In CC/Devas (Mauritius) Ltd. v. Republic of India, 2022 QCCS 7, Justice Pinsonnault was seized with several questions with respect to two seizures before judgment by garnishment, which were authorized within the context of an application for recognition and enforcement of arbitral awards rendered outside of Québec. What makes this situation of interest is the fact that the seizures before judgment involved assets (money) owned by third parties who were not defendants to the arbitration or named in the awards for which recognition is sought (still pending). They are not implicated at all in the facts alleged in the dispute leading to these awards and they are not targeted in the awards either. Nonetheless, Justice Pinsonnault concluded that the allegations against these third-party corporations (fully owned by the respondent, Republic of India) were sufficient to cause him to confirm the seizure against one of them, although with a revised scope. The seizure against the other corporation was dismissed for other reasons related to the State Immunity Act. The application for recognition and enforcement of the awards remains pending.
The dispute originated with the termination of an agreement between Plaintiffs and Antrix, a corporation wholly owned by respondent, the Republic of India. The agreement concerned the construction and operation of two satellites and the rental of spectrum capacity for broadcasting purposes. Notwithstanding the agreement and the tens of millions of dollars invested by the Plaintiffs to comply with this agreement, the Cabinet Committee on Security of India decided to unilaterally order Antrix to terminate the agreement. In conformity with this governmental decision, Antrix terminated the agreement by reason of “force majeure”. This led Plaintiffs to bring one arbitration against Antrix and a second arbitration against the Republic of India (and the basis for an arbitration in which Republic of India is a party is not explained in Justice Pinsonnault’s reasons). It is the latter arbitration that is the subject of Justice Pinsonnault’s decision. That arbitration resulted in two awards, one finding the Republic of India liable for damages caused by the termination of the agreement and the second ordering the Republic of India to pay the amount of USD$111 million to the Plaintiffs in damages.
While Plaintiffs’ application to enforce the awards against the Republic of India in Québec were still pending, Plaintiffs sought two authorizations for seizures before judgment by garnishment, one against the Airport Authority of India (AAI) (heard by Justice Granosik) and the other against Air India (heard by Justice Buchholz), for amounts of money administered by the International Air Transport Association seated in Montréal. AAI and Air India are two distinct entities from the Republic of India although fully state-owned. The two seizures were authorized on the basis that AAI and Air India are alter egos of the Republic of India.
More importantly, Justice Pinsonnault’s decision concerns two applications: (1) an application by Air India to quash the seizure of its assets based on the insufficiency of the allegations in the sworn declarations filed in support of the seizure against Air India and (2) an application by AAI to dismiss or stay the seizure of its assets, claiming the benefit of the state immunity provided for in the State Immunity Act.
As for the first application by Air India, Justice Pinsonnault concluded that the allegations, deemed to be truthful at this stage in the process, were sufficient to conclude “that there were objective and serious reasons to fear that recovery of Plaintiff’s claim against the Republic of India might be jeopardized without the Seizures regardless of the behavior of AAI and Air India”. Justice Pinsonnault described the Republic of India’s conduct as follows (at para. 54):
“Without going into detail into the extensive factual allegations aiming to establish India’s wrongful and abusive conduct towards Plaintiffs, the many actions, direct or indirect, of India within its country’s boundaries to attack, inter alia, the Treaty Awards [Awards rendered against Republic of India] and to prevent their execution by Plaintiffs is simply mind-boggling to say the very least on a prima facie basis and leaves very little doubt in the mind of the Court that it would be next to impossible to execute the Treaty Awards within India leaving Plaintiffs with the sole realistic alternative but to execute the same on assets located outside that country.
The Court understands that even though the Treaty Awards have been homologated so far in five other countries, Plaintiffs have yet to collect a single penny from the Republic of India on account of the Treaty Awards.”
Although Justice Pinsonnault found that the allegations regarding the objective fear for the recovery of Plaintiff’s claim were sufficient, and showed a valid claim, Air India was still a third party to the award from which the claim originated. Therefore, Justice Pinsonnault examined that specific question (at paras. 30 to 33):
“Be that as it may, under normal circumstances, a seizure before (or after) judgment by garnishment entitles the plaintiff to seize assets owned by the defendant that are held by the garnishee or sums of money due to the defendant by the garnishee.
At first glance, what seems to be odd herein is that with their Seizures, Plaintiffs in continuance are not seeking to enforce in Québec the Treaty Awards rendered outside of Québec against the sole named defendant in those awards namely, the Republic of India, but they managed to obtain on two occasions and on an ex parte basis that their Seizures before judgment by garnishment (sic) affect the assets of third parties namely, AAI and Air India, held by IATA in Montréal and even at any of its worldwide branches.
Both AAI and Air India were never—nor were ever alleged to have been—parties to the arbitration proceedings that gave rise to the Treaty Awards nor were they personally condemned to pay any sums of money to Plaintiffs in connection therewith.” (underlining by Justice Pinsonnault)
Beginning his analysis, Justice Pinsonnault first reiterated that the Court’s decision was made solely on the basis of the sufficiency of the allegations in support of the seizure and not their veracity.
Justice Pinsonnault examined the sworn declarations in support of the seizures and noted the following (at paras. 62‑63):
“The basis invoked by Plaintiffs to justify their Applications for seizure before judgment by garnishment against the assets of AAI and Air India derives essentially from the unique and extensive link between them and the Republic of India who exercises an exceptionally high degree of control over those state-owned entities, their assets and their activities which, according to the allegations of the sworn declarations, goes way beyond the involvement and control normally exercised by a shareholder over its wholly owned corporation.
That somewhat unique and exceptional situation identified and alleged in painstakingly details (sic) in the sworn declarations satisfied the Authorization Judges that, on a prima facie basis, AAI and Air India are the alter egos of the Republic of India for the purpose of attachment of their respective assets to eventually serve to satisfy the amounts due pursuant to the Treaty Awards, should the Superior Court homologate the same as requested.”
However, exercising his judicial discretion according to section 522 CCP, Justice Pinsonnault revised the scope of the seizure against Air India reducing it to 50% of the assets received and held by the International Air Transport Association.
As for the second application, Justice Pinsonnault dismissed the seizure against AAI for reasons of state immunity.
Firstly, because state immunity is a question of public order, Justice Pinsonnault concluded that the question of the application of the State Immunity Act to AAI should have been decided before any other issue. Among other arguments, the fact that no allegations supported an exception to the usual steps regarding the application of the State Immunity Act and the fact that there were no allegations that AAI behaved in a way that jeopardized the recovery of Plaintiffs’ claim supported that conclusion.
Secondly, state immunity triggered a jurisdiction question. Therefore, AAI had no choice but to first plead that issue, setting aside any other issue (sufficiency, veracity), to avoid to implicitly submitting to the Superior Court’s jurisdiction.
On the other hand, Plaintiffs relied on Instrubel n.v. v. Ministry of Industry of The Republic of Iraq, 2016 QCCS 1184, to justify the position that any debate concerning the State Immunity Act should be heard after any decisions relating to the validity of the seizures.. However, Justice Pinsonnault saw many differences between Instrubel and the case at bar (at para. 101):
“More importantly, State Immunity was not an issue dealt with at any level up to the Supreme Court of Canada. Justice Stephen W. Hamilton, a Justice of the Superior Court at the time, noted in his judgment that the parties had agreed on an amicable basis before the hearing to plead at a later date the issue of State Immunity raised by Iraq. The Court was never asked to address that issue at the outset of the proceedings contesting the seizure by garnishment that had been authorized in the hands of IATA.”
Even if Justice Pinsonnault found that the allegations made by Plaintiffs to support the alter ego theory were sufficient, he refused to go further by concluding that a simple allegation of a waiver or renunciation by Republic of India to the application of the State Immunity Act should also apply to AAI without any further debate (at para 110):
“With all due respect, Plaintiffs could not circumvent this fundamental determination to the prejudice of AAI by simply arguing on an ex parte basis that as the Republic of India did not allegedly benefit from the State Immunity of jurisdiction nor of the State Immunity of execution pursuant to the SIA by renunciation or otherwise, AAI would have automatically lost any such benefit.”
Update: Leave to appeal this decision was granted at 2022 QCCA 218.
Contributor’s note:
This decision is the first of what we expect to be several interesting decisions concerning the enforcement and execution of an arbitral award made outside Québec (sec. 652 and following CCP), in respect of which there is currently very limited case law in Quebec.
One question relates to the alter ego argument raised by Plaintiffs’ and on which they relied to execute the awards upon third parties to the awards, which will surely be widely discussed in future Court decisions.
Secondly, the question of the numerous contestations of the validity of the awards in foreign countries as well as the homologation of the award granted in five other countries promises to be very interesting. What influence will foreign decisions have on the enforcement of an arbitral award in our jurisdiction?
Recently, in Metso Minerals Canada Inc. c. Arcelormittal exploitation minière Canada, 2020 QCCS 1103, Justice Marie-Anne Paquette stated the following (at para. 13):
“We shall bear in mind that recognition and enforcement are refused only in exceptional cases. The New York Convention indeed promotes the stability of international commercial interests by facilitating the recognition and fluency of arbitration awards with uniform grounds of opposition applicable to foreign arbitration.”
See also an earlier Case Note on this case: Québec – no abuse of procedure if losing arbitral party obliges non-parties to litigate their liability for similar claims – #440.
Also, Justice Dominique Poulin, in Société générale de Banque au Liban SAL c. Itani, 2019 QCCS 5266, examined numerous questions concerning the recognition and enforcement of arbitration awards made outside Québec. See also an earlier Case Note on this case: Québec – award treated as “judgment” subject to ten (10) year prescription (limitation) period – #259.
Update (February 17, 2022) – Leave to appeal this decision was granted at 2022 QCCA 218.
This is clearly a case to follow. Stay posted!