Partner at Ace Law Barristers & Solicitors & Ace Shireen Kapoor Immigration
Non-residents of Canada who earn income from Canadian sources must navigate not only the Income Tax Act (ITA) but also consider the potential impact of tax treaties between Canada and other relevant countries. These treaties play a pivotal role in cross-border tax planning by reducing tax liabilities for residents of one country earning income in another. This comprehensive guide covers various aspects, including the operation of Canada's tax treaties, how Canadian courts interpret them, the requirements for non-residents to claim treaty benefits, and the special features of the Canada-USA Tax Treat.
The bilateral agreement between the United Arab Emirates (UAE) and Canada was officially signed in 2002. This important convention came into effect in 2003, a year after the signing, establishing formal ties between the two nations.
Emirate of Sharjah-based Dana Gas PJSC recently applied to the courts of the United Arab Emirates (UAE) for a declaration that two of its Islamic bonds totaling US$700 million are unlawful and unenforceable for not being Shariah compliant. Dana Gas’s application serves as a good reminder that the law of Middle Eastern jurisdictions can be quite different than Canadian and English law. This article explores how Canadian courts treat some of those differences.
Globalization and the increasing diversity of Canada’s business community have resulted in an increase in the number of commercial interactions with Middle Eastern entities. As a result, Canadian courts have had some opportunity to consider issues of jurisdiction, applicable law, and judgment enforcement in commercial disputes emanating from most of the Gulf Cooperation Council’s (GCC) six countries: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE.
Canadian courts generally respect the judgments of the courts of GCC jurisdictions and give effect to contracts governed by their laws. This is notable because the legal systems in most GCC jurisdictions are broadly speaking distinctive and varying hybrids—of Arabian, Ottoman, Napoleonic and English jurisprudence and practice—that have been developing swiftly in recent decades in response to both globalization and increased regional integration.
When the parties to a contract choose a particular forum for dispute resolution to the exclusion of all others, Canadian courts will respect the choice. However, when an agreement is not exclusive as to the forum to resolve disputes, a contractual choice becomes one of many factors in a Canadian court’s analysis of whether it can or should hear the matter.
A Canadian court gave judgment to a UAE bank for a debt incurred by a Canadian, even though the debt was secured by an instrument stipulating submission to a Dubai court as the provision did not exclude recourse to any other jurisdiction.
However, a Canadian court declined to hear a claim regarding a subcontract where (i) it contained a non-exclusive forum clause providing for dispute resolution by a UAE court and (ii) the primary contract provided for arbitration in Abu Dhabi.
Beyond forum selection clauses, in determining whether they have jurisdiction, Canadian courts will also consider the locations of contractual performance, business operations, head offices, and damages.
A Canadian court-maintained jurisdiction over a claim alleging breach of an employment contract brought against an Abu Dhabi education council, even though the council had no presence in Canada. This was because the plaintiff applied for employment through an Australian recruitment agency that the council would have expected Canadians to access online, the council likely used a recruiting agency in Canada (although not in this case), and the plaintiff suffered damages in Canada.
In that case, the Abu Dhabi Education Council was also unable to defeat Canadian jurisdiction on the basis of state immunity, as was the Saudi foreign investment licensor in a subsequent case regarding unpaid consulting fees, because those claims were for routine contractual or commercial aspects of the defendants’ activities rather than any sovereign aspects of their respective mandates on behalf of the GCC state.
However, a Canadian court declined jurisdiction over a claim brought by Dubai plaintiffs against North Americans with respect to shares in a Dubai company. This was because the defendants showed that a Dubai court would refuse to enforce any Canadian order that purported to declare rights in the securities of a Dubai corporation.
Even if a Canadian court has jurisdiction, the defendant is still entitled to try to demonstrate that it would be more appropriate for the matter to be heard in another forum.
However, that a claim may be governed by the law of a GCC jurisdiction, or that there may be difficulty in enforcing a Canadian judgment in the GCC jurisdiction, may not be sufficient to establish that a Canadian province is not an appropriate forum to determine the dispute. Further, the loss of the benefit of a Canadian limitation period for a claim that may be statute-barred in a GCC jurisdiction can be a factor favoring the determination of the claim in Canada.
Where the parties have agreed that their legal rights would be construed by the laws of a foreign jurisdiction, a Canadian court will apply the foreign law to resolve the dispute utilizing expert evidence regarding such law. However, the application of foreign law only extends to substantive, and not to procedural, matters. Moreover, a Canadian court will not apply foreign law that is contrary to Canadian public policy or the principles of natural justice.
When an agreement contains a choice-of-law clause in favor of a Canadian province, a Canadian court may apply the law of that province to settle the dispute notwithstanding that the agreement was performed overseas. For example, an Ontario court refused to strike out claims brought by Omani franchisees who alleged a breach of Ontario franchisor disclosure obligations when the franchise agreement stipulated that it was to be governed by Ontario law.
Further, the Middle Eastern affiliates of Canadian organizations may sometimes be subject to Canadian law despite the fact such overseas operations are distinct legal entities. A community college in Newfoundland was recently required to disclose information, pursuant to an access request, regarding a branch campus in Qatar, even though the Doha campus was operated by a separate and distinct legal entity owned by the State of Qatar and managed by the Newfoundland college.
Canadian courts will generally recognize and enforce a judgment from a GCC state if the court agrees that the Middle Eastern forum was the proper one to resolve the dispute.
As with foreign law, it is necessary to prove foreign proceedings, orders and judgments through expert evidence to enforce judgments.
The existence of a monarchal right to alter a judgment in a GCC jurisdiction has been held not to tarnish the independence of the judiciary in the eyes of a Canadian court. In enforcing a Dubai accounting judgment obtained by a UAE company against its former general manager, Mr. Justice Holland of the High Court of Ontario found that the Sheikh might suggest that a judgment debtor be given a certain leeway, intimating that any post-judgment alteration would be in favour of the defendant. Finally, the fact that Canadian judgments might not routinely be recognized in a GCC jurisdiction is not a reason to deny enforcement of a judgment from that jurisdiction.
Despite the notable differences between the laws and procedures of Canadian and GCC jurisdictions, Canadian courts generally accord respect to the laws and courts of GCC jurisdictions and, in appropriate cases, are also willing to assume jurisdiction over parties for disputes emanating from GCC jurisdictions. Companies and individuals located in Canada that ignore or respond ineffectively to GCC proceedings run the risk of any ensuing judgment being enforceable in Canada. GCC entities, in turn, should be prepared to respond to Canadian proceedings in respect of contracts or other business dealings with Canadians, absent an effective forum selection clause in the contract favouring arbitration or a GCC jurisdiction. This is the case even if the dispute relates to ventures or contracts to be performed in the Middle East.
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