much more promising results in the Gippsland Basin in Bass Straitadjacent to the State of Victoria than was the exploration in the BritishColumbia offshore zones.

These economic factors led to intense pressures being placed on both levelsof government to put aside their differences and negotiate a stable legal regimeoffshore to facilitate further exploration and production. This they did andin 1967, after five years of negotiations, the Australian Offshore PetroleumSettlement was in place, though not without some misgivings on the partof the Senate. The new regime provided certainty of title through 'mirror'titles (one from each Government), a uniform administrative regime and arevenue sharing formula. This last provision provided for a basic 10% royalty

94 In fact, by this time, the Province of Newfoundland was already claiming sovereign rightsin the continental shelf area in the context of a dispute with France over that area (I LHead, "The Legal Clamour over Canadian Off-shore Minerals" (1966) Alberta Law Review312, 317). The French claim was (and still is) associated with the last remaining North AmericanFrench dependancy, the islands of St Pierre and Miquelon, just off the southern coast ofNewfoundland.

95 The reasons for it doing so are not clear. It has been suggested that it was for reasonsof simplicity. I L Head, "The Canadian Offshore Minerals Reference: The Application ofInternational Law to a Federal Constitution" (1968) 18 University of Toronto Law Journal131, 133.

96 R Harrison, "Jurisdiction over the Canadian Offshore: A Sea of Confusion" (1979) 17 Osgn,_JeHall Law Journal 469, and J McEvoy, "Atlantic Canada: The Constitutional Offshore: Regime"(1984) 8 Dalhousie Law Journal 284.

97 All gas supplies until then came from manufactured coal gas.


(based on the wellhead value of the product) which could rise to 12%. Itwas split, 6-8% to the State and 4% to the Commonwealth.

As events turned out, the Victorian offshore field proved to be highlyproductive of both oil and gas. This meant that before the first oil pricingcrisis of 1973, Australia had moved to over 70% self-sufficiency in crudeoil. When the first oil price rises occurred the value of the Bass Strait fieldsleapt as they, like the 'old' oil fields in Alberta, had been producing profitablyprior to the rises.

The manner in which the vastly increased economic rents were dealt withprovides a graphic demonstration of Australian federalism in action. Forthe reasons previously outlined, related to s 90 of the Australian Constitution,the State of Victoria was prohibited from taking any of the economic rentsby way of an excise duty or sales tax. Moreover, even if Victoria had hadopen to it the option of imposing an additional royalty unilaterally, whichis unlikelY,98 it would then have faced the problem that the High Courtwould likely construe any additional royalty as, in fact, an excise duty.99The Commonwealth was under no such handicaps. It imposed an exciseduty on Bass Strait crude oil which accounted, eventually, for virtually allthe increase in economic rent. Ultimately, it raised the price of Australiancrude oil to world oil price levels. Since the second wave of oil price increasesin 1979, the Crude Oil Levy, as it is called, has accounted for up to 87%of the value of the product from some Bass Strait oil fields. All this revenuehas gone directly to the Commonwealth and has never been subject to anydirect sharing formula with Victoria. Furthermore, the Commonwealthmaintained the wellhead value on which the continuing royalty was based(and which Victoria did share) at pre-rise levels by successfully insisting thatit be calculated using the market wellhead value less the Crude Oil Levy.looOn the other hand, after 1981, all the States enjoyed some limited benefitsfrom these revenues through the general revenue grants made by theCommonwealth to the States. lOl

(4) Australia: Post 1967

Shortly after the 1967 Australian Offshore Petroleum Settlement wascompleted, a Senate Select Committee began a review of the scheme. TheCommittee concluded that despite the functional success of the settlement,the wider national interest was not being served by leaving the offshore legalquestions unresolved.102

In December 1972, the Whitlam Labor Government was elected and withina year of taking office it passed legislation declaring and enactingCommonwealth sovereignty in the territorial sea and sovereign rights overthe continental shelf. The main reason for this legislative activity with respectto the offshore was to create the circumstances for a judicial determination

I of the issues. Advisory opinions, in contrast to Canada, cannot be sought

98 The terms of the 1967 Australian Offshore Petroleum Settlement made this a most unlikelypolitical option as it purported to control the imposition of all royalties on offshore oiland gas by joint action of both levels of government.

99 J R S Forbes, and A G Lang, Australian Mining and Petroleum Laws (2nd ed 1987)45-47.

100 R Cullen, supra n 89, 29.101 [d.102 Report from the Senate Select Committee on Offshore Petroleum Resources (1971) para 2.1.


from any of the courts in Australia. t03 But by passing the provocative federallegislation referred to above, namely, the Seas and Submerged Lands Act1973, the Commonwealth could rely on a constitutional challenge from allthe States.

The Commonwealth was encouraged in its designs by the 1969 case, Bonserv La Macchia. t04 The facts of this case were simple enough. Mr La Macchiawas caught some six nautical miles off the New South Wales coast usingfishing gear prohibited by the Fisheries Act 1952 (Cth). The fisheries powerin the Australian Constitution, s 51(x), allows the Commonwealth to makelaws with respect to fisheries in Australian waters beyond territorial limits.A six judge bench of the High Court found that there was no questionthat the Fisheries Act was constitutionally sound and applied to Mr LaMacchia's behaviour. But only McTiernan and Owen JJ were prepared toleave the matter there. The rest of the court took the opportunity to expoundon the general issue of offshore sovereignty. Barwick CJ said he could notdecide the case without doing so; a most doubtful assertion. In the event,the Chief Justice and Windeyer J explicitly supported the view that theCommonwealth had total sovereignty or sovereign rights beyond the lowwater mark. There is no doubt that Barwick CJ was emboldened in hisapproach by the judgment in the British Columbia Reference. los He referredto that judgment with approval, and relied on R v Keyn t06 in much thesame way as had the Supreme Court of Canada. It was the endorsementof the Federal position in the Bonser's case which braced the WhitlamGovernment in its efforts to precipitate a once and for all legal settlementof the offshore dispute.

Not surprisingly, the outcome of the Seas and Submerged Lands caset07

proved to be a resounding victory for the Federal Government. By a majorityof 5:2 the court found in favour of Federal sovereignty over the territorialsea and internal waters, whilst the verdict in favour of the Commonwealthwith respect to the continental shelf was unanimous. Although the Stateshad argued that they were entitled to complete control of all the offshorezones, their arguments were most forcefully put with respect to the territorialsea as they all held a firm conviction that they had had their own territorialseas since colonial times. The High Court's adve,rse findings on this questionstirred, as we shall see, the States' deepest territorial instincts. The split onthe bench over the territorial sea was over the authority of R v Keyn. Theminority views of Gibbs and Stephen JJ have been discussed often in theCanadian offshore literature but it must be said that their views, rejectingKeyn S case as good authority on the status of colonial territorial seas, havenever been followed by any court in Australia or Canada.

103 In Re Judiciary Act 1903-1920 and Navigation Act 1912-1920 (1921) 29 CLR 257. Forfurther discussion see Howard, supra n 2, 260-261. Proposals to amend the AustralianConstitution to allow the High Court to give advisory opinions continue to be debatedfrom time to time.

104 (1969) 122 CLR 177.105 (1967) 65 DLR (2d) 353.106 (1876) 13 Cox CC 403.107 New South Wales v Commonwealth (1975) 135 CLR 337.


Barwick CJ wrote the leading majority judgment. 108 His Honour endorsedhis previously expressed views in Bonser v La Macchia lO9 and said that onlydid the Commonwealth's power to make laws with respect to external affairs,contained in s 51(xxix) of the Australian Constitution support the Federallegislation, but offshore rights accrued to the Commonwealth as an incidentof Australian nationhood. The Chief Justice said this accrual was an automaticprocess and he clearly implied that this was so as a matter of municipalas well as international law. As to the time at which rights had accrued,the Chief Justice, in common with the approach of the Canadian SupremeCourt, steered well clear of a specific view but he did suggest that sovereigntyover the territorial sea accrued at the time of federation (in 1901) or sometimeshortly thereafter.

The majority of the court found the legislation to be a valid exercise ofs 51(xxix) because it implemented treaties which Australia had signed, namelythe 1958 Conventions on the Territorial Sea and the Continental Shelf. Withrespect, and notwithstanding the fact that these treaties were annexed tothe challenged legislation, the links between the Act and the treaties werequite tenuous. The majority also said, however, that, apart from treaties,s 51(xxix) extended to legislation dealing with any matter beyond Australia'sgeographic limits. In contrast to the Supreme Court of Canada, the HighCourt found explicitly that all the offshore zones were outside of Australiaand this geographic scope of the external affairs power gave further weightto the Commonwealth's case. 110

The offshore cases which followed the Seas and Submerged Lands casein no way diminished its overall authority, although a number of them didgo some way towards clarifying the extent to which the States retained somelevel of offshore legislative competence, despite the adverse result in the Seasand Submerged Lands case. In two of these cases, Pearce v Florencalll andRobinson v Western Australian Museum l12 the High Court endorsed theprinciple of limited State extraterritorial legislative cOlnpetence. The courtdid not formulate the exact extent of this competence but it did say it couldsometimes extend beyond the territorial sea.

Finally, four non-offshore but related cases, in which the Commonwealthsuccessfully resisted State challenges to Federal laws, need to be mentionedas they deal, inter alia, with the operation of the Commonwealth's externalaffairs power. Koowarta v Bjelke-Petersen,l13 Commonwealth v Tasmania l14(the Franklin Dam case), Kirmani v Captain Cook Cruises Pty Ltdl15 andRichardson v Forestry Commission (Tasmania) (the Tasmanian Forests

108 'Leading'in the sense that it was the judgment of the Chief Justice and in the sense thatit, of the majority judgments, put the Commonwealth's case comprehensively.

109 (1969) 122 CLR 177.110 In the 1967 British Columbia Reference the court said that the territorial sea was within

the territory of Canada although it seemed to say so as a mere aside without any thoughtbeing given to the consequences of the remark.

III (1976) 135 CLR 507. Further recent endorsement of the wide scope of offshore Stateextraterritorial legislature competence adumbrated by Gibbs J in this case has just beengiven by the High Court in Union Steamship Co of Australia Ltd v King (1988) 62 ALJR645. See further, infra n 120.

112 (1977) 138 CLR 283.113 (1982) 39 ALR 417.114 (1983) 46 ALR 625.liS (1985) 59 ALJR 265.


case)116 gave further strong endorsement to the treaty implementation powers(and international concern117 based domestic legislative powers) of theCommonwealth contained in s 51(xxix), the external affairs power. It isreasonable to say that the Commonwealth's treaty implementation powersemerging from all this litigation are quite extensive and certainly exceed thosecurrently enjoyed by the Federal Government in Canada. 118

From this review, it can be seen that the litigation phase in the Australianoffshore dispute gave the Commonwealth Government everything it sought.Ironically the main instigator of the push for Federal offshore hegemony,the Whitlam Labor Government, did not endure to enjoy the fruits of victory.A month before the decision in the Seas and Submerged Lands case in 1975was handed down, in 1975, the Governor General sacked Mr Whitlam andhis Cabinet. The ensuing election, held in early December 1975, saw thecoalition conservative parties triumphant at the polls. The new Fraser LiberalNational Party Government announced, shortly after taking office, that, farfrom wielding total authority offshore, it would seek an equitable settlementof the offshore quarrel with the States. But this was not to be any ordinarypolitical settlement.

As suggested already, the States seemed most stunned, not by the economicconsequences of the litigation phase, but by what might be termed the territorialconsequences. Only Victoria, with the Bass Strait oil and gas fields in itscontinental shelf zone, stood in 1975 to make any immediate direct economicgain from a favourable decision with respect to the continental shelf andit had long been the wealthiest State per capita in Australia. Moreover, theStates never seemed to be convinced completely by their own case concerningthe continental shelf. But all the States were convinced that they had a territorialsea and when the High Court said, in effect, 'you've all been profoundlymistaken for many many years', the effect was devastating. The upshot wasthat gaining territorial control of the first three nautical miles of coastalwaters became the key mission of the States' negotiators. The negotiationswith the new Federal Government, leading up to the 1979 Australian OffshoreSettlement, were thus conducted almost exclusively within the confines ofthe legal ownership framework established by the High Court. The negotiatorsset about, in effect, 'setting right' the High Court judgments in a legal contextrather than addressing the broader economic consequences of those judgments.And the principal negotiators were all legal technicians; namely the AttorneysGeneral and Solicitors-General from the Commonwealth and all the States.It is not then surprising that the 1979 Australian Offshore Settlement is mostnoteworthy for its elegant and innovative legal complexity. And,notwithstanding the remarks of the shadow Attorney-General of 1979, SenatorGareth Evans, that the settlement was an 'act of constitutional vandalism',its economic effects have been negligible.

116 (1988) 62 ALJR 158.117 The High Court has expressed the view in these cases that the Commonwealth can legislate

municipally in the absence of a treaty where it can demonstrate that it is dealing witha matter of international concern. As Dawson J put it in the Tasmanian Forests case, thepresence of a treaty is simply clear evidence of the existence of an international concernrather than a separate category permitting domestic legislation based on s 51(xxix).

118 See also, comments on these differences in Final Report of the Constitutional Commission(1988) ii, 734-735.


In essence, what the 1979 Settlement attempts to do (probably successfullyfrom a constitutional point of view) is:

(i) give the States title to the three nautical mile territorial sea (definedas 'coastal waters), without actually extending the boundaries of anyState;

(ii) give the States a virtually unfettered ability to make laws with respectto those coastal waters; and

(iii) put the whole settlement effectively beyond risk of dismantling bya future hostile Federal Government without resort to anyconstitutional amendment.

(a) State Title to Coastal Waters

The first element of the 1979 Settlement has been implemented by theCoastal Waters (State Title) Act 1980 (Cth). This Federal Act has transferredtitle in State coastal waters, as defined, to the individual States. It moreoverallows the States to deal with this property interest in virtually any waythey wish. In the event of Australia declaring a territorial sea of greaterthan three nautical miles,119 this is however to have no effect on the definitionof coastal waters, and would thus not increase the area under State title.

One difficulty with this initiative arises from s 123 of the AustralianConstitution which prohibits the alteration of State boundaries without, interalia, a State referendum. None of the parties was the least bit interestedin coping with the hazards of referendums so what the Act says is that itdoes not have the effect of altering State boundaries. Thus the coastal watersare territory outside of a State, to which each State holds title somewhatakin to the way each State holds freehold title to property in other Statesor overseas.

(b) State Powers over Coastal Waters

Unfortunately this solution of the s 123 exigency creates a further problem.If the coastal waters are outside a State then uncertainty remains as to aState's power to legislate comprehensively with respect to that zone. 120 Itis here that one of the 1979 Settlement's most ingenious mechanisms comesinto play. The Coastal Waters (State Powers) Act 1980 (Cth), which implementsthe second element of the settlement summarised above, is a rarity amongstCommonwealth legislation in that it makes specific reference to the section

119 Australia still has not declared a territorial sea of twelve nautical miles. Canada did soin 1970; Section 3 of the Territorial Seas and Fishing Zones Act S C 1964, c 22.

120 Supra nn 112-113 and accompanying text. It may be that this uncertainty has been reducedsubstantially since the scheme was implemented in 1983. First, the Australia Act 1986 (Cth)and the Australia Act 1986 (UK) both (in s 2) provide that the States have power to legislateextraterritorially "for the Peace order and good government" of each State. The problemwith this formulation, though, is that it arguably does no more than codify the existinggeneral law position (supra R Cullen n 89, 108-110; for a contrary view see M Moshinsky,"State Extraterritorial Legislation and the Australia Acts 1986" (1987) 61 ALl 779). Secondly,the existence of the State Title Act itself may provide the necessary nexus or link witha State to permit the exercise of plenary legislative competence by each State in its respectivecoastal waters zone. The High Court decision in Union Steamship Co of Australia Ltdv King (1988) 62 ALlR 645 would appear to support this line of argument. Althoughit restates the need for a nexus it does so in terms favourable to the likelihood of suchState plenary legislative competence prevailing in these offshore zones. (See also, R Cullen,supra n 89, 107-108.)


in the Australian Constitution pursuant to which it has been enacted. Thatis s 51(xxxviii) which allows the Commonwealth to make laws with respectto:

The exercise within the Commonwealth, at the request or with the concurrenceof the Parliaments of all the States directly concerned, of any power which canat the establishment of this Constitution be exercised only by the Parliament ofthe United Kingdom or by the Federal Council of Australasia.

All the commentators, from the drafters of the Constitution through to themost recent writers, are agreed on the great obscurity of this wording. 121

The analysis which has led to the passage of the State Powers Act mayhowever be briefly stated. At the time of Federation, in 1901, there weremany powers which the United Kingdom Parliament could exercise whichthe new Federal Parliament could not, owing, inter alia, to its colonial status.However, after Australia shed its colonial status sometime between 1926 and1942122 it gained full power to legislate extraterritorially and to overrideImperial statutes. This meant that, with the request of the States, pursuantto the formula in s 51(xxxviii), it could legislate on any topic open to theUnited Kingdom Parliament in 1901. When all the States requested theCommonwealth to grant them all but plenary power to make and applylaws in their coastal waters, the Commonwealth responded with the StatePowers Act. The theory is that the Commonwealth has exercised a poweronly exercisable legitimately at the time of federation by the United Kingdom.Thus all the elements of s 51(xxxviii) were satisfied. There is also a reasonablystrong argument that the State Powers Act is supported by the s 51(xxix)external affairs power in that it relates to matters and events beyond Australia'sgeographic limits. The constitutional validity of the State Powers Act is notbeyond doubt but the balance of opinion is that it would withstand challenge.

121 See J Quick and R R Garran, Annotated Constitution of the Australian Commonwealth,(1901) 651; G Nettheim, "The Power to Abolish Appeals to the Privy Council from AustralianCourts" (1965) 39 ALJ 39; R D Lumb, "Section 51, pI (xxxviii) of the CommonwealthConstitution" (1981) 55 ALJ 328; R D Lumb, and K W Ryan, Constitution of theCommonwealth of Australia Annotated (3rd ed 1981) 213; Crommelin, "Offshore Miningand Petroleum; Constitutional Issues" (1981) 3 Australian Mining and Petroleum Law Journal191; K Booker, "Section 51(XXXVIII) of the Constitution" (1981) 4 University of NewSouth Wales Law Journal 91; and L R Zines, The High Court and the Constitution (2nded 1987) 273-279. Virtually all recent conlmentators claim that, notwithstanding its obscurity,they can explain what the provision means. The writer of this paper confesses to beinga victim of this vanity also.

122 1926 was the year of the (second) Balfour Declaration on the independent status of entitiesof the British Empire such as Canada and Australia, and 1942 was the year of adoptionof the Statute of Westminster 1931 (UK) by Australia. The movement towards this declarationwas given significant impetus by the actions of the British Government in 1922 in responseto the threat by Kemal Ataturk to take Constantinople. Prime Minister Lloyd George warnedAtaturk that any such move would mean war. The press statement so warning threatenedretaliation not just from Britain but from the Dominions. Unfortunately, due to acommunication breakdown, the first the Dominions heard of their possible involvementin yet another European War was this press statement. The Chanak crisis, as it is known,hastened the process leading to the Balfour Declaration significantly. The most dramaticuse of the Dominions' new found freedom under the Statute of Westminster occurred withinsix years of its enactment: the Irish Free State used it to turn itself into the Republicof Ireland. (E L Woodward, A History ofEngland (1979) 199-205). The more famous BalfourDeclaration was that of 1917 which promised Zionists a national home in Palestine.


(c) De Facto Entrenchment

All parties to the settlement were concerned that a Future Federalgovernment, hostile to the 1979 settlement, could wreck the whole arrangementby simply repealing the State Title Act and the State Powers Act. 123 Thepolitical facts of life are that this sort of confrontational action would berisky for a Commonwealth Government. But powerful constitutional andeconomic impediments to dismantling are also in place. The first and weaker'entrenching' factor is centred on an argument that legislation passed by theCommonwealth at the request of the States pursuant to s 51(XXXVIII) canonly be repealed after a request to do so from the States. The second andstronger impediment arises from the operation of s 51(xxxi) of the Constitutionwhich allows the Commonwealth to acquire property from the States on'just terms'. It is said this means that any attempt to recover title to thecoastal waters of the I States would involve the Commonwealth in possiblyvast compensation payments. The likely success of this line of argument inthe High Court is by no means beyond doubt but it is equally clear thatcoastal waters title recovery would today be a risky enterprise for theCommonwealth to attempt.

What we have in Australia in 1989 then, as a result of disputation overthe offshore, is:

(i) confirmation of the Commonwealth's very wide law making potentialcontained in the s 51(xxix), external affairs power;

(ii) a complex, legalistic offshore settlement, probably constitutionallysound, which has restored the States to the position they (erroneously)believed they had enjoyed all along until the High Court told themotherwise; and

(iii) the retention, by the Commonwealth, of complete economic rentcontrol powers and ultimate management rights in all offshore zonesseaward of the coastal waters.

In so far as the States are concerned, the current Australian offshore regimecan be accurately characterised as national, legalistic and territorial. As weshall see, such a description cannot readily be applied to the Canadian offshoreregime today.

(3) Canada:Post1967

For approximately 10 years, following the announcement of the decisionin the 1967 British Columbia Reference, the offshore debate proceeded ina relatively low' key fashion in Canada. In 1968, the Federal Governmentsuggested a plan for offshore revenue sharing and management, which allowedlittle room for Provincial management contribution. Eventually this planformed the basis for what has become known as the 1977 Memorandumof Understanding. The original parties to the negotiations leading up to thatsettlement included the Provinces of Prince Edward Island, Nova Scotia,New Brunswick, Newfoundland and Quebec, but the two last named Provinceswithdrew from the negotiations in 1973 and 1974 respectively.

British Columbia's attempts to join the negotiations in 1974 were rebuffedby Prime Minister Trudeau. Nevertheless, the 1977 Memorandum ofUnderstanding represents the closest Canada has ever come to achieving a

123 The current Federal Labor Government is committed in its platform to dismantling the1979 Australian Offshore Settlement.


national settlement concerning the offshore. The Provincial parties to thefinal settlement were New Brunswick, Prince Edward Island and Nova Scotia.'In 1978 there was a change of government in Nova Scotia, and that Provincewithdrew from the agreement shortly thereafter, re-asserting its full claimsto Provincial offshore sovereignty at the same time.

In the meantime, British Columbia had in 1974 initiated a Reference overthe status of waters of the sea between Vancouver Island and the mainland.In the Strait of Georgia Reference l24 (decided in 1977) the British ColumbiaCourt of Appeal answered the Reference question in the Province's favour,finding, in essence, that the subject waters were inland waters 125 of BritishColumbia. Both the majority judgment and the two dissenting judgmentsare less than clear at times but they essentially differed on the point of whetherthe status of these particular waters had been decided in the 1967 BritishColumbia Reference. The Federal Government appealed the Court of Appealdecision to the Supreme Court of Canada. 126 Both the majority and minorityjudgments of the Supreme Court agree that, either deliberately or by oversight,the waters in question had escaped an explicit statement as to their statusin the British Columbia Reference. The majority in the Supreme Court foundin the Province's favour, primarily on the basis of the documents under whichthe Province had been constituted as a Colony. These specified BritishColumbia's western boundary as the Pacific Ocean, which, it was held, hadits eastern boundary on the west coast of Vancouver Island.

In the meantime, the political debate was quickening with respect to theeast coast offshore zones. In 1979 four events of considerable significanceto the offshore debate occurred. First, the Clark Progressive ConservativeFederal government took office and moved quickly to assure the coastalProvinces that it would transfer 'ownership' in all offshore mineral resourcesto them. Secondly, significant offshore resource discoveries were announcedwith respect to the Atlantic offshore. Natural gas was discovered off SableIsland and large reserves of oil were discovered at the Hibernia site on theGrand Banks east of Newfoundland. Thirdly, the second oil price rise crisisoccurred following the overthrow of the Shah of Iran, and, fourthly, MrBrian Peckford was elected as Premier of Newfoundland. This last eventintroduced a new level of stridency and forcefulness to the offshore debate.

The re-election of a Trudeau Liberal Federal Government in February1980 signalled the end, at least for the time being, of any Clark-style solutionto the offshore dispute. The Liberals' new 'National Energy Program' certainlydid not countenance anything like transfer of ownership of offshore mineralresources to the coastal Provinces. For Newfoundland, this signalled it wastime to retreat to the trenches and await a change of government federally.Nova Scotia, on the other hand, decided to negotiate with the FederalGovernment. The result was the 1982 Nova Scotia Agreement which leftultimate offshore management control in Ottawa's hands and gave the Provinceaccess to all direct offshore revenues until Nova Scotia's per capita, fiscal

124 Re Strait of Georgia (1977) 1 BCLR 97.125 Inland waters are best regarded as, inter alia, waters of the sea which for geographical

or historical usage reasons form part of the primary territory of a coastal state. See further,R Cullen, supra n 89,8-12.

126 Re Attorney General of Canada and Attorney General of British Columbia (1984) 8 DLR(4th) 161. '


capacity had been elevated beyond the national average, after which pointthose revenues had to be shared progressively with the Federal Government. 127

To understand the apparent intransigence of Newfoundland during theoffshore debate from 1980 to 1984 it is necessary to reflect on the unusualaspects of that Province's economic and constitutional history. Although thesubstantive colonisation of Newfoundland dates back only some 200 yearsrather than the 400 years claimed in the tourist brochures,128 the island hasendured many difficult experiences in that period. Its economy has beenlargely tied to the resources of the sea. The island itself offered little in theway of land based natural resources from the outset of colonisation, havingbeen scraped clean of most of its topsoil by glacial action many millenniabeforehand. It was not surprising then, that this chronically impoverishedeconomy was crippled by the ravages of the depression. The result was that,from 1934 to 1949, the Dominion of Newfoundland, as it was then known,was governed by a Commission of Government appointed by Britain. Thiscame to an end, when, after having rejected union with Canada several timessince 1867, the island finally voted in 1948, by a small margin,129 in favourof union. The former Dominion became a Province of Canada the followingyear. Union with Canada eliminated many of the worst indicia of povertyon the island, but it still remains Canada's poorest Province. As such, itis also the Province most dependent on Federal Government largesse. Some55% of the Newfoundland Government's revenues derive from tied and untiedgrants from Ottawa. It is this 200 year old poverty trap, coupled with achronic dependency status within the confederation and the very closeeconomic and historical links to the sea, which help explain Newfoundland'spassionate, almost religious espousal of its offshore mineral resources claims.Those resources seem today to represent the only real chance to break thecycle of deprivation and dependency.

The stand off between Ottawa and St John's resulted in the Newfoundlandoffshore dispute being brought to court on two occasions during the timeof the last Trudeau administration. The first occasion resulted from theProvincial Government asking the Newfoundland Court of Appeal to adviseon which government was legally entitled to exercise sovereignty and sovereignrights over the Newfoundland offshore zones. In the NewfoundlandReference130 in 1983, the Provincial Court of Appeal found in favour ofNewfoundland with respect to the economically unimportant, traditional threenautical mile territorial sea,131 but against the Province on the far moreimportant, continental shelf question. The reasoning of the court, on bothquestions, was questionable at times and it is far from clear that an appealon the territorial sea decision would fail. 132 Independently of this Reference,

127 See the Canada-Nova Scotia Oil and Gas Agreement Act, S C 1984, c 43. The Provincialcounterpart is the Canada-Nova Scotia Oil and Gas Agreement (Nova Scotia) Act, SNS1984, c 2.

128 St John Chadwick, Newfoundland Island into Province, (1967) 1.129 The vote in favour of union at the second referendum held on the question (the first was

indecisive) was 52.33%.130 Reference Re Mineral and Other Natural Resources of the Continental Shelf (1983) 145

DLR (3d) 9.131 Canada now has a declared territorial sea of twelve nautical miles.132 The formalities for lodging an appeal to the Supreme Court of Canada on this question

have been completed by the Federal Government although it has not, to date, been proceededwith.


the Federal Government launched its own Reference but confined itself toasking who was entitled to exercise sovereign rights over that portion ofthe continental shelf adjacent to Newfoundland containing, inter alia, theHibernia oil field. In the Newfoundland Reference133 decided in 1984 theSupreme Court of Canada considered in great detail the Province's argumentsand in a step by step process reasoned with considerable power that theywere all flawed and some of them fatally so. Federal hegemony in theeconomically important Newfoundland offshore zone was thus judiciallyendorsed for the second time in as many years.

Although Newfoundland's offshore fortunes were now at their lowest point,this nadir did not prevail. In September 1984 the Liberals lost office federallyin spectacular fashion at the polls. The new Mulroney Progressive ConservativeFederal Government moved quickly to settle the Newfoundland offshoredispute. Essentially Ottawa proposed a modified version of the old Clarksolution but without actual transfer of ownership of offshore mineral resources.The Atlantic Accord, which applies only to Newfoundland's offshore zones,was signed in February of 1985. The legislative machinery to put it in placehas now been enacted.134 The fundamental features of the 1985 Atlantic Accordare:

(i) a management regime which minimises Federal Governmentinvolvement and provides for the setting up of a Board (whose ultimatecomposition could be decided by the Chief Justice of Newfoundland)to look after most aspects of offshore oil and gas management;

(ii) the granting of complete provincial access to all direct offshore oiland gas related revenues without any cap like that in the 1982 NovaScotia Agreement; and

(iii) a commitment of Federal Government support for any Newfoundlandinitiative to achieve constitutional entrenchment of the Accord.

The 1985 Atlantic Accord will likely become the prototype for a moregeneral resolution of the offshore dispute in Canada. It has already beenused as a model for a Nova Scotia Accord. This recent agreement betweenthe Federal Government and the Province of Nova Scotia modifies the effectsof the 1982 Nova Scotia Agreement so as to place Nova Scotia on substantiallythe same footing (with respect to its offshore resources) as Newfoundland.

It is thus clear that in Canada, the focus of political problem solving withrespect to the offshore has moved almost entirely away from a determinationof strict legal ownership questions. The emphasis is squarely on managementand fiscal rights in the offshore. In contrast to Australia, the emerging Canadianregime could best be characterised as a regionally based, economically focusedapproach to offshore problem solving.

5 CONCLUSION

The discussion in Part 4 provides some important indications of the shapeof the two variants of federalism in Canada and Australia. Clearly the superiorcourts in each country have played a significant role in forging the federalstructures extant in 1989. But has it been an initiating role or a reactive

133 Reference Re the Seabed and Subsoil of the Continental Shelf Offshore Newfoundland(1984) 5 DLR (4th) 385.

134 See Canada-Newfoundland Atlantic Accord Implementation Act, S C 1987, c 3; and CanadaNewfoundland Atlantic Accord Implementation (Newfoundland) Act, S N 1986, c 37.


role? What the courts appear to have done is take advantage of the inevitablegenerality of each country's written Federal Constitution to craft decisionsresponsive to forces extrinsic to the values captured in the constituentdocuments themselves. In fact the decisions often have run counter to thoseintrinsic values. On their face, the respective Constitutions favoured acentralised, 'quasi-federal' structure for Canada and a decentralised, Statedominated structure in Australia. Today's political reality is the reverse ofthis and it has been thus for many years.

Certainly there was a period, until 1920, when the High Court in Australiarespected and reinforced the apparent thrust of the Constitution. Even before1920 however the court had begun to concede that the Commonwealth wasto be allowed to expand. After that time, the law reports increasingly reflectHigh Court endorsement of a reduced role for the States and a concomitantgrowth in Commonwealth political importance.

Thus s 92 of the Australian Constitution was used, firstly, to nip in thebud all attempts at economic balkanisation by the States. Later it was appliedto curtail severely a number of Commonwealth economic regulation initiatives.Recently, however, the court seems to have signalled that, while it is as opposedas ever to State biased economic regulation of commerce, it may well beprepared to facilitate national economic regulation. In the event, Australiaenjoys markedly greater freedom from regionally based, internal restraintson trade than does Canada. There, s 121 of the Constitution Act 1867,Canada's s 92 counterpart, has had a very limited restraining effect onProvincially sponsored (and often biased) economic measures.

When we consider the development of the federal fiscal balance in eachcountry, the contrast is even more striking. Here we have some figures withwhich to gauge the effect of legal and political changes to the fiscal landscape.Essentially the Commonwealth now raises (for its own and State purposes)around 80% of all governmental revenue in Australia. The comparable figurein Canada is approximately 50%. In Australia, in particular, the High Courthas sanctioned elemental changes, in the Commonwealth's favour, in thecountry's federal financial structure.

When we consider the continuing offshore disputes in each country someblips in the pattern sketched out above appear, but they are minor. Theoverall thrust of the outcomes in these disputes has reinforced the trendtowards real regionalised power in Canada and a continued attenuation thereofin Australia. It is true that the Supreme Court of Canada, like the HighCourt of Australia, has strongly favoured central government rights in theoffshore at the expense of the regions. Moreover, the Canadian court, againlike its Australian counterpart, has suggested that the central governmentlikely enjoys considerable power to legislate municipally in the course ofimplementing international treaty obligations. But here the similarity ends.In Australia these pronouncements have been translated into Commonwealthpolitical action to override the States. In Canada no central governmenthas yet felt enough political confidence to attempt even a minor versionof the adventures (now largely a part of constitutional orthodoxy) embarkedupon by Canberra since the decision in the Seas and Submerged Lands case. 135

Then there is the manner in which the respective political solutions inthe offshore have been crafted. In Australia, in 1979, a national offshore

135 New South Wales v Commonwealth (1975) 135 CLR 337.


settlement notable for its legal complexity and relative economic irrelevance(for the States) was negotiated. The bottom line here is that the principalpetroleum producing area in Australia, located adjacent to the State ofVictoria, has returned less than 5% of total direct offshore governmentalrevenues to that State over the period of its producing life. 136 Moreover,although the States retain day to day management responsibilities over allthe offshore zones adjacent to each State, whenever that management is nottaking place in accordance with Commonwealth policy, Canberra retains theright to step in and dictate how the offshore is to be managed. 137 It is truethat the States did have their territorial seas 'returned' in the 1979 settlementbut, when that concession to States' rights is placed alongside the politicaleconomic reality surrounding the settlement, it seems a minor bestowal indeed.

Contrast this with the position in Canada. From the time of the first SupremeCourt decision on the offshore in 1967,138 the principal objective of theProvinces has been, in negotiations with Ottawa, to obtain significantmanagement and revenue rights in the offshore. Legal ownership rights weresought also but they had a lower order of precedence. Even the early settlementproposals, widely regarded as Ottawa biased, conceded a minimum 75%Provincial share of all direct offshore revenues. The regionalised agreementsnow appearing in Canada give the respective Provinces entitlement to 100%of all direct offshore revenues with no cap, regardless of how high the priceof oil might rise. Moreover, these regionally focused agreements employcomplex mechanisms to deny ultimate Federal control of the Provinciallybased management structures. If there is a weakness in these arrangements,from a Provincial point of view, it is that they are all contained in ordinarylegislation. Without any constitutional entrenchment (as yet) and withoutany ownership rights there is an element of vulnerability, from the Provinces'point of view, about the new regime. The political cement is very powerful,however. The States in Australia enjoy a more secure legal hold over theiroffshore rights, it is true, but the intrinsic value of those rights is very limitedvis a vis the rights now being conferred on the Canadian coastal Provinces.

In summary, regionalism pressures have, over time, wrought, through thelegal and political processes, very important changes to the federal politicalstructure in Canada. They have left the Provinces with considerable scopeto develop (and protect) their own economies (and identities). Although notentirely fiscally independent, the Provinces also enjoy significant, Provinciallybased, revenue raising capacity. These regional pressures also have kept theoffshore debate in Canada judicially and politically localised at every stage.Moreover, the focus by the Provinces on offshore revenue and managementrights has largely subsumed legal debate during political negotiations withthe result that substantive Provincial control over offshore resources (andrevenue) is now the norm in Canada.

In Australia, on the other hand, the story of federalism has been largelya tale of fights between two levels of Government rather than a narrativeof struggles between the Commonwealth and each of the individual States.

136 The other 95% has gone to the Commonwealth Government.137 See Fordham and the State of Victoria v Evans and Others (Federal Court of Australia,

13 November 1987, unreported decision of Jenkinson J), where the court endorsed theCommonwealth's power to provide detailed direction as to the manner in which the VictorianState Minister responsible for the offshore was to carry out his duties.

138 Reference Re Ownership of Offshore Mineral Rights (1967) 65 DLR (2d) 353.


The fiscal impotence of the States is palpable and their inability to implementsignificant State biased economic measures a matter of record. Given thefiscal weakness of the States it is surprising that, when the 1979 OffshoreSettlement was being negotiated, they devoted so much energy to recoveringtheir economically insignificant territorial seas. It may be that years of(relatively comfortable) economic dependence on the Commonwealth blurredtheir economic focus. Certainly the territorial seas were of high symbolicimportance to the States. Another factor in the shaping of the 1979 settlementappears to have been the reverence accorded by the negotiators to the judicialpronouncements on the offshore. This, in turn, fed the legalistic bias of thosenegotiations.

It may be that the developments in the Australian federal structure overthe last almost 90 years pose the need fora new definition of federalism.The States are poor cousins indeed, of the Canadian Provinces, in termsof regional political and economic sovereignty. Moreover, despite the mightypower of the Australian Senate,139 the States as States have never reallyenjoyed a share in central political power through that medium. l40 Australia,less and less, fits within what might be termed the classical· definitions offederalism exemplified in the writings of Wheare and Sawer. Yet, clearly,it is no unitary state. Perhaps it is in a stage of transition to some sortof unitary like political structure with High Court judges and State and Federalpoliticians (in their day-to-day clothes) being the most prominent personsgradually and discreetly but directly and steadily shepherding the nation inthis direction. (A number of commentators and many politicians (in rhetoricaldress) of course lament this progression). Or it may be that the process isnot remorseless. Australia's political structure may stabilise at some sort ofattenuated version of classical federalism. It is submitted that it is unlikelythat the process will ever be significantly redressed so as to re-instate someversion of Australia's early federal self. It is very difficult, frankly, to discernthe need for any such restoration within the socio-economic reality of Australiaat the close of the twentieth century. It is likely that the process will continueat least until such time as virtually all barriers to the CommonwealthG'overnment regulating economic activity in Australia are down.

The current state of Canadian federalism, on the other hand, offers littlechallenge to any of the classical definitions; it fits, notwithstanding the contrarytenor of the Constitution Act 1867, quite comfortably within them. In thisregard, the Canadian political structure is relatively stable. This is so despitethe potential menace which the Charter of Rights poses to the resilienceof Canadian regionalism. In the medium term, regionalism will likely prevailin this contest. Without the assistance of any equivalent to s 33 of the Charter,regionalism has suppressed the thrust of the Constitution Act 1867. Andnow Quebec, which has often led the way in developments in Canadianfederalism in the past,141 has said, in an early head to head contest betweenregional values and the Charter, that the former, with the aid of s 33, mustcome first.

139 In 1975 it was, ultimately, able to force an election upon a popularly elected governmentin the House of Representatives which had some 18 months of its term to run.

140 The Senate has been, historically, a chamber controlled by the federal political parties injust the same way as the House of Representatives. Its role in the constitutional crisis of1975 exemplifies this pattern: C Howard, supra n 2, 94-98.

141 Supra n 6 and accompanying text.

I


It is thus the case that the patterns of federal political-structure developmentin Canada and Australia are markedly dissimilar. In each, the structureestablished by the respective Constitutions has been greatly modified by thelegal and political processes. These modifications speak, more than anythingelse, of entrenched, geographically dispersed, social, economic, cultural andpolitical diversity in Canada and the relative lack thereof in the case ofAustralia. 142 The political structures under discussion clearly are in a stateof change but the direction of change in each case is, equally clearly, divergent.It also is arguable that the regional political entities in each country have(perhaps unconsciously) adopted the role conferred on them by the prevailingpolitical reality. This perception of their place in the structure then feedsback into the continuous process of constitutional adaptation143 and reinforcesits current prevailing direction: towards the maintenance of real regional powercentres in Canada and towards a species of almost token federalism inAustralia.

142 Australia is, of course, as a recipient of large scale immigration from around the world,a diverse society. But this is a diversity of relatively recent origin with only tentative Australianroots. More importantly, it is spread throughout the country; it is not geographically clusteredon a State by State basis.

143 As put by Professor Cairns, a "constitution is not a once-for-all achievement but a continuouscreation": A C Cairns, "Author's Introduction" in D E Williams (ed) ConstitutionGovernment and Society in Canada (1988) 12.

Documents

1989] A Federal Parting ofthe Ways A FEDERAL PARTING OF