Points of law

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Summary of the case

At the time of the invasion and occupation of Kuwait in 1990, the Iraqi government ordered its national airline, the Iraqi Airways Company (“IAC”), to appropriate the aircraft and equipment of the Kuwait Airways Corporation (“KAC”). After the war, KAC recovered only some of its aircraft. KAC brought an action for damages against IAC in the United Kingdom. After lengthy and difficult proceedings, IAC was ordered to pay over one billion Canadian dollars to KAC. Alleging that Iraq had controlled, funded and supervised IAC’s defence throughout the proceedings, which had been marked by perjury and by tactics on the part of IAC and Iraq that were intended to deceive the British courts, KAC also claimed costs totalling approximately $84 million in Canadian currency from Iraq. In 2008, the High Court of Justice ordered Iraq to pay the amount in question. According to the English judge, Iraq’s acts in controlling IAC’s defence were not sovereign acts, but instead fell, under the State Immunity Act 1978 (U.K.), within the commercial exception to the principle of state immunity. KAC applied for recognition of that judgment in the Quebec Superior Court. Iraq, relying on the State Immunity Act (“SIA ”), moved for dismissal of the application for recognition on the ground that the impugned acts were sovereign acts and that it was accordingly entitled to immunity under Canadian law. The Superior Court dismissed the application for recognition and the Court of Appeal dismissed the appeal. In their view, Iraq’s participation in the proceedings brought against IAC in England did not fall within the commercial activity exception to the state immunity established in the SIA .



Held: The appeal should be allowed.



The effect of s. 170 of the Act respecting the implementation of the reform of the Civil Code is that the Civil Code of Québec governs the application for recognition, because Iraq’s involvement and the order against Iraq are solely the result of the fraudulent acts in issue in the proceedings that resulted in the 2008 English judgment, which were brought after that Code came into force.



The SIA applies to an application for recognition of a foreign judgment. Article 3076 C.C.Q. provides that the provisions of the Code relating to private international law, which include those on the recognition of foreign decisions, apply subject to those rules of law in force in Quebec that are applicable by reason of their particular object. The rules in question include the SIA . Moreover, an application for enforcement is a judicial demand that gives rise to an adversarial relationship to which the general rules of civil procedure apply as a result of arts. 785 and 786 of the Code of Civil Procedure. It is therefore a “proceeding” (or “instance” in French) to which the state immunity provided for in s. 3 of the SIA applies. Since Iraq is a state, it is in principle entitled to this immunity. Even though the English court rendered its own decision on the issue, that decision is not res judicata in Canada. It is up to KAC to establish, under Canadian law, that it may rely on an exception to this immunity. However, the court hearing the application must confine itself to the role conferred on the Quebec authority for the consideration of an application for enforcement. It cannot review the merits of the decision (art. 3158 C.C.Q.).



In this case, Iraq could not rely on the state immunity provided for in s. 3 of the SIA , because the commercial activity exception provided for in s. 5 applied. For this exception to apply, it is not enough to determine whether the acts in issue in KAC’s action against Iraq in the English courts were authorized or desired by Iraq, or whether they were performed to preserve certain public interests of that state. The nature of the acts must be examined in their full context, which includes the purpose of the acts. To this end, it is necessary to accept the English judge’s findings of fact to the effect that Iraq was responsible for numerous acts of forgery, concealing evidence and lies that misled the English courts. Furthermore, the litigation in which Iraq intervened to defend IAC concerned the retention of KAC’s aircraft after they had been seized. There was no connection between that commercial litigation and the initial sovereign act of seizing the aircraft. The exception to dismiss regarding the application for recognition should therefore be dismissed and the case should be remanded to the court of first instance to hear the application.

Sources

Supreme Court Judgments [2010] 2 SCR 571

Additional information (explanations, notes, etc.)

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