The uncertainty factor in Canadian private international law.

• Author: Castel, Jean-Gabriel

The author criticizes the principle of proximity that in Canadian private international law uses the test of real and substantial connection to determine the jurisdiction of Canadian and foreign courts, forum non conveniens, the law applicable to certain legal relationships, and the recognition and enforcement of foreign judgments. He calls this principle the factor of uncertainty as it does not allow business people to predict the outcome of any international litigation and therefore does not always protect their justified expectations. Too much freedom is given to the courts. In international business, it is imperative for the parties to a transaction to be able to determine with some certainty which court will hear any dispute that may arise between them and which law is applicable to its merits. The flaw with the real and substantial connection test is that it does not predict a single definite result when taking into account the many connecting factors that may be present in a particular case.

After reviewing some relevant objectives of private international law and the application of the real and substantial connection test in Canada, the author pleads in favour of a return to clear and predictable rules of private international law that leave little room for interpretation by the courts. He recognizes, however, that in exceptional circumstances the principle of proximity could perform a corrective function to avoid a totally unjust end result. This he calls limited principled flexibility, which holds predictability in check.

L'auteur critique le principe de proximite qui en droit international prive a recours au test du lien reel et substantiel pour etablir la competence juridictionelle et constitutionnelle des tribunaux canadiens et etrangers, le forum non conveniens, la loi qui s'applique au fond d'un litige et la reconnaissance et l'application des jugements etrangers. Il nomme le principe de proximite le facteur d'incertitude car celui-ci ne permet pas aux personnes qui se livrent au commerce international de prevoir a l'avance ce qui pourrait se passer en cas de litige. Les tribunaux beneficient de trop de latitude. En matiere de commerce international, il est essentiel pour les parties de savoir avec un certain degre de certitude devant quel tribunal tout litige sera presente ainsi que le droit applicable. La faiblesse du lien reel et substantiel reside dans le fait qu'il n'aboutit pas necessairement a un seul resultat previsible dans son interpretation des multiples facteurs propres a chaque cas.

Apres avoir examine certains objectifs du droit international prive et J'application au Canada du test du lien reel et substantiel, l'auteur conclut par un plaidoyer en faveur de regles claires et precises afin d'eviter toute surprise desagreable. Cependant, il reconnait que dans des cas exceptionnels le test du lien reel et substantiel peut jouer un role rectificatif pour eviter un resultat tout a fait injuste. Il s'agit alors d'un principe de flexibilite restreinte qui fait echec a la previsibilite.

Introduction I. Some Objectives of Private International Law II. Legislation and Jurisprudential Applications A. Jurisdiction simpliciter and forum non conveniens B. Choice of Law C. Foreign Judgments Conclusion Introduction

In the last forty years, in various areas of private international law, the legislatures and the courts have abandoned clear and unambiguous rules for new rules that are based on the principle of proximity as a general constitutional requirement of order and fairness as well as a test for forum non conveniens.

This principle posits that:

1. An action must be brought before the court of the province, territory, state, or country with which the parties, the action, or the matter have a real and substantial connection. (l)

2. Once it has jurisdiction, the court must apply the law that has the most real and substantial connection with the issue to be decided. (2)

3. A foreign judgment will be recognized and enforced only if the original court had jurisdiction based on a real and substantial connection with the parties and/or the action. (3)

This reducing approach, which amounts to a nonrule, has at least the merit of simplicity in its enunciation, if not in its application. It is opposed to the view that in order to protect the justified expectations of the parties, the courts should apply clearly formulated and unambiguous rules that allow individuals and their legal counsel to assess the probable outcome of any potential litigation. In light of globalization, this form of determinism has become most relevant in international business transactions that usually involve complex issues in several legal systems.

In contrast, the real and substantial connection test adopts a non-determinist approach for solving private international law cases. This is why it is suggested that the principle of proximity should be called the uncertainty factor! (4)

The application of the real and substantial connection test does not predict a single definite result when taking into account the many connecting factors present in a particular case. It can produce a variety of outcomes depending on their evaluation by different courts and makes it difficult, if not impossible, to achieve predictability and uniformity of result. Thus, a systematic application of the real and substantial connection test introduces an unavoidable element of uncertainty into private international law that is contrary to the objective of predictability of results so needed in international business.

Furthermore, the principle of proximity encourages forum shopping and prolongs litigation. Where there is an element of uncertainty, the door is open for a resourceful lawyer to attempt to change the application of the law; a clear rule of law, by contrast, promotes settlement. (5)

Although a certain amount of flexibility is necessary since private international law rules cannot be completely deterministic, in recent years, the courts have gone too far in relying on the real and substantial connection test to resolve private international law cases. In some instances they have not reached the ultimate goal of protecting the justified expectations of the parties. This is especially true in common law Canada, which uses the real and substantial connection test more than Quebec.

When jurisdiction, contracts, and foreign judgments are at issue, the result of the case will often depend on chance since, in the absence of prescribed connecting factors, the courts are usually analyzing and weighing facts. This is particularly evident in borderline cases. Their decisions can easily be biased. The principle of proximity gives too much power to the courts, rendering them, in a sense, omnipotent.

Consequently, private international law jurisprudence, in which courts apply the real and substantial connection test, is in disarray because the courts are often at odds with one another. It is difficult for appellate courts to make order out of chaos due to the nature of review, which involves mixed questions of law and fact. How do the courts determine the weight to be given to this or that factual element in order to select a truly relevant real and substantial connection? Fortunately, in Quebec, the Civil Code of Quebec ("Code") lists the factors and the order in which they are to be taken into consideration when it uses this test. (6)

A brief review of some of the objectives of private international law will be followed by an examination of a number of legislative and jurisprudential applications of the real and substantial connection test with respect to jurisdiction simpliciter, forum non conveniens, choice of law, and foreign judgments. This analysis will lead to the conclusion that the real and substantial connection test should be applied sparingly.

1. Some Objectives of Private International Law

   Protecting the justified expectations of the parties is an objective that is particularly important in private international law cases involving international business transactions, as "it would be unfair and improper to hold a person liable under the local law of one state when he had justifiably molded his conduct to conform to the requirements of another state." (7) Unfortunately, this objective is often compromised by the uncertainty factor. Decisions regarding choice of jurisdiction, choice of law, and enforcement of foreign judgments should not rely on a court's arbitrary determination of whether, in its opinion, a particular connection with this or that jurisdiction or law is more important than another.

   Clearly formulated and unambiguous rules of private international law are more likely to protect the justified expectations of the parties. Where the rules are vague, they encourage litigation and forum shopping since "tout se plaide" and each party hopes that the court will rely on the factors that favour his or her position.

   It is not easy for a court to protect the justified expectations of the parties. This is why "the parties are free within broad limits to choose the law to govern the validity of their contract," (8) and to choose the court that will hear any disputes arising between them. However, the uncertainty factor reappears if the parties have not addressed these issues and the law does not contain clear rules applicable to them. Predictability, certainty, and uniformity of results or of legal consequences are objectives that ensure the protection of the justified expectations of the parties and discourage forum shopping. A decision should not depend on the fortuitous place of trial or the dubious selection of the applicable law by the courts.

2. Legislation and Jurisprudential Applications

   1. Jurisdiction simpliciter and forum non conveniens

      On the national level, both in Quebec with respect to personal actions of a patrimonial nature and in common law Canada with respect to actions in personam, the exercise of jurisdiction...