Canada: A Primer On Diplomatic Immunity In Commercial Dealings

Last Updated: September 11 2018
Article by John Adair

Diplomatic immunity, distinct from state immunity, is an issue that does not often arise in commercial relations, but one that Canadian companies must nonetheless be mindful of when dealing with foreign states. This article provides a primer on diplomatic immunity.

Nature and Sources

Diplomatic immunity is the protection offered to diplomatic personnel and assets to shield them from the jurisdiction of domestic courts, often referred to as the "host" state's courts. Although it is a broad generalization, diplomatic immunity can usefully be thought of as providing immunity to diplomatic personnel and assets where they are engaged in a diplomatic function. The starting point for the scope of diplomatic functions is:

Article 3

  1. The functions of a diplomatic mission consist, inter alia, in:

    1. Representing the sending State in the receiving State;
    2. Protecting in the receiving State the interests of the sending State and of its nationals, within the limits permitted by international law;
    3. Negotiating with the Government of the receiving State;
    4. Ascertaining by all lawful means conditions and developments in the receiving State, and reporting thereon to the Government of the sending State; and,
    5. Promoting friendly relations between the sending State and the receiving State, and developing their economic, cultural and scientific relations.1

Diplomatic immunity arises under international law, primarily from the Vienna Convention on Diplomatic Relations (the "VCDR").2 The VCDR was drafted in 1961 and entered into force in 1964; it has now been ratified by 191 countries including the United States, Canada, and the UK.

Canada's ratification of the VCDR creates an obligation under international law to adhere to it, but does not per se create a domestic legal obligation. However, all international law is incorporated into Canadian domestic law unless there is specific contradictory domestic legislation, per the Supreme Court of Canada decision in Hape.3

Finally, Canada's Foreign Missions and International Organizations Act4 ("FMIOA") creates some confusion by expressly incorporating certain articles from the VCDR into the law of Canada. It is an open question whether Parliament's intent was that the articles not expressly incorporated are not to be considered part of Canadian law, but that question is likely not of great consequence in light of Hape.

Distinction from State Immunity

Diplomatic immunity must be distinguished from state immunity. Justice Braid in Canadian Planning v. Libya summarized the distinction this way:

[44] The functions of a diplomatic mission are to represent the sending State in the receiving State. In that sense, diplomatic functions lie within the greater circle of State functions. However, it is recognized that the diplomatic functions enjoy greater immunity and protection than the larger circle of State activity.

[45] There is no question that, as a matter of law, diplomatic immunity is different from State immunity. In the text Diplomatic Law: Commentary on the Vienna Convention on Diplomatic Relations, 3rd Ed. (Oxford: Oxford, 2008), Eileen Denza recognizes that they serve different purposes:

As international rules on State immunity have developed on more restrictive lines there has always been a saving for the rules of diplomatic and consular law and an increasing understanding that although these sets of rules overlap they serve different purposes and cannot in any sense be unified.5

It is noteworthy that while state immunity is slowly being abrogated in domestic and international law, diplomatic immunity holds strong, with no recognized exceptions in civil proceedings (criminal proceedings being outside the scope of this brief article).

I now want to examine three specific scenarios in which lawyers should pay attention to diplomatic immunity when their clients are, or are dealing with, foreign states or state actors.

Drafting Contracts

If your client is entering into a commercial relationship with a foreign state or state actor (such as an embassy, or member of the diplomatic staff), you will want to consider whether to insert into the agreement a waiver of both state and diplomatic immunity. An example of the failure to do so is the recent case of Construction Excedra Inc. v. Saudi Arabia, in which the plaintiff construction company was owed some $964,000 for construction of a cultural centre on property owned by the defendant state. When Saudi Arabia refused to pay, the plaintiff registered a lien on the property. Saudi Arabia successfully moved to have the action dismissed, and the lien discharged, on the basis of diplomatic immunity.6

This problem could have been avoided by drafting a contract that provided an express waiver of both state and diplomatic immunity. Such a waiver must be crystal clear and unequivocal, and must expressly provide for a waiver of both types of immunity, not only from the court's adjudicative jurisdiction but also from its enforcement jurisdiction. Waivers of immunity are construed narrowly, so drafting solicitors must be very careful to use appropriate language.

Immunity from Enforcement

Absent a waiver of immunity, enforcing a judgment against a foreign state can be exceptionally difficult. The foreign state likely has limited assets in Canada, and the most obvious assets will be the embassy property and bank accounts.

A state's property is immune from enforcement where it is used for diplomatic purposes, as described in Article 3 of the VCDR, quoted above. The "diplomatic purposes" set out in Article 3 are exceptionally broad, and virtually any use can be fit into the language of Article 3. A better reading of Article 3 would limit it to activity that is truly "official" in nature, but as the law presently stands there is considerable risk for parties with claims against foreign states seeking to enforce those claims against the state's assets.

Building a Record

Finally, if proceedings are taken and diplomatic immunity is raised, the non-state party will be significantly constrained in its efforts to build an evidentiary record to test the immunity claim. The rules of diplomatic immunity prohibit in many cases requiring production of a foreign state's records that would be necessary to test the immunity claim. Counsel must be aware that even if there is reason to believe that immunity is being claimed improperly, there may not be any way to engage the court in a proper review of the assertion.

Conclusion

Commercial relations with foreign states are not uncommon, and most lawyers assisting clients with such relationships will turn their minds to state immunity. However, diplomatic immunity must also be recognized and addressed at the outset of the relationship, lest your client have a claim that cannot be pursued in the face of an assertion of diplomatic immunity.

Footnotes

1. Vienna Convention on Diplomatic Relations, infra, article 3.

2. http://legal.un.org/ilc/texts/instruments/english/conventions/9_1_1961.pdf The VCDR has a sister treaty, the Vienna Convention on Consular Relations, which is outside the scope of this paper but which provides for consular immunity.

3. R. v. Hape, 2007 SCC 26 at paras. 39, 53.

4. S.C. 1991, c. 41.

5. Canadian Planning v. Libya, [2015] O.J. No. 3457 (S.C.J.).

6. Construction Excedra Inc. v. Saudi Arabia, [2017] O.J. No. 89 (S.C.J.)

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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