updated 2:11 PM CET, Oct 31, 2023

'Gwen and Kazia' launch appeal to July FATCA ruling in Canadian court

Supreme Court of Canada Supreme Court of Canada

Two dual Canadian/U.S. citizen plaintiffs in a long-running legal effort to block Canada’s implementation of the U.S.’s Foreign Account Tax Compliance Act have launched an appeal in Canadian Federal Court in Ottawa, after their most recent attempt to challenge the law was dismissed in July. 

Gwendolyn ("Gwen") Louise Deegan and Kazia Highton, both of whom have lived most of their lives in Canada, will be relying on donations to fund their appeal, according to a statement posted on the Isaac Brock Society website on Monday, the date the appeal was filed. 

They have retained Greg DelBigio, of the Vancouver firm Thorsteinssons, to represent them in the matter, the statement, issued by the Alliance for the Defence of Canadian Sovereignty, said. The ADCS is a lobbying group that has supported the anti-FATCA campaign since its inception.  

The ADCS added that the grounds for the appeal "will evolve and be broadened with detail at later stages," but that "Gwen and Kazia," as the appellants have become known to their mostly fellow dual-citizen supporters, intend to appeal not just the decision handed down in July, by Federal Court of Canada Justice Anne Mactavish, but also a 2015 decision, also in Federal Court in Ottawa, by Justice Luc Martineau, in which a different plaintiff named Virginia Hillis was involved instead of Highton. 

"Gwen and Kazia, now as appellants, are appealing both [the] Martineau and MacTavish decisions as they are complementary, and tied to each other (e.g., a treaty with a foreign country must not contravene constitutional rights)," the ADCS statement explains.

It adds that the two appellants are aiming to bring the matter before the Canadian Supreme Court, where they see their "best chance for resolution" to lie.

The efforts to raise a needed C$135,000 is expected to be organized by the ADCS, using its website,  and the appellants also plan to apply for approximately C$50,000 from the Canadian Court Challenges Program, a non-profit organization that helps fund legal cases that are deemed to be of constitutional significance.

'Not unreasonable'

As reported,Charter of Rights photo Federal Court of Canada Justice Anne Mactavish dismissed the arguments put forward by Gwen and Kazia  after a five-day trial that ended in February, on grounds that the Inter-Governmental Agreement (IGA) under which FATCA is implemented in Canada didn't breach Canada's Charter of Rights and Freedoms.

The charter, pictured left, protects Canadian citizens from the "unreasonable seizure" of their financial information, and guarantees them equality under the law "regardless of their citizenship or their national or ethnic origin." 

Justice Mactavish also found that although the IGA provisions do result in the seizure of the banking information of Americans in Canada, the "seizure" of such account information as it is being carried out was "not unreasonable" and thus not in violation of the charter; and that those affected have only "a limited expectation of privacy" in their data in any event.

 The Gwen and Kazia case in Canada is one of many that have been attemped around the world ever since FATCA, came into force, amid much controversy and opposition, in 2014. Thus far no effort to challenge has been successful, but opponents of the legislation remain optimistic that they ultimately will prevail. 

Last month an American who came to the UK 19 years ago and who said she was stunned to receive a letter from her bank in 2016 informing her that her account data would be shared with the Internal Revenue Service as required by FATCA, announced she was seeking to legally challenge the arrangement by arguing that the UK's HM Revenue & Customs is breaching her data protection and privacy rights by forwarding her financial and personal details to the IRS. 

The American, who is known only as Jenny, has retained the Mishcon de Reya law firm to help her, and is currently in the process of appealing to fellow Americans around the world to help her by crowd-funding her, with a donation page set up on the CrowdJustice.com site.

With eight days to go, she is still £21,500 short of her £50,000 goal.  

In July, meanwhile, as reported, France's top administrative court, the Conseil d'Etat, said that it saw no legal basis to support claims by the Paris-based Accidental Americans Association that the way the country's government implements FATCA violated the privacy of dual French/American citizens.  

Last January in the Israeli Supreme Court, the Republicans Overseas Israel lost a years-long battle that had sought to challenge the constitutionality of the legislation that enables Israeli financial institutions to participate in FATCA. 

Efforts to kill off FATCA in Washington, DC, led by Republican party groups, have also failed more than once. In 2017, for example, a U.S. Court of Appeals affirmed a lower district-court ruling dismissing the claims of a group which included Kentucky Republican senator Rand Paul, and James Bopp Jr., the lead lawyer for the plaintiffs in the case. In April, 2018, the U.S. Supreme Court declined to hear a challenge to that decision.

'Marathon not a sprint'

John Richardson, a Toronto-based lawyer and member of the ADCS, said the business of correcting the "injustices" of FATCA and the FATCA intergovernmental agreements "is truly a marathon and not a sprint."

He added: "All Canadian citizens, whether currently affected by FATCA or not, have a moral obligation to support the efforts of our plaintiffs.

"This is not about the taxation. This is about the rights of Canadian citizens to live in a democracy with an entrenched Charter of Rights, free of extraterritorial U.S. laws.

FATCA and the FATCA IGAs are a direct attack on rights of all individuals and the sovereignty of all nations."

Post-financial crisis legislation

FATCA was signed into law in 2010 in the wake of the global financial crisis, as an attempt by the U.S. to target the undeclared offshore accounts of Americans, many of whom had been found to be making use of bank accounts in places like Switzerland to avoid their U.S. tax obligations.

Almost at once, however, American expatriates began to find that the financial institutions in the countries in which they lived began insisting they take their accounts elsewhere, because the complexities for financial institutions to comply, and potential penalties for failing to do so properly, were seen to outweigh the value in keeping most American expats' accounts.

Immediately after FATCA's introduction the IRS also began coming aggressively after American expats who had been failing to file annual tax returns or Foreign Bank Account Reports – as all American expats are required to do, no matter how long they have lived abroad, unless they've renounce their US citizenship or have inconsequential income or assets. Until FATCA came along, many Americans living abroad hadn't realized they were required to do so, particulaly those who had spent most of their lives abroad and hadn't realized that having been born in the U.S. meant that they were still considered to be U.S. citizens.