Commercial Litigation and Dispute Resolution Blog

The repercussions of the first Gulf War have now made their way to the courts of Canada. The Supreme Court of Canada has recently weighed in on whether Kuwait Airways Corp. ("KAC") could enforce in Canada a C$84 million judgment against the Republic of Iraq.

In 1990, Iraq invaded and occupied Kuwait. Iraq ordered its national airline to appropriate aircraft and equipment owned by KAC. After the war ended, KAC was able to recover some but not all of its aircraft and equipment. KAC brought an action for damages in the United Kingdom ("UK") and was eventually awarded a judgment of over C$1 billion against the Iraq national airline. In the course of the trial, it was determined the Republic of Iraq had controlled the defence of its national airline and, in doing so, has committed perjury, and had intentionly misled the court. The Republic of Iraq was added as a Defendant for the purposes of costs and an award was made against it for C$84 million.

In making this costs award, the UK court held that the Republic of Iraq did not have "sovereign immunity" from a judgment because it was engaged in a commercial enterprise as opposed to acting as a sovereign state. If the Republic of Iraq had been successful in this argument, the UK court would have been prohibited from issuing a judgment against it.

In Canada, the UK judgment against the Republic of Iraq is a foreign judgment which requires recognition by our courts before it can be enforced in Canada. KAC applied in Quebec for recognition so that it could enforce the judgement by seizing undelivered planes being manufactured by Bombardier. Both the Quebec Superior Court and the Quebec Court of Appeal held that the judgement could not be recognized in Canada.

The Supreme Court of Canada disagreed with the Quebec Courts and recognized the UK judgment. In Kuwait Airways Corp. v. Iraq 2010 SCC 40, the Supreme Court of Canada ruled that it must be proven in Canada that sovereign immunity does not apply and that a Canadian court cannot rely upon a foreign court’s determination of that issue. However, in this case, they found that Iraq’s involvement in the UK commercial litigation was distinct from its sovereign act of seizing the aircraft during war. As a result, sovereign immunity did not apply and the Court remitted the matter back to the Quebec courts for enforcement proceedings.

In British Columbia, enforcement of foreign judgments from certain "reciprocating states" is governed by the Court Order Enforcement Act. In particular, Part IV of that Act governs the enforcement of judgments from the UK. It provides for a summary court process allowing the registration of the foreign judgment in certain instances. With respect to judgments against foreign governments, however, the Supreme Court of Canada has said that in addition to those registration requirements, an applicant must also show that the foreign government is not entitled to sovereign immunity in Canada regardless of whether the foreign court that issued the judgment had already ruled that sovereign immunity did not apply.