Enforcement of Foreign Judgments: Corruption Defence

Corruption as a Defence to the Recognition and Enforcement of Foreign Judgments in Ontario

Can a judgment rendered in a corrupt foreign tribunal be enforced in Ontario? Where a litigant can raise enough evidence that the foreign tribunal was corrupt, and that the corruption influenced the outcome of the proceeding, the judgment will typically not be enforced. However, in order to make use of applicable defences at the recognition and enforcement stage, the litigant must raise evidence of actual corruption by the particular foreign tribunal during the foreign proceeding.

In Beals v. Saldanha, the Supreme Court of Canada said the following about the defences to the enforcement of foreign judgments:

The defences of fraud, public policy and lack of natural justice […] were developed by the common law courts to guard against potential unfairness unforeseen in the drafting of the test for the recognition and enforcement of judgments. The existing defences are narrow in application. They are the most recognizable situations in which an injustice may arise but are not exhaustive.

Recently, in an Ontario action for the enforcement of a judgment rendered in Singapore, the Ontario Court of Appeal was asked to recognize a judgment by a foreign tribunal that was alleged to be corrupt. The case was Oakwell Engineering Ltd. v. Enernorth Industries Inc., [2006] O.J. No. 2289 (C.A.).

The Oakwell Decision

In Oakwell, the parties were joint venturers for a constructing project in respect of a power generating facility in Singapore. Oakwell commenced an action in Singapore for the breach of a term in the settlement agreement between the parties by Enernorth.

Enernorth did not contest jurisdiction in the Singapore court, but subsequently appealed the Singapore court’s decision, under which Enernorth was ordered to pay sums under the agreement to Oakwell. The appeal was dismissed. At no time during the appeal did Enernorth raise the issue of fairness in the trial proceeding.

During an action in Ontario to enforce the Singapore judgment, Enernorth claimed that the Singapore judgment ought not to be enforced, because it had been granted by a corrupt legal court, with biased judges, and in a jurisdiction that operates outside the rule of law. Oakwell countered by arguing that, while there might be possible government interference in certain trials, the Singapore court was impartial when it adjudicated commercial matters between private parties.

At issue was whether Enernorth’s arguments justified the application of the natural justice and/or public policy defence.  The Court of Appeal dismissed Enernorth’s appeal, concluding that Enernorth did not raise enough evidence to meet the defences of public policy or natural justice.

Public Policy

The Court of Appeal raised the following points concerning the public policy defence. First and foremost, Enernorth failed to sufficiently prove that the Singapore court was biased. Second, Enernorth’s evidence raised a question of fact, instead of a question of law, and therefore the public policy defence was inapplicable:

The public policy defence turns on whether the foreign law is contrary to our view of public morality […] The traditional public policy defence appears to be directed at the concept of repugnant laws and not repugnant facts.

The ways in which a government is said to have influenced a court is an issue that must be resolved by examining the facts, as opposed to an issue of examining a foreign law.

Natural Justice

With respect to natural justice, the Court noted that Enernorth had failed to raise any issues of unfairness during the proceeding in Singapore, and as such, could not raise that defence now. Additionally, the Court noted that Enernorth had attorned to the jurisdiction of the Singapore court by defending the proceeding, and had also chosen Singapore law as the applicable law under the settlement agreement with Oakwell. Therefore, the natural justice defence was inapplicable.

The Court of Appeal also stressed that, absent special or unusual circumstances, which may require the creation of a new defence, a court should only consider the three existing defences to enforcing a foreign judgment.  In this case, the alleged corruption on the part of the Singapore court did not form the unique circumstances required to justify the creation of a new defence.

Conclusion

The corruption of a foreign tribunal is a factor that could bar the enforcement of a judgment obtained in the tribunal. In order to raise this as a defence in an enforcement proceeding, the litigant must prove that the particular foreign tribunal was actually corrupt and that the specific corruption influenced the outcome of the foreign proceeding. It is not enough to allege that the tribunal has a reputation for being corrupt. Specific evidence of corruption must also be raised during the foreign proceeding in order to make use of the applicable defences at the enforcement stage.