Renvoi: Lex Situs Conflictus

Canadian Conflict of Laws Blawg by Seva Batkin

Attornment, Forum Non Conveniens and Corrupt Courts

Posted by Seva on September 1, 2008

Once again, the life of a soon-to-be lawyer takes hold and I find myself with little time to post, either because I am too swamped or simply too tired. Fortunately, as I can gather from my daily Quicklaw alerts, there also haven’t been too many interesting conflicts decisions in the last couple of weeks.

Ever since the decision of the Supreme Court of Canada in Morguard, comity – the respect for “legislative, executive or judicial acts of another nation” – has been the driving force behind Canadian conflict of laws principles. Importantly, as the decision of Brooker J. in Norex Petroleum Limited v. Chubb Insurance Company of Canada, 2008 ABQB  442, illustrates, comity means neither blindness to the realities of corruption in many foreign judicial systems, nor an abdication of a responsibility to protect litigants from such corruption by finding such systems not to be forum conveniens. Furthermore, the decision also confirms that a voluntary attornment to the court’s jurisdiction does not preclude an FNC argument, which appeals to the court’s discretion rather than a specific legal threshold.

Norex arose out of shady dealings between various players in the Russian oil industry. On the limited facts set out in the decision, it appears that the plaintiff was muscled out of a Russian oil-exploration joint venture. The defendants, a Russian insurer Ingosstrakh and CICC (which is somehow linked to Ingosstrakh), insured the joint-venture’s property. After the takeover, Norex sued both defendants in Alberta to recover its losses from the takeover. After filing a statement of defence, Ingosstrakh brought an application disputing the court’s jurisdiction on jurisdiction simpliciter and FNC grounds.

After going through the eight Muscutt factors, Brooker J. concluded that a real and substantial connection did not exist between Alberta and the action, at least with respect to Ingosstrakh. However, because Ingosstrakh has filed a statement of defence defending the action on its merits, he concluded that it voluntarily attorned to the court’s jurisdiction. As always, the fact that Ingosstrakh did not “intend” to attorn was irrelevant since “conduct supersedes intention”. Brooker J. also distinguished the lack of subject matter jurisdiction, which the court cannot regain by consent, and territorial jurisdiction, which can be consent-based.

Because Ingosstrakh attorned to the court’s jurisdiction, Norex argued that this presented an absolute bar to the further consideration of jurisdiction. While Norex did not provide any authorities for this argument, Brooker J. did find two decisions that supported this proposition: Imperial Oil v. Lloyd (Alta. C.A.) and M.J. Jones v. Kingsway General Insurance Co. (Ont. C.A.). However, he also found two cases where courts considered a FNC argument despite attornment: Cincurak v. Lamoureux (Alta. Q.B.), Stoymenoff v. Airtours plc (2001), 17 C.P.C. (5th) 387 (Ont. S.C.J.).

Relying on the inherently discretionary nature of the FNC test, as described in Jordan v. Schatz (B.C.C.A.), Brooker J. found that the court can stay proceedings where it considers appropriate and has “access to the full body of the case law on forum conveniens“.

From the ten FNC factors (see Royal and Sun Alliance Insurance Co. of Canada v. Wainoco Oil & Gas Co.), five favoured Russia:  parties’ residence, parties’ place of business, where cause of action arose, where the loss of damage occurred, and applicable substantive law. Four other factors were neutral: juridical advantage for the defendant, convenience to potential witnesses, cost of litigation, and difficulty in proving foreign law. Unfortunately for Ingosstrakh, Brooker J. found that the “factors favouring Russia are not … particularly significant factors”. The significant factor, and the only one favouring Canada as forum conveniens, was the juridical advantage to Norex in having the action tried in Alberta: access to a fair and impartial court. On this point, the court was presented with conflicting affidavits.

Norex presented evidence from Professor Black of the University of Texas, who opined that “[i]n Russia, judicial corruption not a question of yes or not, but instead of more or less”, and Norex stood virtually no chance against Ingosstrakh, which was controlled by “one of the most powerful oligarchs in Russia today”. Bolstering this opinion, Novex also referred to a recent English case, Cherney v. Deripaska, where the court found “a risk “a risk that substantial justice might not be done in the Russian court because of the risk of improper influences”. Oleg Deripaska, the defendant in that case, is the same oligarch that apparently controls Ingosstrakh.

Ingosstrakh attacked both Prof. Black’s qualifications and opinions, and presented its own expert witnesses: a law professor from Moscow, whose evidence the court discarded as biased; the former Chief Judge of a Moscow Arbitrazh court, who the court also recognized as an interested witness; and Professor Solomon of the University of Toronto, a “leading scholar on the Russian courts”. Prof. Solomon’s views were much more optimistic that Prof. Black’s, and he opined that “[i]t is realistic for persons who litigate in these courts to expect a fair and disinterested resolution of business disputes based on the law and the evidence.”

In the light of Prof. Blacks’s evidence and Cherney, Brooker J. found that given “a real risk that Norex could be unable to obtain justice in this case from the Russian courts … [i]t is unreasonable to expect that Norex should be obliged to court that risk.” Since “[n]o litigant should have to run the risk that the court hearing the dispute might be corrupt”, Brooker J. could not conclude that Russia was forum conveniens.

On a personal note, having more than a passing knowledge of Russia and its legal and judicial system, I have to fully agree with the court’s conclusion. However, on a more pragmatic level, I have to wonder: where the practical connection to the province is as tenuous as it was here, should a Canadian court assume the valiant role of the righter of the world’s wrong by providing a party an impartial, albeit arguably impractical forum the decision of which may have no practical effect on the defendant? Or should the court simply (although perhaps cynically) conclude that a corrupt legal system is a business risk that the party knowingly undertook by operating in Russia (or any other corrupt state), and should now bear the consequences of that decision?

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