Facts: Bombardier alleged that the Republic of Estonia induced Estonian Air to breach its contract with Bombardier, intentionally interfering with its economic relations. Bombardier therefore sought to bring the Republic before the courts of Ontario by invoking the "commercial activity" exception as described in s. 5 of the Federal State Immunity Act, RSC 1985, c S-18 (the "Act").
The commercial activity exception provides that a foreign state is not immune from the jurisdiction of Canadian courts "in any proceedings that relate to any commercial activity of the foreign state." "Commercial activity" is defined as "any particular transaction, act or conduct or any regular course of conduct that by reason of its nature is of a commercial character."
Held: A party seeking to invoke the commercial activity exception in the Act must provide an evidentiary record that permits the court to determine that the foreign state engaged in commercial activity and that the proceedings relate to that activity. Although that analysis does not require a determination of the underlying merit of the cause of action, it is a merits-based analysis of the evidence supporting or refuting the assertion that the court has jurisdiction based on the exception.
Based on the evidentiary record, the court held that the Republic's activities were restricted to oversight as shareholder and to the furtherance of governmental objectives. It had no involvement in the management, governance or commercial activities of Estonian Air and that the decision to end negotiations with Bombardier was made by the airline and not the Republic. Although the Republic owned over 90 percent of the shares of the airline, this did not establish that it was engaged in commercial activity. The Republic's activities were sovereign in both purpose and nature, and therefore Bombardier's claim was dismissed.