In Canada, a third party has two distinct meanings in the political process. For legal and official purposes, a "third party" refers to agents other than candidates and voters who participate in elections. For example, campaign advertisements funded by groups other than the parties and candidates running may be called "third party advertising". During a campaign period, registered third parties must declare their sources of funding and are restricted in the amounts they can spend in advocating for or against a party or candidate. See Harper v. Canada for the Supreme Court decision upholding the constitutionality of these restrictions in the Canada Elections Act.
The second, formerly popular, definition is derived from the phrase in American parlance: a relatively small federal or provincial political party that is not usually considered to have a realistic chance of forming a government, but has representation in the federal House of Commons or the provincial legislature. While both the Congressional and Westminster parliamentary systems tend to reward two dominant parties or blocs, the ability in the latter for third parties to compete and affect the outcome of elections is a major point of differentiation for Canadian political culture and history. In the US, a "third party" describe any party besides the Democrats and Republicans as regardless of their relative position; in the Canadian context (and for the purposes of this article), it more commonly refers to the largest party that does not form the government or Official Opposition. The efficacy of these parties often depends on whether they qualify for party status and are thus entitled to play a formal role in the legislative process. Since the House of Commons standing orders were amended in 1963 to recognize smaller parties, the third-largest party has always met the criteria for status. However, each legislature has different standards, and this is not always the case.