As a result of Cabinet's decision of March 1, 1951, an Ad Hoc Committee rep­resenting the Departments of Justice, National Defence, External Affairs, Citizen­ship and Immigration, National Revenue and Finance and the Foreign Exchange Control Board, has met to consider a draft Agreement between the parties to the North Atlantic Treaty regarding the status of an armed force from one NATO power when that force is present within the territory of another NATO power. A summary of the Committee's recommendations appears in para. 13 of this report.

2. This draft Agreement, a copy of which is attached to this report as Annex A,? has been submitted to governments by the North Atlantic Council Deputies with a request that governments inform the Council Deputies by March 31, 1951, whether governments can, in general, accept the Agreement or wish to submit amendments to it. Following receipt of suggested changes, the draft will be revised in London and will probably be presented to governments for signature in May or June of this year.

3. The draft Agreement was drawn up to apply both in peace and in war, although its terms contemplate revision in the event of a major conflict.

4. The Committee is of the opinion that the draft Agreement deals satisfactorily with the following topics:

(1) Requirements for entry to and departure from a receiving state;

(2) Validity of vehicle driving permits of members of a force in the receiving state;

(3) Wearing of military uniforms;

(4) Carriage of arms;

(5) Provision by the receiving state of goods and services;

(6) Applicability of foreign exchange control regulations.

5. The Ad Hoc Committee is of the opinion that the following topics that are dealt with in the draft Agreement require careful consideration and in some cases amendment as set out hereunder:

(1) The jurisdiction of service courts in the receiving state (paragraph 6 of this report);

(2) The settlement of claims for damages arising out of the activities in the receiving state of forces of sending states (paragraph 7 of this report);

(3) Free entry privileges for goods and commodities (paragraph 8 of this report);

(4) Exemption from income and inheritance tax (paragraph 9 of this report);

(5) Final articles on signature and ratification of the Agreement (paragraph 10 of this report).

6. Jurisdiction of Service Courts

(a) Under Article VII of the draft Agreement, members of a force from a NAT country in Canada will be subject to Canadian criminal law and courts with certain exceptions. The only objectionable exception appears to be that the foreign courts­martial will virtually have exclusive jurisdiction over any member of their own force in respect of acts "done in the performance of official duty".

(b) (i) The main consideration against this exception is: it is a major departure from the principle that Canadian civil courts have jurisdiction over all offences in Canada. The only previous departure agreed to by the Canadian Government was in the case of United States service courts during the Second World War which had exclusive jurisdiction over United States forces in Canada.

(ii) The main considerations in favour of the exception are: The exception is in line with the generally understood principle of international law relating to visit­ing forces, held not only by the United States but also by most of the continental European countries. It is based on recognition of the principle that a visiting force should have full power to maintain internal discipline. The original draft proposed to the NATO Deputies by the United States went very much farther. Negotiations in London resulted in reduction to the present exception. Canada House states of Annex A: "Any amendments suggested which are likely to upset the whole balance of concessions may defeat their own purpose". It should be kept in mind that we are concerned not only with allied forces in Canada, but also with the needs of Canadians in the integrated force in Europe.

(c) Recommendation

The Committee recommends that Article VII be accepted by Canada in view of the reciprocal advantages which Canadian forces will obtain abroad, but that the North Atlantic Council Deputies be told that the Government of Canada desires to suggest amendments to the Article as set forth below:

(i) Article VII, paragraph 3(a)(ii) should be amended to read:

"(ii) any act or omission done or omitted pursuant to an order issued by a military superior of that state and carried out according to the tenor thereof".

The effect of this amendment would be to give the primary right to exercise jurisdiction to the courts of the receiving state over any member of a force or civilian component who carried out his superior's order in an unlawful manner which results in injury or damage. Certain consequential amendments to other articles would be suggested at the same time.

(ii) The penalties imposed for some crimes in European countries are higher than those normally imposed in Canada. In order to protect Canadian service­men against injustice, an amendment should be proposed in the following terms:

"In any case where a court of the receiving state exercises jurisdiction over a member of a force or a civilian component of a sending state, the court shall when passing sentence, take into account the penalty which would normally be imposed under the law of the sending state for a similar offence".

7. Settlement of Claims for Damage Arising out of the Activities of a Force from a Sending State

(a) The draft Agreement provides in Article VIII in effect that:

(i) The Contracting Parties to the Agreement waive all claims against each other in respect of damage to property owned by them and used by their service min­istries, and in respect of injury to or death of service personnel;

(ii) Claims against a sending state in respect of acts done by members of a force or civilian component in the performance of their official duties will be dealt with by the receiving state in the same manner as that employed by the receiving state in respect to claims arising from the activities of its own armed forces; but no judgment will be enforceable against the individual member of the force con­cerned. The amount of the settlement or judgment will in the normal case be borne as to 75% by the sending state and as to 25% by the receiving state;

(iii) As regards tortious acts or omission not relating to the performance of offi­cial duties, the authorities of the sending state will normally stand behind the members of their own force or civilian component and arrange settlement of the claim on an ex gratia basis through the authorities of the receiving state, but the normal jurisdiction of the courts of the receiving state is not displaced;

(iv) Contractual and other claims not specifically dealt with above will be dealt with in the customary manner according to the laws of the receiving state.

(b) The provisions of the draft Agreement appear to provide a reasonable method of dealing with claims. On two points, however, the Committee is of the opinion that legislation in Canada will be necessary before the obligations under the Agree­ment can be fulfilled.

(i) In any dispute as to whether an act was done in the performance of official duty the draft Agreement provides that an arbitrator shall be appointed by the receiving state who shall determine the question and his determination shall be final and conclusive.

(ii) Where the Agreement provides that the receiving state shall settle or adjudi­cate claims against a sending state in respect of tortious acts done in the performance of official duties, it is provided that no proceedings for the enforcement of any judgment given against a member of a force or a civilian component shall be entertained in the courts of the receiving state. In effect, this means that a claimant in the receiving state is limited to a single means of relief: he must secure his indemnity from the sending state and not from the individual tortfeasor. Under existing Canadian law the injured party always has recourse against the individual where the claim against the Crown is unsuccessful.

(c) Recommendation

The Committee recommends that Article VIII of the draft Agreement dealing with claims for damages arising out of the presence of foreign forces in the receiv­ing state be accepted on behalf of the Canadian Government.

8. Customs and Excise Privileges

(a) The draft Agreement provides in Articles XI, XII, and XIII for certain types of dutyfree entry. The general rule laid down is that members of a force and of a civilian component as well as their dependents shall remain bound by the customs and excise laws of the receiving state. In respect of personal importation by mem­bers of a force or a civilian component, provision is made for free entry of (i) private motor vehicles imported temporarily for personal use, and (ii) personal effects and furniture imported at the time of first arrival. On the other hand, the "authorities of a force" are entitled to the free importation of the equipment of the force and of "reasonable quantities of provisions, supplies and other goods for the exclusive use of that force". In addition, where permitted, Articles so imported may be used by the members of a civilian component and by dependents of members of a force and of a civilian component.

(b) The Committee foresees two problems arising out of the arrangement:

(i) Where a "force" consists of a small number of foreign service personnel on detachment in Canada or on course at Canadian schools of instruction, it might produce administrative confusion and possibly abuse of privilege unless the scattered individuals were organized as a unit for the purposes of freeentry privileges. The Committee believes that an attempt should be made to specify more clearly in the draft Agreement the designation of the "authorities of a force" so that a single organization or individual will be responsible for certify­ing that the importer is entitled to freeentry privileges under and according to the Agreement.

(ii) Any scheme of freeentry privileges is likely to result in some of the duty­free commodities finding their way to the black markets of the receiving state. In certain continental European countries during and since the Second World War, this problem arose particularly in the case of cigarettes. A similar situation might well arise out of the draft Agreement under consideration if it were gener­ally adopted by continental European countries. A partial answer to the problem might lie in the general adoption of a scheme whereby sending states would impose normal domestic duties and taxes on commodities shipped to their forces in receiving states, there to be granted entry free of the customs duties of the receiving state. This would tend to reduce the price differential between service­imported and local commodities which renders the blackmarket sale of the for­mer so attractive, and broadens the distinction existing between civilian and mil­itary populations. The Committee believes however, that there are certain difficulties not met by such a scheme. Substantial differences might still exist in the price of the commodities to the members of different forces. Furthermore, the effect of an increase in price due to the imposition of normal excise taxes might be to lower the morale of the members of the forces concerned. It is essential for the morale of the Canadian forces that, if such an arrangement is made, it apply to the forces of all NAT countries concerned.

(c) The draft Agreement also provides that members of a force or civilian compo­nent may at the time of first arrival in the receiving state import free of duty, for the term of their service, personal effects and furniture. The Committee, while not dis­posed to find any objection to this arrangement, agreed that the freeentry privilege might be more properly granted at the time of arrival of the dependents of the members of the force or civilian component.

(d) Recommendation

The Committee recommends that Articles XI, X11 and X1II of the draft Agree­ment be accepted on behalf of the Government of Canada, but that the Canadian Deputy in London be authorized to request the North Atlantic Council Deputies:

(1) to provide for an exact definition of the term "authorities of a force" in Arti­cle XI;

(2) to consider a scheme to alleviate the demoralizing effects of blackmarket sale of dutyfree commodities in receiving states by the imposition of normal domestic duties and taxes by sending states on shipments to forces in receiving states; and

(3) to amend Article XI by allowing personal effects and furniture to be imported free into receiving states upon the occasion of the first arrival of dependents as well as on the occasion of the first arrival of members of a force or of a civilian component.

9. Exemptions from Taxation

(a) Article X of the draft agreement provides both a specific and a general exemp­tion from taxation in the receiving State for a member of a force or civilian compo­nent, who is in the receiving State solely as a consequence of his membership in the force. The specific exemption is for the salary and emoluments paid to him as a member by the sending State. The general exemption provides that the member shall not be considered to be resident or domiciled in the receiving State for tax purposes. This exemption applies to the taxation of income, gifts and successions. An exception to the general exemption is that a member is not free from tax "with respect to any profitable enterprise (other than his employment as a member) in which he may engage in the receiving State." Article X also exempts a member from taxation by the receiving State of any tangible movable property the presence of which in the receiving State is due solely to his temporary presence there.

The Committee agreed that these provisions were acceptable but that there did not appear to be any sufficient reason for excluding dependents from the benefits of the Article.

(b) Recommendation

The Committee recommends that Article X be accepted on behalf of the Cana­dian Government but that the Canadian Deputy be authorized to request the North Atlantic Council Deputies to consider extending the exemptions of Article X to the dependents of members of a force or of a civilian component.

10. Final Articles Providing for Signature and Ratification of the Draft Agreement

(a) The draft Agreement provides that the agreement shall be both signed and ratified by the contracting parties. No mention is made of reservations to the agree­ment. The Committee is of the opinion that delay and confusion might arise if sig­natory states were to make reservations to the application of the agreement at the time they ratified.

(b) Recommendation

The Committee recommends that Articles XIV to XIX inclusive, should be accepted on behalf of the Canadian Government, but that the Canadian Deputy in London be authorized to request the North Atlantic Council deputies to amend the agreement by including an Article in the following form:

"The contracting parties agree that any reservations to this agreement shall be made not later than the date of signature".

11. Legislation to Implement Agreement

(a) The Committee is of the opinion that the draft agreement would require legis­lation in order to authorize the execution of its terms in Canada as necessary. The legislation might conceivably take one of two forms:

(i) a general act authorizing the execution of the provisions of the agreement under regulations to be made by the GovernorinCouncil;

(ii) a detailed act setting forth specifically the provisions of law necessary for fulfilment of the agreement in Canada. In view of the existence in the draft agreement of provisions having a profound effect upon the administration of criminal law in Canada, the Committee is of the opinion that the second course is more appropriate.

(b) On the question of the power of Parliament to pass the legislation mentioned above, the Deputy Minister of Justice has provided the following opinion:

"I am further of opinion, subject to the comments made hereafter, that it is within the competence of Parliament to enact legislation to give effect to the terms of the proposed Agreement in Canada. Such legislation would be either (a) a law dealing with `defence' and falling, therefore, under s. 91(7) of the British North America Act, or

(b) a law dealing with Canada's relations with other countries and, therefore, a law not coming within the classes assigned to the provincial legislatures.

"Certain provisions in the proposed Agreement Articles IV, VII, VIII, IX, X and XI affect matters in relation to which the provincial legislatures ordina­rily have legislative jurisdiction. It must, therefore, be recognized that the deci­sion of the Privy Council in The Labour Convention case, (1937) A.C. 326, raises a doubt as to whether Parliament can carry out the obligations these Arti­cles would impose on Canada. My view is, however, that the reasoning in that case has no application at least in a case such as this where the subject matter of the Treaty is defence."

(c) On the question of cooperation with provincial authorities the Deputy Minis­ter of Justice said:

"I should also mention that, insofar as the proposed Agreement provides for administrative cooperation in Canada e.g., Article VII the Government of Canada has, of course, no administrative control over provincial or municipal authorities. It should, therefore, be borne in mind that, if the proposed Agree­ment is to be construed as contemplating cooperation by provincial or munici­pal authorities, this will probably have to be achieved, as a practical matter, by arrangement with the provincial governments."

The Committee is of the opinion that any consultation with the provincial authori­ties should take place after the Agreement is signed.

GENERAL REMARKS AND RECOMMENDATIONS

12. The draft Agreement is the product of the work of representatives of twelve countries with differing legal systems. It is necessarily a compromise document, and no one country can hope to mould the agreement completely according to its own desires. The conclusion of such an agreement is essential for the protection of the Canadian members of the NATO integrated force in Europe. Suggestions for changes in the agreement must, in order to be considered in London, be submitted before March 31.

13. The Committee Recommends:

(1) that the NATO Deputies be informed that the Canadian Government is favourable to the draft agreement as a whole;

(2) that the Canadian Deputy be instructed to try to obtain the amendments sug­gested in this report;

(3) that the revised draft Agreement be resubmitted to Cabinet prior to signature.

Respectfully submitted,

R.A. MACKAY
Department of External Affairs,
and
W.J. LAWSON, BRIGADIER
Judge Advocate General,
Joint Chairmen.
E.R. RETTIE
Department of External Affairs,
Secretary.