CC/Devas v. India (I)

- Application of the Airport Authority of India (the "AAI") to Dismiss and to Stay the first Seizure Before Judgment by Garnishment authorized on November 24, 2021; (the "AAI Application to dismiss and stay")

- Application of Air India, Ltd. ("Air India") to Quash the second Seizure Before Judgment by Garnishment authorized on December 21, 2021; (the "Air India Application to quash")

- De bene esse Application of Air India to Stay the second Seizure Before Judgment by Garnishment authorized on December 21, 2021²; (the "Air India Application to stay")

- Application of International Air Transport Association ("IATA"), the Third-Party Garnishee to Quash the two Seizures Before Judgment by Garnishment of Plaintiffs; (the "IATA Application to quash")

A. […];

B. AUTHORIZE the Seizure Before Judgment by Garnishment of all sums or moveable property of Defendant Republic of India and/or the Mis-en-Cause Airports (sic) Authority of India, including all air navigation charges and aerodrome charges invoiced and/or collected and/or accrued and/or otherwise being held by the Third-Party Garnishee, the International Air Transport Association, either at its head office in Montreal or at any of its worldwide branches, on behalf of Defendant Republic of India and/or the Mis-en-Cause Airports (sic) Authority of India;

C. DECLARE effective the Seizure Before Judgment by Garnishment in the hands of the Third-Party Garnishee, the International Air Transport Association, for all future sums to be remitted to the Defendant Republic of India and/or the Mis-enCause Airports (sic) Authority of India;

D. DESIGNATE the Third-Party Garnishee, the International Air Transport Association, as the custodian of the property seized;

[Emphasis added]

A. […];

B. AUTHORIZE the Seizure Before Judgment by Garnishment of all moveable property of Air India Limited ("Air India") in the hands of the Third-Party Garnishee, the International Air Transport Authority (the "IATA"), including all sums of money invoiced and/or collected and/or accrued and/or otherwise being held by the IATA, either at its head office in Montreal or at any of its worldwide branches, on behalf of Air India;

C. DECLARE effective the Seizure Before Judgment by Garnishment on all sums of money that become owing or payable by the IATA to Air India from time to time after service of the Notice of Execution upon the IATA for as long as the Seizure Before Judgment by Garnishment remains in force;

D. DESIGNATE the Third-Party Garnishee, the International Air Transport Association, as the custodian of the property seized;

[Emphasis added]

i. An award on jurisdiction and merits issued on July 25, 2016¹⁴ (the "Merits Award"), finding India liable for breaches of the Agreement Between the Republic of India and the Republic of Mauritius for the Promotion and Reciprocal Protection of Investments¹⁵ (the "Treaty"); and

ii. An award on quantum issued on October 13, 2020¹⁶ (the "Quantum Award"), ordering India to pay Plaintiffs USD$111 million plus interest and costs;

(The Merits Award and the Quantum Award, collectively referred to as the "Treaty Awards").

- AAI and Air India being the alter egos of the Republic of India, their assets can serve to satisfy the execution of their claim against India pursuant to the Treaty Awards;

- The Republic of India having been involved in the arbitration process that led to the Treaty Awards, it waived, to all intents and purposes, the State Immunity provided by the State Immunity Act;

- Moreover, as the arbitration process related to commercial matters, therefore, it constituted an exception to India's State Immunity²⁰;

- Although AAI and Air India are agencies of a foreign state²¹, as they are allegedly alter egos of the Republic of India who waived its right to invoke State Immunity by participating in the commercial arbitration that led to the Treaty Awards, they cannot claim as well State Immunity against Plaintiffs' proceedings;

- In any event, should AAI and/or Air India raise the issue of State Immunity, the same should be dealt with later at the hearing on the merits of the Originating Application without affecting the Seizures;

- With respect to AAI, India's wrongful and abusive conduct towards Plaintiffs, for the past ten years, gave the latter every reason to fear that without the requested seizure before judgment, India's assets in Québec (being the AAI assets) will be diverted before the issuance of a final judgment on their Originating Application;

- With respect to Air India, firstly, Plaintiffs believed that IATA holds and receives on a regular basis, significant sums of money that are owed or will become owing or payable to Air India as a result of the various financial solutions offered by the IATA to Air India;

- Secondly, given the imminent sale to the Tata Group of India's shares²² held in Air India, it was urgent for Plaintiffs to obtain the requested second seizure before judgment by garnishment to seize Air India's assets in Québec before the consummation of the acquisition of Air India by the Tata Group and protect their claim against India arising from the Treaty Awards;

- Finally, India's same wrongful and abusive conduct towards Plaintiffs for the past ten years, further gave them every reason to fear that without the requested second seizure before judgment by garnishment, Air India's assets in Québec will be diverted before the issuance of a final judgment on Plaintiffs' Modified Originating Application.

- While Plaintiffs' Second Application for Seizure attempts to try and justify the seizure by invoking several elements which Air India considers irrelevant, these allegations are insufficient to demonstrate that:

(i) Air India is an alter ego of India that will be used to jeopardize the recovery of Plaintiffs' claim against India;

(ii) Air India has done anything that would justify a seizure before judgment against it; or

(iii) the lifting of the corporate veil is justified;

- even though Air India is not involved in any of the proceedings, including the arbitration process between Plaintiffs and India, it is not in any way indebted to Plaintiffs pursuant to the Treaty Awards or otherwise; yet very substantial of its assets held by IATA have been frozen through this ex parte process;

- the funds seized with IATA represent about 65% to 75% of its revenues which effectively requires Air India to carry out flights all over the world with barely 25% to 35% of its usual passenger sales revenues;

- the continued operation of the airline is therefore put in jeopardy pursuant to these ex parte proceedings against it, the whole at a particularly delicate time given global interruptions to the airline industry due to the COVID-19 pandemic;

- In addition, the seizure was authorized shortly before the closing of the well-known public process of privatization of Air India that has been going on for many months; Air India's shares are currently owned by India;

- Moreover, nothing in these allegations can ground an objective fear that Air India will be used to jeopardize the recovery of a claim; Air India has had absolutely no involvement in the dispute between Plaintiffs and India, and has done nothing to Plaintiffs, or in respect of any claim they have;

- All these allegations can only establish is that India has been the shareholder of Air India for an extensive period of time and has acted as any shareholder would have done in the best interest of the corporation.

- The insufficiency of the allegations for this Court to consider that the recovery of Plaintiffs' claim might be jeopardized but for the Seizures;

- The fact that the garnishment proceedings are abusive in that the Seizures target assets that do not belong to the Republic of India but belong to Air India and AAI who are both distinct legal entities from the Republic of India;

- Moreover, those assets are covered by State Immunity, and thus exempt from seizure or execution pursuant to the SIA;

- Finally, the Superior Court exceeded its territorial jurisdiction in respect of authorizing the seizure of assets located in foreign countries, in breach of the fundamental principle of state sovereignty.

La saisie avant jugement

[33] L'article 518 du Code de procédure civile prévoit que le demandeur peut faire saisir avant jugement les biens du défendeur « s'il est à craindre que sans cette mesure le recouvrement de sa créance ne soit mis en péril ».

[34] L'article 520 du Code de procédure civile indique que « [l]a saisie avant jugement se fait au moyen d'un avis d'exécution sur la base des instructions du saisissant appuyées de sa déclaration sous serment dans laquelle il affirme l'existence de la créance et les faits qui donnent ouverture à la saisie ».

[35] Sur une demande de saisie avant jugement, le demandeur doit donc d'abord démontrer, prima facie, l'existence de sa créance. Par la suite, il doit présenter la preuve d'une crainte objective que le recouvrement de cette créance est en péril.

[36] En principe, une simple allégation de fraude ne suffit pas pour justifier une saisie avant jugement. Le demandeur doit en effet alléguer des faits précis qui laissent croire que le débiteur se livre à des manœuvres ayant pour but de soustraire la créance de l'exécution d'un jugement.

[37] Cependant, « en face d'une conduite malhonnête persistante et caractérisée » de la partie visée, la jurisprudence « se montre plus généreuse en ce qu'elle ne se veut pas exigeante au point que le recours à la saisie avant jugement soit en quelque sorte stérilisé ».

[38] Bref, dans de telles circonstances, les faits contenus dans les allégations de la déclaration du saisissant « doivent démontrer que le débiteur se comporte d'une manière reprochable, louche ou suffisamment troublante pour conclure qu'il y a à craindre que, sans la saisie, le recouvrement de la créance soit en péril ».

[39] L'article 522 du Code de procédure civile spécifie que le défendeur peut demander l'annulation de cette saisie « en raison de l'insuffisance ou de la fausseté des allégations de la déclaration du saisissant ». Si une telle insuffisance ou fausseté est avérée, le tribunal annule la saisie. Dans le cas contraire, il la confirme et peut en réviser la portée.

[40] Le juge saisi d'une demande d'annulation de saisie avant jugement pour cause d'insuffisance des allégations du saisissant doit tenir ces dernières pour avérées et en décider uniquement à la lumière des faits tels qu'allégués et de leur rapport logique avec le droit à la saisie avant jugement.

[41] En outre, le juge qui doit statuer sur une telle demande d'annulation bénéficie de l'éclairage supplémentaire qu'apporte la partie saisie, contrairement au juge ayant premièrement autorisé la saisie avant jugement lors d'une audition ex parte.²⁶

With respect to the First Application:

- the Originating Application of some 82 paragraphs (17 pages) with 19 exhibits (P-1 to P-19 (1,378 pages);

- the First Application with some 132 paragraphs (20 pages) and three sworn declarations in support thereof:

- Sworn Declaration of Anne Champion, a lawyer from New York City, dated November 11, 2021 (50 paragraphs (11 pages)) with 24 exhibits in support thereof (878 pages);

- Sworn Declaration of Anurhada Dutt, a lawyer from New Delhi, India, dated November 11, 2021 (51 paragraphs (9 pages)) with 27 exhibits in support thereof (1,361 pages); and

- Sworn Declaration of Lawrence T. Babbio Jr., then director of Original Plaintiff DEMPL and former Chairman of Devas Multimedia Services Ltd., dated November 12, 2021 (73 paragraphs (11 pages)) with 29 exhibits in support thereof (581 pages);

- Plan d'argumentation des demanderesses dated November 24, 2021 (21 pages) and 26 authorities.

With respect to the Second Application:

- The Second Application dated December 17, 2021, with some 143 paragraphs (23 pages) and 5 new exhibits (26 pages) in addition to the three original sworn declarations mentioned previously;

- An additional Sworn Declaration of Anne Champion dated December 17, 2021 (93 new paragraphs (18 pages)) with 24 new exhibits in support thereof (1,752 pages);

- The authorization granted on November 24, 2021, by Justice Granosik as it appears on the minutes of that hearing:

CONSIDÉRANT la preuve au soutien de la demande de saisie ;

CONSIDÉRANT les trois (3) déclarations sous serment ;

CONSIDÉRANT que le Tribunal est convaincu à la fois tant de l'existence de la créance que de la crainte objective que celle-ci soit en péril, tenant compte surtout des démarches de la défenderesse visant à se soustraire ä l'exécution des sentences arbitrales P-6 et P-7 ;

CONSIDÉRANT que le Tribunal fait siens les commentaires ainsi que le résumé des arguments et de la preuve contenus dans le Plan d'argumentation des demanderesses du 24 novembre 2021.

PAR CES MOTIFS, LE TRIBUNAL :

AUTORISE la saisie selon ses conclusions.

- Plan d'argumentation des demanderesses dated December 20, 2021 (21 pages) and 30 authorities.

The seizure before judgment by garnishment requested by the second application darted December 17, 2021, is authorized in light of the two affidavits of Ms. Champion, and of the affidavits of Mr. Babbio and [Ms.] Dutt.

- AAI enjoys a strong presumption of State Immunity provided for in the State Immunity Act, including in respect of execution against its property, and that AAI has not waived and is not waiving its immunity in any way vis-à-vis Plaintiffs;

- As an ex parte hearing was inappropriate under the circumstances, there has been no determination on the merits of the issue of AAI's claim to State Immunity; such a determination was a necessary prerequisite to seek the involvement of AAI in the present proceedings, and it could not simply be made on a prima facie basis; the failure to determine on the merits beforehand the State Immunity applicable to AAI is fatal to the First Seizure insofar as AAI is concerned;

- AAI is an agency of a foreign state, a legal entity distinct of the Republic of India and its assets are also distinct from those of the Republic of India;

- Moreover, by Plaintiffs' own admission, the amounts seized with IATA, including aviation charges, are related to its sovereign functions not commercial functions:

(a) "AAI is namely tasked with collecting air navigation charges, incurred during flights through India's airspace, and aerodrome charges, which relate to the use of airport and other ground or navigation facilities, including airport maintenance fees and route maintenance fees ('Aviation Charges')";

(b) "Aviation Charges are payable by airlines and countries to AAI in order to be granted permission to fly over the Indian airspace and to use its airports and other ground or navigation facilities."

(c) "AAI entrusted the collection and remittance of Aviation Charges from airlines and countries to the International Air Transport Authority."²⁹

(d) "AAI describes its role as an air navigation service provider as a 'sovereign function', as appears from the January 2021 report of the Ministry of Civil Aviation [...]"³⁰

- before even addressing the issue of State Immunity, a court must determine whether service was properly made; and

- an application judge could not make an order declarative of the republic's interest in the shares and then deprive the republic of that interest:

[52] In none of the previous proceedings has the court directly considered and ruled on the issue of whether service on the Republic's Washington embassy was in accordance with s. 9(1)(a) of the SIA. To the extent that in other decisions involving these parties, courts may have declined to address that issue based on Kyrgyzaltyn's lack of standing, that position was taken per incuriam. As a preliminary matter, a court must always determine whether service was properly made on an absent named party whose interests will be affected by the order sought. The question of standing is irrelevant to this issue, as it is the court's role to ensure that the procedural rights of a party that does not appear are protected.

[53] As noted above, s. 3(2) of the SIA specifically requires a court to "give effect to the immunity conferred on a foreign state by subsection (1) notwithstanding that the state has failed to take any step in the proceedings", and the Supreme Court of Canada in Kuwait Airways reinforced that meant a court must give effect to the immunity "of its own volition." A Canadian court must also give effect to the procedural provisions of the SIA on its own volition when faced with a case involving an action against a state, as these provisions are an integral part of the scheme designed to respect state immunity.

[54] The respondent argues that s. 3 of the SIA, which provides for substantive state immunity from the jurisdiction of any court in Canada, is distinct from the procedural provisions of the SIA. It submits that a court is therefore not obliged to consider the procedural issue of validity of service on its own volition. However, this argument ignores the fact that the only logical way to proceed requires a court to address any issue regarding service before it engages with the merits of a proceeding, including the underlying question of substantive immunity.

[Emphasis added and references omitted]

[15] The SIA first establishes a principle of immunity from jurisdiction in favour of foreign states. This immunity applies generally, and the court must give effect to the immunity on its own initiative if applicable:

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

(2) In any proceedings before a court, the court shall give effect to the immunity conferred on a foreign state by subsection (1) notwithstanding that the state has failed to take any step in the proceedings.

[...]

[22] Since the SIA applies, it must be determined whether its provisions preclude recognition of the English judgment. The parties disagree on this issue, regarding the burden of proof in particular. In my opinion, the issue is resolved by the very wording of the SIA. As I mentioned above, s. 3 establishes a presumption of immunity from jurisdiction in legal proceedings against sovereign states. Since the subject of the application, Iraq, is a state, it is entitled to this immunity. It is up to KAC to establish that it may rely on an exception to this immunity (J. Walker, Castel & Walker: Canadian Conflict of Laws (6th ed. (loose-leaf)), vol. 1, at p. 10– 15).

[Emphasis added]

[22] Même si la prudence est de mise en matière de requête en irrecevabilité, celle-ci était, dans les circonstances, mal avisée. Dans Gillet c. Arthur, la Cour rappelle que « le juge saisi d'une requête en irrecevabilité portant sur un point de droit précis doit trancher quelles que puissent être soit la difficulté, soit la complexité de la question ». La question de l'immunité de juridiction d'un État étranger est une question d'ordre public qui, sauf circonstances exceptionnelles, doit être tranchée immédiatement, dès le stade de la requête en irrecevabilité, au même titre, par exemple, que celle de la compétence ratione materiae du tribunal.

[23] L'immunité d'un État par rapport aux tribunaux d'un autre État est un élément essentiel des relations entre États souverains et de l'ordre juridique international. L'importance du principe est telle que le tribunal canadien est tenu de reconnaître d'office l'immunité de juridiction de l'État étranger, et ce, même si celui-ci s'est abstenu d'agir dans l'instance.

[24] Selon moi, il serait contraire à l'objectif visé par la Loi sur l'immunité des États de retarder la décision judiciaire concernant l'immunité de juridiction invoquée puisque cela aurait pour effet d'obliger l'État étranger à se soumettre à la juridiction du tribunal canadien, alors qu'en principe il bénéficie d'une immunité de juridiction reconnue, de façon générale, par la communauté internationale et, de façon particulière, par le Canada dans la Loi sur l'immunité des États.

[…]

[27] Je souscris à ces propos qui, après les avoir adaptés à la procédure civile québécoise, s'appliquent parfaitement ici. La revendication d'immunité de juridiction d'un État étranger est une question d'ordre public qui, tout comme la compétence ratione materiae du tribunal, doit être décidée immédiatement. Avec égards pour la juge de première instance, rien ne justifiait ici de déférer la question au juge du fond.

[Emphasis added and references omitted]

[16] The "plain and obvious" approach cannot be applied to a motion to dismiss founded on a claim of sovereign immunity. That claim challenges the obligation of the foreign state to submit to the court's jurisdiction. Until that challenge is decided, the action cannot proceed. Unlike a court faced with an allegation that a claim does not disclose a cause of action, a court faced with an immunity claim cannot withhold its decision until the end of the trial. There can be no trial until the court decides whether the foreign state is subject to the court's jurisdiction.

[17] The State Immunity Act clearly contemplates that any claim of sovereign immunity will be decided on its merits before the action proceeds any further. Section 4(2)(c) provides that a state submits to the jurisdiction of a court where it "takes any step in the proceedings before the court". Section 4(3)(b), however, permits the foreign state to appear in the proceedings strictly for the purpose of asserting sovereign immunity without thereby submitting to the court's jurisdiction. Participation beyond a claim of immunity may, however, result in the loss of any immunity to which the foreign state might otherwise have been entitled.

[18] If, on a motion to dismiss based on a sovereign immunity claim, a court was to conclude that it was not "plain and obvious" that the claim should succeed and direct that the matter proceed to trial, the foreign state would be in the untenable position of either not participating in the trial and risking an adverse result or participating in the trial and thereby losing its immunity claim. The scheme set out in the State Immunity Act is workable only if immunity claims are decided on their merits before any further step is taken in the action.

[19] Although the sovereign immunity cases from this court have not specifically addressed the test to be applied on a motion to dismiss based on a sovereign immunity claim, all have proceeded on the premise that the motions judge was obligated to determine that claim on its merits and all have applied a correctness standard in reviewing the decision of the motions judge: Jaffe v. Miller (1993), 1993 CanLII 8468 (ON CA), 13 O.R. (3d) 745, 103 D.L.R. (4th) 315 (C.A.), affg (1990), 1990 CanLII 6828 (ON SC), 75 O.R. (2d) 133, 73 D.L.R. (4th) 420 (H.C.J.), leave to appeal to S.C.C. refused, [1994] 1 S.C.R. viii; Walker v. Bank of New York Inc. (1994), 1994 CanLII 8712 (ON CA), 16 O.R. (3d) 504, 111 D.L.R. (4th) 186 (C.A.), revg (1993), 1993 CanLII 5467 (ON SC), 15 O.R. (3d) 596, 20 C.P.C. (3d) 210 (Gen. Div.), leave to appeal to S.C.C. refused, [1994] 2 S.C.R. x; United States of America v. Friedland (1999), 1999 CanLII 2432 (ON CA), 46 O.R. (3d) 321, 182 D.L.R. (4th) 614 (C.A.), revg (1998), 1998 CanLII 14864 (ON SC), 40 O.R. (3d) 747, 21 C.P.C. (4th) 89 (Gen. Div.), leave to appeal to S.C.C. granted, [2000] S.C.C.A. No. 91.⁴²