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  • Writer's pictureStewart Maier

Plastic Politics: The Federal Court's Decision on Plastic Items

By Stewart Maier and Laura J. McPhee


In a major decision released on November 16, 2023, the Federal Court invalidated a Federal Government cabinet order that classified “Plastic Manufactured Items” (“PMIs”) as toxic substances under the Canadian Environmental Protection Act (“CEPA”). This ruling marks another significant moment in the ongoing debate over environmental regulation and federal legislative jurisdiction (including recent legal challenges to the federal Impact Assessment Act and the federal Carbon Tax legislation). The decision held that the blanket categorization of all PMIs as toxic was “unreasonable and unconstitutional”, emphasizing that the term “toxic” has a specific connotation, and the Federal Government cannot arbitrarily label substances as such without substantial evidence. This decision will have significant implications for environmental policy, the plastics industry, and Canadian businesses.


Background


The history of the Federal Government’s decision to list PMIs as toxic substances under CEPA began with a cabinet order published on May 12, 2021 (“Cabinet Order”). The Cabinet Order defined PMIs as “any items made of plastic formed into a specific physical shape or design during manufacture, and have, for their intended use, a function or functions dependent in whole or in part on their shape or design”, and included both whole, final products and individual components of composite products. The Cabinet Order sought to list PMIs as toxic substances under CEPA Schedule 1, and formed part of the Federal Government’s strategy to meet its target of zero plastic waste by 2030. This approach led to significant pushback from industry stakeholders, who argued that the Cabinet Order was overly broad and did not adequately distinguish between various types of PMIs, especially those that did not pose a significant environmental risk.


Further to the Cabinet Order, the Single-use Plastics Prohibition Regulations (“Regulations”) were published on June 20, 2022, and came into effect December 20, 2022. The Regulations are aimed to prohibit the manufacture, import, and sale of six categories of single-use plastic items (a subset of PMIs), including checkout bags, cutlery, six-pack ring carriers, foodservice ware, stir sticks, and straws. The prohibition on manufacture and import for sale in Canada for most categories of items took effect on December 20, 2022, with a complete ban on sale set for December 20, 2023. Certain other items, such as six-pack ring carriers, were banned for manufacture and import for sale in Canada on June 20, 2023, and are set to be banned for sale in Canada on June 20, 2024. Prohibition on the manufacture, import and sale for export of these items will take effect as of December 20, 2025​.


It is notable that the Cabinet Order and the Regulations differ in scope and approach. The Cabinet Order broadly categorized all PMIs as toxic substances under CEPA. In contrast, the Regulations specifically target six categories of single-use plastics identified as harmful based on criteria such as environmental impact.


An industry coalition launched a court challenge against the Cabinet Order in Federal Court on May 18, 2021. The coalition argued that the blanket designation of all PMIs as toxic was not supported by proper scientific analysis and could result in unintended consequences, such as increased costs for small businesses and consumer confusion. Simultaneously, another challenge specifically targeting the Regulations on constitutional and administrative authority grounds is ongoing at the Federal Court.


The Court’s Ruling – Cabinet Order


The Court agreed with the applicants that the broad classification of PMIs as toxic was not only unreasonable but also unconstitutional. The Court held that there was no reasonable apprehension that all PMIs were harmful, therefore the Cabinet Order was too sweeping and did not reasonably differentiate among the wide array of types of PMIs. Indeed, the Court referred to some evidence that suggested certain types of PMIs were not environmentally problematic. The Court criticized the lack of comprehensive scientific analysis and risk assessments to demonstrate the toxicity of all PMIs considered by government officials before listing PMIs broadly under CEPA Schedule 1. As the result, the Court found the Federal Government was acting outside its authority (paragraph 119):


In this case, the [Governor in Council (GIC)] knowing that such a broad extrapolation was not supported by the evidence, and in particular that certain PMI included within the scope of the listing were not toxic, acted outside their authority in listing the broad category of PMI on Schedule 1 in an unqualified manner.


The Federal Court acknowledged the interconnectedness between the decision on the Cabinet Order and the ongoing legal challenge against the Regulations. Since the Regulations were enabled by the listing of PMIs as toxic substances under CEPA Schedule 1 - a listing which the Court found unreasonable and unconstitutional - the outcome of this case could potentially undercut the legal foundation of the Regulations.


Specifically, the Court noted at paragraphs 64 and 65 (emphasis added):


“First, the GIC must determine whether a substance is toxic such that it can be listed on Schedule 1; second, and only after a substance is listed, does the GIC have broad authority to regulate the substance. To add something to Schedule 1 of CEPA, therefore, the GIC must be satisfied that it is a substance or class of substances that is toxic, within the meanings prescribed by CEPA.”


This would seem to suggest that any Regulations made pursuant to an invalid Cabinet Order would also be invalidated. Not so fast. The Court stated at paragraph 203:


Further, declaring the Order unlawful does not go as far as deleting PMI from the existing Schedule 1. […] While a declaration of invalidity could lead the GIC to order that PMI be deleted from the current Schedule 1, the authority to take that step is within the discretion of the GIC.


Additionally, between the date the Cabinet Order was challenged on May 18, 2021, and the date of the Court’s decision on November 16, 2023, Bill S-5 was enacted to reorganize CEPA Schedule 1 to have a Part 1 and a Part 2. While PMIs appeared on both the prior Schedule 1 and the Bill S-5 Schedule 1 (under Part 2), the Court cautioned at paragraph 204 (emphasis added) that the constitutional validity of Bill S-5 was not necessarily impugned.


Similarly, I agree with the Respondents, it is the [Cabinet] Order and not Bill S-5 that has been challenged in this Application. As such, it is not open to the Court to rule on the constitutional validity of Bill S-5. While the Court’s finding on the constitutional validity of the Order may bear on the constitutional validity of the listing of PMI on Schedule 1 enacted under Bill S-5, this finding cannot be made without the provision of further argument and evidence from the parties, including as to the scheme and purpose of the amendments made to CEPA as a result of Bill S-5. On the basis of the submissions that were made before me, I cannot conclude that there would be no relevant evidence or material argument forthcoming.


The Court underscored the principle that the designation of a substance as “toxic” must be grounded in a scientifically substantiated understanding of the term. In this context, the Court found that the Federal Government's broad application of the term “toxic” to all PMIs exceeded the scope of its legislative authority.


The Court’s future ruling on the challenge relating to the Regulations will be an event to watch for.


Impact on Businesses and Next Steps


This ruling may have significant implications for businesses nationwide and is particularly resonant for local companies like LEAF Environmental Products (“LEAF”). LEAF, a Calgary-based company, has developed innovative compostable bags from a starch-based, certified compostable polymer. However, the company faced a perplexing challenge as its products, despite containing no plastic, were caught in the wide net of “PMIs” captured by the Federal Government's single-use plastics ban under the Cabinet Order. LEAF produces several products, but the one that has come under the most debate is its compostable grocery bag, which is designed to be reused as a kitchen compost bin liner after shoppers transport their groceries home. LEAF, along with other Alberta businesses, have been actively involved in lobbying efforts directed at the Federal Government to exempt their products from the Cabinet Order and recognize the distinction between their innovative products and conventional single-use plastics.


The Court's decision to invalidate the classification of all PMIs as toxic is a significant development for LEAF and similar companies. This ruling may alleviate some of the regulatory burdens that these companies face, particularly in the context of broad categorizations that do not properly differentiate between plastics and alternatives.


While the Federal Government contemplates an appeal of the decision, the implications of this ruling are far-reaching. Since the Regulations were predicated on the listing of PMIs as toxic under CEPA Schedule 1, the Court's decision on the Cabinet Order might weaken the legal foundation of the Regulations. Indeed, the ongoing legal challenge against the Regulations may necessitate a re-evaluation of these Regulations in light of the Court's findings on the Cabinet Order.


For businesses, particularly those in the plastic and petroleum industries, this decision offers a potential reprieve and an opportunity for a more balanced regulatory framework going forward.


Conclusion


The Federal Court determined that the decision to classify all PMIs as toxic under CEPA Schedule 1 was an overreach, ignoring the diverse uses and chemical makeups of thousands of plastic items. In addition, the decision has thrown into question the legality of the Federal Government's Regulations on single-use plastics.


The Court’s reasons highlight the complexity of balancing environmental protection with practical and legal considerations. It's a call for more nuanced, evidence-based policy-making that respects both environmental needs and the realities of industries and consumers.


As we await the Federal Government’s next steps, businesses and industry should stay informed and prepared for the evolving regulatory landscape.

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