TMR Energy Ltd. v. State Property Fund of Ukraine

• Jurisdiction: Federal Jurisdiction (Canada)
• Court: Federal Court (Canada)
• Citation: 2003 FC 1517,(2003), 244 F.T.R. 1 (FC)
• Date: 23 December 2003
• Subject Matter: EXECUTION,CONSTITUTIONAL LAW,CONFLICT OF LAWS,INTERNATIONAL LAW,ARBITRATION,COURTS

TMR Energy Ltd. v. State Prop. Fund (2003), 244 F.T.R. 1 (FC)

MLB headnote and full text

Temp. Cite: [2004] F.T.R. TBEd. JA.025

TMR Energy Limited, a duly incorporated legal person incorporated under the laws of Cyprus (applicant) v. State Property Fund of Ukraine, an organ of the State of Ukraine (respondent) and Aviation Scientific Technical Complex Name After O.P. (Antk) Antonov (intervenor)

(T-60-03; 2003 FC 1517)

Indexed As: TMR Energy Ltd. v. State Property Fund of Ukraine

Federal Court

Tabib, Prothonotary

December 23, 2003.

Summary:

The State of Ukraine owned an aircraft which was held by Antonov, a state enterprise, under the "right of full economic management", a legal concept peculiar to former Soviet states. TMR Energy, a private Cypriot company, obtained an arbitral award in Stockholm, Sweden, against State Property Fund of Ukraine (SPF), an organ of the State of Ukraine. TMR commenced proceedings to enforce its arbitral award and caused the aircraft to be seized in Newfoundland, pursuant to a registration order and writ of seizure and sale issued by the Federal Court. Both SPF and Antonov filed objections to the seizure that were held to be effective by the Sheriff of Newfoundland under the Newfoundland Judgment Enforcement Act. TMR then moved to have the court determine the validity of the seizure, raising the following issues: 1) whether the Federal Court had jurisdiction to register the arbitral award; 2) whether the State of Ukraine was immune from the jurisdiction of the Federal Court under the State Immunity Act (Can.); 3) whether the registration order, issued against SPF, could be enforced against the assets of the State of Ukraine (i.e., who was the judgment debtor); 4) what were, under Ukrainian law, the respective rights of Ukraine and Antonov in the aircraft; and 5) was the aircraft immune from execution as military property under the State Immunity Act.

A Prothonotary of the Federal Court held that the court had jurisdiction to register the arbitral award; that the State of Ukraine was not immune to the jurisdiction of the court; the registration order could be enforced against the assets of the State of Ukraine (i.e., the judgment debtor); under Ukrainian law, the State of Ukraine had the right of full ownership in the aircraft, subject only to Antonov's right of full economic management, so long as that right subsisted; and the aircraft was not immune from execution as military property under the State Immunity Act. In the result, the registration order and seizure being valid, the property was subject to judicial sale under the Judgment Enforcement Act (NL).

Arbitration - Topic 5694

The award - Enforcement of award - Foreign awards - General - [See Conflict of Laws - Topic 4883 , Constitutional Law - Topic 4717 , first Execution - Topic 4223 , International Law - Topic 2205 , International Law - Topic 2206 and International Law - Topic 2208 ].

Arbitration - Topic 5695

The award - Enforcement of award - Foreign awards - Jurisdiction - The State of Ukraine owned an aircraft which was held by Antonov, a state enterprise, under the "right of full economic management", a legal concept peculiar to former Soviet states - TMR Energy, a private Cypriot company, obtained an arbitral award in Stockholm, Sweden, against State Property Fund of Ukraine (SPF), an organ of the State of Ukraine - TMR commenced proceedings to enforce its arbitral award and caused the aircraft to be seized in Newfoundland, pursuant to a writ of seizure and sale issued by the Federal Court - Both SPF and Antonov alleged that the court lacked jurisdiction to register and recognize the arbitral award and that the seizure was invalid - A Prothonotary of the Federal Court held that the court had jurisdiction where the three part test for jurisdiction was met: (1) there was a statutory grant of jurisdiction by the federal Parliament (i.e., s. 6 of the United Nations Foreign Arbitral Awards Convention Act (the Act)); (2) the Act in and of itself met the requirement that there be a body of federal law nourishing the jurisdiction; and (3) the finding by the court that both the Act and the State Immunity Act were constitutionally valid federal legislation, met the requirement that the law on which the case was based must be a "law of Canada" within the meaning of s. 101 of the Constitution Act, 1867 - See paragraphs 14 to 53.

Conflict of Laws - Topic 4883

Property - Personalty - Choice of law - The State of Ukraine owned an aircraft which was in the possession of Antonov, a state enterprise, under the "right of full economic management", a legal concept peculiar to state enterprises in the former Soviet states - TMR Energy, a private Cypriot company, obtained an arbitral award in Stockholm, Sweden, against the State Property Fund of Ukraine (SPF), an organ of the State of Ukraine - TMR pursued enforcement proceedings and had the aircraft seized in Newfoundland pursuant to a Federal Court order - The validity of the seizure became an issue, raising a question as to ownership of the aircraft as between Antonov and the State of Ukraine (i.e., the meaning of the concept of "right of full economic management") - A Prothonotary of the Federal Court stated that any right in the aircraft was created in Ukraine and it was the law of Ukraine that must be applied to ascertain the respective rights of Antonov and of the State of Ukraine - However, to the extent that those rights were extended, restricted or affected by the application of Ukrainian laws as to unseizability, execution or enforcement, those Ukrainian laws were inapplicable, and resort would be had to the laws of Canada - The court, after examining the Ukraine law respecting ownership rights, held that the State of Ukraine had the right of full ownership in the aircraft, subject only to Antonov's right of full economic management, so long as that right subsisted - The aircraft was subject to seizure and sale under the Judgment Enforcement Act (NL) as property of the State of Ukraine - See paragraphs 138 to 178.

Constitutional Law - Topic 4717

Peace, order and good government clause - Particular legislative purposes - Regulation of causes of action that can be maintained in Canada against foreign states or their agencies - Section 6 of the United Nations Foreign Arbitral Awards Convention Act (Can.) (the Act) granted the Federal Court concurrent jurisdiction with the superior, district or county courts of the provinces to recognize and enforce arbitral awards under the UN Convention incorporated in the Act - A Prothonotary of the Federal Court stated that both the Act and the State Immunity Act (to the extent the latter was relevant to establishing the jurisdiction of the court) were constitutionally valid legislation - The court held that Parliament had the power by virtue of the exercise of the Crown's prerogative and its residual power to make laws for the peace, order and good government of Canada to recognize and regulate the causes of action that can be maintained in Canada against foreign states or their agencies, including a cause of action for the recognition and enforcement of a foreign arbitral award - See paragraphs 25 to 53.

Courts - Topic 4055

Federal Court of Canada - Jurisdiction - Trial Division - Execution of judgments (incl. foreign arbitration awards) - [See Arbitration - Topic 5695 , Constitutional Law - Topic 4717 and International Law - Topic 2208 ].

Execution - Topic 4223

Sale of goods of judgment debtor - Interests which may be sold - Foreign state owned assets - The State of Ukraine owned an aircraft which was held by Antonov, a state enterprise, under the "right of full economic management", a legal concept peculiar to state enterprises in the former Soviet states - TMR Energy, a private Cypriot company, obtained an arbitral award in Stockholm, Sweden, against the State Property Fund of Ukraine (SPF), an organ of the State of Ukraine - TMR pursued enforcement proceedings and had the aircraft seized in Newfoundland while in Antonov's possession, pursuant to an order of the Federal Court - Issues arose as to the validity of the seizure and as to who owned the aircraft - A Prothonotary of the Federal Court held that the State of Ukraine had the right of full ownership in the aircraft, subject only to Antonov's right of full economic management - However the court found that under Ukrainian law, it was within the powers of the State of Ukraine to withdraw the aircraft from Antonov and thus extinguish Antonov's rights under full economic management - The judicial sale of the aircraft under the Judgment Enforcement Act (NL) would have the same effect - The aircraft would therefore be sold as the property of the State of Ukraine, without encumbrance from any rights of Antonov - See paragraphs 179 to 187.

Execution - Topic 4223

Sale of goods of judgment debtor - Interests which may be sold - Foreign state owned assets - [See International Law - Topic 2205 ].

International Law - Topic 2205

Sovereignty - Incidents of - Immunity - Property of sovereign state - The State of Ukraine owned an aircraft which was held by Antonov, a state enterprise, under the "right of full economic management", a legal concept peculiar to state enterprises in the former Soviet states - TMR Energy, a private Cypriot company, obtained an arbitral award in Stockholm, Sweden, against the State Property Fund of Ukraine (SPF), an organ of the State of Ukraine - TMR pursued enforcement proceedings and had the aircraft seized in Newfoundland while in Antonov's possession, pursuant to an order of the Federal Court - Issues arose as to the validity of the seizure and as to who owned the aircraft - The State of Ukraine argued that the aircraft was exempt from seizure under s. 12(3) of the State Immunity Act as military property - A Prothonotary of the Federal Court held that the aircraft was not immune from execution proceedings - Antonov's use of the aircraft was purely commercial - Any connection with military activities was purely incidental - The aircraft was a cargo aircraft - The court discussed criteria for establishing whether an aircraft was being used for military purposes within the meaning of s. 12(3) - See paragraphs 189 to 222.

International Law - Topic 2206

Sovereignty - Incidents of - Immunity - Foreign agencies (incl. an organ of the state) - The State of Ukraine owned an aircraft which was held by Antonov under the "right of full economic management", a legal concept peculiar to former Soviet states - TMR Energy, a private Cypriot company, obtained an arbitral award in Stockholm, Sweden, against the State Property Fund of Ukraine (SPF), an organ of the State of Ukraine - TMR commenced proceedings to register and enforce its arbitral award and caused the aircraft to be seized in Newfoundland, pursuant to a writ of seizure and sale issued by the Federal Court - The validity of the registration order and seizure became an issue - In particular, an issue arose as to whether the registration order, issued against SPF, could actually be enforced against the assets of the State of Ukraine (i.e., who in fact was the judgment debtor) - A Prothonotary of the Federal Court held that the registration order stood as a valid order against the State of Ukraine (i.e., the State of Ukraine was the judgment debtor) - See paragraphs 69 to 137.

International Law - Topic 2208

Sovereignty - Incidents of - Immunity - When determined - The State of Ukraine owned an aircraft which was held by Antonov, a state enterprise, under the "right of full economic management", a legal concept peculiar to former Soviet states - TMR Energy, a private Cypriot company, obtained an arbitral award in Stockholm, Sweden, against State Property Fund of Ukraine (SPF), an organ of the State of Ukraine - TMR commenced proceedings to register and enforce its arbitral award - The aircraft was seized in Newfoundland, pursuant to a writ of seizure and sale issued by the Federal Court - Both Antonov and the State of Ukraine argued that the Federal Court's registration order was null because neither the notice of application filed by TMR nor the Registration Order expressly raised or addressed the issue of state immunity as required by s. 3(2) of the State Immunity Act - A Prothonotary of the Federal Court rejected this argument - The court held that it had jurisdiction over the subject matter and therefore the registration order was not subject to what amounted to a collateral attack - See paragraphs 54 to 60.

Cases Noticed:

R. v. Wilson, [1983] 2 S.C.R. 594; 51 N.R. 321; 26 Man.R.(2d) 194, refd to. [para. 17].

Volhoffer v. Volhoffer, [1925] 3 D.L.R. 552 (Sask. C.A.), refd to. [para. 19].

Tufts v. Thomson, [1929] 1 D.L.R. 896 (Man. C.A.), refd to. [para. 20].

Grand v. Maclaren (1894), 23 S.C.R. 310, refd to. [para. 22].

R. v. Komadowski (1986), 39 Man.R.(2d) 282 (C.A.), refd to. [para. 22].

Samson v. Hynes et al. (1977), 23 N.S.R.(2d) 195; 32 A.P.R. 195 (C.A.), refd to. [para. 22].

Miida Electronics Inc. v. Mitsui O.S.K. Lines Ltd. and ITO-International Terminal Operators Ltd., [1986] 1 S.C.R. 752; 68 N.R. 241, refd to. [para. 24].

Compania Maritima Villa Nova S.A. v. Northern Sales Co., [1992] 1 F.C. 550; 137 N.R. 20 (F.C.A.), refd to. [para. 27].

Reference Re Foreign Legations, [1943] S.C.R. 208, refd to. [para. 33].

St. John (City) v. Fraser-Brace Overseas Corp., [1958] S.C.R. 263, refd to. [para. 33].

Oag v. Canada - see Oag v. Outerbridge and Howland.

Oag v. Outerbridge and Howland, [1987] 2 F.C. 511; 73 N.R. 149 (F.C.A.), refd to. [para. 49].

Kigowa v. Minister of National Revenue et al., [1990] 1 F.C. 804; 105 N.R. 278 (F.C.A.), refd to. [para. 49].

Bensol Customs Brokers Ltd. v. Air Canada, [1979] 2 F.C. 575 (F.C.A.), refd to. [para. 50].

Prudential Assurance Co. et al. v. Canada et al., [1993] 2 F.C. 293; 153 N.R. 257 (F.C.A.), refd to. [para. 51].

Canada v. Montreal Urban Community Transit Commission, [1980] 2 F.C. 151; 35 N.R. 438 (F.C.A.), refd to. [para. 51].

Overn v. Strand, [1931] S.C.R. 720, refd to. [para. 72].

Kundi v. Active Bailiff Service Ltd., [1996] B.C.J. No. 2036, refd to. [para. 72].

Di-Done-Gagnon v. Di-Done, J.E. 2000-1093 (Que. C.A.), refd to. [para. 72].

Hamilton v. Workers' Compensation Board (B.C.) (1992), 11 B.C.A.C. 192; 22 W.A.C. 192; 65 B.C.L.R.(2d) 96 (C.A.), refd to. [para. 72].

Langstaff Estate, Re, [1923] 3 W.W.R. 626, refd to. [para. 82].

Joy Shipping Co. v. Empressa Cubana des Fletes et al. (2000), 184 F.T.R. 79 (T.D.), refd to. [para. 83].

Ministre de Revenu national v. Gadbois et al. (2002), 298 N.R. 374 (F.C.A.), refd to. [para. 83].

Drapeau v. Canada (Minister of National Defence) (1996), 119 F.T.R. 146 (T.D.), refd to. [para. 86].

Doering v. Grandview (Town), [1976] 2 S.C.R. 621; 7 N.R. 299, refd to. [para. 88].

Norsk Hydro ASA v. State Property Fund of Ukraine et al., [2000] EWHC 2120 (Q.B. Div., Comm. Ct.), refd to. [para. 89].

Genpharm Inc. v. Procter & Gamble Pharmaceuticals Canada - see Procter & Gamble Pharmaceuticals Canada Inc. et al. v. Canada (Minister of Health) et al.

Procter & Gamble Pharmaceuticals Canada Inc. et al. v. Canada (Minister of Health) et al. (2003), 313 N.R. 380; 2003 FCA 467, refd to. [para. 98].

Hoystead v. Hoystead, [1926] A.C. 125 (H.L.), refd to. [para. 99].

Regas Ltd. v. Plotkins, [1961] S.C.R. 566, refd to. [para. 100].

Roxford Enterprises S.A. v. Cuba et al. (2003), 236 F.T.R. 1 (T.D. Protho.), refd to. [para. 109].

Ferranti-Packard Ltd. v. Cushman Rentals et al. (1980), 30 O.R.(2d) 194 (H.C.), affd. (1981), 31 O.R.(2d) 799 (C.A.), refd to. [para. 113].

Trendtex Trading Corp. v. Central Bank of Nigeria, [1977] 1 Q.B. 529, refd to. [para. 113].

Boucher v. Canada, [1981] F.C.J. No. 607 (T.D.), affd. (1984), 60 N.R. 1 (F.C.A.), refd to. [para. 174].

Boucher v. Canada (1990), 43 F.T.R. 100 (T.D.), refd to. [para. 174].

Reference Re Canada Labour Code and State Immunity Act (Can.), [1992] 2 S.C.R. 50; 137 N.R. 81, refd to. [para. 202].

I Congresso del Partido, Re, [1983] 1 A.C. 244 (H.L.), refd to. [para. 202].

All American Trading Corp. v. Cuartel General Fuerza Aera Guardia Nacional de Nicaragua (1993), 818 F. Supp. 1552 (U.S. Dist. Ct., Fla. 2nd Dist.), refd to. [para. 213].

Statutes Noticed:

Judgment Enforcement Act, S.N.L. 1996, c. J-1.1, sect. 2(1)(s), sect. 3(5)(b) [para. 75]; sect. 48, sect. 62 [para. 180]; sect. 73(2) [para. 74]; sect. 77(1) [para. 80].

State Immunity Act, R.S.C. 1985, c. S-18, sect. 3, sect. 4, sect. 5 [para. 55]; sect. 12 [para. 188].

United Nations Foreign Arbitral Awards Convention Act, R.S.C. 1985 (2nd Supp.), c. 16, sect. 6 [para. 25].

Authors and Works Noticed:

Laskin, Bora, Canadian Constitutional Law (5th Ed. 1986), pp. 413, 414 [para. 35].

McLeod, James G., The Conflict of Laws (1983), pp. 212, 214, 337, 338 [para. 146].

Prytyka, D., Karaban, V., and Rotan, V., Scholarly and Practical Commentary to the Civil Legislation of Ukraine, generally [paras. 156, 170, footnote 12].

Scherbyna, Procedures for Effectuation of the Protection of the Rights and Interests of Ukraine, generally [para. 128].

Counsel:

Richard Desgagnés, Azim Hussain and Catherine Deagenais and Ian C. Wallace, for the applicant;

George Pollack and Jody Shugar, for the respondent;

David Platts and Christine Kark, for the intervenor;

Lou Kozak, for the State of Ukraine.

Solicitors of Record:

Ogilvy Renault, Montreal, Quebec, for the applicant;

Sproule Castonguay Pollack, Montreal, Quebec, for the respondent;

McCarthy Tétrault LLP, Montreal, Quebec, for the intervenor.

This action was heard at Ottawa, Ontario, on August 27-29 and September 5, 10 and 17, 2003, by Tabib, Prothonotary, of the Federal Court, who released the following decision on December 23, 2003.