“The third and final defence is that of public policy. This defence prevents the enforcement of a foreign judgment which is contrary to the Canadian concept of justice. The public policy defence turns on whether the foreign law is contrary to our view of basic morality.” (Emphasis added).
Both normative statements reflect a Rawlsian view of contractualism: that morality (and, therefore, public policy) is based on social contract or agreement (see, J. Rawls, J. A THEORY OF JUSTICE (Cambridge, MA: Harvard University Press, 1971). Cf. T.M. Scanlon, “Contractualism and Utilitarianism”, in A. Sen and B. Williams (eds.), UTILITARIANISM AND BEYOND (Cambridge: Cambridge University Press, 1982), pp. 103-28, and T.M. Scanlon, What We Owe to Each Other (Cambridge, MA: Harvard University Press, 1998.) Each statement identifies the continuing jurisprudential debate over the nature and scope of a court’s jurisdiction ratione materiae and the judicial role in reviewing private contractual disputes submitted to consensual arbitration. It also highlights the tension between promoting the primacy of party autonomy and contractual freedom, on the one hand, and defining the limits to judicial intervention of matters involving the “public order” or public interest, on the other. Essentially, it addresses the issue of the privatization of justice and whether a social contract model is appropriate in disputes affecting the public interest. This blog post will briefly explore the implications of promoting a social contract model within the context of advancing and adjudicating international human rights claims in Canada.
In their dissenting reasons, Bastarache and Lebel JJ. (Fish J. concurring) in Dell refer to the Court’s earlier decision in Desputeaux v. Éditions Chouette (1987) inc.,  1 S.C.R. 178, 2003 SCC 17 (SCC) per LeBel J. (Gonthier, Iacobucci, Bastarache, Binnie, Arbour, and Deschamps JJ. concurring) which addressed whether questions relating to ownership of copyright fell outside arbitral jurisdiction. In effect, a matter may be excluded from the field covered by arbitration because it is by nature a “matter of public order”. (id., at para. 52 per LeBel, J.)
As between litigation and arbitration, legislative policy actively supports arbitration as a viable form of alternative dispute resolution and promotes its use. Domestically, the Arbitration Act, 1991, S.O. 1991, c. 17 (as am.) and internationally, the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, (concluded at New York, June 10, 1958, 21 U.S.T. 2517, T.I.A.S. No. 6997, 330 U.N.T.S. 38 and the UNCITRAL Model Law on International Arbitration as incorporated in Ontario by the International Commercial Arbitration Act, R.S.O. 1990, c. I.9 (as am.). are prime examples of legislative policy which reflects a pro-arbitration bias premised on the primacy of contractual freedom, party autonomy, and to a great extent, a presumption of equality of bargaining power and informed consent.
However, the Dell case also demonstrates the inherent problems in adopting a strict contractualist approach to arbitration. Granted, the majority in Dell did address the issue of contracts of adhesion, noting the “introduction of arts. 1435 to 1437 C.C.Q. — which lay down special rules on the validity of certain clauses typically found in contracts of adhesion or consumer contracts — into the law of contractual obligations.” (Dell, supra at para. 81.) However, the majority seems to have elevated the primacy of contractual choice, irrespective of whether the contract is asymmetrical or fails to protect “the weakest and most vulnerable contracting parties”, suggesting that some “abuse” is tolerable, while other forms of “abuse” are not. (See, Dell, at para. 90 where the majority distinguishes between different types of clauses (external, illegible, incomprehensible and abusive) aimed at different types of abuse.)
Equally important is the majority’s stated procedural preference of arbitration over class actions. Specifically, the public policy choice of form over substance: “class action is a procedure, and its purpose is not to create a new right.” So much for access to justice in cases involving click-wrap internet agreements. In Dell, the majority held that Bill 48 had no retroactive effect. (Dell, supra at paras. 112-120). Nevertheless, the Quebec legislature’s response in the form of Bill 48 (An Act to amend the Consumer Protection Act and the Act respecting the collection of certain debts, 2nd Sess., 37th Leg., (now S.Q. 2006, c. 56), assented to on December 14, 2006) as blocking legislation restores the balance in protecting consumers and is a welcome, albeit overdue, development (see also, Consumer Protection Act, 2002, S.O. 2002, c. 30, Sched. A §6(2).).
Whither International Human Rights?
Whether international human rights norms are (or ought to be) incorporated into legislative policy favouring arbitration is more problematic. At the outset, state immunity is an exception to foreign judgment recognition and enforcement and the traditional Canadian judicial approach has favoured restrictive immunity, rather than adopting universal jurisdiction or the jus cogens doctrine. Justice Goudge, in Bouzari v. Republic of Iran (2004) 71 O.R. (3d) 675 at 690, (2004) 243 D.L.R. (4th) 406, (2004) 122 C.R.R. (2d) 26, (2004) 132 A.C.W.S. (3d) 275 (Ont. C.A.) [cited to O.R.] (“Bouzari v. Iran”) notes:
…[W]here Canada’s obligations arise as a matter of customary international law…customary rules of international law are directly incorporated into Canadian domestic law unless explicitly ousted by contrary legislation. So far as possible, domestic legislation should be interpreted consistently with those obligations. This is even more so where the obligation is a peremptory norm of customary international law, or jus cogens. (citation omitted)
Canada’s Federal State Immunity Act, 1985 R.S.C., S.18 provides that a foreign state cannot be subject to the jurisdiction of Canadian courts except in specific circumstances: where the damage occurred as part of the commercial activity of the state (section 5), or where the foreign state is responsible for death or personal injury that occurred in Canada or damage of loss of property that occurred in Canada (section 6). These exceptions reflect existing peremptory norms of international law and customary international law, which through “adoptionist” theory, were integrated into the law of Canada (see R. v. Hape, 2007 SCC 26 (SCC) at para.36 per LeBel, J. quoting with approval Trendtex Trading Corp. v. Central Bank of Nigeria  1 Q.B. 529 (C.A.) at 554 (per Denning L.J.). Cf. Sosa v. Alvarez-Machain, 542 U.S. 692 (2004) (USSC) and the draft United Nations (U.N.) Convention on Jurisdictional Immunities of States and Their Property, Resolution A/RES/59/38 adopted by the United Nations General Assembly, Fifty-ninth session (December 2, 2004)).
In cases involving exclusively tort-based claims for personal injury damages arising from state-sponsored torture or human rights abuses, Canadian courts have resisted assuming jurisdiction. In Bouzari, supra, the trial court dismissed Mr. Bouzari’s claim, finding that the State Immunity Act was constitutional and that there was no international law exception to state immunity for torture. The Ontario Court of Appeal rejected Mr. Bouzari’s appeal, agreeing with the lower court that there was no exception to state immunity for torture. The Court of Appeal also declined jurisdiction on the grounds that Ontario was not the proper forum to hear Mr. Bouzari’s claim, concluding that “Canada’s treaty obligation pursuant to Article 14 of the Convention Against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment, 10 December 1984, 1465 U.N.T.S. 85, Can. T.S. 1987 No. 36 (in force in Canada as at June 26, 1987) did not extend to providing the right to civil remedy against a foreign state for torture committed abroad,” a view disputed by some commentators: (see F. Larocque, “Bouzari v. Iran: Testing the Limits of State Immunity in Canadian Courts” (2003) 41 Can. Y Int’l L. 341.)
The commercial context, which prompted the torture, was insufficient to bring the lawsuit within the section 5 “commercial activity” exception to the restrictive immunity availing under section 3 of the State Immunity Act. Admittedly, Mr. Bouzari may not have been the ideal plaintiff to establish a precedent for an international human rights claim given that he was not a Canadian resident at the time of the alleged torture at the hands of the Iranian secret police.
However, from a procedural standpoint, Bouzari v. Iran was incorrectly decided for two reasons. First, the Court of Appeal failed to consider Rule 17.2(h) of the Rules of Civil Procedure which confers a jurisdictional basis for service ex juris allowing the court to apply the “real and substantial connection” test without expressly establishing jurisdiction simpliciter vis-à-vis assumed jurisdiction. Rule 17.2(h) reads:
“Damage Sustained in Ontario”
17.02 (h) in respect of damage sustained in Ontario arising from a tort, breach of contract, breach of fiduciary duty or breach of confidence, wherever committed; (emphasis added)
In contrast, in Crown Resources Corp. S.A. v. National Iranian Drilling Co., (2005) 142 A.C.W.S. (3d) 421 (Ont. S.C.J.) per Greer, J., the assignees in bankruptcy of a Canadian corporation commenced actions in Ontario relating to a contractual dispute for oil drilling and related services with a state-owned Iranian company. The actions arose from three contracts, executed in 1990, 1996 and 1998. The 1990 contract contained a clause specifying the Republic of Iran as the choice of forum and Iranian law as the choice of law. In contrast, the 1996 contract forum selection clause specified Ontario as the chosen forum and Ontario law as the governing law. The 1998 contract was silent on either choice of forum or choice of law. The plaintiffs were initially successful in resisting a motion for stay of proceedings on various grounds, including jurisdiction simpliciter, forum non conveniens and the state immunity exception. The motions judge concluded that state immunity did not apply because of the commercial nature of the dispute. Moreover, Ontario was the appropriate forum for the case to be heard, despite the fact that much of the dispute concerned activities in Iran, given that the plaintiff would not be able to obtain a fair trial in Iran. While the lower court’s decision was varied on appeal on the issue of the enforceability of the forum selection clauses, the lower court ruling on the commercial activity exception to state immunity was not. Crown Resources Corp. S.A. v. National Iranian Drilling Co., O.J. No. 3345 (Ont. C.A.) per Labrosse, Laskin and Armstrong JJ.A. Application for leave refused with costs on March 8, 2007 (31684) (S.C.C.)
A priori, it appears difficult to reconcile these two decisions given the underlying commercial activities. However, under the State Immunity Act, a state committing human rights abuses or torture within its territory is immune to a lawsuit brought in a Canadian court, while a state or affiliated agency violating a commercial agreement with a Canadian company is not.
However, assume arguendo that Mr. Bouzari entered into a contract with the Islamic Republic of Iran which contained an arbitration clause or arbitration agreement (specifying Ontario law as the applicable law). The commercial activity exception in section 5 of the State Immunity Act would trump any state immunity defence, particularly if the defendant state provided an express waiver and voluntarily consented to private arbitration of any disputes arising under the agreement, whether contractual, tortious or restitutionary in nature. Article 7 of the International Commercial Arbitration Act reads as follows:
Article 7. Definition and form of arbitration agreement
(1)“Arbitration agreement” is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.
Any public policy defence would, therefore, be assessed in terms of “international public policy” or “ordre public international” rather than Canadian domestic public policy (See van den Berg, “Distinction Domestic-International Public Policy”, (1996) XXI Yearbook at p. 502 and Dieter Krombach v André Bamberski, Case C-7/98,  ECR I-0000, paragraph 19 (ECJ), where it was held that the infringement must constitute a manifest breach of a rule of law regarded as essential in the legal order of the State in which enforcement is sought or of a right recognized as being fundamental within that legal order.)
With the possible exceptions of Articles 34(b) and 36(b) of the International Commercial Arbitration Act, both of which refer to “the subject-matter of the dispute is not capable of settlement by arbitration under the law of this State” or “the recognition or enforcement of the award would be contrary to the public policy of this State”, a Canadian court would have no real difficulty in enforcing such an international commercial arbitration award, particularly where an arbitrator’s decision was neither previously annulled nor successfully challenged during enforcement proceedings. Of course, the foregoing approach is inapplicable in a non-commercial context. I would argue, however, that the “justice exception” jurisdictional argument raised by Professor Trevor Farrow in his article “Globalization, International Human Rights, and Civil Procedure” (2003), 41(3) Alta. L. Rev. 671 at 702 in the context of recognition of foreign judgments, would apply, mutatis mutandis, to recognition of a foreign arbitral awards against a defendant Multinational Corporation, or a defendant State, for that matter.
Unless the State Immunity Act is amended to create a “torture” or “human rights abuse” exception, or Canadian federal legislation akin to the U.S.Alien Tort Statute, 28 U.S.C. §1350 (also referred to as the Alien Tort Claims Act) is enacted, the only realistic procedural alternative is to enforce a foreign arbitral award obtained against a state based upon commercial activity. This will, of necessity, include concurrent claims framed in contract and tort, as well as claims imposing liability against Canadian corporations “aiding and abetting” the alleged torture or human rights violations committed in the host state’s territory and falling within the ambit of acts committed by individuals acting in an official capacity (see, Presbyterian Church of Sudan v. Talisman Energy , Inc. No. 07-0016-cv (USCA 2d Cir. Docketed Jan.3, 2007), cf. Doe I v. Unocal Corp., 963 F. Supp. 880 (C.D. Cal 1997) which imposed liability under the ATS against private corporations by imposing a standard of “knowing practical assistance or encouragement that has a substantial effect on the perpetration of a crime.”).
Obviously, enforcing a foreign arbitral award against a foreign state implies that there are exigible assets in Canada which fall within the commercial activity exception or there is an express waiver of immunity by the state or related agency (See §12 of the State Immunity Act). Only time will tell whether the winds of political change or judicial activism will finally hold sway and allow victims of human rights abuses and torture access to Canadian justice.