A-869-88
In the Matter of the Canada Labour Code
And in the Matter of the State Immunity Act
And in the Matter of a Reference by the Canada
Labour Relations Board pursuant to subsection
28(4) of the Federal Court Act
INDEXED AS: CANADA LABOUR CODE (CAN.) (RE) (CA.)
Court of Appeal, lacobucci C.J., Mahoney and
Stone JJ.A.—Ottawa, June 13 and August 9,
1989.
International law — Sovereign immunity — U.S.A. claiming
immunity under State Immunity Act, s. 3 with respect to
certification application filed by Union on behalf of Canadian
civilians employed at its naval base at Argentia, Newfound-
land — Foreign state cannot claim immunity if explicit waiver
of right to sovereign immunity or if proceedings relating to
commercial activity of foreign state — Subscription to North
Atlantic Treaty Status of Forces Agreement not explicit sub
mission to jurisdiction of Canadian courts — Implicit in
definition of "commercial activity" that one look to nature of
activity rather than to purpose — Certification proceeding
involving contracts of employment, entry into which commer
cial in nature — Result disturbing as could mean loss of
dignity if foreign state compelled by domestic tribunal to
bargain over conditions of employment — Problem avoidable
by legislative amendment.
Labour relations — Union seeking certification as bargain
ing agent for Canadian civilians employed at American naval
base in Newfoundland — Certification proceedings conduct
"relating to any commercial activity" of foreign state —
U.S.A. precluded from claiming state immunity by State
Immunity Act, s. 5.
This was a reference to determine whether the Canada
Labour Relations Board erred in finding that the United States
of America could not claim state immunity under section 3,
State Immunity Act with respect to an application for certifica
tion filed on behalf of Canadian civilians employed by the U.S.
Department of Defence at its military base at Argentia, New-
foundland. Some 60 Canadians work at the base as firefighters
and maintenance personnel. The Union sought certification
under the Canada Labour Code as bargaining agent for those
employees. A foreign state is immune from the jurisdiction of
any court in Canada (State Immunity Act, section 3), except
when it waives immunity by explicitly submitting to the juris
diction of the court (section 4), or if the proceedings relate to
any commercial activity of the foreign state (section 5). "Com-
mercial activity" is defined as any conduct that by reason of its
nature is of a commercial character. The Board applied the
commercial activity test developed by American courts (if the
activity is one in which a private person could engage, it is not
entitled to immunity) and found that the contract of employ
ment constituted a commercial activity. The issues were wheth
er the U.S.A. had waived immunity and, if not, whether the
certification proceeding was a commercial activity. The Union
argued that the U.S.A. had waived immunity by signing the
1951 North Atlantic Treaty Status of Forces Agreement, which
provides that local civilian labour requirements shall be satis
fied in the same way as the comparable requirements of the
receiving state.
Held, state immunity could not be claimed.
Per lacobucci C.J. (Stone J.A. concurring): Signing the
North Atlantic Treaty Status of forces Agreement did not
amount to explicit submission to the jurisdiction of Canadian
courts.
The reference in the definition of "commercial activity" to
any transaction, act or conduct that by reason of its nature is of
a commercial character suggests a narrower scope for immuni
ty than if it referred to the purpose of the activity. The
American definition expressly mentions the nature of the
course of conduct, but continues "rather than by reference to
its purpose". The Canadian definition implicitly conveys the
same meaning, i.e. one looks to the nature of the transaction or
activity, not to its purpose. Looking to purpose would tend to
introduce a recognition of the wider net of immunity afforded
under the traditional absolute theory, which could lead to
defeating the statutory objective of adopting a restrictive
approach to immunity as reflected in the State Immunity Act.
The nature of the transaction (employment contracts) was
commercial and the certification proceedings before the Board
related to that commercial activity within section 5 of the State
Immunity Act. Although the purpose of the employment con
tracts was to further state or public objects of the United States
by operating a naval base, the Act does not countenance the
purpose of the state's activity but rather compels focus on the
nature of the alleged commercial activity.
Per Mahoney J.A. (Stone J.A. concurring): In recent years
there has been a move away from absolute sovereign immunity
from the jurisdiction of common law courts to a more restric
tive concept. Canada, the U.S.A. and Great Britain codified
that restrictive concept more or less contemporaneously. The
British legislation by its terms, and the American legislation by
externally stated legislative intent exclude sovereign immunity
in respect of employment of their citizens or residents within
their territories by foreign states. American courts have been
given effect to that legislative intent. Contracts for the pur
chase of goods or services and contracts of employment should
receive the same treatment for the purposes of the State
Immunity Act. A certification proceeding relates to the
employment of members of the proposed bargaining unit under
contracts of service, entry into which is conduct of a commer
cial character on the part of the U.S.A. Invocation of state
immunity in this case could be rationalized only if one looked
beyond the nature of the employment to its broad purpose—to
serve American defence requirements.
This conclusion was disturbing in that the sovereign dignity
of a foreign state could be compromised if a domestic tribunal
can compel it to bargain over conditions of employment and
impose those conditions. The rationale behind state immunity is
the avoidance of embarrassment of functions and loss of digni
ty. That problem was, however, outside the narrow scope of this
reference. Parliament would have to amend the State Immuni
ty Act if Board jurisdiction in cases such as this is to be
abrogated.
STATUTES AND REGULATIONS JUDICIALLY
CONSIDERED
Agreement between the Parties to the North Atlantic
Treaty regarding the status of their forces, June 19,
1951, 199 U.N.T.S. 67, art. 4.
Canada Labour Code, R.S.C., 1985, c. L-2, ss. 48, 80.
Foreign Sovereign Immunities Act of 1976, Pub. L.
94-583, 90 Stat. 2891 (1976), s. 1603(d).
State Immunity Act, R.S.C., 1985, c. S-18, ss. 2, 3(1),
4 ( 1 ),( 2 )(a), 5.
State Immunity Act 1978 (U.K.), 1978, c. 33, s. 4(1),
(6).
CASES JUDICIALLY CONSIDERED
APPLIED:
Goethe House New York, German Cultural Center v
N.L.R.B., 869 F.2d 75 (2d Cir. 1989); revg 685 F.Supp.
427 (S.D.N.Y. 1988); The Charkieh (1873), L.R. 4 Ad.
& Ec. 59.
CONSIDERED:
I Congreso del Partido, [1981] 2 All ER 1064 (H.L.);
Texas Trading & Mill Corp. v. Federal Republic of
Nigeria, 647 F.2d 300 (2d Cir., 1981).
REFERRED TO:
Gouvernement de la République Démocratique du Congo
v. Venne, [1971] S.C.R. 997; 22 D.L.R. (3d) 669; Lorac
Transport Ltd. v. Atra (The), [1987] 1 F.C. 108; (1986),
28 D.L.R. (4th) 309; 69 N.R. 183 (C.A.); Saint John,
The Municipality of the City and County of et al. v.
Fraser-Brace Overseas Corporation et al., [1958] S.C.R.
263.
AUTHORS CITED
Crawford, James "International Law and Foreign Sover
eigns: Distinguishing Immune Transactions" The Brit-
ish Yearbook of International Law 1983, Oxford: Cla-
rendon Press, 1984.
Emanuelli, C. "L'immunité souveraine et la coutume
internationale de l'immunité absolue à l'immunité rela
tive" (1984), 22 Can. - Y.B. Int'l L. 26.
Molot, H.L. and Jewett, M.L. "The State Immunity Act
of Canada" (1982), 20 Can.Y.B. Int'l L. 79.
United States. House Report No. 94-1487, Congressional
Record, Vol. 122.
Williams, S.A. and de Mestral, A.L.C. An Introduction
to International Law, 2nd ed. Toronto: Butterworths,
1987.
COUNSEL:
H. Scott Fairley for Canada Labour Rela
tions Board.
Ronald A. Pink and Ronald Pizzo for Public
Service Alliance of Canada.
Brian A. Crane, Q.C. for Government of the
United States.
Edward R. Sojonky, Q.C. for Attorney Gen
eral of Canada.
SOLICITORS:
Lang, Michener, Lash, Johnston, Toronto, for
Canada Labour Relations Board.
Patterson, Kitz, Halifax, for Public Service
Alliance of Canada.
Cowling, Strathy & Henderson, Ottawa, for
Government of the United States.
Deputy Attorney General of Canada for
Attorney General of Canada.
The following are the reasons for decision ren
dered in English by
IACOBUCCI C.J.: I have had the benefit of read
ing the reasons of my brother Mahoney J.A. and
agree with those reasons and with the conclusion
that he arrives at, namely, the United States of
America ("United States") cannot claim state
immunity under the State Immunity Act, R.S.C.,
1985, c. S-18 (the "SIA") with respect to the
application for certification filed by The Public
Service Alliance of Canada (the "Union") under
the Canada Labour Code, R.S.C., 1985, c. L-2 on
behalf of certain Canadian civilians employed at
the United States naval base at Argentia, New-
foundland. However, I wish to add some comments
of my own but in doing so will not refer to the
general background that has been well described
by Mr. Justice Mahoney.
With respect to the issue of whether or not the
United States has waived immunity within the
meaning of the SIA, particularly paragraph
4(2)(a) thereof, I agree with Mahoney J.A. that
the Board was correct in finding there had been no
waiver. The Union argued that the United States'
signing the 1951 North Atlantic Treaty Status of
Forces Agreement [Agreement between the Parties
to the North Atlantic Treaty regarding the status
of their forces, June 19, 1951, 199 U.N.T.S. 67]
amounted to an explicit submission to the jurisdic
tion of Canadian courts. I cannot agree. At best,
subscribing to the provisions of the Status of
Forces Agreement may amount to an implicit
waiver but paragraph 4(2)(a) of the SIA requires
explicit submission to the jurisdiction of the court
and I do not find anything in the provisions of the
Status of Forces Agreement that constitutes
explicit submission to judicial or adjudicative juris
diction. Consequently, the Union's argument on
waiver fails.
The more difficult issue by far in this reference
centres on the question whether the matters over
which the Board has exercised its jurisdiction
"relate to any commercial activity of the foreign
state" within the meaning of section 5 of the SIA
which provides:
5. A foreign state is not immune from the jurisdiction of a
court in any proceedings that relate to any commercial activity
of the foreign state.
Section 2 of the SIA defines "commercial activity"
to mean:
... any particular transaction, act or conduct or any regular
course of conduct that by reason of its nature is of a
commercial character;
The Board found that commercial activity was
present and I agree, but, as I shall mention below,
I have some doubt on the reasoning underlying the
Board's conclusion on this issue.
I need not dwell at length on the doctrine of
state or sovereign immunity under public interna
tional law or whether Canadian courts favoured a
restrictive approach to such immunity prior to the
enactment of the SIA.' Suffice it to say that under
the traditional principle of sovereign immunity,
each state ensured that no foreign state would be
impleaded in its domestic legal processes except
with the consent of the foreign state. The sovereign
immunity was not immunity from the application
of law of another state but rather immunity from
process in its courts. The rationale was that to
answer to an inquiry into any act of sovereignty
would violate the principle of equality of states and
threaten the dignity of the foreign state. 2 In effect,
the dispute with the foreign state had to be dealt
with by diplomatic means rather than by legal
recourse.'
But eventually international practice on state
immunity changed and national legislation was
enacted to reflect this change of approach. 4 As
noted by Mahoney J.A., the U.S. enacted its legis
lation in 1976 followed by the United Kingdom in
1978 and by Canada in 1982. The change resulted
in the abandonment of the so-called "absolute"
theory of state immunity in favour of a "restric-
tive" theory by which the immunity of the foreign
state is limited to its sovereign or public acts (juri
imperil) and does not extend to its private or
commercial acts (juri gestionis).
A very helpful commentary on this relatively
modern development of restrictive immunity has
been given by Lord Wilberforce in I Congreso del
Partido 5 when he said:
' See Gouvernement de la République Démocratique du
Congo v. Venne, [1971] S.C.R. 997; 22 D.L.R. (3d) 669
especially Laskin J., as he then was, at p. 1020 S.C.R.; see also
Lorac Transport Ltd. v. Atra (The), [ 1987] I F.C. 108; (1986),
28 D.L.R. (4th) 309; 69 N.R. 183 (C.A.).
2 See I Congreso del Partido, [1981] 2 All ER 1064 (H.L.);
C. Emanuelli "L'immunité souveraine et la coutume Interna-
tionale de l'immunité absolue à l'immunité relative" (1984), 22
Can. Y. B. Int'l L. 26.
3 See Saint John, The Municipality of the City and County
of. et al. v. Fraser-Brace Overseas Corporation et al., [1958]
S.C.R. 263, per Rand J., at p. 268.
4 See Williams, S.A. and de Mestral, A.L.C. An Introduction
to International Law, 2nd ed. Toronto: Butterworths, 1987, pp.
139 et seq.
5 Supra, note 2.
The relevant exception, or limitation, which has been
engrafted on the principle of immunity of states, under the
so-called restrictive theory, arises from the willingness of states
to enter into commercial, or other private law, transactions with
individuals. It appears to have two main foundations. (a) It is
necessary in the interest of justice to individuals having such
transactions with states to allow them to bring such transac
tions before the courts. (b) To require a state to answer a claim
based on such transactions does not involve a challenge to or
inquiry into any act of sovereignty or governmental act of that
state. It is, in accepted phrases, neither a threat to the dignity
of that state nor any interference with its sovereign functions. 6
I now return to the provisions of the SIA and, in
particular, section 5 and the definition of commer
cial activity in section 2. I wish to add two com
ments to those made by Mahoney J.A. on the
question of commercial activity. The first relates
to the definition in section 2 of the SIA of com
mercial activity and the second deals with a word
of caution on the reasoning underlying the conclu
sion reached by the Board with respect to commer
cial activity.
In my view, the reference in the definition of
commercial activity to any transaction, act or con
duct that by reason of its nature is of a commercial
character suggests a narrower scope for immunity
than if the wording made reference to the purpose
of the activity. Although the definition in the
United States legislation expressly mentions the
nature of the course of conduct or particular trans
action or act, it goes on to state "rather than by
reference to its purpose". But again as Mahoney
J.A. points out, the Canadian definition implicitly
conveys the same meaning, that is, one looks to the
nature of the transactions or activity, not to its
purpose. Looking to purpose as well would, in my
view, tend to introduce a recognition of the wider
net of immunity afforded under the traditional
absolute theory, which could lead to defeating the
statutory objective of adopting a restrictive
6 /d, at p. 1070; cited with approval by Hugessen J.A. in
Lorac Transport Ltd., supra note I, at p. 115.
approach to immunity as reflected in the SIA. 7
Here the nature of the transaction or activity is
commercial in that employment contracts entered
into by the United States with Canadian civilians
are at the heart of the matter and the certification
proceedings before the Board relate to that com
mercial activity within the meaning of section 5 of
the SIA. Granted the purpose of the employment
contracts is to further state or public objects of the
United States operating a naval base, but, as
mentioned, I believe the SIA and, in particular,
the provisions of section 5 and the definition of
commercial activity in section 2, do not counte
nance the purpose or object of the state's activity
but rather compel us to focus on the nature of the
alleged commercial activity in issue.
One final comment relates to the reasoning of
the Board in concluding there was commercial
activity and that state immunity was not appli
cable. The Board put considerable reliance on U.S.
authorities, given, in their view, the close relation
ship between the Canadian and U.S. legislation.
The Board stated:
In the present case, the contract of employment of civilians
engaged in maintenance duties gave rise to PSAC'S application
for certification. Supposing that such a dispute had arisen in
the United States, on a Canadian base, the question to be
resolved would have been as follows: could such a contract have
been entered into by a private party? In the affirmative, the
contract would have been described as a commercial activity
and the foreign base could not have claimed State immunity.
Hiring civilian employees is an activity that can be performed
by a private party, contrary to hiring "diplomatic, civil service,
or military personnel" (Foreign Sovereign Immunities Act of
1976, House Report, supra, page 6615; emphasis added). It
follows that, pursuant to the Foreign Sovereign Immunities Act
of 1976, in circumstances such as found in this application for
7 See Molot, H.L. and Jewett, M.L. "The State Immunity
Act of Canada", (1982) 20 Can. Y.B. Int'l L. 79; see particu
larly the commentary at pp. 96 et seq. where the authors dicuss
"Commercial Activity" and the emplasis on "nature" rather
than "purpose" in the SIA. The authors point out that, as a
matter of theory, it has been observed that a sovereign state
does not cease to be a sovereign state because it performs an act
which a private citizen might perform. Id, at p. 96. But the
authors note that courts are now being asked to distinguish
between the sovereign and non-sovereign, or the commercial
and governmental, acts of a state and they go on to discuss why
an emphasis on "nature" and not "purpose" is preferable. /d, at
p. 99 et seq.
certification, hiring American civilian employees on a Canadi-
an base located in the United States could be found to be a
"commercial activity". 8
Although I agree with the Board's conclusion as
to commercial activity, I would not put so great an
emphasis on the question whether the contract of
employment could have been entered into by a
private party in every case that might arise under
the SIA. To give an example, it may well be that
the function of a computer programmer in a for
eign state's military base could well be carried out
by a private party, but if the work of the program
mer were in relation to highly confidential and
sensitive information gathering and analysis, I
doubt whether such duties would constitute com
mercial activity within the meaning of SIA so as to
repel state immunity.
In summary, I agree with Mr. Justice
Mahoney's answer to the question in this
reference.
STONE J.A.: I agree.
* * *
The following are the reasons for decision ren
dered in English by
MAHONEY J.A.: The issue in this reference is
whether the Canada Labour Relations Board,
hereinafter "the Board", erred in finding that the
United States of America, hereinafter "the U.S.",
could not claim state immunity as provided in
section 3 of the State Immunity Act, R.S.C., 1985,
c. S-18, with respect to an application for certifica
tion filed on behalf of Canadian civilians employed
by the U.S. Department of Defence at its base at
Argentia, Newfoundland. Two other questions,
dependent on a negative answer to that, relating to
jurisdiction as between Canada and Newfound-
land, while referred were not argued and will, if
necessary, be subject of a later hearing.
The U.S. Navy, under a 99-year lease from
Great Britain effective March 27, 1941, occupies
8 Case, at p. 34.
and operates a military base at Argentia. The lease
provides:
ARTICLE I
(1) The United States shall have all the rights, power and
authority within the Leased Areas which are necessary for the
establishment, use, operation and defence thereof, or appropri
ate for their control, and all the rights, power and authority
within the limits of territorial waters and air spaces adjacent to,
or in the vicinity of, the Leased Areas, which are necessary to
provide access to and defence of the Leased Areas, or appropri
ate for control thereof.
ARTICLE XXIX
The United States and the Government of the Territory
respectively will do all in their power to assist each other in
giving full effect to the provisions of this Agreement according
to its tenor and will take all appropriate steps to that end.
During the continuance of any Lease, no laws of the Territo
ry which would derogate from or prejudice any of the rights
conferred on the United States by the Lease or by this Agree
ment shall be applicable within the Leased Area, save with the
concurrence of the United States.
In addition to its military and civilian personnel
the U.S. employs about 60 Canadian civilians as
firefighters and maintenance workers, such as
plumbers, electricians, etc. The Public Service
Alliance of Canada, hereinafter "the Union", has
sought certification under the Canada Labour
Code, R.S.C., 1985, c. L-2, as bargaining agent for
those employees.
The base is contained within a patrolled perime
ter fence. Access is through a guarded gate. It
contains a communications centre, its raison
d'être, housing and a variety of auxiliary service
and supply buildings and facilities. The Canadian
workers, other than the firefighters, are employed
in the maintenance of the buildings, fence,
grounds, utilities and equipment other than the
communications equipment. Security clearance is
required for their employment and admission to
the base. Their admission to the communications
centre itself, when necessary, is under military
escort.
The relevant provisions of the State Immunity
Act are:
2. In this Act,
"commercial activity" means any particular transaction, act or
conduct or any regular course of conduct that by reason of its
nature is of a commercial character;
3. (1) Except as provided by this Act, a foreign state is
immune from the jurisdiction of any court in Canada.
4. (1) A foreign state is not immune from the jurisdiction of
a court if the state waives the immunity conferred by subsec
tion 3(1) by submitting to the jurisdiction of the court in
accordance with subsection (2) or (4).
(2) In any proceedings before a court, a foreign state sub
mits to the jurisdiction of the court where it
(a) explicitly submits to the jurisdiction of the court by
written agreement or otherwise either before or after the
proceedings commence;
5. A foreign state is not immune from the jurisdiction of a
court in any proceedings that relate to any commercial activity
of the foreign state.
It is agreed that the Board is a "court" for pur
poses of this reference. The only issues are whether
the U.S. has waived immunity and, if not, whether
that over which the Board has asserted its jurisdic
tion is a commercial activity.
The Board found that there had been no waiver
and, before us, that conclusion was challenged only
by the Union. The Board found that the activity
was a commercial activity. Before us the U.S. and
the Attorney General of Canada challenged, and
the Union and Board defended, that finding.
WAIVER
The argument that the U.S. had waived
immunity is founded on its subscription to the
1951 North Atlantic Treaty Status of Forces
Agreement which provides in Article IX:
4. Local civilian labour requirements of a force or civilian
component shall be satisfied in the same way as the comparable
requirements of the receiving State and with the assistance of
the authorities of the receiving State through the employment
exchanges. The conditions of employment and work, in particu
lar wages, supplementary payments and conditions for the
protection of workers, shall be those laid down by the legisla
tion of the receiving State. Such civilian workers employed by a
force or civilian component shall not be regarded for any
purpose as being members of that force or civilian component.
"Civilian component", by definition and in the
circumstances, excludes the Canadian citizens and
others ordinarily resident in Canada employed at
the base.
The Board held that subscription to the NATO
agreement did not constitute explicit submission to
its jurisdiction no matter how liberally one might
construe what could be a waiver. I agree.
COMMERCIAL ACTIVITY
At one time sovereign states enjoyed absolute
immunity from the jurisdiction of common law
courts. As they, directly or though their agencies,
engaged increasingly in commercial activities, a
"restrictive" concept of sovereign immunity came
to be recognized. Canada, the U.S. and Great
Britain, more or less contemporaneously, moved to
codify that restrictive concept. The British statute,
State Immunity Act 1978 (U.K.), 1978, c. 33, as it
pertains to circumstances in issue here, is very
different from the Canadian and American legisla
tion. It excludes "a contract of employment be
tween a State and an individual" from the defini
tion "commercial transaction" but provides
expressly:
4. (1) A State is not immune as respects proceedings relat
ing to a contract of employment between the State and an
individual where the contract was made in the United Kingdom
or the work is to be wholly or partly performed there.
(6) In this section "proceedings relating to a contract of
employment" includes proceedings between the parties to such
a contract in respect of any statutory rights or duties to which
they are entitled or subject as employer or employee.
The American statute, the Foreign Sovereign
Immunities Act of 1976, Pub. L. 94-583, 90 Stat.
2891 (1976) as amended, provides:
1603. For purposes of this chapter
(d) A 'commercial activity' means either a regular course of
commercial conduct or a particular commercial transaction
or act. The commercial character of an activity shall be
determined by reference to the nature of the course of
conduct or particular transaction or act, rather than by
reference to its purpose.
The ultimate clause, "rather than by reference to
its purpose", in my view, conveys a notion not
expressed but implicit in the Canadian definition.
In interpreting its statute, U.S. courts have rou
tinely had recourse to the House Judiciary Com
mittee's comments concerning the concept of com
mercial activity it had in mind in commending the
legislation to Congress. It is useful to quote it in its
entirety.
(d) Commercial activity. Paragraph (c) of section 1603
defines the term `commercial activity" as including broad
spectrum of endeavour, from an individual commercial transac
tion or act to a regular course of commercial conduct. A
"regular course of commercial conduct" includes the carrying
on of a commercial enterprise such as a mineral extraction
company, an airline or a state trading corporation. Certainly, if
an activity is customarily carried on for profit, its commercial
nature could readily be assumed. At the other end of the
spectrum, a single contract, if of the same character as a
contract which might be made by a private person, could
constitute a "particular transaction or act".
As the definition indicates, the fact that goods or services to
be procured through a contract are to be used for a public
purpose is irrelevant; it is the essentially commercial nature of
an activity or transaction that is critical. Thus, a contract by a
foreign government to buy provisions or equipment for its
armed forces or to construct a government building constitutes
a commercial activity. The same would be true of a contract to
make repairs on an embassy building. Such contracts should be
considered to be commercial contracts, even if their ultimate
object is to further a public function.
By contrast, a foreign state's mere participation in a foreign
assistance program administered by the Agency for Interna
tional Development (AID) is an activity whose essential nature
is public or governmental, and it would not itself constitute a
commercial activity. By the same token, a foreign state's
activities in and "contracts" with the United States resulting
from or necessitated by participation in such a program would
not in themselves constitute a sufficient commercial nexus with
the United States so as to give rise to jurisdiction (see sec.
1330) or to assets which could be subjected to attachment or
execution with respect to unrelated commercial transactions
(see sec. 1610(b)). However, a transaction to obtain goods or
services from private parties would not lose its otherwise com
mercial character because it was entered into in connection
with an AID program. Also public or governmental and not
commercial in nature, would be the employment of diplomatic,
civil service, or military personnel, but not the employment of
American citizens or third country nationals by the foreign
state in the United States.
The courts would have a great deal of latitude in determining
what is a "commercial activity" for purposes of this bill. It has
seemed unwise to attempt an excessively precise definition of
this term, even if that were practicable. Activities such as a
foreign government's sale of a service or a product, its leasing
of property, its borrowing of money, its employment or engage
ment of labourers, clerical staff or public relations or marketing
agents, or its investment in a security of an American corpora
tion, would be among those included within the definition.
House Report No. 94-1487, Congressional Record, Vol. 122,
pp. 6614-6615. [My emphasis.]
The Congressional Record also discloses, at page
6604, that "the House bill was passed in lieu of the
Senate Bill".
The British legislation by its terms and the
American legislation by externally stated legisla
tive intent exclude sovereign immunity in respect
of the employment of their citizens or residents
within their territories by foreign states. Decisions
of U.S. courts have given effect to that legislative
intent in considering individual employment con
tracts. It is unnecessary to refer to any but the
most recent American decision which, coinciden
tally, is the most comparable, in a factual way, to
the present case.
No decision of the U.S. Supreme Court has
been cited to us but we were advised that certio-
rari was being sought in respect of the very recent
decision of the U.S. Court of Appeals for the
Second Circuit in Goethe House New York,
German Cultural Center y N.L.R.B., 869 F.2d 75
(2d Cir. 1989). Goethe House is a cultural agency
of the Federal Republic of Germany which, inter
alia, employs non-German personnel in the U.S.
The proceeding in the U.S. courts was for an
injunction to prevent the National Labour Rela
tions Board from further processing a representa
tion petition or conducting a representation elec
tion for those employees. The District Court at
trial, in a reported decision, 685 F.Supp. 427
(S.D.N.Y. 1988), granted the injunction, stating
at page 429:
A denial of injunctive relief, resulting in Goethe House's
having to go forward with the representation election, would
undoubtedly cause Goethe House irreparable harm in the
sensitive area of foreign relations, since Goethe House's
employment policies are controlled entirely by the German
government, and could engender diplomatic embarrassment if
the union prevailed in the election. Goethe House would then
be forced either to bargain with the union in contravention of
some or all of the German government's personnel mandates or,
alternatively, to obtain review it would have to commit an
unfair labour practice under the National Labor Relations Act,
29 U.S.C. § 158(a)(5), such as refusing to bargain with the
union as the employees' representative.
and, at page 430:
It is however one thing to protect and preserve a remedy in
American courts for an unpaid American vendor or employee
by defining that relationship as a "commercial" exception, and
on the other hand to justify thereby the right of a United States
agency to intervene into the underlying employment structure
of a conceded arm of a foreign state that is not involved in
commercial activity. Support for this view is found in the fact
that courts which have found the commercial activity exception
to exist in the employment context have done so as to employ
ment contracts between the foreign state or instrumentality and
a single individual.
A majority of the Court of Appeals allowed the
appeal on the ground that it was premature while
also expressing by dicta doubt as to the probability
of the Federal Republic's ultimate success in
asserting state immunity [at pages 79 and 80].
To justify its assertion of jurisdiction, the district court wrote
that requiring Goethe House to submit to NLRB jurisdiction
might interfere with the West German government's "employ-
ment objectives in implementing cultural foreign policy" and
might cause disturbances and embarrassment in international
relations. In our view, the district court's concerns were largely
unfounded and did not warrant the court's intervention in the
case. Even if the Union were certified as the bargaining agent
of Goethe House's non-German employees, we fail to see how
the presence of the Union would interfere with Goethe House's
implementation of West German cultural foreign policy. Under
the NLRA, Goethe House would have a duty to bargain with
the Union over wages, hours and other terms and conditions of
employment.... Moreover, the fact that the German
employees at Goethe House presently are unionized belies the
prospect that the presence of a union for the non-German
employees would hamper Goethe House's operations.
As an employer, Goethe House has the option of seeking
indirect review of the Board's order by refusing to bargain with
the Union if it is certified, and then seeking review of its
position in a court of appeals.
The dissenting member was in complete agreement
with the trial judge. It is worth noting parentheti
cally that it was precisely to avoid such an "indi-
rect review" confrontation with the U.S. that the
Board made the present reference.
The District Court had noted that all U.S. court
decisions which invoked the commercial activity
exception in the employment context had done so
as to contracts of service between a foreign state
and a single individual. The same is to be said of
the authorities cited to us.
The Board's conclusion, after a thorough review
of the American authorities, was:
Given the close relationship between the Canadian and Ameri-
can legislations, we deem it appropriate to draw our inspiration
from American authorities in order to define the concept of
commercial activity. Specifically, we make ours the commercial
activity test developed by American courts. If we apply this test
to the present case, we find that the contract of employment of
the Canadian civilian employees constitutes a commercial ac
tivity within the meaning of section 2 of the State Immunity
Act.
The American test adopted by the Board was
concisely stated by the U.S. Court of Appeals for
the Second Circuit in Texas Trading & Mill Corp.
v. Federal Republic of Nigeria, 647 F.2d 300 (2d
Cir., 1981), at page 309:
... put another way, if the activity is one in which a private
person could engage, it is not entitled to immunity.
That case involved breach of contracts for the sale
of cement and of related letters of credit.
I see no rational basis for distinguishing between
contracts for the purchase of goods or services and
contracts of employment for purposes of the State
Immunity Act. If, as in my view he is, a supplier of
electricity or groceries to the Argentia base is
entitled to sue the U.S. for breach of contract in a
Canadian court, there seems no reason why a
Canadian civilian employee there should not have
a like entitlement. However, as suggested by the
Trial Judge in Goethe House, exercise by the
Board of its jurisdiction to certify goes a good deal
further than the enforcement of employees' rights
and employers' obligations under employment
contracts.
Certification of a bargaining agent under the
Canada Labour Code is not an end in itself. It
gives the certified bargaining agent rights and,
more important in the present circumstances,
imposes obligations on the certified employer.
Most immediately, if called upon to do so by the
Union, the U.S. will be required to bargain with it
for purposes of entering into a collective agree
ment (section 48). Should that bargaining not
result in a collective agreement, the Board may,
subject to the intervention of the Minister of
Labour, impose an initial agreement (section 80). I
do not think it necessary to go beyond that thresh
old in enumerating the obligations that the Code
imposes on a certified employer and the coercive
powers exercisable by the Board on motion of a
certified bargaining agent.
While the common law has been supplanted by
statute, the rationale for any measure of sovereign
immunity at all remains as it was under the
common law. It has been variously articulated,
nowhere more succinctly than by Sir Robert Phil-
limore in The Charkieh (1873), L.R. 4 Ad. & Ec.
59, at page 97.
The object of international law, in this as in other matters, is
not to work injustice, not to prevent the enforcement of a just
demand, but to substitute negotiations between governments,
though they may be dilatory and the issue distant and uncer
tain, for the ordinary use of courts of justice in cases where
such use would lessen the dignity or embarrass the functions of
the representatives of a foreign state;
The sovereign dignity of a foreign state seems
clearly put in issue when a domestic tribunal can
force it to bargain over the conditions of employ
ment of its employees and, if permitted by a
Minister of the Crown, impose those conditions.
That is very different from a domestic tribunal
enforcing the terms of a contract of employment
the foreign state has freely entered into.
However, the narrow issue on this reference is
whether, the certification proceeding before the
Board "relates to any commercial activity" of the
U.S. What is immediately in issue in a certifica
tion proceeding is not the contracts of employment
of the individuals in the proposed bargaining unit;
it is rather the right of the applicant union to
bargain collectively for those employees and the
obligation of the employer to likewise bargain. I
have come to the conclusion that a certification
proceeding does, nevertheless, "relate" to the
employment of members of the proposed bargain
ing unit under contracts of service, entry into
which is, in my view, plainly "conduct ... of a
commercial character" on the part of the U.S. I
am unable to find anything peculiar to employ
ment on the base that allows me to distinguish, in
a meaningful way, the employment in issue. Only
if one looks beyond the nature of the employment
to its broad purpose—to serve the defence require
ments of the U.S.—can invocation of state
immunity be rationalized.
I am disturbed by this result. The difficulty I
have experienced was anticipated by James Craw-
ford, Professor of Law, University of Adelaide, in
an article ["International Law and Foreign Sover
eigns: Distinguishing Immune Transactions" pub
lished in The British Year Book of International
Law 1983, where he wrote, at page 92:
. although the forum State must be accorded some flexibility
in the definition of `commercial transactions', these may be
defined as contracts or related industrial or commercial activi
ties, not being transactions governed by international law (such
as treaties or public international arbitrations), and not being
matters recognized as within the domestic jurisdiction of the
foreign State. This latter consideration points to the desirability
of distinguishing commercial transactions from contracts of
employment: in some respects at least the relations between a
State and its employees or servants are matters within its
domestic jurisdiction. (The State Immunity Act 1982 (Can.)
makes no specific provision for contracts of employment and
thus asserts jurisdiction over all such contracts as would be
regarded as `commercial transactions' on the basis, e.g., that
there was a breach of contract within the jurisdiction. The
difficulty is that in some respects (e.g. payment of wages due)
such contracts may be `commercial transactions'; in other
respects (e.g. placement or removal of public servants) they
may impinge significantly on the internal administration of the
defendant State.)
I conclude that if Parliament intended that foreign
states be entitled to invoke immunity from the
certification jurisdiction of the Board in respect of
employment of Canadians in Canada, the State
Immunity Act requires amendment.
CONCLUSION
I would answer the first question referred in the
negative. The U.S. cannot claim state immunity
with respect to the application for certification
filed by the Union on behalf of Canadian civilians
employed at its naval base at Argentia, Newfound-
land.
STONE J.A.: I agree.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.