Which prevails: Forum Selection Clause or Statute Confering Exclusive Jurisdiction? The Supreme Court of Canada may soon Decide

The Supreme Court of Canada will soon hear a case in which a forum selection clause in Facebook’s online, click-wrap terms of use collides with a statute mandating that certain actions must be heard in a certain court. The Supreme Court has granted leave to appeal the decision of the British Columbia Court of Appeal in Douez v Facebook, Inc. 2015 BCCA 279.  

Douez, alleging that Facebook shared her personal information with certain friends of hers on Facebook without her consent, sued under B.C.’s Privacy Act, R.S.B.C. 1996, ch. 373.  Section 4 says “Despite anything contained in another Act, an action under this Act must be heard and determined by the Supreme Court.”  Douez takes the position this meant her claim must be heard in that court, and nowhere else, including foreign courts.  

           

            However, the forum selection clause in the Facebook Terms of Use says:  “You will resolve any claim, cause of action or dispute (claim) you have with us arising out of or relating to this Statement or Facebook exclusively in a state or federal court located in Santa Clara County [California]”.  There was also a clause designating California law as the applicable law.*     A forum selection clause, if validly concluded, applicable to the cause of action, and otherwise binding on the parties, must be enforced unless the party opposing enforcement shows “strong cause” for the court to exercise its discretion to not enforce it:   Z.I. Pompey Industrie v. ECU-Line N.V.,2003SCC 27  (the “Pompey test”).

Facebook brought a motion to stay the action, based on the forum selection clause and on forum non conveniens. The plaintiff accepted that the forum selection clause was validly concluded and otherwise binding on her.  She argued that the Privacy Act overrides it, and that there is strong cause to not enforce it.  The motion court held that s. 4 of the Privacy Act means that only the B.C. Supreme Court -- not other B.C. courts nor foreign courts – can hear actions under the Privacy Act, and thus that Act overrides the forum selection clause.   The court then did its forum non conveniens analysis and held that California would not be an appropriate forum for a number of reasons, including that the “California court cannot determine that the Privacy Act does apply as those determinations are solely for [the B.C.] Court's jurisdiction.   The motion court dismissed the motion in a forty-nine page decision: 2014 BCSC 953.

The Court of Appeal, in a unanimous ruling written by the Chief Justice, reversed.   That Court held that s. 4 of the Privacy Act means that the B.C. Supreme Court “has jurisdiction to the exclusion only of other courts in B.C., not other courts worldwide” (para. 65).    Those other courts in B.C. are the Provincial Courts, which do not have the power to grant injunctive or other equitable relief that may be necessary to enforce a judgment.  It said the motion court’s interpretation fails to give effect to the principle of territoriality; in other words, British Columbia statutes apply only in British Columbia.  However, to interpret the Privacy Act this way is at odds with s. 12 of B.C.’s  Court Jurisdiction and Proceeding Transfer Act, (“CJPTA”)  S.B.C. ch. 28, which says “If there is a conflict or inconsistency between [the part of the CJPTA that confers power on a court to decline jurisdiction on forum non conveniens grounds] and another Act of British Columbia or of Canada that expressly (a) confers jurisdiction or territorial competence on a court, or (b) denies jurisdiction or territorial competence to a court, that other Act prevails.”   Section 12 would have no purpose if provisions that confer or deny jurisdiction apply only within the province.  The BCCA did not address the effect of Section 12.  

Ironically, in the same month that the B.C. Court of Appeal decided Douez, another panel of the same court, in Equustek Solutions v. Datalink, affirmed an injunction prohibiting Google from including certain things in results of searches done anywhere in the world.   The Supreme Court of Canada has granted leave to appeal that decision also; see my blogs dated July 9, 2015 and Feb. 18, 2016, and my piece in 2015 Year in Review, soon to be published by the International Section of the American Bar Association.  Possibly the two cases will be heard together.

The Court of Appeal did not need to consider the forum non conveniens issue because it determined that it must first determine whether the forum selection clause is enforceable, then (if necessary) do a separate forum non conveniens analysis. 

The most prominent issue in Douez for the Supreme Court would be when do statutes have extraterritorial effect (the principle of territoriality), at least in the context of conflicts with forum selection clauses.  If Equustek is heard at the same time, it will be interesting to see whether and how the power of courts to give orders with extraterritorial effect differs from the power of legislatures to legislate with extraterritorial effect. 

The case also raises a host of other issues of national interest including:

1.      If the effect of the forum selection clause would be that Douez could not pursue her claim, would that constitute “strong cause” for the purpose of the Pompey test?

2.      Should the Pompey test be applied to forum selection clauses that have not been negotiated, e.g. those in click-wrap agreements?

3.      In the Pompey test, must there be evidence of the law of the designated forum as to whether the courts of that forum would be able to take jurisdiction over the case?   The Court of Appeal says the party that seeks enforcement of the clause need not adduce such evidence, but the party that opposes enforcement may, to show strong cause, adduce evidence showing the courts of that forum lack jurisdiction.

Lawyers in provinces that have a CJPTA with a section similar to s. 12 quoted above will be interested to see what the Supreme Court says about the effect of such provisions.   

* It reads: “The laws of the State of California will govern this Statement, as well as any claim that might arise between you and us, without regard to conflict of law provisions.”

             

OCA Decision on Forum Non Conveniens is Troubling to Plaintiffs

The recent Ontario Court of Appeal decision in Bouzari v.Bahremani 2015 ONCA 275 will be troubling, in two respects, to plaintiffs facing a motion for a stay based on forum non conveniens, particularly in human rights cases.  

 First, a brief synopsis of the case.    Bouzari sued for damages for kidnapping, false imprisonment, assault, torture and death threats all alleged to have occurred in the Islamic Republic of Iran and in Rome, Italy.   The principal defendant, Mehdi Hashemi Bahremani, a.k.a. Rafsanjani* was an Iranian citizen who had moved to the United Kingdom to study after the alleged torts, but who had returned to Iran to face prosecution and was unable to leave Iran.  Both sides acknowledged that the case could not be tried in Iran.  The Ontario court had jurisdiction under the doctrine of forum of necessity.   Bahremani moved for a stay, arguing the case ought to be tried in the United Kingdom.  The motion court dismissed his motion, but the Court of Appeal reversed, ruled that England is a more appropriate forum, and stayed the proceeding.    The ruling was based, not on any jurisdictional connection to England, but only on the grounds that the plaintiffs and Bahremani had ties to England (the plaintiffs have business interests and property there and travel there from time to time, and Bahremani had been living and studying there), and that Bahremani had been denied entry into Canada. 

       

       The ruling is problematic in two respects.  One is that the defendant was not required to show that the British courts would take jurisdiction.  The second is that the defendant was not required to show that the law of the foreign forum will provide the plaintiff the same benefits as the domestic law.  Instead, if going to the foreign forum will cause the plaintiff a loss of juridical advantage, it is up to the plaintiff to prove that.

     

      The Supreme Court of Canada provided guidance regarding forum non conveniens in Club Resorts v. Van Breda [2012] 1S.C.R. 572.  “[The purpose of the forum non conveniens doctrine] is to ensure that both parties are treated fairly and that the process for resolving their litigation is efficient” (para 105).  “[The] courts have held that the party must show that the alternative forum is clearly more appropriate” (para 108).

Turning now to the first concern, the British courts’ jurisdiction, plainly the foreign forum cannot be an appropriate forum, let alone a clearly more appropriate forum, if the courts there will not, or might not, take jurisdiction over the case.    For that reason, as the Supreme Court of Canada stated in Club Resorts, if a defendant raises forum non conveniens, he “must identify another forum that has an appropriate connection under the conflicts rules and that should be allowed to dispose of the action. The defendant must show, using the same analytical approach the court followed to establish the existence of a real and substantial connection with the local forum, what connections this alternative forum has with the subject matter of the litigation” (para 103).  However, there was no real and substantial connection nor other grounds for the British courts to assume jurisdiction.   The case pertains to torts occurring in Iran and Italy. The Canadian court assumed jurisdiction based on the doctrine of forum of necessity.  This doctrine is very new to Canadian law.  The defendant ought to have been, but was not, required to show that the British law also has a similar doctrine of forum of necessity, or that on some other ground British courts could take jurisdiction.   As of last month, no proceeding has yet been commenced in England, and so no British ruling on jurisdiction has been made.  

This concern about jurisdiction goes beyond forum of necessity cases.  The Supreme Court says that the question of whether the foreign court can take jurisdiction is to be determined using Canada’s real and substantial connection analysis.  But the foreign court will decide whether to take or not take jurisdiction based on the foreign law.  To avoid a situation where after a Canadian court has stayed an proceeding the foreign court does not take jurisdiction, it makes sense to require the defendant/moving party to show that the foreign court would in fact take jurisdiction.  This would entail showing that under the law of that foreign jurisdiction, their courts have jurisdiction. 

Imagine the wasted costs and unfairness to the plaintiff if, after a forum non conveniens motion results in a stay, the foreign court will not take jurisdiction.  Substantial legal costs will have been incurred, and wasted, not only for the litigation in that foreign jurisdiction, but also for the forum non conveniens motion that led to that foreign litigation.

           

            Regarding juridical advantage, the plaintiff bases his claim in part on rights established in the International Covenant on Civil and Political Rights and in the Convention Against Torture and other Cruel, Inhuman or Degrading Treatment or Punishment, namely the right not to be subjected to cruel, inhuman, or degrading treatment or punishment.   The motion court had cited as one reason to dismiss Bahremani’s motion the fact he had not shown that those treaties had been adopted under English law.   The Court of Appeal ruled that it is for the plaintiff to prove that differences in English law would disadvantage the plaintiff.  This is at odds with the fact the defendant bears the burden to show the foreign jurisdiction is more appropriate.  What is appropriate surely must be determined having regard for the purpose of the doctrine of forum non conveniens, i.e. to “ensure that both parties are treated fairly”.    Applying the law of a foreign forum might mean part or all of a claim is not recognized.  How could that be fair?   

In proving foreign law, the presumption of similarity means that a Canadian court will presume the foreign law is the same as Canadian law, unless proven otherwise.  No one raised this presumption in Bouzari.  Moreover, the presumption applies “only to the general law, and does not extend to the special provisions of particular statutes altering the common law”:    Gray v. Kerslake [1957] S.C.J. No. 62.   Thus the presumption would not apply if a British statute established forum of necessity.  As well, even absent such a statute, the presumption ought not apply insofar as the doctrine of forum of necessity is very new to Canadian law, has yet to be fully fleshed out, and thus might not exist in English law.   Nor would the presumption apply to the matter of whether those international treaties had been adopted into British law.

             

             The Court of Appeal noted that the plaintiff had not shown which law – the law of Canada, of England, or the law of Iran -- the English court would apply (para. 44-45).    This issue too would bear on whether England would be an appropriate forum.  Indeed, the question of which country’s law to be applied is one of the factors listed in Club Resorts for consideration in a forum non conveniens analysis (para. 105) .  How could Bahremani succeed without having addressed it?      As well, it is very likely that the English law would be applied in this case. Once the case is moved to England, there would no longer be much basis for applying Canadian law, and there is no indication that either side wanted the law of Iran to apply. 

            

            To conclude, there are two main take-aways.  One, the defendant moving party ought to have to show the proposed foreign court would in fact take the case, based on the foreign law regarding jurisdiction, be it forum of necessity or jurisdiction simpliciter.  It is risky to make this determination using the domestic law of jurisdiction.  Two, going back to first principles of forum non conveniens, to meet the burden of showing that the foreign forum is appropriate, the moving party ought to have to show it would be fair to the plaintiff, having regard for the law that would be applied in that forum.

*He is the son of the former president of Iran