Highlights from the Advocates’ Society’s Cross Border Conference

             Several prominent lawyers and judges gathered June 12, 2015 for the Advocates’ Society’s Conference on “Cross Border Issues for Litigators” in Toronto.   A lawyer involved in the recent Nortel Networks dual (Ontario – Delaware) trial recounted the procedural and logistical challenges of conducting two trials in two jurisdictions simultaneously.     Another challenging aspect was the French blocking statute that would have exposed French witnesses to criminal sanctions if they had testified in either of those trials. 

Another lawyer explained the need for protective orders when evidence given in Canada might otherwise be used in American companion proceedings where witnesses may have reason to “invoke the fifth (amendment)”. 

A judge in the Sino-Forest proceedings discussed a world-wide Mareva injunction he issued. The order allowed defendants in Hong Kong to access certain funds for living expenses, but because the judge had no evidence as to the cost of living in Hong Kong, he left the amounts for a Hong Kong judge to decide.

Another presentation covered the Supreme Court of Canada’s decision in R. v. Hape, 2007 SCC 26 which addresses the applicability of the Charter of Rights and Freedoms to the extra-territorial collection of evidence.  In a nutshell, the Court held that the Charter generally does not apply extraterritorially, but would apply in specific circumstances, including where to not apply it would be to violate Canada’s international human rights obligations. 

Letters Rogatory were discussed too.  They are a timely topic:  they played a role in recent litigation involving Nestles, and Sedona Canada has issued a Commentary on Enforcing Letters Rogatory Issued by an American Court in Canada.

Changes may be coming to the enforcement of foreign judgments, specifically in cross-border insolvency cases.  The United Nations Commission on International Trade Law (UNCITRAL) is working on a model law for the enforcement of insolvency-derived judgments.  However, a completed model law is likely still three or more years away.

 

“Judgment Arbitrage” – Can You Enforce a Foreign Judgment in a State that does not Recognize Foreign Judgments by First Obtaining a Recognition Judgment in Another State?

Judgment arbitrage refers to the practice of getting a foreign judgment that would normally be unenforceable in a given jurisdiction (say a particular Canadian province or U.S. state) enforced there by first obtaining recognition of that judgment in another, more liberal province or U.S. state.  The idea is that the recognition judgment, because it is not a foreign judgment, might get around the first state’s restrictions on recognition of foreign judgments.  Some would say this is just a form of forum shopping, i.e. litigating in a particular jurisdiction for its juridical advantages and not because of any connection between the case and that jurisdiction.   Might there be circumstances in which the recognition judgment could properly be enforced?  

Consider the case of the Alberta Securities Commission (“ASC”) and the judgment it obtained in Alberta against one Lawrence Ryckman for $500,000 in costs following an ASC proceeding in which Ryckman had been found to have misled investors.    After Ryckman moved to Arizona the ASC sued in Arizona and obtained a judgment there recognizing the Albertan judgment.    The ASC then sought to enforce the Arizona judgment in Delaware.  (It is not clear whether Ryckman had subsequently moved to Delaware or whether the ASC discovered assets of Ryckman in Delaware.) 

Had the ASC attempted to enforce the Albertan judgment directly in Delaware, the ASC would have failed:  that state does not recognize foreign judgments for fines or penalties.  As well, the claim would have been statute-barred in Delaware.     Ryckman therefore argued that the ASC was trying to gain enforcement through the back door, i.e. by trying to circumvent the Uniform Foreign Country Money Judgments Recognition Act (“UFCMJRA”), which bars enforcement of foreign judgments for fines or penalties.    That statute, which is a relatively recent updating of the Uniform Foreign Money Judgment Recognition Act and which has been enacted in a number of states, shifts the onus to the defendant opposing recognition, thus liberalizing somewhat the enforcement of foreign money judgments in those U.S. states that enacted the UFCMJRA.  

But would the Delaware court allow the ASC to enforce “through the back door”?  The Delaware court observed that Ryckman voluntarily moved to Arizona.  Thus it was Ryckman who chose that forum, not the ASC.  The court concluded that there is no evidence that the ASC engaged in any improper forum shopping.   Leave to enforce was granted.   

This is a reasonable outcome.  There is no indication that the ASC’s decision to sue in Arizona was driven by anything other than the fact Ryckman lived there.  There is no indication that the ASC somehow knew at the time it sued in Arizona that it would need to be able to enforce in Delaware (such that suing in Arizona was chosen as a means by which the ASC could later enforce in Delaware).  If following a judgment debtor as he moves around, perhaps in order to avoid a judgment, constitutes forum shopping then as blogger Ted Folkman of Letters Blogatory says, the cure is worse than the disease!

Amongst Canadian provinces the law regarding enforcement of foreign judgments is fairly uniform, but there are differences that could be significant in some cases.  For example, common law provinces will not enforce foreign penal judgments, whereas the Quebec Civil Code does not mention such judgments in its Article 3155 list of exceptions to the default rule that foreign judgments are enforceable.  There may also be differences between common law provinces that have enacted the Court Jurisdiction and Proceedings Transfer Act, which among other things codifies the grounds for territorial competence, and those provinces that have not.