A group representing American expatriates has sued Canadian government challenging the constitutionality of an intergovernmental agreement between the US and Canada that forces domestic banks to comply with the US Foreign Account Tax Compliance Act (FATCA).
The lawsuit was filed in the Federal Court of Canada by the Alliance for the Defense of Canadian Sovereignty on behalf of two US-born plaintiffs who grew up in Canada and continue to live there.
The lawsuit alleges that the Canada-US intergovernmental agreement violates Canadian Charter of Rights and Freedoms.
In addition, the suit also argues Parliament went beyond its jurisdiction in imposing the FATCA reporting structure on credit unions, which are provincially regulated.
The lawsuit says, "The impugned provisions are grossly over-inclusive in that they capture persons who have no tax liabilities to the United States.
"They seriously interfere with the privacy, liberty and economic interests of US persons and persons whose accounts are associated with US person indicia."
The deal was announced in February and passed into law in June as part of the budget bill.
"The government is confident that the legislation in question is constitutionally valid," The Wall Street Journal quoted said a spokesperson for the Canadian Department of Finance as saying.
"The government is prepared to defend the legislation in court," spokesperson added.