The courts in Quebec can sufficiently exercise their jurisdiction in connection with funds retained by a Quebec-domiciled entity in a Swiss bank account.

A Dutch corporation named Instrubel, N.V. has been engaged in litigation in the province of Quebec (Canada) in order to garnish assets on behalf of the Republic of Iraq. The assets pertain to funds in the bank account of Switzerland payable to the Republic of Iraq, by a Montreal-based trade association (IATA), through the Iraqi Civil Aviation Authority. The character of the legal relationship between the association and the Republic of Iraq was central-point of the matter of law in the instant case.

Primarily, the judge held that the assets were the property of the Republic of Iraq and established in Switzerland. They were not a debt obligation. It was also held that it could not be subjugated to garnishment in proceedings in Quebec. However, the Court of Appeal held that the assets were a debt. Moreover, the Republic of Iraq could execute the debts against the trade association whose head office was located in Quebec. Thereby, the debts were in Quebec under the rule for finding the situs of a debt.

Henceforth, the bench of six judges in majority in Supreme Court of Canada gave similar reasons as that of the Quebec Court of Appeal and denied the appeal. The Court of Appeal held that “there is certainly no ownership of or real rights to the funds. Instead, there is a relationship amounting to creditor/debtor”. It was further stated by the court that the Republic of Iraq never possessed or owned any debts due to it by different airlines on the account of landing at airports in Iraq. It does not at present own the funds composed together in return of those debts and submitted by IATA in its bank account. Hence, the bench was of the view that IATA is obliged to pay the money and should not merely submit the dollar bills obtained from third parties.

The Court of Appeal stated reasonable grounds for its decision: “More importantly it appears that [Instrubel, N.V.] and other in equivalent positions which attempts to effectuate an unsatisfied claim would be compelled into an international “shell-game” of in some manner guessing/discovering where the garnishee or mandatary (here IATA), submitted the sum- a task that would be virtually unattainable.” The court was of the view that the law when applied in the right manner, should not result into such unworkable conclusions. Thus, “as the in personam debtor of ICAA, it doesn’t concern whether IATA has deposited the sum of money it collected and reaching such indebtedness in a bank account in Geneva, New York or Montreal. The situs of its bank account doesn’t alter or transforms the situs of the debt IATA owes to its creditor.”

Thus, in a way this case is significant mostly for what it didn’t execute, which is to permit the garnishing of assets outside the province of Quebec.