In light of the sudden and unexpected economic turmoil caused by the global pandemic, many companies in the United States will find themselves in disputes necessitating litigation against companies based in Canada and/or whose assets are primarily located in Canada.
One of the most important questions any of these potential litigants must answer prior to initiating litigation is "what court should I choose?" Although potential litigants would typically prefer to sue in their local jurisdiction, a critical ingredient in the choice of venue is the likelihood that a favourable decision in their local jurisdiction would be enforceable in Canada against a Canadian company.
Generally, the common law in Canada is favourable towards the enforcement of foreign judgments. The Canadian Supreme Court has repeatedly emphasized the prevalence and importance of the notion of comity in Canada. In 2015, for example, the Supreme Court, in Yaiguaje v. Chevron Corp., explained that the "need to acknowledge and show respect for the legal acts of other states has consistently remained one of the principle's core components", that "[c]omity, in this regard, militates in favour of recognition and enforcement", and that "[l]egitimate judicial acts should be respected and enforced, not sidetracked or ignored." Despite this overarching principle, Canadian courts still perform a rigorous analysis of several factors to determine whether a foreign judgment should be recognized and enforced.
The following commentary provides a short primer on the relevant jurisprudence and factors Canadian courts consider when determining whether to recognize and enforce a foreign judgment.
Considerations for the Recognition and Enforcement of a Foreign Judgment in Canada
In its Chevron decision, the Supreme Court re-affirmed that there is a two-prong test courts should utilize to determine whether to recognize and enforce a foreign judgment in Canada.
First, the court must ensure that a "real and substantial connection existed between the foreign court and the underlying dispute." Indeed, once it has been determined that a foreign court properly assumed jurisdiction, a foreign judgment is prima facie enforceable.
Second, the foreign judgment debtor - the Canadian company that lost the lawsuit in a U.S. court - must be provided with the "opportunity to convince the enforcing court that there is another reason why recognition and enforcement should not be granted."
A Real and Substantial Connection
In analyzing the first prong, specifically whether a real and substantial connection existed between the foreign court and the underlying dispute, courts will typically consider any connections between the subject matter of the action, the alleged wrongdoing, the damages suffered, the parties, and the actions of the parties, and the foreign jurisdiction. Courts will not typically require that the real and substantial connection be the most real and substantial connection of all possible jurisdictions. The test will also be guided by fairness, and is not rigidly applied.
The following selection of decisions illustrates some of the factors that courts have relied upon to find that a real and substantial connection existed between the matter and the foreign jurisdiction:
In Sleep Number Corporation v. Maher Sign Products, where a Minnesota plaintiff sought to enforce a foreign judgment obtained in Minnesota against an Ontario defendant, the Ontario Court of Appeal affirmed a motion judge's finding that there was a real and substantial connection with Minnesota where (1) the plaintiff was a Minnesota corporation with its principal place of business in Minnesota, (2) the defendant went to Minnesota to solicit business, (3) the contract at issue was largely negotiated in Minnesota and (4) the contract was performed by delivery of products to Minnesota.
In Old North State Brewing Co. v. Newlands Services, Inc., where a North Carolina plaintiff sought to enforce a foreign judgment obtained in North Carolina against a British Columbia defendant, the British Columbia Court of Appeal accepted that there was a real and substantial connection with North Carolina where the defendant (1) solicited business in North Carolina via brochure, (2) delivered an estimate to the plaintiff in North Carolina, (3) shipped product to North Carolina, and (4) had representatives visit North Carolina to address defects.
In Mill Valley Bamboo Associates, LLC v. D.T.I. Diversified Transportation Inc., where a California plaintiff sought to enforce a foreign judgment obtained in California against an Ontario defendant, the Ontario Superior Court found there to be a real and substantial connection with California where the Ontario defendant was hired to ship flooring manufactured in Ontario to the plaintiff in California, and the goods arrived damaged.
Finally, in Pomini Inc. v. EMPCO-FAB Ltd., where a South Carolina plaintiff sought to enforce a foreign judgment obtained in South Carolina against an Ontario defendant, the Ontario Superior Court found there to be a real and substantial connection with South Carolina where the defendant maintained offices in various locations in Canada and the United States (though not in South Carolina), entered into contracts with the plaintiff for the supply of parts for a furnace to be installed in South Carolina, and failed to properly engineer, manufacture, and install, the parts.
Although the finding of a real and substantial connection is ultimately a heavily fact-specific inquiry, the likelihood of a court finding a real and substantial connection to exist where factors similar to those enumerated above are present is strong. Indeed, as indicated above, a Canadian company need not have any physical presence in the U.S. state chosen by the U.S. plaintiff as its forum for litigation, so long as the Canadian company knew that it was supplying a good or service for delivery to, or use in, that state and had other related contact.
As noted above, once a foreign plaintiff seeking recognition and enforcement of a foreign judgment has established that a real and substantial connection existed between the defendant and the foreign court, the defendant is provided with the opportunity to convince the enforcing court that there is another reason why recognition and enforcement should not be granted.
The Supreme Court in its Beals v. Saldanha decision enumerated the defences available to a foreign judgment debtor (the defendant) as fraud, public policy, and lack of natural justice. Importantly, it is the defendant that has the onus of establishing these defences.
With respect to the first, fraud, the defence is limited. For example, a foreign judgment "can be challenged on the basis of fraud only where the allegations are new and not the subject of prior adjudication," and where material facts not previously discoverable arose that potentially challenge the evidence that was before the foreign court. A defendant may not attempt to re-litigate any of the merits of the action that led to the foreign judgment. Failing to defend an action in the foreign court further limits this defence. The Supreme Court in Beals commented that "[w]here the foreign default proceedings are not inherently unfair, failing to defend the action, by itself, should prohibit the defendant from claiming that any of the evidence adduced or steps taken in the foreign proceedings was evidence of fraud just discovered."
With respect to the second, public policy, the defence may only be raised where enforcement of the foreign judgment would be contrary to the Canadian concept of justice. Here, a court will consider the historical and factual context of the proceedings that led to the foreign judgment. The Supreme Court has further explained that the public policy defence should be "directed at the concept of repugnant laws, not repugnant facts" and that it should be narrow in application.
With respect to the third, and final defence, natural justice, a party must prove that the foreign proceedings were contrary to Canadian notions of fundamental justice and that minimum standards of fairness were not applied. This defence is restricted to such aspects as the form of the foreign procedure and to due process, while the merits of the case are not relevant. Courts may consider such procedural aspects as proper notice and opportunity to defend when evaluating this defence.
The defences enumerated here are unlikely to be applicable to most actions initiated in the U.S., because the U.S. court system, both state and federal, enjoys an excellent reputation for adherence to the rule of law. Nevertheless, there are still circumstances in which the assertion of one of the defences could be supported on the specific circumstances of how a given case has proceeded.
As counsel and parties consider where to initiate litigation against Canadian companies, it is important to consider whether a judgment resulting from litigation initiated outside of Canada would be enforceable in Canada.
As indicated by the commentary provided above, if a Canadian company has reasonable contacts with a U.S. forum and litigation in that forum proceeds in a fair manner, enforceability is likely.
 Although the jurisprudence on this topic is similar in most Canadian provinces, with the notable exception of Quebec, this article is based primarily on Ontario jurisprudence and written from the standpoint of a U.S.-based plaintiff seeking a monetary judgment against an Ontario-based company. Foreign litigants should also be mindful as to whether their foreign jurisdiction maintains reciprocal enforcement legislation with Canada, as that would require analysis specific to that legislation.
 2015 SCC 42, at para. 53.
 Ibid, at para. 54; if the Canadian defendant willingly attorned to the jurisdiction of the foreign court or otherwise has a physical presence in the foreign jurisdiction, this will typically suffice.
 Ibid., at para. 55.
 Plaintiffs should also be mindful as to whether there is an applicable jurisdiction clause in a contract formalizing the relationship between the parties. Although it is well-established that a permissive jurisdiction clause (e.g., one that authorizes jurisdiction in the courts of Ontario, but does not make that venue exclusive) will not deprive a foreign forum of having a real and substantial connection, the jurisprudence with respect to overcoming exclusive jurisdiction clauses remains undeveloped.
 2020 ONCA 95, at para. 12. This case, in which the author of this piece acted as counsel to the U.S. litigant, involved a default judgment. The test for recognition and enforcement of a foreign judgment is equally applicable to default judgments.
  4 WWR 573 (B.C.C.A).
  O.J. No. 4686 (S.C.J.).
 1998 CarswellOnt 3848.
 2003 SCC 72.
 Ibid, at para. 51.
 Monte Cristo Investments LLC v. Hydroslotter Corp., 2011 ONSC 6011, at para. 21.
 Beals, supra note 10 at para. 53; given these limitations, and in particular the prohibition on re-litigating the underlying merits of the lawsuit, well-advised Canadian companies are likely to strongly consider either defending proceedings initiated in a U.S. forum, or challenging jurisdiction in that forum where they feel the forum does not have jurisdiction, in most circumstances.
 Beals, supra note 10, at para. 71.
 See, e.g., Great America Leasing Corp. v. Yates, 2003 CanLII 16128 (ON CA).
 Beals, supra note 10 at para. 71; see also, Sleep Number Corporation, supra note 6, at para. 13.
 For example, in Lambert, Re, 2001 CanLII 28474 (ON SC), the Ontario Superior Court declined to enforce default judgments obtained in two U.S. states on public policy grounds where doing so would permit a double recovery for the plaintiff.