The Liberal Party is claiming full discretion to wade into local races and decide who can run for its nominations even as Prime Minister Justin Trudeau publicly insists the process is open and in the hands of local members, internal documents show.

Nomination races for by-elections in Markham-Thornhill and St-Laurent, two strongholds in the Greater Toronto Area and Montreal respectively, have been mired in bitter infighting.

The Liberals faced allegations the process was rigged to favour specific candidates because new members were shut out of the vote in Markham-Thornhill and a local power broker was rejected as a candidate in St-Laurent.

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Globe editorial: Sunny ways, with a chance of cloudy Liberal nominations

In his four years as Liberal Leader, Mr. Trudeau has striven to transform the party into a political movement that offers free memberships and give its supporters broad powers. However, the nominations furor stands to hurt efforts to rebrand the Liberals as a grassroots organization that lets local members make key decisions.

A long-time Mayor of the borough of St-Laurent in northwestern Montreal, Alan DeSousa received a terse four-paragraph letter last week informing him the party's Green Light Committee, which vets prospective candidates, had turned down his bid to seek the nomination. It gave no rationale for the decision, which he has appealed to a newly created dispute-settlement body.

Internal records show the Liberal Party responded that it was simply exercising the broad powers that are at its disposal and not subject to any Charter challenge.

The Green Light Committee "had no obligation to provide reasons" for its decision, party lawyer Craig Munroe said in a submission to the Permanent Appeal Committee.

Mr. Munroe, who is the Liberal Party's constitutional and legal adviser, added the Green Light Committee had the "sole and unfettered discretion" to accept or reject Mr. DeSousa's candidacy.

Mr. DeSousa lost his appeal. His case, which was the first to be determined under the party's current rules, will be a precedent for future disputes.

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Mr. DeSousa said in an interview that the party's decision has opened the door to an easy victory for Yolande James, a former provincial minister with strong allies in the Liberal hierarchy.

"I've been taken out of the game because they feel that I am the biggest threat to their party-chosen candidate," Mr. DeSousa said. "I do think the legitimacy of the process is severely impaired and I question the legitimacy of whichever candidate is ultimately selected, because of what has gone on."

Mr. Trudeau said last week that the Liberal Party is choosing its candidates through a fair and transparent process.

"Open nominations mean that local communities, local Liberals, get to have the final say on who is actually going to be their candidate," Mr. Trudeau said at a news conference in Victoria. He added some people will "speculate and create conflicts."

Only about 200 members voted in the nomination meeting for Markham-Thornhill on the weekend after the party imposed a retroactive cutoff date for signing up new members. Mary Ng, a former director of appointments in Mr. Trudeau's office, won after rival candidate Juanita Nathan dropped out. Ms. Nathan said she signed up 1,600 new members who were declared ineligible to vote because of the procedural move.

Liberals in St-Laurent will chose on Wednesday evening among Ms. James, fiscal law professor Marwah Rizqy and teacher Emmanuella Lambropoulos. The riding was left vacant after former foreign affairs minister Stéphane Dion stepped down earlier this year.

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Mr. DeSousa said the decision to keep him off the ballot will "disenfranchise" hundreds of local Liberals who wanted him as their candidate.

In his appeal filed last week, Mr. DeSousa sought a clear explanation for the rejection of his candidacy. The Permanent Appeal Committee sided with Mr. Monroe, confirming that Mr. DeSousa will not be eligible to participate in the nomination in St-Laurent.

"No one has an unfettered right to become a Qualified Nomination Candidate and participate in the nomination process," wrote Sarah Sidhu and Stéphane Lacoste, co-chairs of the appeal committee. "We conclude that the appeal [by Mr. DeSousa] has no chance of success and it is not necessary to hold a hearing."

In the interview with The Globe, Mr. DeSousa acknowledged the fact that he worked in Montreal municipal politics alongside officials who were eventually caught up in corruption or collusion scandals may have been a factor in the decision.

In his appeal, Mr. DeSousa said he was "shocked and distressed" by his rejection. He was particularly angry that the two members of the Green Light Committee who interviewed him on Feb. 24, Leanne Bourassa and Suh Kim, did not give him an opportunity to respond to any allegation that might have been made against him.

"All the matters discussed were matters that are easily verifiable, have no impact on my candidacy and do not in any way impact the LPC in a detrimental manner," Mr. DeSousa said in an affidavit. "Clearly the discussion by telephone did not allow the members of the Committee to comprehend the entire fact pattern of any or all matters discussed."

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He said he has an unblemished record in public life and would have gladly rebutted any allegation.

"If you have something, bring it on," he said, adding that the speculation since he was rejected has been detrimental to his reputation.

Ms. James was a minister between 2007 and 2012 in a provincial Liberal government that was also hurt by scandals. She has refused to comment on the controversy.

The by-elections in St-Laurent and Markham-Thornhill, as well as two in Alberta and one in Ottawa-Vanier, will be held on April 3.

With reports from Steven Chase in Ottawa and Justine Hunter in Victoria