Spanish Court Refuses to Hear American’s Helms Burton Claim

     In May 2019 the United States ended the suspension of rights of Americans under the Helms-Burton Act to sue for losses arising from the Cuban government’s expropriation of their properties in Cuba.  The following month, a Cuban-American and his company, heirs to former owners of expropriated Cuban land, sued the Spanish hotel chain Melia, which leased that land (in Playa Esmeralda, a popular beach vacation destination) to operate a hotel.

     Why bring such a claim in Melia’s home jurisdiction?  The Spanish Civil Code establishes a right to receive the fruits of possession in bad faith and profiting off confiscated land.    Also, it may be hard to enforce in Spain an American judgment.  Such a judgment, which would be based on the Helms Burton Act, would face the hurdle of an EU blocking law (EU Council Reg. 2271/96) which aims to protect E U residents and companies against the effects of extra-territorial legislation of foreign countries.   

     Not surprisingly the Spanish Court was not receptive. But its analysis was principled and should guide courts in other cases brought under Helms Burton.   The Court noted that the claim is based primarily on “the illegality of Cuba’s nationalization of the land”.  That meant the court would have to “assess the legality of the nationalization, or the confiscation” in order to decide whether Melia was “illicitly enriched” through its use of the land.     

     The Court had at least three reasons not to accept the claim.   One, the nationalization was a state action of a foreign country, exercising its sovereign powers, over which action the Spanish court has no jurisdiction.   Spain, like Canada, has a statute giving foreign states immunity from most legal claims: the Foreign State Immunity Act (Spanish law 16/2015).  This statute, like Canada’s, carves out an exception for commercial dealings.  However,   even though the hotel’s lease and use of the land is commercial, the underlying issue of the expropriation is not, and so the Court held the exception did not apply. 

     Two,  Spanish courts –like Canadian courts – generally will not take jurisdiction over cases pertaining to foreign land.   

     Three, to assess the legality the nationalization would entail an analysis of the law of Cuba as of the time of the expropriation, the circumstances surrounding the expropriation, and the fairness of the compensation offered for the land.    Testimony from Cubans would certainly be necessary.  Some may be very elderly and unable to travel.  If this claim was subjected to a forum non conveniens analysis, a court may well find Cuba to be the more appropriate jurisdiction.

     The ruling is under appeal.

Hague Conference Adopts Judgments Convention

Introduction

The Hague Conference on Private International Law adopted its Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters (“Convention”) on July 2 at the Hague Conference’s 22^nd Diplomatic Session.  The Convention will go into effect after two countries have signed; one country – Uruguay – has already signed. The Hague Conference began work on the Convention in 1992. 

If many countries sign, the Convention will be a major improvement in international legal cooperation.    Enforcement of foreign judgments is highly restricted, or not available, in several big countries which impose a reciprocity requirement, such as the People’s Republic of China, the Russian Federation, India, Germany, Japan, and Austria.   The Convention eliminates reciprocity as a prerequisite for enforcement.  

Highlights of the Convention

The Convention requires that a judgment given by a court of a Contracting State (the “State of Origin”) shall be recognized and enforced in other Contracting States (the “Requested State”) – without any review of the merits (Art. 4) -- if it is in effect in the Contracting State (art. 4) and if the judgment meets any one of a long list of conditions are met (Art. 5).  Those conditions, which are similar to the conditions for jurisdiction in the common law in Canada, include:

a.)    the judgment debtor was habitually resident in the State of Origin;

b.)    the judgment debtor had its principal place of business, or at least a branch, there;

c.)    the judgment debtor attorned to the jurisdiction (e.g. by suing there, by consenting to jurisdiction in a forum selection clause, or by arguing the merits of the case without contesting jurisdiction);

d.)    the judgment pertains to a lease of real property located in the State of Origin; and

e.)    the judgment pertains to a tort arising from death, physical injury, or damage to/loss of property, and the act/omission causing the harm occurred in the State of Origin.

Recognition and enforcement may (not must) be refused only on specific grounds set out in the Convention, which grounds are similar to the defences found in the common law of Canada, such as a breach of natural justice, more specifically if the defendant was not properly notified of the court proceeding in the State of Origin, or, if the defendant was in the Requested State, he/she was  notified of the proceeding in a manner incompatible with the fundamental principles of the Requested State regarding service of documents.     Enforcement may also be refused if the judgment: 

a.)    is inconsistent with another judgment in the Requested State;

b.)    is inconsistent with an earlier judgment from another state;

c.)    was issued in a proceeding that was contrary to a forum selection clause;

d.)    is manifestly incompatible with the public policy of the Requested State; or

e.)    was obtained by fraud. 

           Enforcement may also be refused, or postponed, if there is a court proceeding in the Requested State involving the same parties and subject matter, provided that the court was seized before the court in the State of Origin and there is a close connection between the dispute and the Requested State. Enforcement may also be refused to the extent the judgment imposes non-compensatory damages, e.g. punitive damages.

           Unfortunately, Art. 18 allows a State that has a “strong interest in not applying .. [the] Convention to a specific matter” to exempt that matter.   In addition, Art. 19 allows a State that is a party to the judgment to exempt itself from enforcement.  This can be extended to a natural person acting for the State, or a government agency or person acting for that agency.   

Judgments in some types of cases are excluded from the Convention, such as family law, insolvency, wills and estates, defamation, intellectual property, some maritime law cases, and the carriage of passengers and goods.  Nor does the Convention apply to judgments in tax or customs matters or law enforcement.  However, the mere fact a government is a party to the proceeding does not by itself exclude the case from the reach of the Convention.    

Commentary

Overall, the Convention will substantially improve international cooperation in legal matters, and substantially improve the efficacy of court judgments. 

However, the Convention unfortunately will probably not remedy the problems of excessive delays or bureaucratic requirements for enforcement proceedings seen in some countries (e.g. Mexico, India).  Although the Convention says the court in the Requested State “shall act expeditiously”, the Convention does not attempt to streamline procedures. It allows each country to follow its own procedures for enforcement.

The Convention provides welcome protection to consumers who are judgment debtors in consumer contract cases and to employees who are judgment debtors in employment contract cases.  Contracts of adhesion often contain forum selection clauses that are unfavourable to the consumer or employee.  See for example the clause for Uber drivers in Heller v Uber 2019 ONCA 1. The court in the State of Origin does not have jurisdiction, for the purpose of enforcement, based on the consumer’s or employee’s consent to the court’s jurisdiction unless that consent was addressed to the court, i.e. not given merely by way of a forum selection clause. 

The Convention does not clearly indicate whether judgments for injunctions or other monetary relief are enforceable.   The Convention’s definition of judgment (Art. 3) does not address the type of remedy, other than to exclude interim measures of protection.   Article 7 sets out six permissible grounds for refusing to enforce a judgment;  the fact  a judgment imposes a non-monetary the remedy is not among them.  Article 10 permits a State to refuse to enforce a judgment if it imposes a certain kind of remedy, namely damages such as punitive damages that do not compensate for actual loss or harm.  That article too is silent about non-monetary remedies.    I would conclude the Convention applies to non-monetary judgments.   

However, even if the Convention does not exclude such judgments, and even if it implicitly allows enforcement, the Convention does not provide much help in enforcing them.  Judgments in many of the main areas of law where such remedies are given are excluded from the Convention, for example family law (orders for access), defamation (injunctions to not publish defamatory material), anti-trust (injunctions restraining anti-competitive tactics) and intellectual property (injunctions to prevent or stop infringement).

All in all, the Convention advances international cooperation and sets a clear path toward for the wide-spread international enforcement of judgments and thus better access to justice.   Congratulations to the Hague Conference!

Legal Test for Risk of Unfairness in Foreign Court Systems Evolves

     Recent news reports about the fierce resistance in Hong Kong to a proposal to allow extradition to the People’s Republic of China, and about the imprisonment of dissidents in Saudi Arabia,  remind us that some foreign countries have judiciaries that often fail to deliver justice, due to bias or corruption, and that Canadians have a legitimate concern about being subjected to them.   

     This concern can arise where a defendant asks the Canadian court to decline jurisdiction in favour of a foreign court based on forum non conveniens, or where a judgment creditor asks a Canadian court to enforce a foreign judgment.   

     Until recently the standard of evidence to establish that a foreign court is corrupt and to be avoided was unreasonably high.    In Oakwell v Evernorth (2006) 81 O.R. (3d) 388 (C.A.), a judgment debtor, Evernorth, defended a proceeding to enforce a judgment from Singapore in a commercial matter. Evernorth led uncontroverted evidence of government interference in political (not commercial) trials in Singapore, but no evidence of interference in its own case.   The Ontario Court Appeal rejected this defence, saying that Evernorth needed to have proven interference in its own case in Singapore, and needed to have proven actual bias, as opposed to reasonable apprehension of bias. 

     In Garcia v Tahoe Resources, 2015 BCSC 2045 the plaintiffs were protestors who allegedly had been shot at the defendant’s mine in Guatemala by security guards. They sued the Canadian owner in B.C.  The defendant moved to stay the proceeding on the grounds that the courts of Guatemala are a more appropriate forum.   The plaintiffs led evidence of unfairness of those courts, and the court found there are some problems there.  In granting the stay, the motion court ruled that:

where the forum non conveniens analysis points to a clearly more appropriate forum, then the plaintiff must take the forum as he finds it even if it is in certain respects less advantageous to him unless he can establish that substantial justice cannot be done in the appropriate forum.  (para. 64).

     More recently the test has become less onerous.   The B.C. Court of Appeal reversed the motion court decision in Garcia (2017 BCCA 39), saying the motions judge had applied the wrong test, and had inappropriately placed the onus on the plaintiff.    The proper test is “whether there is a real risk of an unfair process in the foreign court”, which is incidentally the test used in the United Kingdom (para. 115 and 124).  The Court said “It is inadequate to ask whether the foreign forum is capable of providing justice.” (para. 124).       As well, the issue of unfairness is to be treated as one of the factors in the forum non conveniens analysis.  Insofar as it is the party that advocates for moving the case to a foreign court has the onus of showing the foreign court is more appropriate, that party must show there is no real risk of an unfair process.     

      This ruling has not been appealed.      The B.C. Court of Appeal applied the real risk test again in Araya v Nevsun Resources (2017) BCCA 401), another case involving abuses at a Canadian-owned mine overseas (Eritrea). The defendant has appealed to the Supreme Court of Canada but not on this issue.    

     In Evernorth, the Court called for evidence of corruption in the party’s own case; evidence of corruption in other cases from the same court would not suffice.   The Court also required evidence of actual bias, not just a reasonable apprehension of bias.    Should the test in a foreign judgment enforcement case differ from the test in a forum non conveniens case?   In the former, the plaintiff’s case has been tried in the foreign court and a judgment has been rendered, whereas in the latter the case has not yet been tried. 

     However, this is not a reason to require the judgment debtor to prove corruption   Proof of corruption and bias is almost by definition very difficult to obtain.  If a judgment was affected by a bribe or political interference, how is a litigant expected to know that the reason he lost is not the reason the judge gave in written reasons but instead a bribe from the plaintiff, or a discreet phone call from a higher-ranked government official whose interests, financial, political or other, are affected?  The defendant cannot expect disclosure.  It is not impossible, but very unlikely, that he/she will find out at all, let alone before its too late.   Evidence of corruption in other cases in the same court, or evidence that the judicial system lacks safeguards against corruption, or evidence that judges are vulnerable to outside influences should be given at least some weight, albeit less weight than evidence of corruption in one’s own case.  To ignore that evidence altogether is to turn a blind eye to that corruption. 

     The Court of Appeal in Garcia made clear that although the evidence of corruption was general, not case-specific, it cannot be ignored, although it will carry only limited weight (para. 125-126).  With that caveat, it makes sense to extend the “real risk” test to judgment enforcement cases.  That is, the court should ask whether there is a real possibility that the foreign judgment was the product of an unfair process in the foreign court”.  Otherwise, to enforce a foreign judgment is to put at risk public confidence in our own justice system.