Deputy Minister of Finance describes race against time to prevent economic damage from border blockades

Open this photo in gallery:

The federal government was in a race against time to stop the escalating economic damage created by the February border blockades, Michael Sabia, the Finance Department’s most senior public servant, told the inquiry into the use of the Emergencies Act.

He testified that government and media projections of the daily economic impact to the country underestimated the fact that the scale of harm would escalate sharply the longer the blockades continued.

With U.S. lawmakers weighing Buy America provisions that could have cut Canada out of future electric-vehicle manufacturing, Mr. Sabia said Canada’s reputation as a reliable trading partner was at risk and the concern had risen to the level of discussions between U.S. President Joe Biden and Prime Minister Justin Trudeau.

“These were very meaningful issues that arose in the Canada-U.S. relationship,” he said. Had the border disruptions continued, he said the government was concerned that it would cause “very severe long-term consequences” for not only the Canadian auto sector but also for a whole range of industries that export goods to the U.S.

Mr. Sabia – along with two other senior Finance Department officials, Rhys Mendes and Isabelle Jacques – outlined the department’s assessment of economic risks related to the blockades during a joint appearance Thursday before the Public Order Emergency Commission into the use of the act.

Emergencies Act inquiry: What to know about the commission and what’s happened so far

They also discussed the government’s decision to authorize the freezing of bank accounts via the act’s orders.

Mr. Sabia is one of the Liberal government’s most trusted sources of policy advice. He was named deputy minister of the Finance Department in December, 2020, but has previously advised the government in a variety of other roles.

The federal government invoked the Emergencies Act for the first time on Feb. 14 and ended the use of the powers on Feb. 23. The decision allowed police to compel tow-truck operators to assist in removing vehicles that were blocking roads during anti-government, anti-vaccine-mandate protests.

One of the most contentious powers used under the act was the ability to freeze the bank accounts of protesters without due legal process.

When the Emergencies Act was invoked, the blockade at the Ambassador Bridge in Windsor, Ont., which had been wreaking havoc on cross-border trade, had already been cleared, while other major blockades – in Coutts, Alta. and Emerson, Man. – were on the cusp of being resolved. They were ultimately cleared on Feb. 15 and 16, respectively.

Even though the Ambassador Bridge was cleared prior to invoking the act, Mr. Sabia said the government had no assurance that border blockades were over.

“Our concern at the time was that while a disruption may have ended in one place, there was certainly the very live possibility that disruptions could emerge elsewhere, or in fact, at that same bridge,” he said.

Around 280 accounts, totalling about $8-million in assets, were frozen using powers under the Emergencies Act, according to a Finance Department report tabled with the commission. Mr. Sabia said the number of individuals affected would be far less than 280, because some people had multiple accounts frozen.

The Canadian Bankers Association has said that its members primarily relied on a list of individuals provided by the RCMP when deciding which accounts to freeze. The association has said that it also froze a small number of additional accounts that were not on the RCMP lists based on its own “risk-based” reviews.

The government orders that provided the power to freeze accounts without due process did not lay out a formal process for unfreezing those accounts, the inquiry has heard.

At a cabinet committee meeting on Feb. 20 – six days after the act was invoked – RCMP Commissioner Brenda Lucki reported that the service was working with banks to develop a process to unfreeze accounts. The likely process, she said, would be that “individuals will have to report to a police station and will be given some type of document to present to the financial institution,” according to meeting minutes tabled with the inquiry.

The following day, Deputy Prime Minister Chrystia Freeland e-mailed Mr. Sabia several questions about the financial measures, including, “Can we say: To have your account unfrozen, go to your local police station?”

“Not yet, this is the process we are currently developing. We would recommend that individuals call their respective financial institution’s consumer service,” Ms. Jacques responded to Mr. Sabia, after being asked to provide answers to Ms. Freeland’s questions. The department officials added that the bank would likely call the RCMP to confirm that the person was no longer involved in the protests.

In an interview with inquiry lawyers ahead of her testimony, Ms. Jacques said the Finance Department initially expected that banks would unfreeze accounts once it became clear that a person was no longer involved in the protests, but ultimately, the RCMP took the role of notifying banks when people had left.

All accounts that were frozen using powers under the Emergencies Act were unfrozen by Feb. 24, according to a federal government document tabled with the inquiry, although it notes that some accounts remained frozen because of an unrelated court order.

Mr. Sabia said Thursday that he, and then later he and Ms. Freeland, had discussions with the CEOs of Canada’s banks in the days before the government invoked the act on Monday, Feb, 14.

“There was an openness on the part of the bank CEOs to working with us to try to find solutions that would bring a peaceful end to what was a difficult circumstance,” he said.

At one point, senior commission counsel Gordon Cameron asked the Finance officials if the intent of freezing bank accounts was to apply pressure on protesters’ family members.

“Did you appreciate that you are moving to a different level?” he said, noting that freezing personal accounts is a step beyond freezing the accounts that were being used to fundraise on behalf of the protesters.

“In the first scenario, you’re saying to the protester: ‘We are going to cut off the money you’re using to buy gas for your truck or whatever,’ " said Mr. Cameron. “And then the second mode, you’re saying: ‘We are going to cut off your family’s money that they use to buy groceries and pay their rent, so you’d better get out of this protest.’ Right?”

Ms. Jacques insisted the government did not intend to target family members.

Mr. Sabia later added that anyone dealing with a frozen account had an obvious option.

“I think people had reasonable notice and it was a very simple solution,” he said. “All you had to do was leave.”

Several convoy organizers have testified about the impact of their accounts being frozen.

The owner of a trucking company said that fuel cards for his drivers were shut off for several days. Another organizer said he was only able to buy his son’s heart medication because he had cash on hand and that the credit rating of his former spouse, with whom he shared a bank account, dropped 109 points. A third described fears that he wouldn’t be able to pay his mortgage.

Throughout his testimony, Mr. Sabia repeatedly defended the use of the act to freeze bank accounts. He said it allowed the government to act quickly with a peaceful approach to encouraging protesters to leave.

“It came and went quickly,” he said. “It contributed to the peaceful end in a way that we had intended.”

Meanwhile, Jody Thomas, the Prime Minister’s national-security and intelligence adviser, told the inquiry Thursday that the government took a broader interpretation of the definition of a national-security threat than what is outlined in the Emergencies Act.

Whether the convoy protests met the security-threat threshold required to invoke the act is a key question at the inquiry. The act’s definition of threats to the security of Canada comes from the Canadian Security Intelligence Service Act, but Ms. Thomas testified that the government received legal advice that the Emergencies Act “is not limited by the CSIS Act.”

That interpretation was quickly challenged by lawyers cross-examining Ms. Thomas, including Cara Zwibel of the Canadian Civil Liberties Association who said the act’s definition of threats to the security of Canada is “tied exclusively and exhaustively” to the CSIS Act’s definition.

Ms. Thomas declined to engage in a debate about the legal advice the government got, but she described the definition used in the CSIS Act as “narrow” and said it should be modernized.

In her testimony, Ms. Thomas also told the inquiry that RCMP Commissioner Brenda Lucki failed to share crucial information with cabinet ahead of its Feb. 14 decision to invoke the act.

“If there’s useful information or critical information, it needs to be provided whether you’re on the speaking list or not,” Ms. Thomas said.

With a report from Marieke Walsh