Kuwait Airways Corporation v. Iraq in the Supreme Court of Canada

In yet another, but not the final, step in the very long-running litigation between KAC, IAC and the Republic of Iraq, the Supreme Court of Canada has held that the enforcement in Quebec of a 2008 judgment of the English Commercial Court ordering Iraq to pay CAD$84 million to KAC is not barred by soveriegn immunity (decision here).

Many on this list will be familar with the facts.  After the 1990 invasion of Kuwait, KAC sued IAC in England for conversion of several airplanes.  As part of that litigation, KAC was able to claim against Iraq for the costs of the actions that had been brought.  This claim flowed from Iraq’s having controlled and funded IAC’s defence, and it was not barred by sovereign immunity in England because it fell within the commercial activity exception.  Iraq did not defend this claim and default judgment was granted.

KAC discovered immovable property owned by Iraq in Quebec and also some undelivered airplanes Iraq was buying from Bombardier Aerospace.  It thus brought proceedings in Quebec to enforce the English judgment.  Two lower courts held the claim was barred by sovereign immunity but the Supreme Court of Canada found that it fell within the commercial activity exception.

The court applied the State Immunity Act, RSC 1985, c S-18 and held that it applied to proceedings to enforce a foreign judgment (paras. 19-20).  The English decision, which addressed the issue of sovereign immunity, was not binding in Canada and was not res judicata (since to be so it would first have to be recognized in Canada, which was the very issue before the court) (para. 22).  The application of the commercial activity exception to the facts is somewhat brief (para. 35), though there is some useful discussion of the scope of the exception in the United Kingdom, the United States and Canada (paras. 25-33).

Two other points of interest: 1. the court does not wade into the issue of whether there are any exceptions to sovereign immunity beyond those set out in the statute (para. 24), and 2. the court accepts the factual findings of the English decision as part of its analysis, prior to concluding that the decision is enforceable in Canada (para. 34).  This latter point seems somewhat hard to explain, and the court does not offer much explanation.

The Supreme Court of Canada did not determine if the English judgment is enforceable in Quebec – it only dealt with the sovereign immunity issue.  The case was therefore remanded to the court of first instance to hear the claim for enforcement.  Iraq likely has some further arguments to advance, such as that the Quebec court lacks jurisdiction over it and that the English default judgment is not entitled to recognition and enforcement (for example, due to the lack of a real and substantial connection between England and the claim advanced against Iraq).

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