



COURT OF APPEAL FOR ONTARIO

CITATION: Bombardier Inc. v. AS Estonian
    Air, 2014 ONCA 41

DATE: 20140117

DOCKET: C57268

Weiler, Rouleau and Strathy JJ.A.

BETWEEN:

Bombardier Inc.

Plaintiff (Appellant)

And

AS Estonian Air and
the Republic of Estonia through
    Its Ministry of Economic Affairs and Communications

Defendants (
Respondent
)

Douglas F. Harrison and Vanessa Voakes, for the
    appellant

Jonathan Lisus and James Renihan, for the respondents

Heard: January 13, 2014

On appeal from the order of Justice Edward M. Morgan of
    the Superior Court of Justice, dated May 24, 2013, with reasons reported at
    2013 ONSC 3039.

ENDORSEMENT

[1]

The essence of the appellants claim is that the Republic of Estonia
    (the Republic), through its alleged involvement in the economic
    decision-making process of AS Estonian Air (the Airline), engaged in activity
    that brought it within the commercial activity exception in s. 5 of the
State
    Immunity Act
, R.S.C. 1985, c. S-18 (the Act).

[2]

Section 3(1) of the Act creates a presumption that a foreign state is
    immune from the jurisdiction of Canadian courts. A court is obliged to give
    effect to that immunity, even where it has not been raised by the state.

[3]

The commercial activity exception provides that a foreign state is not
    immune from jurisdiction in any proceedings that relate to any commercial
    activity of the foreign state. Commercial activity is defined as any
    particular transaction, act or conduct or any regular course of conduct that by
    reason of its nature is of a commercial character.

[4]

In its statement of claim, the appellant alleges that the Republic induced
    the Airline to breach its contract with the appellant and intentionally
    interfered with the appellants economic relations.

[5]

A party seeking to bring a foreign state before the court, by invoking
    the commercial activity exception, cannot simply plead facts constituting a
    cause of action and then plead that those facts are commercial activity,
    thereby grounding jurisdiction: see
Schreiber v. Canada (Attorney General)
,
    2002 SCC 62, [2002] 3 S.C.R. 269. It must do more. It must provide an
    evidentiary record to enable a court to perform the necessary contextual
    analysis to determine that the state has engaged in commercial activity and
    that the proceedings relate to that activity: see
Kuwait Airways Corp. v.
    Iraq
, 2010 SCC 40, [2010] 2 S.C.R. 571, at paras. 30-33.

[6]

Although that analysis does not require a determination of the
    underlying merit of the cause of action, it is a merits-based analysis of the
    evidence supporting or refuting the assertion that the court has jurisdiction
    based on the exception: see
Schreiber
, at para. 18.

[7]

Moreover, it is an analysis in which the party seeking to overcome the
    presumption of sovereign immunity bears the burden of proof:
Kuwait Airways
at para. 22. In this regard, we do not accept the appellants submission
    that the motion judge should have deferred the motion until a later stage, such
    as after discoveries, so the issue could be determined on a full record. As
    Doherty J.A. noted in this courts decision in
Schreiber,
(2001), 52
    O.R. (3d) 577 (C.A.), at para. 16, the action cannot proceed until the issue of
    sovereign immunity has been decided.

[8]

The Republic owns over 90 percent of the shares of the Airline. The
    parties agree that the Republic is not engaged in commercial activity simply
    because of this interest. More is required.

[9]

Here, the motion judge considered the record and found the appellant
    failed to meet the onus of establishing that the actions of the Republic
    intruded into the management sphere of the operation of the Airline. He held
    that the Republics activities were restricted to oversight as shareholder and to
    the furtherance of governmental objectives. He also found, at para. 83, that
    with one insignificant exception, all of the evidence before him demonstrated
    that there was no involvement by the government and no political interference
    with [the Airlines] management in reaching its decision to cease negotiations
    with the appellant and to buy aircraft from a competitor.

[10]

These
    findings were squarely based on the evidence before the motion judge, which
    included affidavits from both the Chief Financial Officer of the Airline and a
    senior officer of the Ministry of Economic Affairs and Communications. This
    evidence satisfied the motion judge that the Republic had no involvement in the
    management, governance or commercial activities of the Airline and that the
    decision to end negotiations with the appellant was made by the Airline and not
    by the Republic.

[11]

We
    are not persuaded that any of the evidence identified by the appellant was
    individually or collectively sufficient to refute this evidence and to discharge
    the appellants burden. Other than a second-hand report contained in a tabloid,
    the appellants evidence does little more than show that the Republic responded
    to requests that it guarantee loans to the Airline, something it consistently
    refused to do, and may have urged the Airline to carry out a comparative
    analysis of competing bids from aircraft suppliers. This falls short of demonstrating
    the type of commercial activity envisaged by the Act and carries little weight
    in the face of the denials in the affidavits of the representatives of the
    Airline and the Republic, on which they were not cross-examined.

[12]

We
    do not agree with the appellants submission that the motion became a
    determination of the underlying merits of the action. Both parties put forward
    an evidentiary record to provide the necessary contextual basis to determine
    whether the appellant had met the onus of showing that the conduct at issue
    fell within the statutory exception.

[13]

In
    essence, the motion judge found, on the evidence, that the Republics
    activities were sovereign in both purpose and nature and did not cross the line
    into the management sphere. His conclusions are entitled to deference and are
    fully supported by the evidence. We would therefore dismiss the appeal, with
    costs fixed at $20,000, inclusive of all applicable taxes and disbursements, as
    agreed by the parties.

K.M. Weiler J.A.

Paul Rouleau J.A.

G.R.
    Strathy J.A.


