Canadian Planning and Design Consultants Inc. v. State of Libya; Royal Bank of Canada, Garnishee

[Indexed as: Canadian Planning and Design Consultants Inc.v. Libya]

Ontario Reports

Ontario Superior Court of Justice,

Braid J.

March 11, 2015

124 O.R. (3d) 579 | 2015 ONSC 1638

Case Summary

International law — Diplomatic immunity — Bank accounts — Embassy and consular bank accounts entitled to diplomatic immunity to extent that they are used for running diplomatic or consular mission — Court required to accept assurances from competent authority of foreign state that bank accounts are used for running embassy unless creditor can prove that funds are used for commercial purpose — Certificate issued by Department of Foreign Affairs pursuant to s. 11(a) and (c) of Foreign Missions and International Organizations Act not constituting proof that bank account is entitled to diplomatic immunity [page580] — Foreign Missions and International Organizations Act, S.C. 1991, c. 41, s. 11(a), (c).

The applicant claimed against the defendant for breach of contract. The parties had agreed that disputes would be settled at the International Chamber of Commerce International Court of Arbitration ("ICC"). Both parties submitted to the jurisdiction of the ICC for the purpose of arguing the dispute on its merits. The ICC ordered the respondent to pay damages to the applicant. When the respondent failed to do so, the applicant obtained a recognition and enforcement order from the Superior Court of Justice and obtained notices of garnishment against the respondent's bank accounts. The Department of Foreign Affairs, Trade and Development ("DFATD") issued a certificate pursuant to s. 11(a) and (c) of the Foreign Missions and International Organizations Act stating that the bank accounts were the "diplomatic property of Libya" and enjoyed privileges and immunities under the Act. The respondent brought a motion for orders quashing the notices, directing that no new notices be issued, and restraining the applicant from any further enforcement attempts in respect of the bank accounts on the ground that the bank accounts enjoyed diplomatic immunity. The applicant brought a motion for a declaration that the notices of garnishment where valid.

Held, the parties should be permitted to present further evidence and submissions.

Embassy and consular bank accounts are entitled to diplomatic immunity to the extent that they are used for running a diplomatic or consular mission. If a competent authority of the State of Libya provided the court with due assurances that the bank accounts' funds were for the sovereign purposes of the functioning of the embassy, the court was required to be satisfied with those assurances unless the applicant could prove that the funds were for a commercial purpose. The parties had failed to provide any evidence from a competent authority regarding the purpose of the bank accounts. The DFATD certificate was not sufficient proof that the bank accounts were entitled to diplomatic immunity. The Foreign Missions and International Organizations Act is silent with respect to bank accounts and therefore does not directly grant immunity over bank accounts. The DFATD certificate could not immunize bank accounts where the Act failed to do so.

R. v. Hape, [2007] 2 S.C.R. 292, [2007] S.C.J. No. 26, 2007 SCC 26, 280 D.L.R. (4th) 385, 363 N.R. 1, J.E. 2007-1140, 227 O.A.C. 191, 220 C.C.C. (3d) 161, 47 C.R. (6th) 96, 160 C.R.R. (2d) 1, EYB 2007-120452, 73 W.C.B. (2d) 528, apld

Bennett Estate v. Iran (Islamic Republic of), [2013] O.J. No. 4998, 2013 ONSC 6832, 368 D.L.R. (4th) 500, 235 A.C.W.S. (3d) 498 (S.C.J.); Tracy v. Iranian Ministry of Information and Security, [2014] O.J. No. 1242, 2014 ONSC 1696 (S.C.J.), distd

Other cases referred to

Alcom Ltd. v. Republic of Colombia, [1984] 1 A.C. 580, [1984] 2 All E.R. 6, [1984] 2 W.L.R. 750 (H.L.); Amaratunga v. Northwest Atlantic Fisheries Organization, [2013] 3 S.C.R. 866, [2013] S.C.J. No. 66, 2013 SCC 66, 338 N.S.R. (2d) 360, 451 N.R. 1, 2013EXP-3797, 2013EXPT-2240, J.E. 2013-2062, EYB 2013-229877, 365 D.L.R. (4th) 511, 11 C.C.E.L. (4th) 277, 47 C.P.C. (7th) 227, 235 A.C.W.S. (3d) 513; Banamar-Capizzi v. Embassy of the Popular Democratic Republic of Algeria (1989), 87 ILR 56 (Court of Cassation) (Italy); Birch Shipping v. Embassy of United Republic Tanzania, 507 F. Supp. 311 (D.C. 1980); Canadian Planning and Design Consultants Inc. v. Libya, [2014] O.J. No. 6169, 2014 ONCA 924; [page581] FG Hemisphere Associates LLD v. Democratic Republic of Congo, [2010] HKCA 19, [2010] 2 HKLRD 66; Iraq v. Dumez (1995), Civil Court of Brussels, 106 ILR 285; Lai v. Canada (Minister of Citizenship and Immigration), [2007] F.C.J. No. 476, 2007 FC 361, 307 F.T.R. 161 Imm. L.R. (3d) 261, [2008] 2 F.C.R. 3, 156 A.C.W.S. (3d) 889; Liberian Eastern Timber Corp. v. Government of the Republic of Liberia, 659 F. Supp. 606 (D.C. 1987); MK v. State Secretary for Justice (1986), 94 ILR 357 (Dutch Council of State); Netherlands v. Azeta BV (1998), 128 ILR 688 (Dist. Ct. of Rotterdam); The Philippine Embassy Bank Account Case (1977), 65 ILR 146 (Fed. Const. Ct.) (Germany); United Mexican States v. British Columbia (Labour Relations Board), [2014] B.C.J. No. 41, 2014 BCSC 54, 237 C.L.R.B.R. (2d) 5, [2014] 7 W.W.R. 584, 62 B.C.L.R. (5th) 164, 71 Admin. L.R. (5th) 235, 237 A.C.W.S. (3d) 206; Z v. Geneva Supervisory Authority for the Enforcement of Debts and Bankruptcy (1990), 102 ILR 205 (Feb. Trib.) (Switzerland)

Statutes referred to

Diplomatic and Consular Privileges and Immunities Act, R.S.C. 1985, c. P-22

Foreign Missions and International Organizations Act, S.C. 1991, c. 41, ss. 3, 11 [as am.], (a) [as am.], (c), Sch. I, art. 22, (3)

Foreign Sovereign Immunities Act (U.S.)

State Immunity Act, R.S.C. 1985, c. S-18, ss. 3(1), 12(1)(a)

Rules and regulations referred to

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 38.11

Treaties and conventions referred to

Vienna Convention on Consular Relations

Vienna Convention on Diplomatic Relations, s. 22, (3), 25

Authorities referred to

Denza, Eileen, Diplomatic Law: Commentary on the Vienna Convention of Diplomatic Relations, 3rd ed. (Oxford: Oxford University Press, 2008)

van Alebeek, Rosanne, "Diplomatic Immunity", in Max Planck Encyclopedia of Public International Law (Oxford: Oxford University Press, 2009)

MOTION by the respondent for an order quashing notices of garnishment and other relief; MOTION by the applicant for a declaration that notices of garnishment were valid.

John Adair, for applicant Canadian Planning.

John Melia, for respondent Libya.

Catherine Francis, for garnishee RBC.

[1] BRAID J.: — This case concerns issues of diplomatic immunity, state immunity and the right of a private debtor to recover judgment against bank accounts held by another state within Canada's borders.

I. The Facts

[2] Canadian Planning and Design Consultants ("Canadian Planning") is a Canadian corporation who made a monetary [page582] claim against the State of Libya ("Libya") for breach of contract arising out of a hospital management agreement from 2007. In that agreement, both parties agreed that any disputes would be settled at the International Chamber of Commerce International Court of Arbitration in Paris ("ICC"). A dispute arose, and both parties submitted to the jurisdiction of the ICC for the purpose of arguing the dispute on its merits.

[3] On May 4, 2012, the ICC ordered Libya to pay damages to Canadian Planning for lost profit. The current value of this judgment is approximately $11 million Canadian dollars. Despite the fact that Libya submitted to the jurisdiction of the ICC, Libya has failed to pay the judgment.

[4] Canadian Planning brought an application seeking an order to permit them to enforce the ICC judgment in Canada. On June 20, 2014, Justice Parayeski of the Ontario Superior Court of Justice issued a recognition and enforcement order. Despite having been served with the application, Libya was not present for this hearing. The recognition and enforcement order stated that Libya "has, by implication, waived its immunity from attachment, execution, seizure, and forfeiture within the meaning of Section 12(1)(a) of the State Immunity Act, R.S.C. 1985, c. S-18".

[5] Libya appealed the recognition and enforcement order. On December 19, 2014, the Ontario Court of Appeal found that there was no basis to interfere with the order on procedural fairness grounds and dismissed the appeal [[2014] O.J. No. 6169, 2014 ONCA 924]. The court stated that the appropriate procedure to raise this issue was by way of a motion to set aside the order pursuant to rule 38.11 [of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194]. Libya subsequently brought a motion to set aside Justice Parayeski's order, which is scheduled to be heard later this month.

[6] On December 22, 2014 and January 12, 2015, the Department of Justice wrote to the Civil Enforcement Office. The letters enclosed a certificate that had been issued by Department of Foreign Affairs, Trade and Development ("DFATD") pursuant to s. 11(a) and (c) of the Foreign Missions and International Organizations Act, S.C. 1991, c. 41 (the "Foreign Missions Act"). The DFATD certificate stated that several named bank accounts were the "diplomatic property of Libya" and that the accounts "continue to enjoy privileges and immunities under the Foreign Missions and International Organizations Act". In their letters to the court, the Department of Justice letter stated that the DFATD certificate was prima facie proof that the accounts were immune from enforcement and attachment. [page583]

[7] On December 29, 2014, the court issued notices of garnishment (the "original notices of garnishment") naming the State of Libya as the debtor. On January 6, 2015, Canadian Planning served the original notices of garnishment on Royal Bank of Canada ("RBC") bank accounts in Ottawa. Libya has paid the $20,000 costs order from the appeal on this matter out of one of the garnished bank accounts.

[8] On January 9, 2015, Canadian Planning obtained an order amending the style of cause in the recognition and enforcement order. The amendment added the Libyan Embassy as a defendant to the application (as one of the aliases for the State of Libya).

[9] On January 26, 2015, Canadian Planning served notices of withdrawal of the original notices of garnishment. Canadian Planning then attempted to withdraw the original notices of garnishment and replace them with the new notices of garnishment in order to reflect the amended title of proceedings. In light of the correspondence that it had received from the Department of Justice, the Civil Enforcement Office would not accept any further documents for filing, including the notice of withdrawal of garnishment and the new notices of garnishment.

[10] RBC argues that the service of the notices of withdrawal for notices of garnishment, together with the related correspondence, constitute an undertaking to formally withdraw the notices with the court. I find that the e-mail exchanges and supporting documents do not establish that Canadian Planning undertook to withdraw the original notices of garnishment. Even if I am wrong on this, the issue is not determinative of the motion.

[11] The parties have brought the following motions:

A. Libya seeks the following relief:

(i) an order quashing the original notices of garnishment because the bank accounts enjoy diplomatic immunity;

(ii) an order directing that no new notices of garnishment

be issued in respect of the bank accounts; and

(iii) an order restraining Canadian Planning from any further enforcement attempts in respect of the bank accounts.

B. Canadian Planning seeks the following relief:

(i) a declaration that the original notices of garnishment are valid; and [page584]

(ii) a direction from the court to permit the issuance of new, amended notices of garnishment that reflect the amended style of cause in the proceedings.

These motions involve two overriding, competing interests: the right of Libya to assert diplomatic immunity over the bank accounts versus the right of the judgment creditor Canadian Planning to enforce a debt.

II. Issues

[12] The following are the issues raised by the motions:

A. Does the waiver of state immunity constitute a complete waiver of immunity over diplomatic bank accounts?

B. Does the Foreign Missions and International Organizations Act grant immunity over diplomatic bank accounts?

C. To what extent does international law recognize immunity over diplomatic bank accounts?

III. Analysis

A. Does the waiver of state immunity constitute a complete waiver of immunity over diplomatic bank accounts?

[13] Immunity is essential to the efficient functioning of both diplomatic and international organizations. Without immunity, these institutions would be vulnerable to intrusions into its operations and agenda by the host state and that state's courts (Amaratunga v. Northwest Atlantic Fisheries Organization, [2013] 3 S.C.R. 866, [2013] S.C.J. No. 66, 2013 SCC 66).

[14] In Canada, state immunity is protected by the State Immunity Act, R.S.C. 1985, c. S-18 ("SIA"):

State Immunity

3(1) Except as provided by this Act, a foreign state is immune from the jurisdiction of any court in Canada.

Execution

12(1) . . . property of a foreign state that is located in Canada is immune from attachment and execution . . . except where

(a) the state has, either explicitly or by implication, waived its immunity from attachment, execution arrest, detention, seizure or forfeiture.

[15] In the case of United Mexican States v. British Columbia (Labour Relations Board), [2014] B.C.J. No. 41, 2014 BCSC 54, at para. 71, [page585] the court interpreted s. 3(1) of the SIA to give effect to the ordinary meaning of the words and in a manner that is consistent with the international law doctrine of sovereign immunity:

State immunity is a narrowly focused but potent immunity in that it protects states from one another's enforcement jurisdiction. It is usually applied to forestall or halt domestic judicial proceedings against a foreign state. In other words, state immunity, a long-established and universally recognized doctrine of customary international law, essentially blocks a state's courts from exercising jurisdiction over foreign states.

[16] State immunity is distinct from diplomatic immunity; the former limits the jurisdiction of domestic courts over foreign countries, while the latter protects diplomatic personnel and property from the reach of Canadian laws and courts.

[17] The recognition and enforcement order obtained in Canada stated that Libya "has, by implication, waived its immunity from attachment, execution, seizure, and forfeiture within the meaning of Section 12(1)(a) of the State Immunity Act, R.S.C. 1985, c. S-18". Canadian Planning argued that this clause constitutes a full waiver of immunity by Libya. However, Libya's waiver under the State Immunity Act is limited to immunity under that Act, and does not constitute a full waiver of immunity.

B. Does the [Foreign Missions and International Organizations Act](https://www.canlii.org/en/ca/laws/stat/sc-1991-c-41/latest/sc-1991-c-41.html) grant immunity over diplomatic bank accounts?

[18] Diplomatic immunity is a long-standing principle of international law, which was codified in the Vienna Convention on Diplomatic Relations (the "Vienna Convention") and the related Vienna Convention on Consular Relations ("VCCR"). Canada is a signatory to both these conventions, and is therefore bound by its precepts at international law. Canada ratified these conventions by incorporating a subset of the Vienna Convention and the VCCR into Canadian law in the form of the Foreign Missions and International Organizations Act.

[19] The DFATD certificate was issued pursuant to s. 11(a) and (c) of the Foreign Missions Act. The certificate listed several bank accounts and stated that the accounts were the "diplomatic property of Libya" and that the accounts "continue to enjoy privileges and immunities under the Foreign Missions and International Organizations Act".

[20] Canadian Planning does not challenge the certificate itself, nor do they challenge the right of DFATD to issue such a certificate. This is not a challenge to the exercise of crown prerogative. [page586]

[21] At issue, however, is whether the Foreign Missions Act provides diplomatic immunity to bank accounts such that the account can never be subject to attachment or execution. While the DFATD certificate claims that these bank accounts enjoy the privileges, benefits and immunities provided in the Foreign Missions Act, the certificate can only furnish what the Foreign Missions Act provides. The certificate is a product of s. 11 of the Foreign Missions Act and cannot grant any greater protection than provided for in that Act. If the Foreign Missions Act does not immunize bank accounts, then neither can the certificate.

[22] Libya argues that Bennett Estate v. Iran (Islamic Republic of), [2013] O.J. No. 4998, 2013 ONSC 6832 (S.C.J.) and Tracy v. Iranian Ministry of Information and Security, [2014] O.J. No. 1242, 2014 ONSC 1696 (S.C.J.) are authority for the proposition that a certificate issued pursuant to the Foreign Missions Act provides immunity over bank accounts. However, the Bennett case primarily dealt with non-disclosure on the application for a Mareva injunction; and the applicants in the Tracy case sought declarations in relation to two Iranian non-diplomatic bank accounts. Both rulings were focused on other issues and the court did not perform an analysis or make any conclusions of law with respect to immunity over diplomatic bank accounts. The Bennett Estate and Tracy decisions are of little assistance to this court.

[23] There are no Canadian cases considering the Foreign Missions Act that address immunity of bank accounts. Therefore, this court must perform its own analysis to identify the immunities granted by the Foreign Missions Act.

[24] The Foreign Missions Act sets out the authority that DFATD relied upon to issue the certificate:

11. A certificate purporting to be issued by or under the authority of the Minister of Foreign Affairs and containing any statement of fact relevant to any of the following questions shall be received in evidence in any action or proceeding as proof of the fact stated in the certificate without proof of the signature or official character of the person appearing to have signed the certificate:

(a) whether a diplomatic mission . . . has been established with the consent of the Government of Canada; . . . or

(e) whether any person, diplomatic mission, consular post, office of a political subdivision of a foreign state, international organization or accredited mission has privileges, immunities or benefits under this Act.

[25] Schedule I of the Foreign Missions Act incorporates portions of the Vienna Convention into the Act. By virtue of s. 3 of the Foreign Missions Act, art. 22 of Sch. I (namely, art. 22 of the Vienna Convention) has the force of law in Canada. Article 22(3) [page587] provides for diplomatic immunity in relation to a foreign mission in Canada:

22(3) The premises of the mission, their furnishings and other property thereon and the means of transport of the mission shall be immune from search, requisition, attachment or execution.

[26] It is notable that neither s. 11(e) nor art. 22(3) specifically mentions bank accounts.

[27] The fact that the Vienna Convention is silent with respect to bank accounts has been recognized in the literature. It is generally considered that art. 22 of the Vienna Convention does not immunize the bank accounts of the mission, but rather leaves this issue open to be decided by state practice and customary international law (see Rosanne van Alebeek, "Diplomatic Immunity", in Max Planck Encyclopedia of Public International Law (Oxford: Oxford University Press, 2009), at paras. 15 and 52; see, also, Eileen Denza, Diplomatic Law: Commentary on the Vienna Convention of Diplomatic Relations, 3rd ed. (Oxford: Oxford University Press, 2008)).

[28] Libya argues that the DFATD certificate demonstrates that the bank accounts have diplomatic immunity. However, the Foreign Missions Act is silent with respect to bank accounts and therefore does not directly grant immunity over bank accounts. DFATD cannot confer any more privilege than is provided for in the Foreign Missions Act. For those reasons, I find that the DFATD certificate cannot and does not confer immunity on the bank accounts on its own.

C. To what extent does international law recognize immunity over diplomatic bank accounts?

[29] The rules of modern international law have a common rationale: ensuring the effective performance of diplomatic functions (see van Alebeek, supra, at para. 3). Customary international law can have a direct legal effect without being given force of law through domestic statute.

[30] In R. v. Hape, [2007] 2 S.C.R. 292, [2007] S.C.J. No. 26, 2007 SCC 26, the Supreme Court of Canada addressed the fact that international law should be incorporated into domestic law [at paras. 39 and 53]:

. . . the doctrine of adoption operates in Canada such that prohibitive rules of customary international law should be incorporated into domestic law in the absence of conflicting legislation. The automatic incorporation of such rules is justified on the basis that international custom, as the law of nations, is also the law of Canada unless, in a valid exercise of its sovereignty, Canada declares that its law is to the contrary. Parliamentary sovereignty dictates that a legislature may violate international law, but that it must do so expressly. [page588]

It is a well-established principle of statutory interpretation that legislation will be presumed to conform to international law. The presumption of conformity is based on the rule of judicial policy that, as a matter of law, courts will strive to avoid constructions of domestic law pursuant to which the state would be in violation of its international obligations, unless the wording of the statute clearly compels that result.

(Emphasis added)

[31] House debates make clear that the Foreign Missions Act (as a successor to the Diplomatic and Consular Privileges and Immunities Act, R.S.C. 1985, c. P-22) was enacted in order to comply with the Vienna Convention, which is attached as a schedule to that Act. Since the Foreign Missions Act and the adopted provisions of the Vienna Convention within the Foreign Missions Act are silent regarding immunity over diplomatic bank accounts, the court must interpret the Foreign Missions Act in conformity with Canada's international obligations. This court should look to international law principles for guidance.

[32] While there is variation in state practice, most states take what is called a "restrictive approach" to immunity over diplomatic bank accounts. The Supreme Court of Canada has determined that Canada also takes this approach (see Amaratunga v. Northwest Atlantic Fisheries Organization, supra, at para. 28). The restrictive approach generally entails providing immunity to bank accounts when the purpose of the account is to cover the embassy's costs and expenses, but not where the funds are for a commercial or other non-sovereign purpose. The reason for exempting them from the enforcement jurisdiction of the forum state lies primarily in protecting the ability of embassies to serve their diplomatic functions. The right to carry out diplomatic functions is a product of a state's sovereignty.

[33] In the textbook Diplomatic Law: Commentary on the Vienna Convention on Diplomatic Relations, supra, Eileen Denza reflects on customary international law:

With respect to whether bank accounts held by a mission in a receiving state are subject to attachment or execution, "Article 22 [of the Vienna Convention on Diplomatic Relations] leaves a lacuna to be filled by customary international law" (p. 156).

"In most jurisdictions where the possibility arises, superior courts have concluded that embassy bank accounts maintained to cover a mission's costs and running expenses are not subject to enforcement" (p. 157). [page589]

In the absence of express consent or earmarking an account for the satisfaction of a claim, embassy accounts are not available for the purposes of prejudgment or post-judgment measures of constraint or execution.

[34] Canadian Planning takes the position that international law ought to be proved by expert evidence. None of the parties have introduced any expert evidence on this point. However, the authorities Canadian Planning cited for this proposition refer to "foreign law", for example, cases in which a Canadian court is interpreting Chinese law (Lai v. Canada (Minister of Citizenship and Immigration), [2007] F.C.J. No. 476, 2007 FC 361). This is distinct from the case at bar, in which the court must interpret Canada's international law obligations -- something the Supreme Court has instructed Superior Courts to do (see R. v. Hape, supra). Although the issue is complex, I am of the view that this particular case does not require expert evidence. This court is merely interpreting Canadian law in light of international law, rather than attempting to interpret laws of other states.

International jurisprudence

[35] The following passage from Diplomatic Immunity, supra, is apposite (at para. 52):

Another example of where the general obligation not to interfere with the performance of diplomatic functions adds to the protection explicitly granted by the Convention is the inviolability of embassy bank accounts. It is undisputed that under the law of State immunity property of a foreign State that is used in the public service is immune from execution. Bank accounts that are used or that are intended for use in the performance of diplomatic functions are covered by this rule (see also Arts 19(c) and 21(1)(a) Convention on Jurisdictional Immunities of States and their Property). Plaintiffs sometimes argue, however, that a particular bank account that is registered in the name of a foreign embassy is also used for commercial purposes, and that the account is therefore a so called "mixed account" that is not completely immune from execution. The argument was rejected by the German Federal Constitutional Court in the Philippine Embassy Bank Account Case. The court reasoned that if a foreign State claims that a certain bank account is in use for the exercise of diplomatic functions, the receiving State has to accept this claim since an inquiry into the actual use of the account would unduly interfere in the affairs of the mission (see also Republic of 'A' Embassy Bank Account; Abbott v Republic of South Africa). In Alcom v Republic of Colombia the House of Lords held the possibility of attachment to be limited to funds specifically earmarked for commercial purposes. Other courts formulate the immunity in less absolute terms by allowing individuals to produce evidence in order to prove the alleged partial commercial use of the account (see Iraq v Vinci Constructions, The Republic of Angola v Springbok Investments [Pty] Ltd; MK v State Secretary for Justice, Z v Geneva Supervisory Authority for the Enforcement of Debts and Bankruptcy; [page590] and implicitly Banamar Capizzi v Embassy of Algeria).

(Emphasis added)

[36] The following cases are instructive regarding the recognition of international law on the issue of immunity of diplomatic bank accounts:

(i) The Philippine Embassy Bank Account Case (1977), 65 ILR 146 (Fed. Const. Ct.) (Germany): the German Federal Constitutional Court held that embassy accounts are immune from execution. The court stated that there was a general rule of international law that execution of judgment against a foreign state was not permitted when the purpose of the bank account is to cover the embassy's costs and expenses. The court made the following comments regarding the required evidence to demonstrate that an account is for a diplomatic purpose (at p.189):

General international law does not prohibit asking the sending State to substantiate the fact that a given account is one that is used for the continued performance of the functions of its diplomatic mission . . .The State must, in accordance with international law, be satisfied with due assurances from a competent authority of the sending State.

While immunity from enforcement was not considered absolute, the court placed a high burden on plaintiffs by endorsing a quasi-presumption in favour of the sovereign purposes of an embassy account.

(ii) Birch Shipping v. Embassy of United Republic Tanzania, 507 F. Supp. 311 (D.C. 1980): the U.S. District Court upheld a writ of garnishment on the basis that the property in question, namely, the embassy bank account, was in fact used for a commercial activity. Funds were used for salaries of staff, incidental purchases and services for operation of embassy. The commercial purpose exception to immunity was upheld. The court stated that, even if the slippery slope argument were true, and failing to provide broad immunity for mixed bank accounts would result in embassies being unable to function, embassies could solve this problem by creating separate accounts. Holding otherwise, i.e., providing immunity without exception, would "defeat the express intention of Congress to provide, in cases of commercial litigation such as this, that a 'judgment creditor (would have) some remedy if, after a reasonable period, a foreign state or its enterprise failed to satisfy a final judgment'" (at p. 313 F. Supp.). [page591]

(iii) Liberian Eastern Timber Corp. v. Government of the Republic of Liberia, 659 F. Supp. 606 (D.C. 1987): the U.S. District Court upheld immunity of embassy bank accounts by relying on art. 25 of the Vienna Convention, and the Foreign Sovereign Immunities Act of 1976. The court noted that, if the property is for a commercial activity, then it is not immune from attachment. What is key is the "essential character" of the activity for which the funds are used. Courts ought to define commercial exceptions narrowly. Here, the court concluded that despite the possibility that the "some portion of the funds in the bank accounts may be used for commercial activities in connection with running the Embassy, such as transactions to purchase goods or services from private entities", this was minimal, so the funds had not lost their overall sovereign character (see p. 610 F. Supp.). The court concluded that the bank accounts should therefore be protected by immunity.

(iv) Alcom Ltd. v. Republic of Colombia, [1984] 1 A.C. 580, [1984] 2 W.L.R. 750 (H.L.): the House of Lords explicitly considered it to be a rule of customary international law that a bank account of a diplomatic mission used to defray the expenses of running the mission enjoys immunity from execution in the receiving state. The head of the diplomatic mission's certificate that property is not in use for commercial purposes is sufficient evidence of that fact unless the contrary is proved. A bank account that is for the purpose of meeting the expenditures incurred in the day-to-day running of a foreign embassy was immune from attachment unless the judgment creditor could demonstrate "commercial purposes".

(v) MK v. State Secretary for Justice (1986), 94 ILR 357: the Dutch Council of State accepted a declaration from the Turkish Embassy that the money in the bank account was for the performance of embassy functions. To require a further and more detailed account of the use of the account would amount, under international law, to an unjustified interference in the internal affairs of the mission.

(vi) Banamar-Capizzi v. Embassy of the Popular Democratic Republic of Algeria (1989), 87 ILR 56: the Italian Court of Cassation recognized the prevailing international tendency to grant complete immunity for bank deposits held in the name of foreign embassies or consulates. The court also commented that, where the funds in question appear to be [page592] devoted to financing the expenses necessary to fulfil sovereign purposes, "any attempt to check if such funds are effectively used in whole or in part for those purposes would inevitably result in undue interference in the affairs of the diplomatic mission" (at p. 60 ILR).

(vii) Z v. Geneva Supervisory Authority for the Enforcement of Debts and Bankruptcy (1990), 102 ILR 205 (Fed. Trib.): the Federal Tribunal in Switzerland held that funds allocated for the use of a foreign diplomatic mission enjoyed immunity from attachment. In the absence of evidence to the contrary from the claimant, authorities were entitled to rely on diplomatic notes claiming specific sovereign functions of bank accounts.

(viii) Iraq v. Dumez (1995), Civil Court of Brussels, 106 ILR 285: the Belgian court permitted attachment against embassy accounts. In that case, the court held it could attach to an account held by Iraq to enforce a judgment even though Iraq argued funds were "held to acquire embassy building". The court held that the Vienna Convention did not preclude national courts from considering the nature of funds deposited by an embassy. The court in that case was clearly influenced by Iraq's behaviour, including that it had failed to provide any proof that the funds in question were allocated for the performance of diplomatic functions.

(ix) Netherlands v. Azeta BV (1998), 128 ILR 688 (Dist. Ct. of Rotterdam): Chile filed a letter from the foreign minister stating the bank accounts were intended for the running of the Chilean Embassy. Upon receipt of this letter, the onus was on the creditor to prove the contrary, which it failed to do. The court held that Chile is entitled to claim immunity, and does not have to provide more detailed information about the bank accounts. To require more from Chile would constitute "an unacceptable interference under international law in the internal affairs of this mission".

(x) FG Hemisphere Associates LLC v. Democratic Republic of Congo, [2010] HKCA 19, [2010] 2 HKLRD 66: the court held that the question of immunity had to be decided according to the common law of Hong Kong. The court held that the determination of whether an asset is immune is dependent upon the nature of the transaction, not the intent of the state. If the asset was used for commercial purposes, it was not immune. [page593]

[37] These cases demonstrate that various international courts have recognized the immunity of diplomatic bank accounts as a general rule of international law. Embassy and consular bank accounts, at least as far as they are used for running a diplomatic or consular mission, are entitled to diplomatic immunity, in particular immunity from attachment. This court is bound to follow these principles.

Application of international law to the case at bar

[38] A key issue in this case is whether the parties have provided sworn evidence or a declaration regarding the purpose of these bank accounts

[39] Procedurally, if a "competent authority" of the State of Libya provides a court with "due assurances" that a bank account's funds are for the sovereign purposes of the functioning of the embassy, the court must be satisfied with those assurances unless Canadian Planning can prove that the funds are for another purpose (i.e., for a commercial purpose). If Libya asserts that these bank accounts exist for the proper functioning of its embassy, and Canadian Planning has no evidence to the contrary, the court must be satisfied with these assurances and provide the immunities due to such bank accounts at international law. The court is not entitled to inquire further into the use of the bank accounts, because doing so would be an undue interference into the affairs of the sending state, contrary to international law.

[40] In this case, Libya has filed the affidavit of the Libyan ambassador in Canada. This affidavit states that the ambassador supports the application for a dismissal of the garnishment proceeding, but does not assert that the bank accounts in question are intended to fund the embassy's sovereign diplomatic functions.

[41] Although Libya may argue that the DFATD certificate is proof of the diplomatic status of the bank accounts, there must be "a due assurance of competent authority". As noted above, the authority of Canada to issue the DFATD certificate is found in the Foreign Missions Act, which does not grant immunity over bank accounts; therefore, Canada is not a competent authority on this point. It is unclear that Canada could ever be a "competent authority" to make assurances on behalf of Libya. I do not accept the blank assertion from counsel for Libya as "competent authority". I also reject the fact that Libya is the named holder of the RBC accounts as sufficient evidence for immunity. [page594]

[42] Canadian Planning has not provided evidence that these bank accounts are not for diplomatic purposes but rather for commercial purposes. Canadian Planning states that it is noteworthy that Libya paid $20,000 costs of the appeal out of the diplomatic bank account, and therefore questions whether the accounts are being solely used for diplomatic purposes. This piece of information, standing alone, is not evidence that the accounts are for a commercial purpose.

[43] I find that the parties have not provided any evidence from a competent authority regarding the "diplomatic purpose" of these bank accounts. As such, the court is left with a dearth of information upon which to determine these very serious and internationally important questions.

IV. Conclusion

[44] Customary international law provides that diplomatic bank accounts are generally immune from execution and attachment. If a competent authority of the State of Libya provided the court with due assurances that the account's funds are for the sovereign purposes of the functioning of the embassy, this court must be satisfied with those assurances unless Canadian Planning can prove that the funds are for a commercial purpose.

[45] Libya has strenuously argued that the DFATD certificate was sufficient proof of the diplomatic protections afforded to the bank accounts. As noted above, I reject that argument. However, I will provide the parties with a further opportunity to provide a declaration or additional sworn evidence regarding the nature of the bank accounts. Once the court has received that evidence, the parties may provide additional submissions as to the nature of the bank accounts.

[46] The 38.11 motion is returnable before me this week. Any additional evidence on this point must be served and filed by Thursday, March 12, 2015. Counsel will have the opportunity to make submissions on this narrow point on Friday, March 13, 2015. If this timeline is too short, counsel may request additional time when the matter is in court on March 13, 2015.

Order accordingly.

End of Document