



COURT OF APPEAL FOR ONTARIO

CITATION:
Steen v. Islamic
    Republic of Iran, 2013 ONCA 30

DATE: 20130121

DOCKET: C54635

Winkler C.J.O., Armstrong and Watt JJ.A.

BETWEEN

Alann B. Steen, John Rose Jr. (Representative of
    the Estate of Virginia Steen), Eric Jacobsen, Paul Jacobsen, Diane Jacobsen and
    Doris Fisher

Plaintiffs (Appellants/Respondents
  by way of cross-appeal)

and

Islamic
    Republic of Iran, Iranian Ministry of Information and Security, and
    Iranian Revolutionary Guard

Defendants (Respondents/Appellants
  by way of cross-appeal)

Mark H. Arnold, François Larocque and Syed Ali Ahmed,
    for the appellants/ respondents by way of cross-appeal

James A. Woods, Sarah Woods and Barbra Miller, for the
    respondents/ appellants by way of cross-appeal

Heard: May 23, 2012

On appeal from the judgment of Justice Katherine B.
    Corrick of the Superior Court of Justice, dated November 1, 2011, with reasons
    reported at 2011 ONSC 6464, 108 O.R. (3d) 301.

Armstrong
    J.A.:

Introduction

[1]

This is an appeal from a judgment granting a motion to dismiss the
    appellants claim for enforcement of two American judgments against the
    respondents, Islamic Republic of Iran, Iranian Ministry of Information and
    Security, and Iranian Revolutionary Guard. The motion judge granted the
    respondents motion on the basis that the
State Immunity Act
, R.S.C.
    1985, c. S-18 (the 
SIA
), bars the appellants enforcement claim. The
    cross-appeal concerns the motion judges decision to award costs against the
    respondents even though they were successful on the motion. For the reasons
    that follow, I would dismiss both the appeal and the cross-appeal.

Background

[2]

Between 1982 and 1988, Iran directed the kidnapping and detention of 18
    American citizens in Beirut, Lebanon, for the purpose of collecting a ransom.
    Alann Steen and David Jacobson were two of the individuals kidnapped. Both were
    detained for an extended period of time, kept in inhumane conditions, and
    subjected to mental and physical abuse.

[3]

Alann Steen and his wife, Virginia Steen, sued the respondents in the
    United States District Court for the District of Columbia for damages arising
    out of Mr. Steens captivity. The respondents did not appear. On July 31, 2003,
    the court awarded a judgment of US$342,750,000 against the respondents.

[4]

David Jacobsens children, Eric, Paul and Diane, and his sister, Doris
    Fisher, sued the respondents in the same court for damages arising out of David
    Jacobsons captivity.
[1]
Again, the respondents did not appear. On October 6, 2006, the court awarded a
    judgment totalling US$6,400,000 against the respondents.

[5]

These judgments have not been satisfied in the United States and the
    appellants commenced an action in Ontario seeking to enforce them. The
    respondents moved under rule 21.01(2) of the
Rules of Civil Procedure
,
    R.R.O. 1990, Reg. 194, to dismiss this action on the basis that they are immune
    from the jurisdiction of any court in Canada pursuant to s. 3(1) of the
SIA
.
    This provision reads: Except as provided by this Act, a foreign state is
    immune from the jurisdiction of any court in Canada.

[6]

Before the motion judge, the appellants submitted that the respondents
    conduct that gave rise to the American judgments constituted commercial
    activity within the definition of s. 5 of the
SIA
, which states: A
    foreign state is not immune from the jurisdiction of a court in any proceedings
    that relate to any commercial activity of the foreign state. The appellants
    argued that, based on the commercial activity exception, the respondents are
    not immune from the courts jurisdiction. In the alternative, the appellants
    contended that the common law of state immunity continues to apply, which
    precludes immunity for acts of terrorism, kidnapping, torture and
    hostage-taking committed by or on behalf of sovereign states.

[7]

The motion judge held that kidnapping and detention do not constitute
    commercial activity under the
SIA
and therefore the exception under s.
    5 does not apply. Following this courts decision in
Bouzari v. Iran

(2004), 71 O.R. (3d) 675, the motion judge also concluded that the
SIA
is a complete code that permits no common law exceptions.

[8]

The appellants also sought a stay of the proceedings pursuant to s. 106
    of the
Courts of Justice Act
, R.S.O. 1990, c. C.43, in the event that
    the motion judge ruled that the
SIA
barred the action. The request for
    a stay was premised on proposed legislation then before the House of Commons,
    which would have amended the
SIA
to prevent a listed foreign state
    from claiming immunity from the jurisdiction of the Canadian courts in relation
    to its actions in support of terrorism. It was submitted that Iran would be one
    of the listed states, which would remove its immunity under the
SIA
.

[9]

The motion judge declined to grant the stay as the proposed legislation
    had not passed through Parliament.

[10]

Despite
    the respondents success on the motion, the appellants were awarded costs of
    $70,000.

The Change in the Law Since the Decision of the Motion Judge

[11]

Following
    the motion judges decision, the
Justice for Victims of Terrorism Act
,
    S.C. 2012, c. 1, s. 2 (the 
JVTA
), came into force on March 13, 2012.
    Section 4(5) of the
JVTA
provides:

A court of competent jurisdiction must recognize a judgment of
    a foreign court that, in addition to meeting the criteria under Canadian law
    for being recognized in Canada, is in favour of a person that has suffered loss
    or damage [as a result of terrorist acts that would be punishable under Part
    II.1 of the
Criminal Code
]. However, if the judgment is against a
    foreign state, that state must be set out on the list referred to in subsection
    6.1(2) of the
State Immunity Act
for the judgment to be recognized.

Concomitantly, the
SIA
was amended to provide
    for a list of countries that would not [be] immune from the jurisdiction of a
    court in proceedings against it for its support of terrorism on or after
    January 1, 1985:
SIA
, s. 6.1(1). On September 7, 2012  after this
    appeal had been heard  the Governor General in Council established the list of
    countries, which includes the Islamic Republic of Iran:
Order Establishing
    a List of Foreign State Supporters of Terrorism
, SOR/2012-170, s. 2.

[12]

At
    the time of the argument of this appeal (May 23, 2012) counsel for the appellants
    knew that Iran would likely be listed pursuant to s. 6.1(2) of the
SIA
in September 2012. Counsel advised that he expected the appellants would pursue
    whatever rights they had as a result of the new legislative regime. However,
    the appellants still wished to pursue this appeal.

[13]

In
    oral argument, the court questioned counsel for the appellants about the need
    for pursuing this appeal. The court pointed to what appeared to be at that time
    the imminent addition of Iran to the list of countries that are not immune from
    jurisdiction in proceedings concerning a states support for terrorism.

[14]

Counsel
    acknowledged having considered the question of mootness with respect to this
    appeal. However, counsel took the position that it was not certain at that point
    whether Iran would be added to the list, and so the appeal was not yet moot.
    Counsel requested the court to decide the issues on the appeal in light of the
    law as it stood at the time the appeal was argued.

[15]

This
    court cannot simply ignore that Iran has been added to the list of foreign
    state supporters of terrorism referred to in s. 6.1(2) of the
SIA
.
    However, I would be prepared to decide the issues raised by the appellants
    because it is not a foregone conclusion that the addition of Iran to the list
    will result in a successful proceeding to enforce the two American judgments.
    Such further proceeding in the Superior Court of Justice would require a
    consideration,
inter alia
, of the application of s. 6.1(1) of the
SIA
and s. 4 of the
JVTA
to the
    present circumstances
.

The Appeal

[16]

The
    appellants raise the following grounds of appeal:

(i)    The
    motion judge erred in concluding that the kidnapping and detention of Alann
    Steen and David Jacobsen did not constitute commercial activity within s. 5 of
    the
SIA
.

(ii)   The
    motion judge erred in failing to apply a common law exception to state immunity.

(iii)  The
    motion judge erred in failing to conclude that the respondents lost the benefit
    of state immunity by committing acts in violation of peremptory norms of
    international law (
jus cogens
).

Analysis

(i)

The Commercial Activity Exception

[17]

In
Bouzari
, some of the same legal issues were raised before this court. 
    While the facts in
Bouzari
are not identical, there are similarities
    to the case at bar. Over a six-month period, Houshang Bouzari was abducted,
    imprisoned and brutally tortured by agents of the Iranian government. After his
    release, he escaped from Iran and eventually ended up in Canada as a landed
    immigrant where he sued Iran for damages.

[18]

On
    a motion before in the Ontario Superior Court of Justice, Swinton J. found that
    the action could not succeed because it was barred by the
SIA
and it
    did not fall within the exceptions in the
SIA
. The case was appealed
    to this court.

[19]

Goudge
    J.A., writing for the court, agreed with the motion judge that the commercial
    activity exception in s. 5 of the
SIA
did not apply. At para. 51 of
    his reasons he said:

I agree ... that the commercial activity exception does not
    apply here. Section 5 of the Act requires that the acts to which the
    proceedings relate (namely the acts of torture) be commercial in nature. It is
    not enough that the proceedings relate to acts which, in turn, relate to
    commercial activity of the foreign state. To interpret the exception in this
    way, as the appellant contends, would broaden the exception beyond the clear
    language of the
SIA
.

[20]

The
    appellants submit that the present case is distinguishable from
Bouzari
.
    In that case, Mr. Bouzari was kidnapped, imprisoned and tortured for refusing
    to pay a bribe in the context of an oil and gas transaction. Goudge J.A. held,
    at para. 53, that apart from their purpose, the acts of torture underpinning
    the appellants action cannot be said to have anything to do with commerce. In
    essence, torture is not a commercial act.

[21]

The appellants argue that in this case, the systematic
    exchange of hostages for money and guns does constitute a commercial act. They
    contend that it makes no difference to the legal analysis that the
    consideration for money and guns was human beings, rather than a commodity like
    oil.

[22]

I
    agree with the motion judge, at para. 42, that the exchange of human beings
    for weapons and money [does not fall] within the ordinary meaning of commercial
    activity in s. 5 of the [
SIA
]. A mere nexus to commercial activity is
    insufficient to invoke the exception. Rather, the nature of the acts for which
    relief is sought  in this case kidnapping, detention and torture  must be
    commercial. As the motion judge held, at para. 42, [t]he fact that Iran
    demanded the payment of money and weapons before releasing Mr. Jacobsen and Mr.
    Steen does not alter the true nature of hostage taking as a brutal criminal
    act.

[23]

I
    thus would not give effect to the first ground of appeal.

(ii)

The
    Alleged Common Law Exception to State Immunity

[24]

The
    appellants argue that the motion judge failed to apply the decision of the
    Supreme Court of Canada in
Kuwait Airways Corp. v. Iraq
, 2010 SCC 40,
    [2010] 2 S.C.R. 571, which they submit left open the question whether there is
    a common law exception to state immunity. LeBel J., writing for the court, said
    at para. 24:

As I mentioned above, the
SIA
represents a clear
    rejection of the view that the immunity of foreign states is absolute. It
    reflects a recognition that there are now exceptions to the principle of state
    immunity and in so doing reflects the evolution of that principle at the international
    level. But I need not determine here whether the
SIA
is exhaustive in
    this respect or whether the evolution of international law and of the common
    law has led to the development of new exceptions to the principles of immunity
    from jurisdiction and immunity from execution (on this issue and the
    controversies it has generated, see F. Larocque, La
Loi sur limmunité des
    États
canadienne et la torture (2010), 55 McGill L.J. 81). It will
    suffice to determine whether the commercial activity exception applies in the
    case at bar.

According to the appellants, at common law, Iran does
    not benefit from state immunity on the facts of this case.

[25]

In
Kuwait Airways
, LeBel J. found it was unnecessary to decide the issue
    whether common law exceptions to state immunity exist, since the case could be
    disposed of on other grounds. However, this court in
Bouzari
concluded
    that the exceptions to state immunity listed in the
SIA
are
    exhaustive. At paras. 56-59, Goudge J.A. said:

The final argument related to the
SIA
issue is raised
    by the intervener CLAIHR. It argues that the enactment of the
SIA
has
    not displaced the common law of state immunity and that, under that common law,
    torture cannot be legitimized as a government act and cannot therefore attract
    immunity.

In my view, the wording of the
SIA
must be taken as a
    complete answer to this argument. Section 3(1) could not be clearer. To
    reiterate, it says:

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

The plain and ordinary meaning of these words
    is that they codify the law of sovereign immunity. Indeed in
Re Canada
    Labour Code
, [
[1992] 2 S.C.R. 50]

La Forest J.
    says exactly that at 69:

This appeal raises the issue of sovereign
    immunity,
as codified in the
State Immunity Act.

[Emphasis added].

Thus the appellant is left with the exceptions
    in the Act


[26]

Counsel
    for the appellants invites us to reconsider the courts characterization of the
SIA
in
Bouzari
and to apply a common law exception to state
    immunity. In my view, not only are we bound by the courts conclusion in
Bouzari
,
    Goudge J.A.s reasoning for reaching that conclusion is persuasive.

[27]

Indeed,
    after this appeal was argued, the Quebec Court of Appeal in
Islamic
    Republic of Iran v. Hashemi
, 2012 QCCA 1449, expressed its agreement with
    the above analysis in
Bouzari
. Morissette J.A., writing for the court,
    held at para. 42:

In my view, what Goudge J.A. wrote on behalf of the Court in
    paragraphs [56] to [59] of his reasons is entirely apposite  in fact, it
    coincides with most of the preceding observations on the
SIA.
I
    therefore see no reason to depart from his reasoning: the exceptions to state
    immunity in Canadian positive law are those set out in the
SIA
, not in
    some remnant of a hypothetical common law doctrine that would coexist with the
    Act, or in some rule of customary international law that might modulate the
    interpretation of a statutory phrase which in fact is in no need of
    interpretation.

[28]

I
    agree that the language in s. 3(1) of the
SIA
is clear and does not
    permit the application of a common law exception to state immunity.

(iii)

Jus
    Cogens

[29]

I
    now turn to the concept of
jus cogens
and whether the motion judge
    erred in failing to conclude that the respondents lost their entitlement to
    sovereign immunity because their acts were in violation of peremptory norms of
    international law.

[30]

Peremptory
    norms of international law, or
jus cogens
, are higher forms of
    customary international law from which no derogation is permitted: see
Bouzari
,
    at para. 86. The content of
jus cogens
is not settled, however,
    generally-accepted examples of such norms include the prohibitions against
    genocide, slavery, apartheid and torture: John H. Currie, Craig Forcese and
    Valerie Oosterveld,
International Law: Doctrine, Practice, and Theory
(Toronto: Irwin Law Inc., 2007), at p. 159
.
    According to the appellants, a state that violates peremptory norms of
    international law  which they say include prohibitions against torture and
    terrorism  cannot rely on the immunity provided in the
SIA
because, in committing such acts, the state is not
    acting in a sovereign capacity.


[31]

The
jus cogens
issue was addressed by the court in
Bouzari
.
    Goudge J.A. concluded at para. 94 of the reasons: The peremptory norm of
    prohibition against torture does not encompass the civil remedy contended for
    by the appellant. Goudge J.A. further remarked at para. 95:

Both under customary international law and
    international treaty there is today a balance struck between the condemnation
    of torture as an international crime against humanity and the principle that
    states must treat each other as equals not to be subjected to each others
    jurisdiction. It would be inconsistent with this balance to provide a civil
    remedy against a foreign state for torture committed abroad. In the future,
    perhaps as the international human rights movement gathers greater force, this
    balance may change, either through the domestic legislation of states or by
    international treaty. However, this is not a change to be effected by a
    domestic court adding an exception to the
SIA
that is not there, or
    seeing a widespread state practice that does not exist today.

[32]

In the recent decision in
Hashemi
, released on August
    15, 2012, the Quebec Court of Appeal rejected the argument that customary
    international law has developed to recognize an exception to state immunity in
    cases where violations of
jus cogens
norms are alleged. In rejecting
    this argument, Morissette J.A. relied on the decision of t
he
    International Court of Justice in
Jurisdictional Immunities of the
    State (Germany v. Italy
:
Greece Intervening
),
Judgment (3 February 2012), ICJ
    General List No. 143, online: International Court of Justice,
    www.icj-cij.org/docket/files/143/16883.pdf.

[33]

The majority judgment of the ICJ considered the
    relationship between
jus cogens
and the rule
    of state immunity at para. 93:

This argument therefore depends upon the
    existence of a conflict between a rule, or rules, of
jus cogens
, and the rule of customary law which requires one State to accord
    immunity to another. In the opinion of the Court, however, no such conflict
    exists The two sets of rules address different matters. The rules of State
    immunity are procedural in character and are confined to determining whether or
    not the courts of one State may exercise jurisdiction in respect of another
    State. They do not bear upon the question whether or not the conduct in respect
    of which the proceedings are brought was lawful or unlawful.

[34]

The majority went on to survey the treatment of this issue in
    courts of various nations, including this court in
Bouzari
. The
    majority, at paras. 96-97, concluded that alleged violations of
jus cogens
norms do not affect state immunity
:

[T]his argument about the effect of
jus
    cogens
displacing the law of State immunity has been rejected by the
    national courts of the United Kingdom (
Jones
v.
Saudi Arabia
,
    House of Lords, [2007] 1
AC
270;
ILR
, Vol. 129, p. 629), Canada (
Bouzari
v.
Islamic Republic of Iran
, Court of Appeal of Ontario,
DLR
,
    4th Series, Vol. 243, p. 406;
ILR
, Vol. 128, p. 586), Poland (
Natoniewski
,
    Supreme Court,
Polish Yearbook of International Law
, Vol. XXX, 2010, p.
    299), Slovenia (
case No. Up-13/99
, Constitutional Court of Slovenia),
    New Zealand (
Fang
v.
Jiang
, High Court, [2007]
NZAR
p.
    420;
ILR
, Vol. 141, p. 702), and Greece (
Margellos
, Special
    Supreme Court,
ILR
, Vol. 129, p. 525), as well as by the European Court
    of Human Rights in
Al-Adsani
v.
United Kingdom
and
Kalogeropoulou
    and others
v.
Greece and Germany
(which are discussed in paragraph
    90 above), in each case after careful consideration.



Accordingly, the Court concludes that even on
    the assumption that the proceedings in the Italian courts involved violations
    of
jus cogens
rules, the applicability of the customary international
    law on State immunity was not affected.

[35]

In
Hashemi
, at para. 55, Morissette
    J.A. observed that the ICJs judgment in
Germany v. Italy
provides a conclusive refutation of the arguments against
    jurisdictional immunity which several parties in this case based on customary
    international law and on a
jus cogens
protection of human rights.

[36]

In
    sum, the appellants contention that customary international law has developed
    to recognize an exception for state immunity where violations of
jus cogens
norms are alleged is contrary to this courts conclusion in
Bouzari
,
    and the more recent decisions of the majority of the ICJ in
Germany v.
    Italy
and the Quebec Court of Appeal in
Hashemi
. I thus see no
    merit in this ground of appeal.

[37]

For
    the above reasons, I would dismiss the appeal.

A.

The cross-appeal

[38]

The
    respondents require leave to appeal the costs award. In
Brad-Jay
    Investments Ltd. v. Szijjarto
(2006), 218 O.A.C. 315 (C.A.), at para. 21,
    this court set out the test for leave to appeal a costs order as follows:

Leave to appeal a costs order will not be granted save in
    obvious cases where the parties seeking leave convinces the court that there
    are strong grounds upon which the appellate court could find that the judge
    erred in exercising his discretion.

[39]

In
    making her costs award, the motion judge said at para. 56 of her reasons: The
    defendants [respondents in the appeal] did not seek costs and are content to
    leave the matter of costs to the court. In spite of this position before the
    motion judge, the respondents now seek to appeal her costs award.

[40]

The
    respondents submit that the motion judge did not have jurisdiction to make a
    costs award against them by virtue of sovereign immunity under the
SIA
,
    or in the alternative, that the motion judge improperly exercised her
    discretion under rule 57.01(2) to award costs against the respondents who were
    successful on the motion.

[41]

I
    am not satisfied that there are strong grounds to find that the motion judge
    erred in exercising her discretion. This is particularly so when the
    respondents left the issue of costs in the hands of the judge.

[42]

In
    these circumstances, I would not grant leave to appeal the costs award.

Disposition

[43]

I
    would dismiss the appeal without prejudice to the appellants right to take the
    appropriate steps to have their judgments recognized by the Superior Court
    pursuant to the new legislative regime under the
JVTA
and the
SIA
referred to above. I would not make any award as to the costs of the appeal.

[44]

I
    would not grant the respondents leave to appeal the costs award. I would not
    make any costs award in respect of the leave to appeal.

Released:

RPA                             Robert P. Armstrong
    J.A.

JAN 21 2013                 I agree W. Winkler C.J.O.

I agree David Watt
    J.A.





[1]
David Jacobsen had previously pursued an action on his own behalf and
    successfully collected on a judgment of US$9,000,000: see
Cicippio v.
    Islamic Republic of Iran
, 18 F. Supp. (2d) 62 (D.D.C. 1998). As such, he
    is not a party to this action.


