The recent and unprecedented decision in Canada (Attorney General) v. Heffel Gallery Limited  brings clarity to the interpretation of the Cultural Property Export and Import Act  (the “CPEIA”) and the concepts of “outstanding significance” and “national importance” that are at the core of this legislation. In Heffel, the Federal Court of Appeal  ruled that a cultural object created in a foreign country may nonetheless be of “national importance” to Canada, allowing it to receive special tax treatment under the Canadian Income Tax Act as well as protection in export and import transactions under the CPEIA.
Heffel resulted from a legal dispute involving French artist Gustave Caillebotte’s impressionist painting Iris bleus, Jardin du Petit Gennevilliers (1892) (the “painting” or “Iris bleus”) and a Toronto auction house. The dispute originated in 2016 following the auction of the painting by a Toronto-based owner, Heffel Fine Art Auction House, to a commercial gallery in London, UK. The day after the auction sale, Heffel applied to the Department of Canadian Heritage for a cultural property export permit to send the painting abroad, which permit was refused.
In Canada, cultural properties that are more than 50 years old and whose creator is no longer living are subject to inclusion in the Canadian Cultural Property Export Control List established under the authority of the CPEIA (the “Control List”). The Control List divides cultural properties into eight groups, each setting out its own distinct criteria for inclusion:
- Group I: Objects recovered from the Soil or Waters of Canada (archaeological objects, and fossils and minerals);
- Group II: Objects of Material Ethnographic Culture (ethnographic objects including Aboriginal, Métis and Inuit objects);
- Group III: Military Objects;
- Group IV: Objects of Applied and Decorative Arts;
- Group V: Objects of Fine Arts;
- Group VI: Scientific and Technological Objects;
- Group VII: Textual Records, Graphic Records and Sound Recordings (archival material including documents, photographs, maps, sound recordings and films); and
- Group VIII: Musical Instruments.
The fact that an object is included in the Control List does not mean that its exportation is automatically restricted. The Control List merely serves to indicate which cultural properties must be submitted to the federal Department of Canadian Heritage (“Canadian Heritage”) for an assessment of whether the object is of “outstanding significance” and “national importance”. Should both of these criteria be met, an export permit will not be issued, irrespective of the reason(s) for exporting the cultural property, whether the property will be sent away permanently or temporarily, or the length of time during which the property has been in Canada. It is a criminal offence to export or attempt to export objects that are in the Control List without an export permit. Penalties include fines, imprisonment or both.
In Heffel, Canadian Heritage refused to issue such a permit, a decision that Heffel sought to have reviewed by the Canadian Cultural Property Export Review Board (the “Review Board”). In rejecting Heffel’s application, the Review Board concluded that Iris bleus met the CPEIA’s requirements of “outstanding significance” and “national importance”. Cultural objects are of “outstanding significance” when they are “closely associated with Canadian history or national life” or have “singular and striking aesthetic qualities” or where the nature of the property is of “great value in the study of the arts or sciences”. “National importance” is different from “outstanding significance” insofar as the former applies to objects that have “such a degree of national importance that their loss to Canada would significantly diminish the national heritage”.
After confirming that the painting met the criteria subjecting it to the Control List under Group V, the Review Board determined that the work was both of “outstanding significance” and “national importance”, highlighting that apart from Iris bleus, there is only one other work by Caillebotte in Canada. The Metropolitan Museum of Art in New York, notwithstanding its prominence, also only has one painting from the artist, which seriously limits opportunities for Canadians to study Caillebotte’s art. The Review Board considered Iris bleus to be of “outstanding significance” for its value in the study of arts since the artist was one of the leading exponents of French Impressionism.
The Review Board also opined that cultural objects originating from outside Canada can meet the required degree of national importance even if they do not have any other connection with Canada. Further basis for the Review Board’s decision included the scarcity of works by Caillebotte in Canadian collections, and the fact that Iris bleus is a “highly desirable example of Impressionist landscape painting”. The provenance – Iris bleus came from the inventory of Ambroise Vollard, one of the most important dealers of French contemporary art in the 20th century – authenticity and condition of the painting were also relevant in the Review Board’s decision to keep it in within Canadian borders. Following the Review Board’s decision, Heffel sought judicial review before the Federal Court. This was the first time an application for judicial review of cultural property export was brought since the CPEIA’s coming into force. 
The Federal Court quashed the Review Board’s decision and ruled that its interpretation of “national importance” was unreasonable for being overly broad; it also considered that the Review Board’s determination that the painting was of “national importance” was also unreasonable. In reaching such conclusions, the court relied heavily on the fact that the author of the painting was a French artist and that his work was not in any way directly connected to Canada’s cultural heritage. The judge pointed out that the painting had never been in display in Canada since its arrival in the country and was not connected to any Canadian artistic movement or style. In sum, Iris bleus was an international work from an international artist and therefore was not one of “national interest”. The Federal Court then sent the decision back to the Review Board for reconsideration, this time under a different panel of decision-makers.
Aiming to defend Canada’s interests, the Attorney General of Canada appealed the Federal Court’s decision before the Federal Court of Appeal (the “FCA”). The FCA ruled that the lower court applied the wrong standard of review and erred in not deferring to the decision of the Review Board, which had taken a broader approach as to what can be considered Canadian cultural heritage. In Canadian administrative law, there are only two standards of review on judicial reviews: reasonableness and correctness. The standard of review dictates the level of deference the courts will apply to administrative decisions. Questions of law involving a decision maker’s own statute, or statutes connected to the decision maker’s function, as was the case in Heffel, should be reviewed on reasonableness.  Thus, if the original decision falls within a range of defensible solutions, the reviewing court must show a high level of deference for the decision reached by the appointed decision maker.
In the case at bar, the FCA concluded that the Federal Court did not apply a standard of reasonableness and failed to show deference to the Review Board’s decision, proceeding instead with what the FCA called a “disguised correctness review”. In coming to such a conclusion, the FCA took stock of the fact that expressions such as “national importance” and “national heritage” are not defined in the statute. Also, along the same line of thought, the words “significantly” and “of such a degree”, which are part of the “national importance” test, are broad qualifiers calling upon the Review Board’s subjective consideration. It therefore follows that it was Parliament’s intention to confer upon the Review Board a wide discretion to assess and determine whether an object is of “outstanding significance” and “national importance”, and to determine on a case-by-case basis the impact of letting an object included in the Control List leave the country. Thus, the FCA ruled that the Review Board’s decision not to issue an export permit could not be overturned on subjective grounds.
The Chagall Imbroglio
In 2018, another polemic situation involving a cultural object occurred although the matter was never brought to the courts. The National Gallery of Canada manifested the intention to auction the painting La Tour Eiffel (1929) by the French artist Marc Chagall, at Christies in New York. The National Gallery intended to use the proceeds of the sale to acquire the painting Saint Jerome hears the trumpet of the last judgment (1779) by Jacques-Louis David from a church in the province of Quebec. However, two other museums in Quebec also claimed to have an interest in buying this work, which led the Quebec Minister of Culture to intervene and declare Jacques-Louis David’s work part of Quebec’s cultural heritage.
Because of the Minister’s intervention, the Minister’s consent would now be required before the work could be sold to a buyer outside Quebec. In addition to the Quebec Minister’s intervention, a large wave of criticism and public outcry convinced the National Gallery to cancel the auction of La Tour Eiffel in New York. The idea that this sale would represent a loss to Canada led to questions of whether a permit to export would be necessary. This question became moot when the National Gallery decided to withdraw its offer to sell La tour Eiffel.
In conclusion, the Heffel decision establishes that the concepts of “outstanding significance” and “national importance” are not to be given restrictive interpretations. Parliament intentionally opted to give Canadian Heritage and the Review Board a wide discretion to assess, on a case-by case basis, the degree of importance that a cultural object holds for Canada and how its exportation would affect Canadian heritage. As such, the decision is an important precedent, with implications going beyond simply keeping cultural property in Canada.
Canada’s Income Tax Act (the “ITA”) provides favourable tax treatment for dispositions of certified cultural objects to designated donees, which can be charities, public bodies performing a function of government or other organizations such as museums and art galleries. This treatment includes a tax exemption for capital gains realized on the disposition of such objects and, when the disposition is by way of a gift, the provision of a tax credit or a deduction to donors. In order to benefit from these measures, a taxpayer (whether an individual or corporation) who disposes of, or proposes to dispose of, a cultural property must obtain from the Review Board a certificate establishing that the property meets the CPEIA’s criteria of “outstanding significance” and “national importance”. Had the Federal Court’s decision not been overturned, a chilling effect on donations of foreign cultural objects to qualified donees might have emerged, affecting the ability of museums to augment their collections. The FCA’s decision bodes well for the Canadian art world.
This article written by Martin Aquilina, International Business Lawyer, assisted by Marcela Souki, articling student, of HazloLaw Business Lawyers | Avocats d’affaires.
 2019 FCA 82 (hereafter “Heffel”)
 Cultural Property Export and Import Act (R.S.C., 1985, c. C-51)
 See s.11 (1) (a) and (b) of the CPEIA
 The Federal Court of Appeal is a Canadian appellate court that hears cases in connection with matters of federal jurisdiction. The Court has jurisdiction to hear appeals from inter alia the Federal Court, and judicial review applications in connection with certain federal boards and tribunals. The Court’s decisions are appealable to the Supreme Court of Canada.
 https://www.canada.ca/en/canadian-heritage/services/export-permits-cultural-property.html (last checked on June 5, 2019)
 See sections 40, 41, and 45 of the CPEIA
 In addition to the CPEIA, the Outstanding Significance and National Importance framework (OS/NI) (online at https://www.canada.ca/content/dam/pch/documents/services/movable-cultural-property/oSNIGuide-eng.pdf) provides some guidance in order to assist applicants in addressing “national importance” and “outstanding significance” in their application. According to the OI/NI framework, “outstanding significance” is a question of nature and kind (i.e., what?) whereas “national importance” is a matter of degree (i.e., how much, to what extent?). It is notable that the OS/NI framework uses terms that are not in the CPEIA, such as “singular”, “striking”, and “closely associated”
 Heffel, para 25
 Herman, Alexander. “Court decision on Caillebotte export rocks the boat”. Online at > https://ial.uk.com/court-decision-on-caillebotte-export-rocks-the-boat/
 See Dunsmuir v. New Brunswick  1 SCR 190 and Smith v. Alliance Pipeline Ltd.  1 SCR 160
 Ibid footnote 9
 Ibid footnote 9