Wednesday, 28 February 2018

Place Where Harm Occurs, as Basis for Jurisdiction, is Limited: U.K. Supreme Court

            Sometimes, for strategic reasons, a foreign litigant prefers to sue in the Courts of the United Kingdom.    For example, Russian oligarchs have often done so, even when the connection between the U.K. and the dispute is tenuous.     A recent ruling of the U.K. Supreme Court narrows the British courts’ jurisdiction.  In AMT Futures Ltd. v. Marziller  [2017] UKSC 13, AMT chose the British courts for a claim against a lawyer, Marziller, who resides in Germany. AMT could sue Marziller in the U.K. only if the claim is for damage “sustained within [the U.K.]”  (CPR PD 6B r.3.1(9)).    This rule is based on the Brussels I Regulation (s 7(2)).  Such jurisdiction is an exception to the general rule that a defendant is to be sued in the defendant’s domicile.  
            The facts are these.  Marziller had sued AMT on behalf of AMT clients, in Germany. He did so despite the fact the client contracts contained a exclusive jurisdiction clause in favour of  the U.K. courts.     AMT challenged the jurisdiction of the German courts but lost, and paid over two million pounds to settle the case.     AMT then sued Marziller, arguing that Marziller had deprived AMT of the benefit of the exclusive jurisdiction clause by inducing AMT’s clients to breach their contract.   AMT argued that the harm occurred in the U.K. based on the fact AMT had paid the settlement out of an account in England and based on the exclusive jurisdiction clause in favour of the U.K. 
            AMT succeeded at the trial level, but the Court of Appeal and U.K. Supreme Court ruled that the claim could not be brought in the U.K.  The Supreme Court stated that promoting certainty is central to the Regulation.  A defendant ought to be able to predict where he might be sued.  Exceptions to the general rule that a defendant is to be sued in his domicile are to be restrictively interpreted.   There must be a close connection between the court and the action, for the sake of the sound administration of justice.    The rationale for the ‘damage sustained in the jurisdiction’ exception is that the courts of such jurisdiction are in a particularly good position to determine the evidence of actual damage.   However, on the facts here, where the inducement to breach occurred in Germany, such rationale would not apply.       Various rulings of the Court of Justice for the European Union have limited the scope of the ‘damage sustained in the jurisdiction’ exception to initial and direct damage to the immediate victim.  
            This wariness about damage sustained as a basis for jurisdiction is found also in Canada.   The Supreme Court of Canada expressly rejected ‘damage sustained’ as a presumptive connecting factor for tort cases in Club Resorts v Van Breda [2012] S.C.J. no. 17.   Its reason:  that an injury may occur in one jurisdiction and the injured person suffer the pain and inconvenience in a second, or a third.    “damage sustained”, as a presumptive connecting factor, would risk “sweeping into that jurisdiction claims that have only a limited relationship with the forum”  (para 89).    Similarly, the Court Jurisdiction and Proceedings Transfer Act,  in force in B.C.,  Saskatchewan and Nova Scotia, which deems several types of claims to have a real and substantial connection (e.g. claims relating to a tort occurring in the province, or claims relating to a contract to be performed in the province) does not include damage sustained in that list.   

Wednesday, 31 January 2018

Must a Court to Defer to a Foreign Gov’t’s Interpretation of its Own Laws?

The United States Supreme Court has just agreed to hear an appeal to decide whether, when determining the content of a foreign law, a court must defer to a foreign government's characterization of its domestic law, due to comity.  In AnimalSciences Products v. Hebei Welcome Pharmaceuticals, a U.S. company that had been importing vitamin C from certain Chinese companies sued those companies for violation of U.S. anti-trust laws.  The plaintiffs alleged the Chinese companies had fixed prices and quantities of the vitamin.   The Chinese companies admitted it, but said they were required to do so under Chinese law, and that therefore the case should be dismissed.   The Chinese government confirmed this in an amicus curiae brief.   

The trial court ruled that price fixing was not mandated by Chinese law.  The case went to a jury that awarded $147,000,000 to the plaintiffs.   The U.S. Court of Appeals (Second Circuit) reversed, ruling that the Court must defer to the Chinese government’s interpretation of its law.    

The Ninth Circuit has also ruled in favour of deference.  The Fifth, Sixth, Seventh, Eleventh and D.C. Circuits have ruled that courts may independently review a foreign government’s interpretation.    Another court, I do not know which but not necessarily an appeal court, ruled that it must defer even if the foreign government is a party to the dispute.    The foreign government may have an interest in the outcome even if it is not a party.   In Animal Sciences, the Chinese government arguably has an interest in facilitating exports.

The exact question the Supreme Court will answer is: 
Whether a court may exercise independent review of an appearing foreign sovereign’s interpretation of its domestic law … or whether a court is “bound to defer” to a foreign government’s legal statement, as a matter of international comity, whenever the foreign government appears before the court…

In Canada, the content of foreign law is a question of fact to be proven by way of expert witnesses, such as law professors from the foreign jurisdiction or lawyers practising in the foreign jurisdiction.     There is no obligation in Canada to defer to a foreign government on the meaning of a foreign law.     See Halsbury’s Laws of Canada, HCF-96 and MacDonald, Cross Border Litigation:  Interjurisdictional Practice and Procedure at p. 166.  

There are at least two reasons why courts ought not defer.  One is that the foreign government’s interest in the outcome.  The other is that to defer to a foreign government’s interpretation, instead of relying on expert evidence about cases decided by the courts of that country regarding that law, is in effect to disregard the separation of powers as between the executive and judicial branches of government. This undermines the rule of law.

I thank Ted Folkman, whose Letters Blogatory blog brought Animal Sciences to my attention. 

Thursday, 30 November 2017

California Court Bars Enforcement of Cdn Injunction Against Google

     This month, the United States District Court in San Jose, California granted Google a preliminary injunction preventing enforcement of the order issued by the British Columbia Supreme Court that compels Google to remove Datalink’s websites from its search results not just in Canada but worldwide.    Equustek Solutions had sought the order after discovering Translink had stolen its trade secrets and was misrepresenting a Equustek product as a Translink product.  The B.C. order was affirmed by the B.C. Court of Appeal and by the Supreme Court of Canada (Google v. Equustek Solutions 2017 SCC 34)  – see my post from this summer and earlier.   Equustek did not defend Google’s motion.  However, the judgment itself and the reasons of the Supreme Court of Canada made clear to the California court the underlying facts and the rationale for the injunction.  

     The test the U.S. court applied is similar to the Canadian common law test for an interlocutory injunction, and consists of four requirements:   a.) a strong case on the merits, b.) a likelihood of irreparable harm, c.) the balance of equities weigh in favour of the injunction, and d.) the injunction would be in the public interest. 

     As for the merits, Google relied on the Communications Decency Act (“CDA”), which immunizes providers of interactive computer services (such as Google) from liability arising from content created by third parties.  Google is not to be treated as the publisher or speaker; Translink is the publisher while Google is merely an intermediary. 

     As for irreparable harm, it is hard to see how Google could meet that test.  After all, in the Canadian proceedings Google admitted it already has staff who delist certain offensive material from search results, and Google admitted that to delist Translink sites would not be burdensome.   Nor was there any indication that delisting Translink sites (or other sites containing intentionally misleading information) would affect Google’s revenues or would harm Google’s reputation.  Yet the U.S. court disposed of irreparable harm in a single sentence: “Google is harmed because the Canadian order restricts activity that section 230 [of the CDA] protects” (p. 5 lines 13-14). 

     The court summarily disposed also of the balancing of the equities.   It did not even address the fact that the content that was delisted misrepresents Equustek’s product as its own, which misrepresentation harms not just Equustek but also potential buyers, and possibly also the general public,  especially if the products sold by Translink have latent defects.  The Court said only that “the balance of equities favours Google because the injunction would deprive it of the benefit of federal law” (p. 5, lines 14-15).  Far from balancing equities, the court did not even consider the potential benefits of the injunction, for anyone.     

     The test’s last requirement is that the injunction be in the public interest.    The court answered that the order “threatens free speech on the global internet” (p. 6, lines 9 – 10).    “[With the passage of the CDA,] Congress wanted to encourage the unfettered and unregulated development of free speech on the Internet”, and “free speech … would be severely restricted if websites were to face tort liability for hosting user-generated content”.  (p.5 lines 19-24 and p. 6 lines 1 – 10).

     Nowhere does the ruling address the principle that in general, in foreign judgment enforcement cases,  U.S. courts are not to review the merits of the underlying judgment, or the principle of comity (Hilton v Guyot 159 US 113 (1895).  Arguably the court did not need to address those matters, insofar as California law does not provide for the enforcement of non-monetary judgments;  their courts’  power to enforce foreign judgment applies only to monetary judgments (Cal. Code of Civil Proc. S. 1715 (a)).

     By the same token, nor did the court need to base its ruling on the ground the judgment conflicts with the CDA and its supposed purpose of protecting free speech.  The California court could have rendered a narrower ruling, granting the injunction barring enforcement merely on the ground that the judgment is non-monetary. 

     The fact the court chose instead to base its ruling on inconsistency with the CDA suggests that U.S. courts may refuse to enforce a judgment on the basis that it runs contrary to a U.S. statute.  A Canadian court would probably not refuse enforcement on that basis.  In both Canada and the U.S. one defence to the enforcement of foreign judgments is that the foreign law on which the judgment is based is contrary to public policy.  This U.S. decision in Google suggests this defence is broader in the U.S. than in Canada.   In Canada public policy is equated to fundamental morality.  Inconsistency between statute law and a judgment does not necessarily mean the judgment offends public policy, particularly if the statute is not a criminal statute.  In Boardwalk Regency v Maalouf (1992) 6 O.R. (3d) 737 the Ontario Court of Appeal rejected that defence, and upheld enforcement, in a case involving a foreign judgment for a gambling debt even though an Ontario statute prohibited enforcement of gambling debts.