IF THE HARPER GOVERNMENT IS truly serious about building an efficient Canadian economy for the 21st century, then a national securities regulator has to be at the foundation.

But the major reason the government should try again is that the decision of the Supreme Court of Canada (SCC) in December seemed to be inviting Ottawa to try again. Although the SCC may have ruled that the proposed Canadian Securities Act, as it was drafted, would be unconstitutional, the decision still left open the possibility of a national regulator based on a more co-operative model.

The SCC judges ruled that the federal government cannot impose a “wholesale takeover” of regulation of securities as proposed in the draft legislation. Their decision indicated, however, that a new model built on intergovernmental co-operation might lead to a national regulator everyone can live with.

Of course, this would require Ottawa to learn to play nice with other levels of government – and, so far, that seems not to be an easy task for the Harper government.

The feds might consider trying again, with a lot less attitude. As the SCC noted, “We have not been asked for our opinion on the extent of Parliament’s authority over securities regulation.” That seems to be saying that the SCC found Ottawa’s argument in the case too arbitrary and in need of a rewrite.

As Ottawa academic Gord DiGiacomo noted recently on ipolitics.ca: “Ouch! The implication here is that if the federal case had been grounded more firmly, the justices may have decided differently.”

The judges put it this way: “Co-operation is the animating force. The federalism principle upon which Canada’s constitutional framework rests demands nothing less.”

Clearly, the feds are being sent a message by a court that has already had several run-ins with the Harper government: “It is not for the court to suggest to the governments of Canada and the provinces the way forward by, in effect, conferring in advance an opinion on the constitutionality on this or that alternative scheme.”

The Harper government probably does deserve a stern rebuke. Since the 2011 election, “co-operation” and “consultation” doesn’t seem to be in its vocabulary.

But Ottawa, and Canadians at large, probably would be right in reminding the judges about some things.

Historically, federal and provincial jurisdiction has been divided on the following basis: Ottawa has power over national commerce – the big-picture stuff, in layman’s terms; the provinces are in charge of civil rights of citizens to go about their business on a day-to-day basis.

So, while most of us have long believed there is some sort of complicated equation in the Canadian Constitution that provides the demarcation between federal and provincial powers, there is not.

We can thank the judicial committee of the Privy Council of Britain, which acted as Canada’s final court of appeal until 1949, for deciding who regulates what in Canadian life. This committee decided in 1881 that while Ottawa should regulate things affecting the entire country (such as the banking system), the provinces should be in charge of securities trading at a time when stock exchanges barely existed and financial instruments such as derivatives were beyond human imagination.

The committee’s decision may have made sense in 1881; but it doesn’t make sense now. Judges haven’t been shy about reinterpreting the law on matters covered by the Charter of Rights and Freedoms. Maybe they should be taking a fresh look at matters affecting the Canadian economy.

And maybe Ottawa should take the initiative for a new national debate that would lead to the creation of an Economic Charter of Rights; such a charter could cover everything from capital markets to free trade between provinces.

Of course, someone would have to explain to the prime minister that a debate means the other guy has a chance to contribute ideas and that public policy is advanced through free discussion and leadership rather than heavy-handedness.

Our economic policy doesn’t have to be frozen in time. All levels of government and the courts should be working to bring it up to date.

© 2012 Investment Executive. All rights reserved.