Hague Convention Choice of Court Agreement - Quebec Law 2007

CIVIL LAW SECTION

QUEBEC LAW AND THE HAGUE CONVENTION ON CHOICE OF COURT AGREEMENTS OF 2005

By Frédérique Sabourin[1], Quebec City

Readers are cautioned that the ideas or conclusions set forth in this paper, including any proposed statutory language and any comments or recommendations, may not have not been adopted by the Uniform Law Conference of Canada. They may not necessarily reflect the views of the Conference and its Delegates. Please consult the Resolutions on this topic as adopted by the Conference at the Annual meeting.

Charlottetown Prince Edward Island, September 2007

[1] The object of this report is to set out the differences that exist between Quebec law and the Hague Convention on Choice of Court Agreements of 2005[2](hereinafter referred to as the “Convention”). Our approach will not be a section-by-section analysis but will be more general in scope, focusing on the three key obligations in the Convention: (1) that of the court chosen by the parties; (2) that of the court that is seized but is not the court chosen by the parties; and (3) that of the court asked to recognize and enforce the judgment given by the chosen court.

Obligations of the court chosen by the parties

[2] The Convention is designed to give effect to choice of court agreements, that is to say agreements by which the parties designate the courts that will have jurisdiction to decide their disputes (art. 3). This possibility is given to the parties only in civil and commercial matters. The Civil Code of Quebec (C.C.Q.) also provides that a choice of court agreement may be concluded in personal actions of a patrimonial nature (art. 3148, par. 1 (4°) C.C.Q), which thereby excludes real actions[3] and personal actions of an extrapatrimonial nature. These limitations are somewhat reminiscent of the first paragraph of article 2639 C.C.Q., which provides: “Disputes over the status and capacity of persons, family matters or other matters of public order may not be submitted to arbitration”. On this point, therefore, the Convention and Quebec law are to the same effect.

[3] However, the Convention excludes a large number of civil and commercial matters and makes it possible for a declaration to be made excluding even more (arts. 2 and 21).[4] Contracts for household purposes (involving consumers) and contracts of employment are thus excluded from the Convention. In Quebec law, according to the very language of article 3149 C.C.Q., it is not possible to raise against a consumer or worker his or her waiver of the jurisdiction of the courts of his or her residence or domicile.[5] According to the case law,[6] the waiver referred to in article 3149 C.C.Q. would specifically occur only where there was an arbitration clause[7] or a choice of court clause referring to foreign courts and where the action is brought against the weaker party. A new distinction has been made by recent amendments to the Consumer Protection Act.[8] Choice of court clauses cannot be raised against a consumer or an employee, whether they are agreed to before, or after, the occurrence of the dispute, but arbitration clauses, on the other hand, are permitted in consumer contracts once the contract has been concluded and the dispute has arisen.[9]

[4] Choice of court clauses are permitted in insurance contracts under the Convention, except for those entered into by consumers.[10] The courts in Quebec have not yet had an opportunity to address the validity of choice of court clauses in insurance contracts and the doctrine is divided. According to Goldstein and Groffier, Czajka v. Life Investors Insurance Co. of America[11], a decision of the Superior Court, confirms the view of Castel and Talpis to the effect that the jurisdiction established by article 3150 C.C.Q. is not exclusive.[12] A more recent decision in which an arbitration clause had been agreed to also followed their view.[13] In our opinion, choice of court clauses are certainly allowed in insurance contracts under Quebec law, since article 3150 C.C.Q. does not exclude the application of other more general provisions such as article 3148 C.C.Q. They are probably also allowed in insurance contracts concluded by consumers, since the Consumer Protection Act[14] does not apply to these contracts. The Convention is more explicit than Quebec law on this point.

[5] Article 3 c) of the Convention sets out the formal requirements that a choice of court agreement must meet for the Convention to apply. It must have been entered into or documented in writing or by any other means of communication that renders information accessible so as to be usable for subsequent reference. If the agreement does not meet these conditions, the Convention will not apply to it. However, the Convention does not prohibit Contracting States from enforcing such an agreement or the resulting judgment under their own domestic law. In Quebec law, the Act to establish a legal framework for information technology[15] would also make it possible to give effect to a choice of court clause in a technological medium, subject to the rules in the Civil Code governing the admissibility of evidence. Furthermore, since there are no particular formal requirements for a choice of court agreement, unlike the situation with respect to arbitration agreements,[16] a choice of court agreement could even be oral since a contract is formed by the sole exchange of consents between persons having capacity to contract, according to article 1385 C.C.Q. On this point, therefore, the scope of the Convention is more restrictive than that of Quebec law.

[6] Concerning the substantive requirements, article 3 d) of the Convention provides that a choice of court agreement that forms part of a contract shall be treated as an agreement independent of the other terms of the contract. Therefore, the validity of the choice of court agreement must be determined independently, in the light of the tests set out in the Convention. It is therefore open to the chosen court to find that the contract is not valid without at the same time making the choice of court agreement invalid. On the other hand, of course, it is also possible that the reason why the contract is invalid also applies to the choice of court agreement: everything will depend on the circumstances and the applicable law. In Quebec law, the Civil Code does not contain any particular rule governing choice of court clauses, unlike articles 2642 and 3121 C.C.Q.,[17] which clearly provide that an arbitration agreement is severable from the main contract. The courts have not yet had an opportunity to rule on the question of the independence of the choice of court agreement from the main contract, but it may be assumed that the solutions will be similar to those adopted for arbitration agreements, especially since, under article 1438 C.C.Q., “a clause which is null does not render the contract invalid in other respects, unless it is apparent that the contract may be considered only as an indivisible whole”. On this point, therefore, the Convention is more explicit than Quebec law, although probably to the same effect.

[7] Which law applies to a choice of court clause? The Convention does not expressly address this question and refers generally to the rules of the chosen court, including its conflict of laws rules (see infra par. [13]).

[8] The chapter of the Convention on jurisdiction applies solely to exclusive choice of court agreements, that is to say agreements that exclude the jurisdiction of any court in another Contracting State.[18] The Convention would not apply to an asymmetrical choice of court agreement drafted so as to be exclusive with respect to proceedings instituted by one of the parties but not to proceedings instituted by the other.

[9] The Convention applies only to international cases (art. 1). In other words, if a situation is otherwise strictly foreign because the parties reside in the same State and their relationship and the other relevant elements of the dispute are linked solely to that State, the mere fact that a Quebec court is chosen does not make it international in terms of jurisdiction (art. 1 (2)). A Quebec court would not therefore be required to hear the dispute.[19] In that case, article 19 provides that a declaration may be made that the Quebec courts could decline to hear cases to which an exclusive choice of court agreement applies if the only connection with Quebec is the choice of court clause. The risk that the courts of Quebec might be overburdened does not prima facie warrant such a declaration, in our view, especially when the requirement that there be a connection between the chosen court and the case submitted to it is not a requirement in Quebec law, subject to the doctrine of forum non conveniens[20] (see infra par. [18]).

[10] The Convention defines the residence of a legal person for the purpose of determining whether a case is international (art. 4, 2nd paragraph). Quebec law does not include specific private international law rules. The definitions of domestic law accordingly apply. Residence is the place where a person usually resides (art. 77 C.C.Q.). There is no specific definition for legal persons. Normally, residence will correspond to an establishment; in the case of suretyship for costs, however, it is the location of the head office that determines the place of a company’s residence.[21] The head office must be in Quebec when the legal person is incorporated under Quebec law, and in Canada when it is incorporated under federal law.[22] In the latter case, a legal person would be considered to be domiciled in Quebec if its statutory seat or its actual domicile were there. The location of its central administration could therefore play a role in Quebec law in determining the residence of a legal person. As far as the essential character of an establishment as the main establishment is concerned, given the possibility that a person may have more than one residence, this issue should apply only in determining domicile, which is defined as the head office (art. 307 C.C.Q.). Even a secondary establishment should normally be capable of qualifying as a residence. In this regard, Quebec law has a larger scope than the Convention.

[11] We should note, moreover, that, according to the first paragraph of article 3077 C.C.Q., “where a country comprises several territorial units having different legislative jurisdictions, each territorial unit is regarded as a country”. Article 25of the Convention is to the same effect, but adds that a Contracting State that comprises two or more territorial units in which different systems of law apply shall not be bound to apply the Convention to situations involving solely those different territorial units. This means, therefore, that the Convention would not apply in the event that a choice of court clause agreed to by the parties, one from Quebec and the other from another Canadian province, chose the courts of Quebec. Thus, on this point, the scope of the Convention is narrower than that of Quebec law.

[12] According to the Convention, the chosen court shall hear the case when proceedings are instituted in that court (art. 5). In Quebec law, when the parties confer jurisdiction on the courts of Quebec, this jurisdiction is also recognized (art. 3148, par. 1 (4) C.C.Q.).[23] On this point, therefore, the Convention and Quebec law are in agreement.

[13] The main exception to article 5 of the Convention provides that the chosen court is not required to hear the case if the choice of court agreement is null and void under the law applying to the court, including its conflict of laws rules.[24] In Quebec law, there is no provision similar to article940.1 of the Code of Civil Procedure (C.C.P.), which makes it possible to challenge the validity of arbitration clauses, that applies to choice of court clauses. The solution favoured by the doctrine is that the same rules should be applied to both types of clauses and, in this regard, has invited the legislature to review the rules governing the international jurisdiction of Quebec courts and to consolidate them into a full set of rules.[25] The report of the Comité de révision de la procédure civile [civil procedure review committee], tabled in 2000, is to the same effect since it recommends the inclusion in the C.C.P. of a consistent and complete chapter on private international law that would include the rules governing arbitration currently included in Book VII of the C.C.P.[26] It must be noted, however, that neither the provisions of the C.C.P. nor those of the United Nations Commission on International Trade Law Model Law on International Commercial Arbitration or the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, on which they are based, indicate which law applies to make an arbitration agreement null and void. In these circumstances, it is difficult to say whether the substantive law or the conflict of laws rules would govern the validity of a choice of court clause in Quebec law.

[14] Indeed, it is possible to contemplate the application of Quebec substantive law since, according to article 3078 C.C.Q.,[27] the agreement must be an agreement under Quebec law. Thus, Quebec law would apply to defects in consent that might entail the nullity of the choice of court clause. In HSBC Bank Canada c. Nytschyk,[28] the Superior Court accepted to decline jurisdiction, as sought by a surety domiciled in Ontario, and dismissed the action brought by the financial institution on the basis that the last part of the choice of court clause at issue in that case did not apply because it was contained in a contract of adhesion and was abusive and exorbitant.[29] In that clause, the bank had reserved to itself a unilateral right to sue the surety in the courts of the province or country of its choice, in that case the courts of Quebec. The defendant, for his part, had submitted himself irrevocably to the jurisdiction of the Ontario courts. Moreover, the law that applied to the contract was the law of Ontario. There was no specific choice of court clause in the agreement. The law of Quebec was applied without the Court justifying its decision in any manner whatsoever.

[15] Another solution would be to allow the question of nullity (for fraud, error, principal fraud, fear) to be governed by the Quebec conflict of laws rules, that is to say by the law chosen by the parties (art. 3111 par. 1 C.C.Q.), which, as we noted earlier (see supra par. [6]), may differ from the law that applies to the main contract. Absent a choice of law, or if the chosen law makes the choice of court clause invalid, the law of the State that is most closely connected with the clause would apply (article 3112 C.C.Q.). Article 3113 C.C.Q. cannot be applied in this situation, where the obligations of the contractual parties under a choice of court clause are no more specific than others (as is also the case in partnership or exchange contracts, for example). In fact, this provision creates a simple presumption[30] that the closest connections exist with the law of the State in which the party who must provide perform the obligation featured in the contract has his or her residence or, if the contract is concluded as part of the activities of a business, its establishment. If the parties have not chosen the law that applies to their choice of court agreement, the applicable law could accordingly be that of the chosen court or that which applies to the main contract.

[16] On the other hand, a party’s incapacity to conclude a choice of court agreement conferring jurisdiction on the Quebec courts would be subject to the law of that party’s domicile in the case of a natural person, or to the law under which it was incorporated in the case of a legal person (art. 3083 C.C.Q.). However, one thing is clear: once the applicable law has been identified, if that law is a foreign law, reference to its conflict of laws rules is excluded by article 3080 C.C.Q.[31] The Convention makes no specific provision in this regard. Everything would depend on the rules of law applied by the chosen court.

[17] On this point, therefore, the Convention and Quebec law do not essentially differ but neither is much more explicit than the other. At least, the Convention eliminates use of the law of the court that is seized but no chosen to decide these matters.

[18] Unlike Quebec law, the Convention excludes the possibility that the chosen court might decide not to hear the case because another court seems to be more appropriate. Thus, in a Quebec Court of Appeal case,[32] Kardiak Productions inc. had signed a management contract with Kathleen Sergerie (an artist known in Quebec simply as Kathleen). In its general provisions, this contract included a choice of court clause selecting the Ontario courts and, in a specific provision amending another clause (this may have been an erroneous reference) a choice of court clause selecting the Quebec courts. According to the Court of Appeal, the contract expressed the intention of the parties to seize to the Quebec courts of any disputes that related to the interpretation and application of the contract. A recording contract had subsequently been entered into by Kardiak and Sony Music Canada inc. securing the services of Kathleen. This contract included a choice of court clause conferring jurisdiction on the Ontario courts[33] to decide any dispute arising under the contract. When she was sued in Quebec for damages by Kardiak, Kathleen was granted a transfer of the action to the Ontario courts, which were better able to decide the dispute, according to article 3135 C.C.Q.[34] This isolated decision is not the last word on this question, according to one author.[35] However, since the language of article 3135 C.C.Q. does not prohibit the use of the forum non conveniens principle when a choice of court clause is present, it would be necessary to exclude this possibility by implementing the Convention. Indeed, on this point, the Convention and Quebec law differ.[36]

[19] While, in Quebec law, a choice of court clause may always be challenged by the forum non conviens principle, we are of the view that the litis pendens principle no longer avails, on the other hand. Indeed, according to article 3137 C.C.Q., the chosen Quebec court could not stay proceedings seisin if proceedings had previously been instituted in another court or if a judgment had already been given, because litis pendens could not arise in a case where the foreign judgment given or to be given could not be recognized and enforced in Quebec. Now, if there is an exclusive choice of court clause selecting the courts of Quebec, a foreign judgment given by another court would never be recognized because in no case would it fill the condition set out in article 3155 (1) C.C.Q. that the foreign authority have jurisdiction. Although there is no case on this question in Quebec, it may be assumed that, on this point, the Convention and Quebec law are in agreement.

[20] Paragraph 3 of article 5 of the Convention includes specific provisions that allow the chosen court to apply its rules related to jurisdiction over subject-matter or the allocation of jurisdiction among the courts of a Contracting State. In Quebec law, the case law has repeatedly stated that the provisions of the C.C.P. come into play only when jurisdiction has been established under Book X.[37] Thus, if the parties choose the Quebec courts or the courts of Quebec, articles 34, 68 and 73.1 C.C.P., for example, will determine whether the Court of Quebec or the Superior Court has jurisdiction and in which judicial district the case may be heard. A more explicit choice of court clause would not make this clause null and void, however; it merely means, in all probability and in the absence of case law on this specific question, that it would be ignored. On this point, therefore, the Convention and Quebec law are in agreement.

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