In a 32-17 vote, the Senate shot down a ruling by Speaker Leo Housakos that would prevent the government from shutting down debate on Bill C-377.
The appeal was brought by Claude Carignan, government leader in the Senate.
He was backed all Conservative senators except Diane Bellemare, who voted with the Liberals and Speaker, and five others who abstained.
The stage is now set for the Senate to shut down debate on Bill C-377, which had been going on for days as Liberal senators conducted a filibuster they said they were prepared to continue, if necessary, until Parliament is dissolved for this fall's election, thereby killing the legislation.
That means the Conservatives could now force a vote and pass C-377 with their majority, in spite of opposition from Liberal senators — and from seven provinces — who feel the bill is unconstitutional.
Bill C-377 would require unions and labour organizations to publicly disclose the details of their spending, including how much goes to political activities.
"This is extraordinary," James Cowan, Liberal leader in the Senate, said to media in its foyer shortly before the vote.
Motion not 'very exceptional'
"Here's a Speaker who's recently appointed by the prime minister and he has done the proper thing in my view. He's followed the precedent of Speaker Kinsella, clearly saying that you cannot mix government and private business, and the government now is seeking to overrule his decision," he said.
"That is almost unprecedented and I think very, very unwise."
On Thursday, the government's deputy leader in the Senate, Yonah Martin, gave notice of a motion to cutting off debate and forcing a final vote on the bill, likely early next week.
However, Senate rules allow the government to limit debate only on government business, not on private member's bills such as the union disclosure bill.
Housakos, ruling against the motion, says that allowing the government to shut down debate on private member's bills like C-377 would violate the basic principles of how the Senate operates.
Seconds after Housakos delivered his ruling, Carignan announced he would appeal to the Senate as a whole.
"For me, it's very clear. It's in the rules. This type of motion [has existed for a] long time and it's not something very exceptional," he said to reporters.
In 2009, Liberal senators — who had the majority — challenged and overturned a ruling by then-Speaker Noel Kinsella.