A Toronto lawyer believes Thursday's court decision that Canadian Blood Services has the right to ban gay men from donating blood is more than just disappointing; it sets a dangerous precedent for how governments can shirk their Charter responsibilities.

R. Douglas Elliott, an equality rights expert who represented the Canadian AIDS Society in the case, says the judge made a serious error in declaring Canadian Blood Services a non-government entity.

In the decision, Ontario Superior Court Justice Catherine Aitkin ordered a Toronto man, Kyle Freeman, to pay $10,000 to the blood agency for lying about his sexual history while donating blood.

Though Freeman attempted to argue that his rights were violated when the blood agency discriminated against him because of his sexual history of having sex with other men, Aitkin ruled that the Charter of Rights didn't apply in this case.

The Charter affects only government activities or government actors (such as the police), but the court ruled that Canadian Blood Services is not a government agency. Aitken decided that because of the agency's bureaucratic structure and the fact that it does not take day-to-day direction from government, it not a government agency.

Not only does Elliott disagree, he says the ruling sets a worrying precedent.

"This creates a roadmap for governments to contract out of the Charter of Rights. And that's a very dangerous situation," Elliott told CTV's Canada AM Friday.

Elliott notes that Canadian Blood Services is owned by the provincial government and its directors are appointed by the provincial government. It's also fully funded and regulated by the federal government.

"So despite the fact that CBS walks like a duck and talks like a duck – it looks like government to most Canadians – in the eyes of the court, it's really a drug manufacturer, just like Bayer," Elliott said.

He now worries whether the ruling will tempt governments to simply incorporate their departments, or contract them out, so that they can be shielded from future Charter challenges and avoid more costly lawsuits.

"In the future, that any time that government had a controversial area – like immigration or prisoners, you could think of lots of examples – all they would have to do is incorporate and they could conceivably get around the Charter of Rights," Elliott said.

"It's a giant loophole and I think that's very dangerous."

Dr. Graham Sher, the CEO Canadian Blood Services says he's pleased the court decided his agency is an independent corporation that's at arm's length from government.

But he says his agency did ask the judge to offer an opinion on the Charter's application to this case as if the Charter did apply.

"And in her ruling in that regard, she made a couple of very important points," Sher told Canada AM.

"Firstly, blood donation is not a right. There is no law or obligation that requires Canadians to be blood donors and Canadian Blood Services is under no obligation to receive a donation. Blood donation is a gift; it's not a right."

Secondly, Sher said, the court decided that his agency's policy to not accept blood donations from men who have sex with men does not distinguish on the basis of sexual orientation, but rather, is based on health and safety issues -- in particular, the much higher prevalence of HIV and other diseases in the men-who-have-sex-with-men population.