Chapter 11: Settlement of International Business Disputes
Auctions in Domestic Court: Suing and being sued
Choice of law:
- The parties are free to specify the choice of law clause that their contract will be
governed by law of a particular jurisdiction as long as their selection is made in good
faith and NOT for avoiding the public policy of a country that has a connection to the
- The choice is unlikely to be respected and enforced by a court if a legal system is
expressly chosen for the purpose of evading the provisions of the legal system with
which the transaction is most closely connected to.
- Law only applies to terms in contract and It does not affect the parties to continue
obliging the laws of any jurisdiction in which they carry business.
Proof of foreign law:
- Judges in most common law country have no obligation to ascertain foreign law
- In the event, where a contract must be governed by the foreign law, it must be proved
by an expert witness or similar admissible evidence.
- The law of the jurisdiction will be used if a party wishing to benefit from foreign law fails
to plead or bring evidence.
The Proper law of contract:
- If parties haven’t made a choice of law, the proper law of contract must be determined.
- A transaction may have several different aspects, and it is possible that different laws
are applicable to different aspects of the same transactions.
- F parties have not made express selection of law they wish to apply, courts will choose
legal system that has closest and most real connection. To determine the proper legal
system the court looks at:
• The place the contract was made
• The place contract is performed • The place of business of parties
• The language, form and terminology used in the contract
• The contract’s connection with any preceding transaction
- Sometimes the parties have not made an express choice of law but they have made
inferences by other clauses in contract e.g. designating arbitration place or stating
certain country’s courts have jurisdiction.
EU Convention on Contractual Law:
- This convention states two basic principles:
• 1 preserves right of choice of law
• 2 provides that where parties have not chosen, the law of contract will be the
law having closest connection with the contract
- Concept of Characterise Performance: Law of domicile (place of residence: the
country a person treats as their permanent home) of performing party, not the law of
place where performance is carried out.
Choice of Forum:
- The parties may also stipulate in advance where (in what jurisdiction’s court or forum) a
case relating to their transaction will be heard. These clauses are honoured by most
countries subject to the following conditions:
• The choice of forum must not violate the public policy of country having a
genuine connection with the contract
• The forum must not be seriously inconvenient for one or more of the parties of
the court itself
- Choice of Forum – Clauses: maybe ‘exclusive’ or ‘non-exclusive’.
- A ‘non-exclusive’ clause is a statement by the parties that they submit to a particular
court, but the clause does not specify that all the disputes must be decided by that
- For ‘exclusive’ clause, parties should each appoint an agent resident in the chosen
jurisdiction for service of any relevant documents. - The usual way ‘choice of forum’ occurs is, once a dispute has arisen, one party begins
an action in the country (jurisdiction) of its choice. However, the court in which the
action is initiated may not always agree to accept the jurisdiction.
Who can Sue or be Sued in Canadian Courts?
- The most practical rule to follow when deciding where to sue is to choose the jurisdiction
in which the defendant’s assets are located.
- Ontario courts will assume jurisdiction if either of the following has occurred:
• The defendant was served while he/she/it was within Ontario
• The defendant was served outside Ontario but there’s a ‘connection to
- The Ontario Rules of Civil Procedure provides that ‘a connection to Ontario’ exists
• The contract was made in Ontario
• The contract provides that it is to be governed by or interpreted in accordance
with the law of Ontario
• The parties to the contract have agreed that the courts of Ontario are to have
jurisdiction over legal proceedings in respect of the contract
• The breach of contract has been committed in Ontario
• Damage was sustained in Ontario as a result of a breach of contract wherever
If none of these connecting factors is present, the plaintiff must obtain
permission of the court to start and action. This requires a preliminary motion
before a motion court (hearing before a judge to obtain decisions on matters
relating to a lawsuit, which must be dealt with before or after trial)
- Once a plaintiff has brought an action in its chosen jurisdiction, the defendant may be
able to object to the jurisdiction and have the action stayed or dismissed. The
defendant’s argument in these cases is usually:
• The case did not fall within the rules for service without leave
• If leave was granted, the leave of the court to serve outside the jurisdiction
should not have been granted
• The court is not a convenient or appropriate forum for hearing (forum non
conveniens) - If the defendant is successful in any of these arguments, the court will stay or stop the
A court that has a jurisdiction over a defendant under national laws declines to exercise
it and stays the action because it’s not appropriate venue for action and considerations
of justice require that the plaintiff litigate in another jurisdiction. This situation arises
when a defendant served ex juris (outside jurisdiction)
The Anti-suit Injunction: An action in which the foreign defendant asks the court to
enjoin or prevent plaintiff’s residence in the court’s jurisdiction from proceeding with
their foreign action against the foreign defendant.
Enforcement of Foreign Judgements
Enforcing a Foreign Judgement in Canada:
- Even when the decision is made in the favour of plaintiff, the real reason for lawsuit is
recovery of damages. For this reason, the action should, whenever possible, be
brought into a jurisdiction where defendant has assets against which the judgement can
- If the judgment is obtained in one jurisdiction and the defendant’s assets are in another,
the plaintiff must obtain recognition in the second jurisdiction and attempt to enforce the
- If a plaintiff has obtained foreign judgement against a defendant in Canada, plaintiff
must then enforce its foreign judgement here. This will require a court proceeding in
Canadian province in which judgement is to be enforced.
- Canadian courts are increasingly prepared to enforce judgments by US courts and by
respected courts in other jurisdictions, provided the following conditions are met:
• There was a proper subject matter jurisdiction over the Canadian parties
• The judgement is not fraudulent or contrary to public policy or natural justice
• There is a real and substantial connection between the deciding court and the
Provisions for Reciprocal Enforcement of Judgements:
- Canada provides legislation for reciprocal enforcement of judgements between the
- Only provision for reciprocal enforcement of judgments outside Canada is with United
Actions Involving Foreign States - Sovereign Immunity is immunity from prosecution or suit claimed by a nation state.
- There are two states of immunity – absolute immunity and restrictive immuni