A judge has struck down the Harper cabinets 2009 decision to overrule the CRTC and let a cell carrier with Egyptian ties operate in Canada.
That decision was based on errors of law and must be quashed, Mr. Justice Roger Hughes of Federal Court wrote on Friday.
He put in place a 45-day stay of judgment in order to avoid chaos and give the carrier, Globalive, a chance to go back to the federal telecom regulator. This means Globalive can keep operating for now.
The decision comes one day after the Conservatives signalled they would overturn another CRTC decision, on Internet billing.
It leaves Wind Mobile hanging.
"I've got another fight on my hands," said Globalive chairman Anthony Lacavera, which now runs Wind Mobile. "We're disappointed. We're assessing our options and we will fight it vigorously."
Mr. Lacavera stressed that this would not result in Globalive's Wind Mobile being shut down, simply that it would require another round of wrangling with the regulator over how much foreign influence is acceptable in a Canadian telecommunications company. He added that it throws more uncertainty at an already opaque issue.
The court case raises profound questions in Ottawa: How much power do Stephen Harper and his cabinet really have and are there any limits to it?
Over the past five years, Mr. Harper's government has acquired a reputation for overriding the opinions of federal watchdogs and experts from Statistics Canada on the need for a long-form census to the Parliamentary Budget Officer on whether Ottawa has a structural deficit.
In many cases, the federal cabinet has broad discretion to act, as legal rulings have recognized, on matters of public convenience and general policy but in the case of telecom, its mandate and manoeuvrability are governed by the Telecommunications Act.
Public Mobile, like other telecom firms, was upset the Harper government appeared to have changed the rules of the game even after the CRTC had balked at the fact that the Egyptian company, Orascom Telecom Holding, had put up most of the money for the Globalive venture. Carriers felt this was unfair to other firms that had stayed within foreign ownership rules.
The last time cabinet power on telecom was examined by the courts, the decision effectively shaped the legal view of cabinet authority for a generation. In 1980, a Supreme Court ruling on the Inuit Tapirisat's challenge of a cabinet decision on Bell Canada's rate structure effectively gave cabinet more blanket authority.
In January, Hudson Janisch, a University of Victoria expert in regulatory law who helped revise the Telecommunications Act in 1993, called this case is a long overdue challenge to the Inuit Tapirisat ruling and the expansive interpretation the government's lawyers have adopted. I would argue Inuit has been overtaken by time. We don't like the idea now of these very broad unchecked powers.
Prof. Janisch said over the last three decades administrative law has grown more sophisticated, and a good argument can be made for much more checks and balances ... on the exercise of power.
The Telecommunications Act gives cabinet the power to change or rescind CRTC decisions, but Public Mobile argued this cannot be used arbitrarily or in manner that is inconsistent with the express terms of the legislation from which [cabinet's] power derives, or with the legislation's purpose and intent.
Lawyers for Ottawa had argued cabinet's power under the legislation is largely unbounded. The Supreme Court has affirmed that the power exercised by [cabinet] under section 12 ... is virtually unbounded, the Attorney-General's office said in a submission to the Federal Court.
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