TMR Energy Ltd. v. State Property Fund of Ukraine

TMR Energy Ltd. v. State Property Fund of Ukraine
Court (s) Database
Federal Court Decisions
Date
2003-12-23
Neutral citation
2003 FC 1517
File numbers
T-60-03
Notes
Digest
Decision Content
Date: 20031223
Docket: T-60-03
Citation: 2003 FC 1517
Ottawa, Ontario, Tuesday, this 23rd day of December, 2003
PRESENT: MADAM PROTHONOTARY MIREILLE TABIB
BETWEEN:
TMR ENERGY LIMITED, a duly incorporated
legal person incorporated under the laws
of Cyprus
Applicant
- and -
STATE PROPERTY FUND OF UKRAINE,
an organ of the State of Ukraine
Respondent
- and -
AVIATION SCIENTIFIC TECHNICAL COMPLEX
NAMES AFTER O.P. (ANTK) ANTONOV
Intervener
REASONS FOR ORDER
TABIB P.
INTRODUCTION
[1] On June 28, 2003, an Antonov AN-124-100 cargo aircraft (the "Aircraft") was seized in Goose Bay, Newfoundland, pursuant to a writ of seizure and sale issued by this Court.
[2] The writ was issued in execution of an order recognizing and registering for enforcement an arbitral award rendered in Stockholm, Sweden in favour of TMR Energy Ltd. ("TMR") a private Cypriot company, against State Property Fund of Ukraine ("SPF"), an organ of the State of Ukraine. The dispute arose out of a joint venture agreement for the operation of an oil refinery in Ukraine. The Aircraft is owned by the State of Ukraine, but held by Aviation Scientific Technical Complex Named After OP (Antk) Antonov ("Antonov") under the "right of full economic management", a legal concept peculiar to former Soviet states.
[3] Both SPF and Antonov having filed objections to the seizure that were held to be effective by the Sheriff of Newfoundland[1], TMR brought the present motion, asking the Court to make a determination as to the validity of the seizure.
[4] The determination of this motion raises several issues, chief among which are the following:
1) Did the Federal Court have jurisdiction to register the arbitral award?
2) Is the State of Ukraine immune from the jurisdiction of this Court under the State Immunity Act, R.S.C. 1985, c.16 (2nd Suppl.)?
3) Can the registration order, issued against SPF, be enforced against the assets of the State of Ukraine? In other words, who is the judgement debtor?
4) What are, under Ukrainian law, the respective rights of Ukraine and Antonov in the Aircraft?
5) Is the Aircraft immune from execution as military property under the State Immunity Act?
[5] Over the course of the summer, TMR and Antonov marshalled an impressive body of evidence, chiefly in the form of expert affidavit evidence as to Ukrainian institutions and laws, arranged for translation of Ukrainian legal texts and documents, conducted cross-examinations in Paris and Kyiv, many through interpreters, and delivered complete memoranda of fact and law: a Herculean task. The hearing of this motion began on August 25, 2003 and concluded, after seven days of hearing, on September 17, 2003.
THE FACTS
[6] In 1991, shortly before the dissolution of the Soviet Union and Ukraine's declaration of independence from the former Soviet Union, a joint venture was established between the Ukrainian state enterprise Lisichansk Oil Refinery Works ("LOR") and a Swiss company for the modernization and operation of an oil refinery in Lisichansk. The joint venture was eventually organized in the name of Lisoil. In 1992, the Swiss company transferred its interest in the joint venture to TMR, and in 1993, TMR signed a contract entitled Constituent Contract (the "1993 Constituent Contract") with LOR for financing an upgrade of the refinery and repayment of the financing through the operation of the refinery.
[7] In 1993, the State of Ukraine began the process of privatization and corporatisation[2] of LOR. As a result of the corporatisation, LOR ceased to exist as an entity, and a new open joint stock company, Lisichansknefteorgsintez ("Linos") was formed. SPF owned 67.4% of Linos' shares, while the rest was distributed to various Ukrainian interest. One would have thought that corporatisation had the effect of transferring all of LOR's assets and obligations to Linos, and indeed, Linos continued to perform LOR's obligations under the 1993 Constituent Contract until 1997, when performance was halted in the wake of financial difficulties of Linos. However, in 1999, SPF declared that it, and not Linos, was the legal successor to LOR's participation interest in the joint venture, Lisoil. To formalize this succession, TMR and SPF entered into a new Constituent Contract, (the "1999 Constituent Contract"). SPF, as Linos had, failed to perform its obligations under the 1999 Constituent Contract. The 1999 Constituent Contract contained a clause referring disputes to the Arbitration Institute of the Stockholm Chamber of Commerce for final determination.
[8] Pursuant to this clause and to arbitration clauses found in the 1993 Constituent Contract and another agreement between TMR, LOR and Lisoil[3], TMR requested arbitration in July 2000 against Linos, SPF and the State of Ukraine. On January 22, 2001, after the arbitration panel had been duly constituted, TMR terminated without prejudice its arbitration against the State of Ukraine. The arbitrators then ordered the arbitration against Linos under the 1993 Constituent Contract and the M & O Agreement to be conducted separately from the arbitration against SPF under the 1999 Constituent Contract. The final arbitral award in the arbitration between TMR and SPF was rendered on May 30, 2002, (the "Award"), ordering SPF to pay to TMR the amount of US $36,711,475.00, pre- and post-award interest and costs. As of December 31, 2002, the total value of the Award was in the amount of $62,260,697.99 Canadian.
[9] On January 15, 2003, TMR filed an ex parte notice of application for registration of the Award, pursuant to the United Nations Foreign Arbitral Awards Convention Act, R.S.C. 1985, c.16 (2nd Suppl.) and to Rules 327 and 328 of the Federal Court Rules, 1998. The Respondent to the application is named as "State Property Fund of Ukraine, an organ of the State of Ukraine". By order dated January 17, 2003, (the "Registration Order") the Court granted TMR's application, with the proviso that execution shall not issue for 60 days following service of the Registration Order. The Registration Order was served in Kyiv on SPF "an organ of the State of Ukraine" on March 4, 2003, in accordance with the Hague Convention on Service Abroad, through the Ministry of Justice of Ukraine.
[10] On June 11, 2003, TMR requested the issuance of a writ of seizure and sale of the property of "the State of Ukraine". The Court, however, did not authorize the issuance of such a writ but issued instead a writ against the property of "the Respondent".
[11] On June 28, 2003, the High Sheriff of the Supreme Court of Newfoundland, pursuant to instructions given on behalf of TMR, proceeded to seize the Aircraft as being "property of the State of Ukraine", the judgement debtor being described as "State Property Fund of Ukraine, an organ of the State of Ukraine".
[12] On July 11, 2003, Antonov filed with the Sheriff a notice of objection and a notice of third party interest pursuant to the JEA, arguing that the State of Ukraine was not the appropriate judgement debtor under the Registration Order, and that the Aircraft belonged to Antonov and could in any event not be seized in satisfaction of a debt of the State of Ukraine. As the notices filed by Antonov were accompanied by a letter from SPF, the Sheriff considered the notice of objection as having been filed by SPF. The Sheriff, in a decision dated July 17, 2003, found both notices to be effective under Part XII of the JEA. This led TMR to file the within motion for a declaration as to the validity of the seizure, pursuant to section 163 of the JEA.
[13] Both Antonov and SPF submitted responding materials and appeared at the hearing to oppose TMR's motion. In addition, the State of Ukraine through diplomatic channels asserted jurisdictional immunity in these proceedings (both for the registration and execution processes) under the State Immunity Act; it further asserted a distinct property interest in the Aircraft from that of Antonov and immunity from execution on the basis that the Aircraft is military property pursuant to subsection 12(3) of the State Immunity Act. At the hearing of this motion, counsel for the State of Ukraine requested and was granted recognition by the Court for the limited purpose of presenting argument on the issue of state immunity, as provided in paragraph 4(3)(a) of the State Immunity Act[4]. The State of Ukraine took no position as to any other issue in this motion.
JURISDICTION OF THE COURT
[14] Both Antonov and SPF have submitted that this Court was without jurisdiction to register and recognize the Award and that, as a result, the writ of seizure and sale issued pursuant to the Registration Order was null and void.
A. Preliminary Issue: Collateral Attack
[15] The Registration Order of January 17, 2003 has not been appealed, and the time provided for doing so has long since passed. While SPF has, on August 8, 2003, filed a motion to set aside the ex parte Registration Order, a hearing date for that motion has neither been requested nor set.
[16] The validity of the Registration Order not having been directly attacked by way of appeal or motion to set aside, is it open for SPF or Antonov to raise its invalidity in the context of execution proceedings?
[17] It has been a long-standing principle of law that collateral attacks on judicial orders will not be permitted. The Rule was discussed in the following terms by the Supreme Court of Canada in R. v. Wilson [1983] 2 S.C.R. 594, at page 599:
"It has long been a fundamental rule that a court order, made by a court having jurisdiction to make it, stands and is binding and conclusive unless it is set aside on appeal or lawfully quashed. It is also well settled in the authorities that such an order may not be attacked collaterally and a collateral attack may be described as an attack made in proceedings other than those whose specific object is the reversal, variation, or nullification of the order or judgment."
[18] The key to the appreciation of the rule, however, is that the Court making the order must have had jurisdiction.
[19] The distinction was clearly expressed by the Saskatchewan Court of Appeal in Volhoffer v. Volhoffer [1925] 3 D.L.R. 552, at pages 556-557:
"From these authorities, the law would appear to be that, if a tribunal which has jurisdiction over a subject-matter, provided a given state of facts exists, makes an order in respect of that subject-matter in the absence of the existence of that state of facts, and, therefore, without jurisdiction, such order must be treated as valid and binding until it is reversed upon an appeal, and, generally speaking, it cannot be attacked in a collateral proceeding. But where the tribunal has not been given any jurisdiction over the subject-matter, no matter what state of facts may exist, an order made in respect of it is a nullity, and need not be appealed against, and its invalidity may be set up as an answer in any proceeding taken under it."
[20] In Tufts v. Thomson, [1929] 1 D.L.R. 896, the Manitoba Court of Appeal (Dennistoun, J.A.), wrote, at page 899:
"The order upon which the jurisdiction was based was regular on its face and the Judge had jurisdiction to admit it as evidence in the subsequent proceeding. Any attack upon the committal order should have been made directly, and not by a side wind in another proceeding. Of course when the want of jurisdiction so clearly appears upon the face of collateral proceedings that the Court is forced to find that the whole matter was coram non judice it must act accordingly for to do otherwise would be a violation of the first principles of justice."
[21] And again at page 900:
"In other words, if the want of jurisdiction is obvious upon the face of the judgment the Court should recognize it; but where the Court has jurisdiction if it acts properly, and the proceedings are regular upon their face, the Court will not re-try the case in a collateral proceeding, in order to ascertain whether the jurisdiction was exceeded or not."
[22] (See also: Grand v. Maclaren (1894), 23 S.C.R. 310, R. v. Komadowski [1986] M.J. No. 182 (Man. C.A.), Samson and Samson v. Hynes, Hynes, Doyle and Marchand [1977] N.S.J. No. 556 (N.S.S.C.A.).
[23] The Federal Court is a statutory Court with limited jurisdiction. If SPF and Antonov are correct that the subject matter of the dispute falls outside the Court's jurisdiction, then the Court had no jurisdiction to entertain the application for registration and the resulting order would therefore be a nullity, its invalidity capable of being raised in any collateral proceedings.
B. Analysis: Jurisdiction of the Court
1. The test:
[24] The Supreme Court of Canada has set out a succinct three-part test to support a finding that the Federal Court has jurisdiction (ITO - International Terminal Operators Ltd. v. Miida Electronics Inc. [1986] 1 S.C.R. 752, (hereinafter "ITO") at page 766):
"1. There must be a statutory grant of jurisdiction by the federal Parliament.
2. There must be an existing body of federal law which is essential to the disposition of the case and which nourishes the statutory grant of jurisdiction.
3. The law on which the case is based must be "a law of Canada" as the phrase is used in s. 101 of the Constitution Act, 1867."
2. The first part of the test: a statutory grant of jurisdiction:
[25] The parties are ad idem that the only statute pursuant to which this Court could be granted jurisdiction over the subject matter of this application is the United Nations Foreign Arbitral Awards Convention Act, R.S.C. 1985, c.16 (2nd Suppl.) (the "Act"). Section 6 of the Act clearly grants 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:
6. For the purpose of seeking recognition and enforcement of an arbitral award pursuant to the Convention, application may be made to the Federal Court or any superior, district or county court.
6. Une demande de reconnaissance et d'exécution d'une sentence arbitrale aux termes de la Convention peut être faite à la Cour fédérale ou à toute cour supérieure, de district ou de comté.
[26] However, SPF and Antonov argue that the Act does not and cannot apply to the Award, because its subject matter falls within the category of "property and civil rights", rather than any area of federal jurisdiction.
[27] The Act itself does not define the kind or subject matter of arbitral awards to which it applies (other than arising out of commercial legal relationships). However, it has been held by the Federal Court of Appeal in Compania Maritima Villa Nova S.A. v. Northern Sales Co. (C.A.) [1992] 1 F.C. 550 (hereinafter "Villa Nova"), while considering the constitutional validity of the Act, that the Act can only apply in relation to matters of federal character:
"Section 6, they say, is to be read as creating a federal cause of action for the recognition and enforcement of foreign arbitral awards falling within federal legislative competence.
[...]
I am persuaded by these submissions. In my view, Parliament did possess the power to adopt the Act as valid federal legislation for the recognition and enforcement in Canada of foreign arbitral awards having a federal character in a constitutional sense. Questions will no doubt arise in individual cases as to whether a particular award is one whose enforcement falls within the proper ambit of the legislation."
[Emphasis mine]
[28] Thus, if SPF and Antonov are correct that the Award is purely a matter of property and civil rights, the Act, including section 6, is inapplicable and this Court had no jurisdiction to recognize the Award, since the first part of the ITO test cannot be met.
[29] Applying the first part of the ITO test will therefore require that I delve into the constitutional applicability of the Act, an exercise usually confined to the third part of the ITO test.
[30] The question, therefore, is whether the Award has a "federal character in a constitutional sense" so as to be enforceable under the provisions of the Act. In other words, does Parliament have power to legislate as to a cause of action for the recognition and enforcement of an arbitral award between a foreign company and an organ of a foreign state? I am of the view that it does, in the exercise of the Crown's prerogative and of its residual power to make laws for the "peace, order and good government of Canada". Indeed, it is through these powers that Parliament has been recognized the right to exercise jurisdiction over external affairs and to implement the rules of public international law in internal laws, including laws recognizing and regulating the immunity of foreign states.
[31] The State Immunity Act codifies the common law concept of the immunity of foreign sovereign states from the judicial processes of internal courts, and the circumstances in which this immunity is lost.
[32] Basic principles of international law recognize that all states being sovereign and equal, one state cannot exercise authority over the other. This recognition provides the basis for the original principle of the absolute immunity of foreign states from the jurisdiction of the courts of other states. This principle was incorporated into internal Canadian law as a common law principle, and later evolved into a restrictive theory of immunity. Under this theory, affirmed and codified by the State Immunity Act, a sovereign state is held to be immune from the jurisdiction of the courts of another state, unless that immunity is lost through certain exceptions as provided in the State Immunity Act.
[33] Thus, in the exercise of its constitutional power over international affairs and its relations with foreign states, Canada has jurisdiction and has exercised this jurisdiction to legislate as to the manner and circumstances in which sovereign states may be sued before the courts of Canada. It has not been suggested by the parties that Parliament does not have the constitutional power to enact the State Immunity Act or to legislate in the field of the amenability to suit or judicial process of foreign states and the applicability of Canadian laws to them. Indeed, the case law would appear to support Parliament's exclusive jurisdiction to recognize, withdraw or regulate sovereign immunity. (See Foreign Legations Reference [1943] S.C.R. 208; St. John (City) v. Fraser-Brace Overseas Corp., [1958] S.C.R. 263).
[34] Nor can it be right that Parliament's constitutional power is limited simply to declaring whether or not a foreign state is subject to the jurisdiction of the courts, stopping short of the power to recognize, establish or regulate the causes of action which may be brought against a foreign state. Sovereign immunity, it seems to me, is not simply a matter of unenforceability of the internal legislation, but of its inapplicability.
[35] The parties have not submitted any authorities on this point. However, the following passage in Laskin's Canadian Constitutional Law (5th ed.), Carswell, 1986, at p. 413-414, while pointing to the lack of judicial authority on this issue, also articulates the following position, which I adopt:
"An unexplored constitutional question in the field of foreign relations is the extent to which provincial legislatures may regulate or tax activities or property of foreign governments which have been properly admitted to Canada in consequence of mutual recognition and establishment of diplomatic relations between Canada (acting through the federal government) and such foreign governments. This is a situation not covered by the Labour Conventions case, and it is arguable that even apart from the applicable federal legislation, the foreign states should be in no different position than is the federal Crown vis-à -vis provincial legislatures. The issue is more than one of jurisdiction of provincial courts over a foreign state, though even here it should be clear that it is only the Dominion that may as a matter of domestic constitutional law, modify, abolish or extent the accepted common law rules of immunity: Diplomatic and Consular Privileges and Immunities Act, S.C. 1976-7, c. 31. How far the courts recognize, in domestic litigation, the principles of international law respecting immunity of foreign diplomatic representatives from local process and liability, or the immunity of property of a foreign state from local jurisdiction, does not as such touch legislative power but it necessarily presupposes (unless this be another gap in law-making authority) that there is a competent legislature able to deal with those matters; see Reference re Exemption of U.S. Forces from Proceeding in Canadian Criminal Courts, [1943] S.C.R. 483. In the Diplomatic and Consular Privileges and Immunity Act, the federal Parliament adopted as law certain provision of the Vienna Convention on Diplomatic Relations, including Article 23 which exempts foreign states "from all national, regional or municipal dues and taxes in respect of the premises of the mission" and Article 28 which exempts "from all dues and taxes" the fees and charges levied by the mission in the course of its official duties. The constitutional value involved is surely a matter of the peace, order and good government of Canada. It would follow, on this basis, that while it is proper to construe provincial taxing legislation as not intended to override tax immunity recognized by international law, it would in any event as a result of federal paramountcy be incompetent to a province to legislate in derogation of such immunity. Cf. Reference re Powers of Ottawa and Rockcliffe Part to Levy Rates on Foreign Legations and High Commissioners'Residences, [1943] S.C.R. 208; Jennings v. Whitby, [1943] O.W.N. 170 (Co. Ct.)."
(Underlining is mine)
[36] I therefore conclude that Parliament does have power 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, and that, as a result, the Act is applicable to the recognition and enforcement of the Award.
[37] The Act being applicable, the first part of the ITO test is met by the specific grant of jurisdiction found in section 6 of the Act.
3. The second part of the test: a body of federal law nourishing the jurisdiction:
[38] As regard the second part of the test, counsel for SPF has argued, on a reading of the Court of Appeal's reasons in Villa Nova, that the Act, in and of itself, does not fulfill this part of the test, and that there must be a body of federal law applicable to the original dispute underlying the arbitral award. Key to SPF's argument is the Court's discussion as to how the ITO test would apply to the case before it, and the Court's statement that "the existing body of federal law essential to the disposition of the case and nourishing the jurisdiction is found in Canadian maritime law" (at p. 569). From this, SPF extrapolates that the Court did not consider the Act as an existing body of federal law essential to the disposition of the case. I cannot agree with SPF's argument.
[39] I first note that the Court's comment as to the application of the ITO test is obiter. The issues of law to be determined by the Court on that appeal were narrowly defined as a series of four questions, the first of which includes a clearly defined constitutional question:
"[6] The action was instituted in the Trial Division on May 19, 1987, for enforcement of this arbitral award. The pleadings in that action gave rise to the points of law which were formulated as questions by the order of February 1, 1989, being namely:
(a) [I]s the Arbitration Award ("the Award") referred to in paragraph 5 of the statement of claim herein enforceable or maintainable in Canada under the provisions of the United Nations Foreign Arbitral Award[s] [Convention] Act, Stat. Canada 1986, c. 21?
(b) [C]an the Award be enforced or maintained in Canada if the plaintiff's original cause of action is statute barred under the laws of England?
c) [C]an the Award be enforced or maintained in Canada if the plaintiff has failed to enforce its claim for demurrage under the Charter Party ("the Charter Party") dated the 17th day of January, 1978 against the receiver of the goods carried on board the Grecian Isle[s]?
(d) [D]id the Plaintiff's failure to enforce its claim for demurrage under the Charter Party against the receiver of the goods carried on board the Grecian Isle[s] deprive the arbitrators of jurisdiction?
[...]
[8] After this appeal was launched, the appellant gave notice of the following constitutional question pursuant to Rule 1101 of the Federal Court Rules:
Is the United Nations Foreign Arbitral Awards Convention Act, S.C. 1986, c. 21 ultra vires The Parliament of Canada by reason of its violation of Sections 92(13), 92(14), 92(16) of the Constitution Act, 1867?"
[40] Questions c) and d) were answered in two short paragraphs. It is the first question, framed as a question regarding the constitutional validity of the Act, which forms the bulk of the Court's reasons.
[41] Accordingly, it is clearly the applicability and constitutionality of the Act that were put in issue. The jurisdiction of the Federal Court was not directly questioned, at least, no further than as to the constitutional applicability or validity of the entire Act, including its section 6.
[42] Indeed, the Court's very brief discussion at pages 568 and 569 as to the manner in which the ITO test would apply to the case before it comes after the Court has already concluded, at page 563, that the Act was valid in relation to matters of a federal character, and at page 568, that the enforcement of the particular award before the Court "falls within federal legislative competence over navigation and shipping".
[43] In addition, nothing in the Court's statement would justify the inference that in identifying Canadian maritime law as the body of law nourishing the jurisdiction, the Court intended to exclude the Act itself. Indeed, the Court determined that the creation of a cause of action for the recognition and enforcement of the arbitral award in the matter was "legitimate Canadian maritime law" (at p. 567). As the definition of Canadian maritime law includes alterations brought by any Act of Parliament (section 2 of the Federal Courts Act), the Court's reference to Canadian maritime law as the body of federal law essential to the disposition of the case must be taken to include rather than exclude the Act.
[44] It should perhaps be mentioned here that while the Court of Appeal in Villa Nova also considered elsewhere in its reasons the law governing the underlying dispute, it did so in the context of its discussion as to whether the award had a federal character in a constitutional sense.
[45] The relevant passage reads as follows:
"It thus seems to me to be entirely proper for the Court, faced with determining whether an award may be recognized and enforced in accordance with the Act, to have regard to its origin in a charterparty agreement, an undoubted maritime contract [...]
[...]
In my opinion, the creation of a cause of action for the recognition and enforcement of the foreign arbitral award in issue, arising as it does from a breach of the charterparty agreement for payment of demurrage, is a maritime matter or so integrally connected to a maritime matter as to be legitimate Canadian maritime law. The award derives indirectly from the charterparty, and amounts, in reality, to a finding of validity and proper quantification of the demurrage claim. If that agreement had not called for submission to arbitration, the respondent would have been entitled to sue on the original claim in the Trial Division which, as we shall see, has been invested with express jurisdiction over claims of that kind." (at page 567).
[46] Neither this passage nor the passage cited above from page 569 can be read as a requirement that the underlying dispute to the arbitral award be otherwise within the jurisdiction of the Federal Court in order to meet part two of the ITO test. Of course, and as pointed out by the Court of Appeal, it may be useful and proper for the Court to have regard to the nature of the underlying dispute in order to ascertain whether the award has a federal character for the purpose of the constitutional application of the Act. And indeed, once it is found that the underlying dispute has this federal character and would, moreover, be within the Federal Court's jurisdiction, it may follow as a matter of course that the award would be clothed of the same federal character. But the reverse need not be true, and nothing in the reasons of the Court in Villa Nova leads to the inference that if the underlying dispute is not otherwise within the jurisdiction of the Court, the Court cannot have jurisdiction over the enforcement of the award.
[47] Certainly, and as I made clear in the discussion concerning the constitutional applicability of the Act to this matter, the federal character of the Award herein is not dictated by the subject matter of the underlying dispute, but by the identity of the Respondent as an emanation of a foreign sovereign. Consideration of the law governing the underlying dispute in this instance would therefore not be determinative of the federal character of the Award, nor should it be determinative of the jurisdiction of the Court.
[48] Finally, reading the Court's reasons as a judicial determination that it is the law applicable to the underlying dispute which is essential to the disposition of the case would contradict the Court's premise that "the foreign arbitral award, as I have already stated, gave rise to a fresh cause of action" (at p. 569). It would further be at odds with the very economy of the Act, which intends that the merits of an award not be re-considered on an application for recognition and enforcement.
[49] In my view, and as held by the Court of Appeal in Villa Nova, an arbitral award constitutes a fresh cause of action, the recognition and enforcement of which is regulated and governed by the Act. Save where expressly provided in the Act, the underlying dispute and the law governing same have no relevance or application in recognition and enforcement proceedings. The Act therefore meets the requirements of the second part of the ITO test, as more fully discussed in Oag v. Canada [1987] 2 F.C. 511 and Kigowa v. Canada [1990] 1 F.C. 804, in that it is clearly a "detailed statutory framework" from which the Applicant does derive specific rights and which governs the exercise of these rights.
[50] Even if I am wrong that the Act, in and of itself, satisfies the second part of the ITO test, I would nevertheless hold that the State Immunity Act, which would equally apply to the underlying dispute as to recognition proceedings, independently provides the necessary body of federal law required to nourish the grant of jurisdiction. It has been held on numerous occasions by the Court of Appeal that federal law does not need to exclusively apply to the dispute in order to sustain a grant of jurisdiction (Bensol Customs Brokers Ltd. v. Air Canada [1979] 2 F.C. 575, at p. 583):
"It should be sufficient in my opinion that the rights and obligations of the parties are to be determined to some material extent by federal law. It should not be necessary that the cause of action be one that is created by federal law, so long as it is affected by it."
[51] The same principle was upheld in Prudential Assurance co. v. Canada [1993] 2 F.C. 293 and The Queen v. Montreal Urban Community Transit Commission [1980] 2 F.C. 151. The following passage of the latter case is particularly apposite to the present circumstances (at p. 153):
"In the case at bar, I think federal statute has an important part to play in determining the rights of the parties, since without it appellant would not be able to maintain any right against respondent. I cannot agree with counsel for the respondent, who argued, if I understood correctly, that in the circumstances the federal statute has only a secondary role, since all it does is to authorize the Crown to exercise a remedy already existing under [provincial][5] law. It is true that the role of the federal statute may seem secondary to respondent, to whom the identity of its creditor matters little, but the role of that statute is of particular interest to the Crown, since without it it would have no right."
[52] In the same way, but for the application of the exceptions found in the State Immunity Act, the Applicant herein would have no right against the Respondent, making the State Immunity Act essential to the determination of the case.
4. The third part of the test: "a law of Canada":
[53] Having concluded, as I did in the course of my discussion as to the first part of the ITO test, that both the Act and the State Immunity Act (to the extent the latter is relevant to establishing the jurisdiction of the Court) are constitutionally valid federal legislation, it follows that this third and last part of the ITO test is satisfied.
STATE IMMUNITY
A. As affecting the validity of the recognition order
[54] SPF has not asserted on its own behalf immunity under the State Immunity Act. Nevertheless, both Antonov and the State of Ukraine have argued that the Registration Order of January 17, 2003 is null because neither the notice of application filed by TMR nor the Registration Order expressly raise or address the issue of state immunity.
[55] Sections 3, 4 and 5 of the State Immunity Act read as follows:
3. (1) Except as provided by this Act, a foreign state is immune from the jurisdiction of any court in Canada.
(2) In any proceedings before a court, the court shall give effect to the immunity conferred on a foreign state by subsection (1) notwithstanding that the state has failed to take any step in the proceedings.
3. (1) Sauf exceptions prévues dans la présente loi, l'État étranger bénéficie de l'immunité de juridiction devant tout tribunal au Canada.
(2) Le tribunal reconnaît d'office l'immunité visée au paragraphe (1) même si l'État étranger s'est abstenu d'agir dans l'instance.
4. (1) A foreign state is not immune from the jurisdiction of a court if the state waives the immunity conferred by subsection 3(1) by submitting to the jurisdiction of the court in accordance with subsection (2) or (4).
(2) In any proceedings before a court, a foreign state submits to the jurisdiction of the court where it
(a) explicitly submits to the jurisdiction of the court by written agreement or otherwise either before or after the proceedings commence;
(b) initiates the proceedings in the court; or
(c) intervenes or takes any step in the proceedings before the court.
(3) Paragraph (2)(c) does not apply to
(a) any intervention or step taken by a foreign state in proceedings before a court for the purpose of claiming immunity from the jurisdiction of the court; or
(b) any step taken by a foreign state in ignorance of facts entitling it to immunity if those facts could not reasonably have been ascertained before the step was taken and immunity is claimed as soon as reasonably practicable after they are ascertained.
(4) A foreign state that initiates proceedings in a court or that intervenes or takes any step in proceedings before a court, other than an intervention or step to which paragraph (2)(c) does not apply, submits to the jurisdiction of the court in respect of any third party proceedings that arise, or counter-claim that arises, out of the subject-matter of the proceedings initiated by the state or in which the state has so intervened or taken a step.
(5) Where, in any proceedings before a court, a foreign state submits to the jurisdiction of the court in accordance with subsection (2) or (4), that submission is deemed to be a submission by the state to the jurisdiction of such one or more courts by which those proceedings may, in whole or in part, subsequently be considered on appeal or in the exercise of supervisory jurisdiction.
4. (1) L'État étranger qui se soumet à la juridiction du tribunal selon les modalités prévues aux paragraphes (2) ou (4), renonce à l'immunité de juridiction visée au paragraphe 3(1).
(2) Se soumet à la juridiction du tribunal l'État étranger qui_:
a) le fait de manière expresse par écrit ou autrement, avant l'introduction de l'instance ou en cours d'instance;
b) introduit une instance devant le tribunal;
c) intervient ou fait un acte de procédure dans l'instance.
(3) L'alinéa (2)c) ne s'applique pas dans les cas où_:
a) l'intervention ou l'acte de procédure a pour objet d'invoquer l'immunité de juridiction;
b) l'État étranger a agi dans l'instance sans connaître les faits qui lui donnaient droit à l'immunité de juridiction, ces faits n'ayant pu être suffisamment établis auparavant, et il a invoqué l'immunité aussitôt que possible après l'établissement des faits.
(4) La soumission à la juridiction d'un tribunal qui s'opère soit par l'introduction d'une instance soit par l'intervention ou l'acte de procédure qui ne sont pas soustraits à l'application de l'alinéa (2)c), vaut pour les interventions de tiers et les demandes reconventionnelles découlant de l'objet de cette instance.
(5) La soumission à la juridiction d'un tribunal intervenue selon les modalités prévues aux paragraphes (2) ou (4) vaut également pour les tribunaux supérieurs devant lesquels l'instance pourra être portée en totalité ou en partie par voie d'appel ou d'exercice du pouvoir de contrôle.
5. A foreign state is not immune from the jurisdiction of a court in any proceedings that relate to any commercial activity of the foreign state.
5. L'État étranger ne bénéficie pas de l'immunité de juridiction dans les actions qui portent sur ses activités commerciales.
[56] Antonov and the State of Ukraine take the position that on a reading of section 3(2), no court has jurisdiction in any matter involving a foreign state unless the conditions giving rise to the exceptions provided in the State Immunity Act are specifically alleged, proven and determined to be applicable by the Court.
[57] While I do agree that subsection 3(2) imposes on the Court the duty to raise and give effect to the State Immunity Act proprio motu, I cannot agree with the contention that the failure of the Court or of the parties to address the issue goes to the jurisdiction of the Court rationae materiae so as to render its order a nullity. This proposition ignores the fact that some of the grounds upon which the lack of immunity may be founded can only occur after a proceeding is initiated (ie., paragraphs 4(2)(a) or (c), whereby a state may waive immunity by agreement or by intervening in the proceedings). If a court were to lack jurisdiction until such time as an exception provided in the State Immunity Act were alleged and recognized, the ability of a foreign state to waive immunity after the commencement of a proceeding would be nugatory, as, absent another preexisting exception to immunity, there could be no valid proceedings taken to which a foreign state could attorn. It further flies in the face of the principle that a court which lacks jurisdiction rationae materiae may not be clothed of such jurisdiction through the consent of the parties.
[58] In my view, the Court had jurisdiction over the subject matter, indeed, it had the requisite jurisdiction to make a determination as to whether or not the exceptions provided in the State Immunity Act existed. Whether or not the Court discharged its burden of making a determination, or whether or not it erred in making its determination are matters which do not affect the prima