Dealing with Non-Resident Companies
In a topsy-turvy world, the relative strength and stability of Canada’s economy continues to attract foreign investment, including our commercial and residential real estate sectors.
Since it may not always be advantageous for foreign companies to incorporate a Canadian entity, Canadian businesses are more likely today than ever to have dealings with non-resident companies, whether as buyers, sellers, landlords, tenants or financiers.
Transacting with a foreign company raises a host of issues that need to be thought about. To illustrate just one, consider a situation where a Canadian landlord wants to enforce a covenant in a lease – say a payment or an indemnity – that the non-resident tenant corporation has failed to honour.
Very likely, the landlord will commence proceedings in the courts of the province in which the leased property is located. Unfortunately, unless the tenant is registered to carry on business in that province, it may be necessary to serve the notice of claim on the tenant in its home jurisdiction. Even this initial step can be challenging if the foreign jurisdiction is not a member of the Hague Convention of 1965 on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters.
Assuming service is successful, the tenant may still challenge the jurisdictionof the Canadian court to adjudicate the dispute. Even if the landlord is successful in resisting such a challenge and goes on to obtain judgment against the tenant, the landlord will still likely need to obtain a court order to enforce the judgment.
First, the extent and location of the tenant’s assets need to be ascertained, which can be difficult. Assuming worthwhile assets are located in the tenant’s home jurisdiction, it will then be necessary to have the judgment recognized by that jurisdiction.
Some Canadian provinces have legislation or agreements in place with various jurisdictions to reciprocally recognize and enforce judgments. Unfortunately, the lists of reciprocating jurisdictions are surprisingly short even for provinces that have such legislation. In B.C. and Alberta, for example, they include only a handful of countries and U.S. states.
In the absence of reciprocal enforcement legislation or agreements, the landlord will need to commence an action in the foreign jurisdiction seeking to have the foreign court recognize and enforce the judgment.
Needless to say, the actions described above can be time-consuming and costly, and their outcomes uncertain. They demonstrate that in an ever shrinking world, the old axiom “Always know who you’re doing business with” is still a smart starting point.
commercial foreign investment Hague Convention of 1965 Landlord non-resident companies real estate sectors residential tenant