Federal Court

International Law

Sovereign immunity
Presumptive immunity for foreign states from jurisdiction of Canadian courts under State Immunity Act (Can.)

Creditor obtained arbitral award against State of Eritrea, with respect to contract for sale of military equipment. Canadian company S Corp. operated mine in state in joint venture with Australian company that it wanted to buy out. On ex parte motion, creditor registered arbitral award, exceeding $4 million at that point, in court for purposes of enforcement. Pursuant to state’s regulatory conditions, S Corp. through Eritrean branch office entered into joint venture with state through its alter ego E Co. to operate mine through joint venture mining company A Co. of which S Corp. owned 60 per cent while E Co. held remaining 40 per cent. On ex parte motion, creditor obtained provisional order of garnishment against S Corp. to garnish “debts” of exploration licence fees paid to states and of shares A Co. issued to E Co.. Creditor’s motion for final order of garnishment against S Corp. was granted. S Corp. appealed. Appeal allowed. There was presumptive immunity for foreign states from jurisdiction of Canadian courts under State Immunity Act (Can.). Only payments that were properly categorized as payments related to commercial activity could be seized. Exploration licence fees were exempt from seizure because they were quintessentially regulatory obligations imposed by sovereign state on those who carry on business within its reach, such that they did not relate to “commercial activity” for purposes of Act. State imposed licence requirement for purpose of asserting national control over businesses such as mining activities within its territory and fees were inextricably bound up with licences themselves. Licence fees also raised taxes for use by state’s government.

Sunridge Gold Corp. v. Delizia Ltd. (Apr. 8, 2016, F.C., Henry S. Brown J., T-1157-13) Decision at 248 A.C.W.S. (3d) 98 was reversed. 265 A.C.W.S. (3d) 645.

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