Canadian court rules against seizure of assets in enforcement of award against Eritrea

Delizia Ltd. sold military aircraft equipment to Eritrea in 2003 but did not receive full payment. Under terms of contract, D ltd. commenced arbitration proceeding before Arbitration Institute of Stockholm Chamber of Commerce with Eritrea not fully participating.

Delizia Ltd. obtained arbitration award of $2,175,775 (US). Amount owed was increased to $4,062,428.70 (US) to include arbitral fees and interest and award was registered as judgment in recognition order following ex parte proceeding. Delizia Ltd. obtained provisional garnishment order providing for attachment of any debts owed by Sunridge corp. to Eritrea.

Sunridge corp. was Canadian company involved in joint venture mining project in Eritrea, who through state-owned company, exercised legal right to acquire significant equity interest. Prothonotary issued final order on basis that Sunridge corp. owed certain licence exploitation fees to Eritrea and also found issuance of shares was effectively sale valued at $4.3 million that should have attached in Delizia Ltd.’s favour.

On appeal, Federal court conducted de novo hearing that resulted in finding that licence exploitation fees were exempt from seizure and that finding debt was owed by Sunridge corp. directly to Eritrea arising from share issuance would involve impermissible piecing of corporate veil. Delizia Ltd. appealed. Appeal dismissed.

Federal Court did not err in conducting de novo hearing, as it effectively resulted in reviewing questions of law underlying Prothonotary’s decision on standard of correctness. No error arose respecting questions of fact, as issue of piercing corporate veil was not determined by Prothonotary. There was no error in concluding no debts owed or accrued from Sunridge corp. to Eritrea was capable of garnishment. Any transfer from Sunridge corp. to Eritrean state-owned company arising from share transfer did not create debt obligation capable of attachment under provisional garnishment order. Rather, obligation was in nature of creating equity interest in project acquired by Eritrea. It was not necessary to determine whether corporate veil should be pierced in relation to share issuance.

Delizia Limited v. Sunridge Gold Corp. (2017), 2017 CarswellNat 5228, 2017 FCA 188, Wyman W. Webb J.A., D.G. Near J.A., and J. Woods J.A. (F.C.A.); affirmed (2016), 2016 CarswellNat 1062, 2016 CarswellNat 3000, 2016 FC 392, 2016 CF 392, Henry S. Brown J. (F.C.).


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