The long arm of the law

The International Air Transport Association («IATA»), based in Montreal, collects fees imposed by Iraq on airlines, deposits them in a Swiss bank account, and remits them to Iraq. Instrubel, a Dutch Company having a substantial arbitration award against Iraq, obtained an order from the Superior Court of Quebec for the seizure of funds belonging to Iraq and held by IATA. Iraq filed an application to quash this seizure.

The Superior Court quashed the seizure to the extent that it applied to sums held outside of Quebec. The Judge concluded that since the object of the seizure was money held by IATA and belonging to Iraq, Quebec Courts lacked jurisdiction because the funds were located in Switzerland.

The Court of Appeal overturned this ruling and confirmed the seizure. The Court concluded that IATA did not hold property belonging to Iraq, but rather was indebted to Iraq for the amounts collected. The debt could be seized by order of the courts of IATA’s domicile, namely Montreal, Quebec. The Court reasoned that money is fungible, and that it was impossible to identify the specific funds that were said to belong to Iraq. Also, if the seizure in question were viewed as a seizure of specific monies (rather than a debt), Instrubel would be forced into an international «shell-game» of discovering where the funds had been deposited.

The approach taken by the Court of Appeal facilitates the international collection of debts. It is worth noting, however, that at the time of writing the present article, the deadline for application for leave to appeal to the Supreme Court of Canada had not yet expired.

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