In October 2010, the Supreme Court of Canada released a decision dealing with recognition and
enforcement of a foreign judgment against a foreign state. The
decision will have particularly interesting ramifications in
matters involving claims of state immunity and alleged commercial
activity by foreign states but it also clarifies certain
evidentiary rules governing recognition and enforcement
In 1990, following the invasion of Kuwait, the Iraqi government
ordered its state-owned airline, Iraqi Airways Company (IAC) to
appropriate the aircraft and equipment belonging to Kuwait Airways
Corporation (KAC). When the war was over, KAC was only able to
recover some of its aircraft from IAC. KAC brought an action
against IAC before the United Kingdom's High Court of Justice
in 2008. The Republic of Iraq was added as a second defendant. In
the UK proceedings, Iraq was found to have controlled, funded and
supervised IAC's defence throughout the proceedings and to have
intentionally deceived the English Courts (through forgery,
concealing evidence and lies). While IAC was ordered to pay KAC the
equivalent of over $1 Billion CAD, Iraq itself was ordered to pay
KAC the equivalent of approximately $84 Million CAD. The High Court
of Justice held that the state immunity did not excuse Iraq because
its control of IAC's defence was not a sovereign act but,
rather, fell into the commercial activity exception to the state
KAC sought to have the UK decision recognized by the Superior
Court of Québec, and Iraq brought a motion to dismiss the
application by KAC and invoked Canada's State Immunity
Act (SIA), which is similar to the law applied in the UK and
which also contains an exception for "commercial
activities". The Superior Court granted the motion and
dismissed the application for recognition and enforcement, on the
grounds that Iraq's participation in the proceedings brought in
England did not fall within the commercial activity exception to
state immunity established in the SIA. That decision was upheld by
the Court of Appeal of Québec and KAC appealed to the
Supreme Court of Canada.
Decision and discussion
The Supreme Court of Canada allowed the appeal by KAC and sent
the application for recognition and enforcement back to the
Superior Court of Québec. The Court reiterated the principle
that a Court hearing an application for recognition of a foreign
judgment must not review the merits of the original decision itself
but confirmed that it remains an adversarial "proceeding"
such that the SIA applies. It was, however, open to KAC to
establish that the commercial activity exception in the SIA also
applied. The English Court's decision on this issue was not
determinative — but in order to reach its own conclusion
on whether the commercial activity in the SIA applied, the local
Court would rely on the findings of fact made by the English Court
with respect to Iraq's actions.
Finally, in overruling the lower Courts, the Supreme Court of
Canada held that although the initial decision to appropriate
KAC's aircraft and equipment may have been a sovereign act, the
issue before the English Court involved not the appropriation but
the retention of the aircraft and Iraq's involvement in that
litigation therefore qualified as a commercial activity. The nature
of Iraq's actions that were the object of the English decision
(forgery, concealing evidence and lies in the context of litigation
about the retention of the aircraft) was such that it fell within
the definition of commercial activity rather than that of sovereign
acts. In other words, seizure of property by a state is not a
commercial activity — but engaging in litigation to
retain it later may be.
This case is a clear confirmation that, in the event of an
application to recognize and enforce a foreign judgment, even if
the local Courts do not review the merits of the original decision
and rely on findings of fact made by the foreign Court, there is
still a serious adversarial process here in which those original
findings of fact will be considered in light of local law. The
decision will be of particular interest, however, in cases
involving foreign governments. The immunity normally granted to
foreign states under the SIA will not always apply where the
state's actions can be tied to a commercial interest.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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