Renvoi: Lex Situs Conflictus

Canadian Conflict of Laws Blawg by Seva Batkin

“Cougar Ace” – Jurisdiction for Federal Matters

Posted by Seva on July 23, 2008

Thus far, posts on this blawg have only discussed conflicts decisions from provincial courts. In a change of pace, I want to bring to everyone’s attention a recent conflicts case from the Federal Court of Appeal: Mitsui O.S.K. Lines Ltd. v. Mazda Canada Inc., 2008 FCA 219. This case – a legal component of the well-publicized “Cougar Ace” drama – is interesting both for its extensive discussion and application of FNC principles, and for its somewhat questionable approach to jurisdiction simpliciter.

First, a little bit of background. In July 2006, “Cougar Ace”, a Singapore-flagged car carrier vessel, was en route from Japan to Canada and the US with a load of 4,812 brand new Mazda and Isuzu vehicles with a total value of approximately $117M. On July 23, during a “routine” ballasting operation, the ship lost stability and listed 60% to port. The crew was evacuated off the ship by the U.S. Coast Guard helicopters and the ship’s owner, Mitsui O.S.K. Lines, called in an elite Seattle salvage outfit Titan Salvage. In a daring and deadly operation, the salvage team was able to re-ballast the ship so that it could be towed. Although most of the vehicles were not visibly damaged, Mazda decided that it did not want to take the risk of selling the vehicles that were “tied-down at severe angles for an extended period” and decided to destroy them.

Naturally, legal consequences soon followed, and Mazda Canada and Mazda USA sued the ship’s owner, charterer (MOB COUGAR (PTE) Ltd.), and the ship’s chief and second engineers, in personam and in rem, in Canada (Federal Court), US (Oregon), and Japan. At the same time, Mitsui sued in Japan seeking a declaration of non-liability. The Oregon action was dismissed based on the jurisdiction clause in the contract, which stated that the carrier could only be sued in Japan. Mitsui applied to stay the Canadian action on the basis forum non conveniens but was unsuccessful at the trial division.

The key to overriding the contractual jurisdiction selection clause was s. 46(1) of the Maritime Liability Act, which allows a party to sue in Canada notwithstanding such a clause if the port of loading/unloading is in Canada, the defendant resides or operates in Canada, or the contract was made in Canada. In OT Africa (FCA), it was held that the court can still decline jurisdiction on the basis of forum non conveniens, which is what Mitsui requested in this case in favour of Japan.

The court’s discussion of the law of forum non conveniens was uneventful. Relying on Spar Aerospace and Amchem, the court explained that a stay will be granted if a party can prove, using inter alia the non-exhaustive list of 10 factors, that another forum is clearly more appropriate:

… it must be clear that the jurisdiction chosen by the plaintiff is inappropriate compared to another obviously superior jurisdiction.

The court then proceeded to review the trial judge’s consideration of the factors (10 from Spar, and three of his own invention) and concluded that the trial judge fell into error by giving too little weight to some and too much to others. In particular, the court concluded that the trial judge did not place nearly enough emphasis on the ongoing proceedings in Japan. The court concluded that it was of no importance that Mazda Canada, the plaintiff in the Canadian action, has chosen to withdraw its claim from the Japanese action pursued by Mazda USA. In the court’s opinion, avoidance of parallel proceedings and international comity militated towards Japan “even though its discovery procedures may be less fulsome than ours.” I note that although the court did not cite any authorities for its decision to disregard the timing of the actions, its approach is congruent with other Canadian authorities, as discussed in a previous post.

Additionally, the court disagreed with the trial judge’s assessment of the importance of:

  • Location of witnesses – the court concluded, without citing any specific evidence, that although “[w]herever this trial is held, witnesses will have to be called from different countries and the costs will be significant for all of the parties; a trial in Japan will likely be the least costly overall.”
  • Applicable law – the court disagreed with the trial judge’s assertion that there no “any differences between the Japanese and Canadian law on the issues involved in the case.”

By handling these issues in Japan in Japanese by Japanese Judges and lawyers a more accurate picture of the complex legal issues of Japanese law will emerge. This would be preferable to dealing with these matters by affidavits translated into English, by Judges totally unaware of the actual Japanese jurisprudence and its legal system.

I note a parallel between the above reasoning and the BCSC’s discussion of admissibility of expert evidence on foreign law in Seidel v. Telus, recently discussed on this blawg.

  • Quantum of damages – the court imported Spiliada for the proposition that higher damages available in another jurisdiction is not a factor supporting a stay.

Thus far, although the extent to which the court decided to substitute its own discretion for that of the trial judge may be questioned, none of its reasoning or conclusions seem particularly controversial. However, the same cannot be said for the court’s (re)consideration of the three additional factors considered by the trial judge:

(1) the public policy of Canada,

(2) the action in rem and

(3) the jurisdiction clause.

Dealing with (1), the court held that the trial judge incorrectly assumed that s. 46(1) “evinced a policy that would favour Canadian plaintiffs in their choice of a forum” because:

The wording of the legislation and the jurisprudence based on it make it clear that subsection 46(1) does not grant Canadian courts jurisdiction; it only allows Canadian courts, if chosen by the plaintiff pursuant to subsection 46(1), to consider whether Canada is the most appropriate forum employing the usual forum non conveniens factors. (See OT Africa, supra.)

While it may be merely an artefact of badly chosen words, but it is difficult to see how s. 46(1) does not grant Canadian courts jurisdiction simpliciter. The conclusion is contradicted by the text of the provision, which expressly allows a party to “institute judicial … proceedings” in an otherwise competent court, and the court’s own earlier statement that the doctrine of forum non conveniens allows the court to “still decline the jurisdiction” despite s. 46(1). Moreover, the conclusion contradicts OT Africa, cited by the court, where the FCA held that “this provision confers jurisdiction on the Federal Court over the shippers’ claim” despite the jurisdiction selection clause.

Unfortunately, it seems that the court’s conflation of jurisdiction simpliciter and forum non conveniens also found its way in its subsequent consideration of the second new factor considered by the trial judge. The court held that it was not important in this case because Canadian in rem procedure would only be “available … if Canada assumes jurisdiction”. I cannot help but wonder if this conclusion can stand in the light of the fact that Canada assumes jurisdiction by the simple operation of s. 46(1), and the court can then decide to decline this statutorily assumed jurisdiction on the basis of forum non conveniens. As a side note, I wonder whether there is really any difference between the trial judge’s second factor and the more general Spar factor of “advantages conferred upon the plaintiff by its choice of forum.”

Finally, the court held that (3) was more relevant than the trial judge assumed because:

… the clause is not one of those offensive ones that gives jurisdiction to a Court that has little or no connection to the contract, which often treated Canadians so unfairly. On the contrary, here there exists a long-standing relationship between the parties, who have dealt with one another over many years on the basis that the Japanese courts will have jurisdiction in a context where Japan has a close connection to the arrangements made. In these circumstances, the jurisdiction clause is a factor that deserved to be given more weight favouring Japan, where it might not deserve such weight if the links with Japan were more tenuous.

An interesting decision overall, demonstrating both the court’s understanding of and confusion over the interrelationship between fundamental jurisdictional principles. Although I do not think that the the outcome of the case would have been any different if the court drew a proper distinction between jurisdiction simpliciter and FNC, I am interested to see whether its (possibly accidental) conclusions will give rise to further confusion in this area of law.

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