Canada: Instrubel Goes To The Supreme Court: What This May Mean For International Arbitration In Canada

  1. Overview and Importance of Decision

The recent pronouncement by the Court of Appeal of Québec in Instrubel, n.v. v Republic of Iraq 1 takes yet another step forward in judicial recognition of economic realities, in a context respectful of international arbitration. Making clear that arbitral awards are as deserving as any other when it comes to enforcement procedures, this decision demonstrates the willingness of Canadian courts to facilitate the execution of arbitral awards. Now that the Supreme Court of Canada has granted leave to appeal, we will soon see just how arbitration-friendly Canada will be.

The eventual SCC decision may also provide guidance for the enforcement of and execution on arbitral awards and as to pre-award creditor protection.

  1. Context and Background of this Case

A recent line of Canadian appellate decisions emphasize that, in a globalized world and electronic age, courts must be attentive to parties' current needs. In relation to the preservation of assets in anticipation of enforcement, "to require that a judgment creditor wait until the foreign debtor is present or has assets in the province before a court can find that it has jurisdiction in recognition and enforcement proceedings would be to turn a blind eye to current economic reality."2

Instrubel, a Dutch company, instituted arbitration proceedings against the Ministry of Industry of The Republic of Iraq relating to contracts concluded by the parties over 30 years ago.3 The International Court of Arbitration in Paris rendered arbitral awards against Iraq in 1996 and 2003. By 2013, the 2003 award of $32 million plus interest had still not been paid. Consequently, Instrubel considered that its recovery of the award was at risk and applied, in Québec, for a writ of seizure before judgment by garnishment, naming the International Air Transportation Association ("IATA") as garnishee. Instrubel alleged that Iraq had assets in Québec, in the form of aerodrome and air navigation fees held by IATA, whether at IATA's head office in Montreal or at any of IATA's worldwide branches.

Québec Superior Court: Acknowledging the Courts' Role in Facilitating Arbitration... To an Extent

The Québec Superior Court granted, in part, the defendants' motion to quash the writ of seizure before judgment by garnishment. Considering that the funds were held in a Swiss bank account, the Court concluded that it did not have jurisdiction to authorize a writ of seizure by garnishment that extended to assets held outside Québec.4 As a result, Justice Stephen Hamilton (later elevated to the Court of Appeal of Québec) struck out the words "either... or at any of its worldwide branches" from the writ. He ordered IATA to file a new declaration within thirty days with respect to all aerodrome charges and air navigation charges of the Republic of Iraq held by IATA at its Montreal head office on behalf of the Republic of Iraq.

Although he limited the wording in the writ, Justice Hamilton acknowledged the role of Canadian courts in facilitating arbitration, stating that the "courts have no connection to the present dispute other than assisting in the execution of the arbitral awards."5

Court of Appeal of Québec: We Must Avoid an International Shell Game

Justice Mark Schrager reaffirmed that the Court's jurisdiction over IATA as a garnishee stemmed from the place at which the debt was collectible, rather than where the bank account happened to have opened. Justice Schrager emphasized IATA's Montreal domicile, subject to the Québec courts.6 He held that the debt was, for private international law purposes, located at the place where it was collectible, which was the domicile or principal place of business of the account debtor.7

Justice Schrager also underlined the importance of facilitating international arbitration in a way that does not lead to unworkable results.8 In doing so, he stated that it did not matter where IATA deposited the money it collected, so there was no need to strike the words "either... or at any of its worldwide branches" from the writ of seizure before judgment by garnishment. His reasoning was rooted in the importance of encouraging international commerce, and avoiding forcing judgment creditors into an international "shell game" and somehow discovering or guessing where a garnishee deposited the money reflected in its bookkeeping entries.9

What Do These Decisions Mean?

The Court of Appeal of Québec's decision confirming the ability to act against local garnishees, as opposed to distant assets, contributes to Canada's reputation as an arbitration-friendly country. The decision facilitates the execution of awards in international arbitration, and paves the way for flexibility in the preservation of assets needed for enforcement proceedings.

The Supreme Court of Canada, in earlier decisions, has permitted foreign judgment creditors to choose where they wish to enforce their judgments and to assess where their debtors' assets could be located. In doing so, the Court, mindful of Canada's public policy interest as a globally trading nation, linked the need for liberal and simple rules pertaining to enforcement of foreign judgments to the imperative of facilitating the flow of wealth, skills and people across borders.

The upcoming decision of the Supreme Court of Canada in Instrubel will establish just how powerful this public policy interest can be, not to mention how flexible the courts can be to accommodate it in the future. 

  1. How to Preserve Assets in Anticipation of Enforcement of an International Arbitral Award

If the Supreme Court of Canada agrees with the Court of Appeal of Québec, the specific location of monetary deposits will be less important than where the bookkeeping flows may be arrested.

The Instrubel case entailed a writ of seizure before judgment by garnishment, which not only orders a garnishee to declare under oath what funds it owes to the debtor and what movable property it holds belonging to the debtor, but also places under judicial control and makes the garnishee its guardian. This is but one method of preserving assets in anticipation of an award.

The Instrubel decision also briefly discussed the use of Mareva injunctions in these circumstances. The Canadian courts' treatment of Mareva injunctions makes them a powerful tool to preserve assets pending enforcement. Recent cases against the Kyrgyz Republic exemplify Canadian courts' willingness to grant Mareva injunctions to aid in the execution of international arbitral awards.

In Sistem Muhendislik Insaat Sanayi Ve Ticaret Anonim Sirketi v Kyrgyz Republic,10 the Ontario Superior Court of Justice held that the Kyrgyz Republic had an equitable interest in shares of an Ontario mining company, Centerra Gold Inc, though they were legally held by a state-owned entity. Here, a Mareva order prevented that entity from moving its shares outside Ontario.

In CE International Resources Holdings LLC v Yeap Soon Sit, the British Columbia Supreme Court granted a Mareva injunction as an interim measure to allow the claimant time to seek the same relief from the arbitrator presiding over the dispute in New York.11 In doing so, the Court acknowledged that, without this injunctive remedy, the assets on which the claimant could execute would probably be lost. This allowed CE International Resources Holdings LLC to secure exigible assets owned by Yeap Soon Sit that were in British Columbia.

Overall, these examples demonstrate Canadian courts' understanding of the flexibility required in enforcement proceedings.

  1. Canada's Public Interest

Canada's legal landscape is arbitration-friendly. Generally, Canadian courts are inclined to provide arbitral creditors with practical, effective remedies to assist them in enforcing and executing awards in a world in which it is in Canada's interest that businesses, assets, and people may cross borders with ease.12

  1. Affirming Principles or Shifting Policy?

If the upcoming Supreme Court of Canada decision in Instrubel accords with that of the Court of Appeal of Québec, international arbitral judgments, even those involving parties and disputes unattached to Canada, will be enforced more easily in Canada. This will be consistent with the view that "predictability in the enforcement of dispute resolution provisions is an indispensable precondition to any international business transaction and facilitates and encourages the pursuit of freer trade on an international scale."13


1Instrubel, n.v. v Republic of Iraq, 2019 QCCA 78 [Instrubel].

2Chevron Corp. v Yaiguaje, 2015 SCC 42 at para 57.

3Instrubel, n.v. v The Ministry of Industry of the Republic of Iraq, 2016 QCCS 1184 at para 7.

4Ibid at paras 76-77.

5Ibid at para 78.

6Instrubel, supra note 2 at para 42.


8Ibid at para 50.


10Belokon et al. v The Kyrgyz Republic, 2016 ONSC 4506.

11CE International Resources Holdings LLC v Yeap Soon Sit, 2013 BCSC 186; 2013 BCSC 1804.

12Chevron, supra note 1 at para 1.

13Chevron, supra note 1 at para 57.

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