Court File Number: A-140-02

File No. 32738

IN THE SUPREME COURT OF CANADA(ON APPEAL FROM THE COURT OF APPEAL OF ALBERTA)

BETWEEN:

YUGRANEFT CORPORATIONAppellant

- and -

REXX MANAGEMENT CORPORATION

Respondent

RESPONDENT'S FACTUM(Rexx Management Corporation, Respondent)

(Pursuant to Rule 42 of the Rules of the Supreme Court of Canada)

Counsel for the Respondent:

David R. Haigh, Q.C.Michael J. DonaldsonSonya A. MorganBurnet, Duckworth & Palmer LLP1400, 350 – 7th Avenue S.W.Calgary, AB T2P 3N9Telephone: (403) 260-0228Telephone: (403) 260-0322Fax: (403) 260-0332E-Mail: [email protected]: [email protected]: [email protected]

Ottawa Agent for Counsel for the Respondent:

Marie-France MajorLang Michener LLP50 O'Connor Street, Suite 300Ottawa, ON K1P 6L2Telephone: (613) 232-7171 ext. 131Fax: (613) 231-3191E-Mail: [email protected]

Counsel for the Appellant:

Scott A. TurnerBurns, Fitzpatrick, Rogers & Schwartz LLP1400 – 510 Burrard StreetVancouver, BC V6C 3A8Telephone: (604) 685-0121Fax: (604) 685-2104E-Mail: [email protected]

Ottawa Agent for Counsel for the Appellant:

Nancy BrooksBlake, Cassels & Graydon LLP45 O'Connor StreetSuite 2000, World Exchange PlazaOttawa, ON K1P 1A4Telephone: (613) 788-2200Fax: (613) 788-2247E-Mail: [email protected]

TABLE OF CONTENTSPage

I. OVERVIEW OF FACTS................................................................................................1A. What this Appeal is about ...................................................................................1B. Response to Yugraneft's Statement of Facts ........................................................2

1. The Parties ..............................................................................................22. Russian Oligarchs and the Corrupt Russian Legal System........................33. Mikhail Fridman and TNK Take Over Chernogorneft..............................44. Mikhail Fridman and TNK Use Fraud and Force to Take Over

Yugraneft ................................................................................................55. The Arbitration and the Award ................................................................76. The U.S. RICO Proceedings ....................................................................87. The Application to Enforce the Award in Alberta ....................................8

II. ISSUES..........................................................................................................................9

III. ARGUMENT ...............................................................................................................10A. The Limitation Period for Recognition and Enforcement has Expired ...............10

1. The International Community Expects Limitations Laws to Apply ........102. Alberta Limitations Law Applies to Applications in Alberta..................113. Alberta's Basic Two-year Discoverability and 10-year Ultimate

Limitation Periods .................................................................................124. Section 11 Does Not Apply to Arbitration Awards ................................15

a. An "Award" is not a "Judgment" or "Order"...............................15b. Alberta Legislature Distinguishes Between "Awards" and

"Judgments"...............................................................................16B. Policy Reasons to Apply the Section 3 Limitation Period ..................................18C. No Conflict Between Section 3 of Limitations Act and Convention ...................19D. Discoverability Ensures Adequate Time to Discover Assets..............................21E. Not Time to Change Law Relating to Foreign Judgments..................................23

1. Presumption of Legislative Intention to Make No Change .....................232. Institute Did Not Recommend Change...................................................253. This Court Should Not Change the Meaning of Section 11 ....................26

a. Girsberger Wrongly Decided.....................................................27b. Girsberger Rationale Not Persuasive .........................................29

F. Enforcement of Yugraneft's Award Would Violate Public Policy......................301. The New York Convention and Defences to Enforcement .....................302. Rexx was Unable to Present its Case .....................................................313. Enforcement of Award Contrary to Public Policy ..................................32

G. Alternatively, Stay until RICO Action Complete...............................................35H. Conclusion........................................................................................................35

IV. COSTS.........................................................................................................................36

V. ORDERS SOUGHT .....................................................................................................37

VI. TABLE OF AUTHORITIES ........................................................................................38

TABLE OF CONTENTS(continued)

- ii -Page

VII. STATUTORY PROVISIONS ......................................................................................42

APPENDIX A: Chart ..............................................................................................................71

I. OVERVIEW OF FACTS

A. What this Appeal is about

1. This is an Appeal about a Russian corporation's attempt to evade the clear language of

Alberta's Limitations Act and enforce an international arbitration award obtained by fraud.

2. The Alberta Legislature reformed Alberta's limitations system in 1996. It replaced a

myriad of arbitrary, obscure and sometimes conflicting limitations provisions with one simple,

clear and predictable limitations rule for all claims: a claimant must sue within the earlier of 10

years from accrual of the cause of action or two years from discoverability. Because it ignored

this limitation period, the Appellant wants this Court to change the law, complicate what the

Legislature simplified, and carve out a new exception for foreign arbitration awards.

3. There is no statutory basis or principled reason for this exemption. Both the international

conventions and the leading commentators acknowledge that local limitation periods apply to

enforcement of international awards, and that these limitation periods vary by jurisdiction. In

fact, many "arbitration-friendly" jurisdictions have shorter limitation periods than Alberta. The

Alberta Court of Appeal was not wrong to enforce Alberta's 2-year discoverability limitation

period here.

4. In addition to limitations, there is another reason the Alberta courts were right to refuse to

enforce this Award. As permitted by Rule 29(3), the Respondent submits, as it did in the Courts

below, that no Canadian court should enforce this Award because it was obtained as part of a

campaign of fraud, corrupt legal proceedings, and armed force, conducted in Russia with the

assistance of the notoriously corrupt Russian Arbitrazh Courts.

5. The Canadian courts' right to refuse to enforce an award tainted by fraud and corruption

is specifically provided for in Article V of the New York Convention and s. 36 of the Model Law.

If Yugraneft's application to enforce its Russian Award is not out of time, before it can be

enforced in Canada there must be a judicial determination – in this Court, in Alberta, or in

related RICO proceedings ongoing before the U.S. Courts – of whether the manner in which the

Award was obtained should prevent its enforcement.

- 2 -

B. Response to Yugraneft's Statement of Facts

6. The Appellant Yugraneft Corporation (Yugraneft) has filed a Factum that blandly

summarizes the basic procedural facts that led to its arbitration award (the Award) but ignores

virtually all of the evidence that was before the Chambers Judge and Court of Appeal. This

evidence — which includes opinions from internationally recognized blue-chip experts in

Russian law (including a retired Russian judge) — provides the background to the Arbitration

and tells a story of bribery, corruption, fraudulent court proceedings, manufactured minutes of

shareholders' meetings that never occurred, and the invasion and takeover of Yugraneft's

corporate offices and field operations by a paramilitary gang of thugs armed with machine guns.

7. Yugraneft contradicted none of this evidence: in fact, it did not even cross-examine on it.

While it is understandable that Yugraneft would prefer to pretend this damning evidence did not

exist, it does exist and this Court cannot ignore it.

1. The Parties

8. Before the fraudulent takeover of Yugraneft, Yugraneft and the Respondent Rexx

Management Corporation (Rexx) were part of a group of companies under similar ownership

and control that was producing oil from the Malo-Chernogor oilfield in Russia.1 A chart

summarizing the relationships between the various entities involved is attached as Appendix

"A".

9. Yugraneft is a Russian corporation that holds the interest in the Malo-Chernogor oilfield.2

Prior to TNK's illegal takeover of Yugraneft described below, Yugraneft's 97% shareholder was

NoreX Petroleum Ltd. (NoreX).3 NoreX is subject to similar (but not identical) management

and control as Rexx.4 Prior to the illegal takeover, OAO Chernogorneft (Chernogorneft) was

1 Record of the Respondent (Respondent's Record), Vol. I, p. 3, paras. 6-10 2 Respondent's Record, Vol. I, p. 3, para. 63 Respondent's Record, Vol. I, p. 3, paras. 9-10 4 Respondent's Record, Vol. II, p. 178, para. 3; Respondent's Record, Vol. I, pp. 2-3, paras. 1 and 10; Respondent's Record, Vol. II, p. 1, paras. 3–5

- 3 -

the minority 3% shareholder in Yugraneft, and NoreX held a right of first refusal over

Chernogorneft's shares.5

10. Now (and at the time of the Arbitration), Yugraneft is controlled by the infamous Russian

oligarch Mikhail Fridman (Fridman) through his holding company Tyumen Oil Company

(TNK), both of whom have a well-documented history of corrupting and abusing the Russian

legal system.6

11. Rexx is an Alberta corporation that was created to provide logistical support to Yugraneft

when Yugraneft was 97% owned by NoreX.7 On October 1, 1998, Rexx and Yugraneft entered

into an Equipment and Materials Supply contract,8 which Yugraneft later (when under the

control of Fridman and TNK) used as a basis for making a fraudulent arbitration claim against

Rexx. This contract contained an arbitration clause that, in English, provided the parties with

"the right to refer this issue to the Arbitration court of Russia."9 The "Arbitration Court of

Russia" does not exist.

2. Russian Oligarchs and the Corrupt Russian Legal System

12. The evidence of Stanford Law Professor Bernard Black, who has extensive first-hand

experience of the Russian legal system,10 is that Russian "oligarchs" often use various fraudulent

mechanisms, including "ordered bankruptcies" procured through a corrupt court system, to

illegally take control of corporations or acquire their assets. An "ordered bankruptcy" refers to

the fact that the bankruptcy has been "ordered" by someone powerful, who uses false claims,

threats against and bribery of judges, and other fraudulent means to obtain a corporation's assets

through a bankruptcy proceeding.11 According to Professor Black:

In cases involving two parties of roughly equal power and influence, there is a possibility of obtaining a fair decision from the Russian arbitrazh courts.

5 Respondent's Record, Vol. I, p. 4, para. 206 Infra, paras. 13-147 Respondent's Record, Vol. I, p. 3, at para. 108 Appellant's Record, Vol. II, p. 1029 Appellant's Record, Vol. II, p. 104, clause 4.510 Respondent's Record, Vol. II, pp. 29-31 11 Expert Declaration of Professor Bernard Black dated June 2003, Respondent's Record (Black Declaration), Vol. II, p. 34, para. 16(m); the Expert Report of Marina V. Telyukina (Telyukina Report), Respondent's Record, Vol. II, pp. 91–94

- 4 -

However, it is not reasonably possible, for a small company, especially a foreign-owned company, to obtain a fair decision against a major, oligarch-controlled company, once the major company decides to complete a hostile takeover of the small company or its Russian interests. On the contrary, corruption of the courts is central to the major company's takeover strategy.

It is difficult to overstate the power of the major oligarchs. The oligarchs meet regularly with senior government officials, including President Putin. They have great influence on the central government and often control regional and local governments. They are, for all practical purposes, above the law.12

13. Mikhail Fridman is one of the most powerful Russian oligarchs. He controls the Alfa

group, which is, according to the evidence before this Court, a 50% shareholder of TNK. The

evidence is that a portion of TNK's remaining 50% ownership is controlled by another major

Russian oligarch, Viktor Vekselberg.13

14. TNK is a frequent and aggressive practitioner of hostile takeovers using corruption in

Russian courts and ordered bankruptcy proceedings.14 Professor Black's evidence is that the

Tyumen appellate court in particular is "thoroughly in TNK's pocket."15 He also notes that the

Governor of Tyumen — who fixes the salary and benefits of the Tyumen Court Judges — was at

the time of the events in issue Chairman of TNK's board of directors.16

3. Mikhail Fridman and TNK Take Over Chernogorneft

15. The Award is part of a broader dispute between TNK and NoreX (Rexx's affiliate). TNK-

controlled Yugraneft's moves against Rexx (including the Arbitration) must be considered in

light of this bigger picture.

16. In 1998, TNK intervened in and manipulated the bankruptcy proceedings of

Chernogorneft, Yugraneft's minority shareholder.17 Through a court application and subsequent

12 Black Declaration, Respondent's Record, Vol. II, p. 33, para. 16(f)–(g); see also pp. 34-35, para. 16(n), and pp. 65-66, para. 100, which concludes that the Tyumen appellate (cassation) court "is thoroughly in TNK's pocket"13 Black Declaration, Respondent's Record, Vol. II, p. 33, para. 16(e)14 Black Declaration, Respondent's Record, Vol. II, p. 28, para. 215 Respondent's Record, Vol. II, pp. 65-66, para. 10016 Black Declaration, Respondent's Record, Vol. II, p. 34, para. 16(i); Expert Declaration of Sergey B. Zaitsev dated June 27, 2003 (Zaitsev Declaration), Respondent's Record, Vol. II, pp. 165-17317 Respondent's Record, Vol. I, pp. 3-5, paras. 11–21; see also the Telyukina Report, Respondent's Record, Vol. II, pp. 87-129, with conclusions set out at paras. 5–6

- 5 -

appeal, TNK had its hand-picked candidate appointed as Chernogorneft's external manager (the

equivalent of a trustee in bankruptcy under Canadian law).18 This external manager then

arranged for an "auction" of Chernogorneft's assets and shares (including its interest in

Yugraneft), which were sold to TNK's subsidiary TNK-NV at rock-bottom prices. TNK and

related companies were the only attendees at this "auction"19 and NoreX was never given the

opportunity to exercise its right of first refusal to purchase Chernogorneft's shares in Yugraneft.20

17. Marina V. Telyukina, a Russian law professor, reviewed the Chernogorneft bankruptcy

proceedings and concluded they were not conducted in accordance with Russian law, saying:

Given the frequency and magnitude of violations of law by the bankruptcy managers involved, and the equally significant errors made by the courts in upholding such actions, I conclude that the Chernogorneft bankruptcy proceedings were not carried out in good faith and were biased and affected by corruption. Indeed, the Chernogorneft bankruptcy contained many of the tell-tale signs of an "ordered" bankruptcy.21

4. Mikhail Fridman and TNK Use Fraud and Force to Take Over Yugraneft

18. Throughout this time period, Yugraneft (still controlled by Rexx's affiliate NoreX) was

trying to collect money it was owed by Chernogorneft.22 At meetings in November 1999, TNK's

officers told Yugraneft to "forget about repayment" or TNK "would run over Yugraneft like a

steamroller."23 When Yugraneft persisted,24 TNK began to use illegal and fraudulent means to

take control of Yugraneft as well.25

19. A Yugraneft shareholders' meeting was scheduled for June 28, 2001.26 TNK first

attempted (unsuccessfully) to bribe Yugraneft's employees.27 TNK could not win a legitimate

vote at a shareholders' meeting, so a few days before the meeting, on June 25, 2001, TNK-NV

18 Respondent's Record, Vol. I, p. 169; Telyukina Report, Vol. II, pp. 99-106, paras. 38–6719 Respondent's Record, Vol. I, p. 170; Telyukina Report, Vol. II, pp. 115-122, paras. 107–14020 Respondent's Record, Vol. I, p. 4, para. 2021 Respondents Record, Vol. II, p. 8922 Respondent's Record, Vol. I, p. 5, paras. 22–2623 Respondent's Record, Vol. II, p. 42, paras. 198–19924 Respondent's Record, Vol. II, pp. 9-1025 Respondent's Record, Vol. I, pp. 5-6, paras. 27–3526 Respondent's Record, Vol. I, p. 43, paras. 208–21127 Respondent's Record, Vol. I, pp. 43-44, paras. 212–216

- 6 -

filed an ex parte complaint in the Russian courts, falsely claiming that NoreX had been served

with notice28 and making misrepresentations about Chernogorneft's entitlement to a greater

percentage of Yugraneft's shares.

20. On or about June 26, 2001, the Tyumen local Arbitrazh Court issued an order forbidding

NoreX from voting most of its shares.29 Sergey B. Zaitsev, a retired Russian Judge of the

Federal Arbitrazh Court in Moscow, reviewed the documents relating to these proceedings and

concluded that the court decisions involved were likely a result of undue influence.30 He noted

the entire case's "striking similarity to the textbook pattern of an illegal hostile takeover" and

concluded that "the most likely explanation is that the court decisions were influenced in order to

attain control over Yugraneft."31

21. The shareholders' meeting was held on June 28, 2001 as scheduled. No representatives

from Chernogorneft attended. TNK's representatives were not permitted to vote at the meeting,

as TNK was not listed in the shareholders' register. NoreX, which was able to vote its few

remaining unencumbered shares, voted to re-elect Yugraneft's General Director.32

22. The battle for control of Yugraneft did not end with the shareholders' meeting. The next

day, on June 29, 2001, TNK forcibly took over Yugraneft's offices, using approximately 20

armed thugs wearing military fatigues and carrying machine guns.33 Similar armed takeovers of

Yugraneft's field operations followed and were completed by July 17, 2001.34

23. To create a veneer of legitimacy over these illegal actions, TNK claimed that TNK's own

representative was elected General Director of Yugraneft at the June 28, 2001 shareholders'

28 Respondent's Record, Vol. II, pp. 21-26; Respondent's Record, Vol. II, pp. 179-180, paras. 7-1529 Respondent's Record, Vol. I, pp. 5-6, paras. 29–30; see also the Zaitsev Declaration, Respondent's Record, Vol. II, pp. 130-177, which concludes at para. 2 that court decisions in this case exhibited a manifest disregard for Russian law and its normal application and that court processes were likely used as an "administrative resource" in a scheme to take control of Yugraneft30 Respondent's Record, Vol. II, p. 14631 Respondent's Record, Vol. II, p. 15032 Respondent's Record, Vol. I, p. 6, paras. 31–3233 Respondent's Record, Vol. I, p. 6, para. 3334 Respondent's Record, Vol. I, p. 45, paras. 231–233

- 7 -

meeting. This was a patent lie but to support it TNK manufactured a phoney set of meeting

minutes.35

24. After this illegal takeover was complete, TNK began to strip Yugraneft of its assets and

has continued to use its influence over the Russian courts and government to start baseless

criminal proceedings against various Yugraneft employees and NoreX shareholders.36 As a

result, NoreX's shareholders cannot set foot in Russia for fear of arrest.37

25. Once Yugraneft had been illegally taken over by TNK, the fundamental basis of the

Equipment and Materials Supply contract between Yugraneft and Rexx was undermined.

Yugraneft also owes money to Rexx and NoreX.38 This led to Rexx's refusal to supply further

equipment and materials to Yugraneft under the contract until it was paid in full.

5. The Arbitration and the Award

26. Once it was in control of Yugraneft, TNK used Yugraneft to start a Russian arbitration

proceeding against Rexx. In the course of hearing a jurisdictional challenge by Rexx, the

arbitrators made it clear they would not hear any evidence about Yugraneft's illegal takeover.39

The arbitrators then dismissed Rexx's jurisdictional challenge,40 and invited Rexx to appeal their

decision to the Russian courts. However, given the uncontradicted evidence of Professor Black,

Judge Zaitsev and the other experts in Russian law, such an appeal would have been pointless.

27. Having lost its jurisdictional challenge, Rexx did not participate further in the arbitration,

choosing instead to resist enforcement of the Award on public policy grounds in the event that a

TNK-controlled Yugraneft sought recognition and enforcement from an independent and

impartial court somewhere outside of Russia.

35 Respondent's Record, Vol. II, pp. 13-1536 Respondent's Record, Vol. I, p. 6, paras. 34–35; Respondent's Record, Vol. II, pp. 4-737 Respondent's Record, Vol. II, pp. 6-7; Vol. II pp. 11-12; Vol. II, p. 1838 Respondent's Record, Vol. I, pp. 6–7, para. 3639 Respondent's Record, Vol. II, p. 269; Respondent's Record, Vol. II, pp. 270-27140 Appellant's Record, Vol. II, pp. 119-123

- 8 -

6. The U.S. RICO Proceedings

28. On February 28, 2002, NoreX started a Racketeer Influenced and Corrupt Organizations

(RICO) lawsuit against TNK and others in the United States in an attempt to obtain the justice it

had been denied in Russia.41 This proceeding will determine the legality of Fridman and TNK's

takeovers of Chernogorneft and Yugraneft, the very same public policy issues Rexx is raising in

this proceeding. For this reason, Rexx asked the courts below, as an alternative to an order

dismissing Yugraneft's application, for a stay of Yugraneft's application until the U.S. Courts

determine the legality of the events which led to the Award.

7. The Application to Enforce the Award in Alberta

29. Yugraneft took no steps to obtain recognition and enforcement of the Award until

January 27, 2006 – almost 3½ years after the Award was made.42 Yugraneft provided no

explanation for why it waited until after the expiry of the Alberta limitation period to make its

application for recognition and enforcement of the Award. The Award itself notes that Rexx is

an Alberta corporation headquartered in Calgary, so this was obviously known to Yugraneft.43

30. The evidence before the Chambers Judge about whether the arbitrators refused to deal

with TNK's illegal takeover of Yugraneft was conflicting: Rexx's Russian counsel swore that the

arbitrators refused to consider this evidence, while Yugraneft's Russian counsel swore the issue

was never raised.44 There was no cross-examination on either affidavit and there is no record of

the arbitration proceeding. Under Alberta procedure, the Chambers Judge could not have

resolved this conflicting evidence without directing a trial of an issue.

31. The Chambers Judge held that Yugraneft's application for recognition and enforcement of

the Award was an application for a "remedial order" under the Limitations Act that was subject to

a two-year discoverability limitation period. Because Yugraneft's application was not filed until

41 Respondent's Record, Vol. I, p. 6, paras. 37–38; Vol. I, pp. 9-8042 The Award was issued September 6, 2002 (Appellant's Record, Vol. II, p. 142) and the Originating Notice was brought January 27, 2006 (Appellant's Record, Vol. I, p. 7) 43 Appellant's Record, Vol. II, p. 142; the Equipment and Materials Supply Contract identifies Rexx as being registered in Alberta (Appellant's Record, Vol. II, p. 102)44 Respondent's Record, Vol. II, pp. 270-277

- 9 -

more than three years after the Award was granted and Yugraneft led no evidence on

discoverability, he dismissed Yugraneft's application.45

32. Although it was unnecessary for him to do so, the Chambers Judge also conducted a

superficial analysis of Rexx's opposition to enforcement of the Award on public policy grounds

and its request for a stay. The Chambers Judge said "While it was not necessary to deal with this

issue in light of the conclusion I have already reached [on limitations], I note that I would not

have set aside the award on this basis."46 He did not consider whether a trial of an issue would

be needed to deal with the 20 volumes of evidence before him, including the three expert reports

and the conflicting evidence of the two Russian counsel involved in the Arbitration.

33. In the Alberta Court of Appeal, Rexx argued not only that the Chambers Judge was

correct on the limitations issue, but also that the Court of Appeal should affirm his Order on the

alternative ground that enforcement of the Award would be contrary to public policy. In light of

its finding on limitations, the Court of Appeal held it was unnecessary to consider Rexx's

submissions on the issue of public policy.47

II. ISSUES

34. The Appeal raises two main issues:

• Limitation Period: The New York Convention says international arbitration awards must be enforced in accordance with local rules of procedure. The Chambers Judge and Alberta Court of Appeal held the two-year discoverability limitation period — which applies to all claims for remedial orders in Alberta —applied here. Is this wrong?

• Public Policy: Yugraneft obtained the Award after Russian oligarchs used fraudulent Russian court proceedings and a machine-gun toting private army to take control of Yugraneft and initiate the arbitration. Leading experts say there is no possibility Rexx could get a fair hearing in the Russian courts to stop the oligarchs' illegal plot or overturn the Award. Is Yugraneft allowed to use Canadian courts to carry out the oligarchs' unlawful scheme?

45 Appellant's Record, Vol. I, p. 20, para. 8246 Appellant's Record, Vol. I, p. 20, para. 8347 Appellant's Record, Vol. I, p. 31, para. 33

- 10 -

III. ARGUMENT

A. The Limitation Period for Recognition and Enforcement has Expired

35. While Yugraneft at all times knew that Rexx was an Alberta corporation headquartered in

Calgary, Yugraneft did not attempt to enforce its Award in Alberta for over 3½ years. It has

provided no explanation for its delay. Pursuant to s. 3 of Alberta's Limitations Act,48 Yugraneft

is now out of time to bring its application to enforce its Award in Alberta.

1. The International Community Expects Limitations Laws to Apply

36. The international arbitration community understands and expects that each state will

impose its own limitation periods on applications to enforce international arbitration awards. As

one article on the Court of Appeal's decision in this case says, local limitation periods requiring

timely applications for recognition and enforcement of international awards "are not new and

have long been recognized as outside the scope of the New York Convention49 and within the

domain of local 'rules of procedure'."50 Redfern & Hunter, in their leading text on international

commercial arbitration, give this warning to arbitration practitioners:

Time-limits for the commencement of proceedings for the recognition and enforcement of an arbitral award are usually laid down in national legislation. Careful attention must be paid to such time-limits (and to any other time-limits contained in the rules of court of forum state). In this respect, it would be foolhardy not to consult an experienced local practitioner; and this applies as much to the party seeking recognition or enforcement of an award as it does to the party wishing to challenge an award.51 (emphasis added)

48 R.S.A. 2000, c. L-1249 The New York Convention, formally the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, has been incorporated into Alberta law as Schedule 1 to the International Commercial Arbitration Act, R.S.A. 2000, c. I-5 (ICAA)50 Wayne D. Gray and Robert Wisner, "The Russians Are Coming, But Can They Enforce Their Arbitral Award?" (2009), 47 Can. Bus. L.J. 244 (Gray & Wisner) at 265 [Respondent's Authorities Tab 36]; see also Compania Maritima Villa Nova S.A. v. Northern Sales Co., [1992] 1 F.C. 550 (C.A.) (Compania Maritima) at paras. 29-30 (eCarswell) [Respondent's Authorities Tab 14] 51 A. Redfern and M. Hunter, Law & Practice of International Commercial Arbitration, 4th Ed. (London: Sweet & Maxwell, 2004) (Redfern & Hunter) at 437–438 [Respondent's Authorities Tab 39]; see also Nicholas Pengelley, "Alberta Says Nyet! Limitation Act Declares Russian Arbitral Award DOA: Supreme Court to Give Kiss of Life?" (2009), 5 J. P. Int'l L. 105 (Pengelley) at 107 [Respondent's Authorities Tab 38]

- 11 -

37. The drafters of the UNCITRAL Model Law,52 in recognition of the right of each state to

enact its own limitation period, rejected a proposal to include a universal limitation period in that

international instrument, leaving it to each state to determine the limitation period for itself.53

These limitation periods vary widely among the signatories to the New York Convention.54 For

example:

a. In the United States, time-limits vary between states and the relevant limitation

period may be anything from one to three years.55 Federally, the United States

Code governs the enforcement of foreign arbitral awards and provides a limitation

period of three years, with no discoverability.56

b. In China, the limitation period is six months, 57

c. In the Netherlands, it is 20 years.58

d. British Columbia has specifically legislated the limitation period applicable to

recognition and enforcement of foreign arbitral awards: its Limitation Act defines

"local judgment" to include a foreign arbitral award and prescribes a 10 year

limitation period.59

2. Alberta Limitations Law Applies to Applications in Alberta

38. While Yugraneft might wish this Court could establish a common – and generous –

limitation period applicable throughout Canada, this would ignore the federal nature of the

52 Formally the Model Law on International Commercial Arbitration, adopted by the United Nations Commission on International Trade Law on June 21, 1985, and adopted in Alberta as Schedule 2 to the ICAA53 Report of the Working Group on International Contract Practices on the Work of its Sixth Session, reproduced in Yearbook of the United Nations Convention on International Trade Law, 1984, Volume XV, p. 155 at pp. 160-161 [Respondent's Authorities Tab 46]54 A.J. van den Berg, "Striving for Uniform Interpretation", Enforcing Arbitration Awards Under the New York Convention (New York: United Nations, 1999) at 42 [Appellant's Authorities Tab 43]; A.J. van den Berg (ed.), Y.B. Comm. Arb., Vol. XXVIII (2003), p. 645 [Respondent's Authorities Tab 44]; Pengelley at 106 [Respondent's Authorities Tab 38]55 Redfern and Hunter at 438 [Respondent's Authorities Tab 39]56 Title 9, ss. 201-208 [Respondent's Authorities Tab 4]57 Supra, note 5458 Supra, note 5459 Limitation Act, R.S.B.C. 1996, c. 266, ss. 1, 3(3)(f) [Respondent's Authorities Tab 2]

- 12 -

Canadian state. The focus here must ultimately be on Alberta law and how it applies in this

instance.

39. In Castillo, this Court recognized that "The Alberta legislature can, in relation to the

administration of justice in the province, determine the time limits within which the Alberta

courts can entertain actions, including live actions arising in a foreign jurisdiction governed by

the substantive law of that foreign jurisdiction."60 The Alberta Legislature has done so with s. 12

of the Alberta Limitations Act (the subject of this Court's decision in Castillo), which provides:

(1) The limitations law of the Province shall be applied whenever a remedial order is sought in this Province, notwithstanding that, in accordance with conflict of law rules, the claim will be adjudicated under the substantive law of another jurisdiction. (emphasis added)

40. The Alberta Legislature has thus chosen to make the expiry of an Alberta limitation

period a procedural bar61 to enforcement of an arbitration award in Alberta.

3. Alberta's Basic Two-year Discoverability and 10-year Ultimate Limitation Periods

41. The Alberta Limitations Act is intended to provide a comprehensive scheme for limitation

periods.62 The general limitation period is set out in s. 3 of the Limitations Act and provides for a

two-year limitation period in almost all circumstances, starting when the "injury" was

discoverable. If no discovery occurs, there is an "ultimate" limitation period of 10 years:

3(1) Subject to section 11, if a claimant does not seek a remedial order within

(a) 2 years after the date on which the claimant first knew, or in the circumstances ought to have known,

(i) that the injury for which the claimant seeks a remedial order had occurred,

(ii) that the injury was attributable to conduct of the defendant, and

60 Castillo v. Castillo, 2005 SCC 83 at paras. 5-6, citing s. 92(14) of the Constitution Act, 1867 (the administration of justice in the province) [Respondent's Authorities Tab 11]61 Gray and Wisner at 256-257 note that Tolofson v. Jensen [1994] 3 S.C.R. 1022, which classified limitations laws as substantive for certain purposes, does not affect the characterization of limitations laws as "rules of procedure" as contemplated in Article III of the Convention (discussed below) [Respondent's Authorities Tab 36]62 Subject to a specific limitation period prescribed by another statute, which does not exist here

- 13 -

(iii) that the injury, assuming liability on the part of the defendant, warrants bringing a proceeding,

or

(b) 10 years after the claim arose,

whichever period expires first, the defendant, on pleading this Act as a defence, is entitled to immunity from liability in respect of the claim.

42. Yugraneft concedes its application is for a "remedial order" under the Limitations Act.63

"Claimant" and "defendant" are simply defined to mean, respectively, the person who seeks a

remedial order, and the person against whom the remedial order is sought,64 and "injury" is

defined to include "non-performance of an obligation" and "the breach of a duty", both of which

describe the failure to pay an award.65

43. The Legislature intended that s. 3 would apply in nearly all circumstances to eliminate

the difficulties of the previous limitations regime, which had provided for different limitation

periods for different causes of action and circumstances. The Alberta Court of Appeal explains

this as follows:

A main purpose of the New Act was the simplification of limitations law, by the imposition of one period (two years) for nearly all causes of action. … debates in the Legislative Assembly repeatedly emphasized that the new legislation would simplify and clarify the system while eliminating inconsistencies and special treatment for certain defendants. …

Because the Old Act contained different limitation periods for different types of actions, courts sometimes had to characterize the cause of action in order to discern what limitation period applied. … The application of the Old Act became technical and difficult to predict.66

44. To better understand the Legislature's intentions in enacting the Limitations Act,67 the

Alberta courts frequently look to the Alberta Law Reform Institute's (the Institute) reports on

63 Appellant's Factum at para. 6564 s. 1(b) and (c)65 See Compania Maritima [Respondent's Authorities Tab 14]66 Daniels v. Mitchell, 2005 ABCA 271 (Daniels) at paras. 30-31 [Respondent's Authorities Tab 15]67 Enacted as the Limitations Act, S.A. 1996, c. L-15.1

- 14 -

the amendment of Alberta's limitations regime.68 The Institute's goal in enacting s. 3 was to have

all claims subject to a single approach, combining discoverability with an ultimate "drop-dead"

rule.69 In establishing this single approach, the Institute recognized that it would apply to the

enforcement of foreign judgments, which have always been enforced as "actions upon a debt."70

45. Where a party seeks the Alberta courts' assistance in recognizing and enforcing an

international arbitral award, the two-year limitation period in s. 3 will begin to run when that

party knows or ought to know there has been a "non-performance of an obligation", and that this

"non-performance" warrants bringing a proceeding in Alberta.71 In keeping with the contractual

nature of arbitration, "non-performance" occurs for limitations purposes when a party to an

arbitration fails to comply with the terms of the arbitral award. As the Federal Court of Appeal

has noted,

[T]he courts have had no difficulty in finding that parties to an arbitration submission impliedly agree to honour an award and … this agreement affords a foundation for enforcing the award in the ordinary courts. The award coupled with an implied promise to pay it creates a fresh cause of action.72

46. The 10-year "ultimate" period would run from the date of the award. The limitation

period for enforcement is therefore between 2 and 10 years, depending on when discoverability

(discussed below) occurs.

68 The Alberta Court of Appeal noted the special importance of the Institute reports in the interpretation of Alberta's Limitations Act at para. 29 of Daniels. The Institute's recommendations were published in two reports: Limitations (Report for Discussion No. 4) (Edmonton: Institute of Law Research and Reform, 1986) (1986 Report) [Respondent's Authorities Tab 31] and Limitations (Report No. 55) (Edmonton: Alberta Law Reform Institute, 1989) (1989 Report) [Appellant's Authorities Tab 40]69 1986 Report at 141 [Respondent's Authorities Tab 31]70 1986 Report at 197-198 [Respondent's Authorities Tab 31]71 See the similar discussion in Gray & Wisner at 258 [Respondent's Authorities Tab 36]72 Compania Maritima at para. 20 (eCarswell) [Respondent's Authorities Tab 14]; see also Agromet Motoimport v.Maulden Engineering Co. (Beds.) Ltd., [1985] 1 W.L.R. 762 (Q.B.D.) at 772: "In my judgment, the action on the award and the action to enforce an award is an independent cause of action. It is distinct from and in no way entangled with the original contract or the breach occurring from it, as reflected in the award. … In my view, therefore, there is such an implied term that an award will be honoured when it is made … if the award is not honoured, there is a breach of that implied term and time begins to run for the purposes of the Limitation Act." [Respondent's Authorities Tab 5]

- 15 -

4. Section 11 Does Not Apply to Arbitration Awards

47. In order to escape the two-year discoverability period that the Legislature intended to

apply to all claims, Yugraneft argues that its application is to enforce a "judgment or order for

the payment of money" under s. 11 of the Limitations Act and is therefore subject to a 10-year

limitation period. (Because the law does not support its position, Yugraneft also says this Court

should change the law in its favour, despite a clear legislative intent to leave the law unchanged.)

The most obvious problem with this argument is that s. 11 says nothing about " awards" at all:

11 If, within 10 years after the claim arose, a claimant does not seek a remedial order in respect of a claim based on a judgment or order for the payment of money, the defendant, on pleading this Act as a defence, is entitled to immunity from liability in respect of the claim.

a. An "Award" is not a "Judgment" or "Order"

48. Courts issue "judgments" and "orders"; arbitrators issue "awards." And an award is not a

judgment, as Bastarache and LeBel JJ noted in Dell Computer Corp.:

134 One of the major differences between courts and arbitration is that contractual arbitrators are not representatives of the state, but, rather, are privately appointed. On account of this, whether an arbitration is situated in Quebec or not, in order for an arbitral award to be legally enforceable, the laws of Quebec require the decision to first be recognized by Quebec courts. There is no difference here with how judgments from foreign courts must first be recognized before having force of law in the province. This is noted by R. Tremblay in "La nature du différend et la fonction de l'arbitre consensuel" (1988), 91 R. du N. 246, at p. 252:

[TRANSLATION] However, care must be taken not to confuse the judicial function with the arbitration function. Judges derive their jurisdiction from a state's foundational institutions. Arbitrators, on the other hand, derive their jurisdiction from the mutual agreement of the parties. The difference is an important one. An arbitrator is chosen and appointed by the parties and is not a representative of the state. Arbitrators may rule on disputes, but their decisions are not enforceable unless they are homologated; unlike a judgment, an arbitrator's decision is not enforceable on its own. (emphasis added) 73

73 Dell Computer Corp. v. Union des consommateurs, 2007 SCC 34 at para. 134 [Respondent's Authorities Tab 16]

- 16 -

b. Alberta Legislature Distinguishes Between "Awards" and "Judgments"

49. Section 11 must be interpreted in accordance with the principles of statutory

interpretation, the most basic of which is that:

[T]he words of an Act are to be read in their entire context, in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament [or the Legislature].74

50. This "entire context" includes "any other legislation that may cast light on the meaning or

effect of the words."75 As noted by Ruth Sullivan in her leading text on statutory interpretation:

The legislature is presumed to know its own statute book and to draft each new provision with regard to the structures, conventions, and habits of expression as well as the substantive law embodied in existing legislation.76

51. Alberta legislation distinguishes between "judgments" on the one hand, and "awards" on

the other. Nowhere does Alberta legislation describe the documents issued by arbitrators as

"judgments". Alberta legislation is consistent in referring to these documents as "awards", as are

all international conventions on the subject.77 There is nothing that warrants a departure from

this pattern of descriptions, so that "judgment" is interpreted to include an "award" in s. 11 of the

Limitations Act but nowhere else in the statute book.

52. Where the Alberta Legislature wishes to expand the definition of "judgment" to include

an arbitral award, it does so expressly. For example, Alberta's Reciprocal Enforcement of

Judgments Act defines "judgment" as follows:

(b) "judgment" means a judgment or order of a court in a civil proceeding whereby a sum of money is made payable, and includes an award in an arbitration proceeding if the award, under the law in force in the jurisdiction

74 Bell ExpressVu Limited Partnership v. Rex, [2002] 2 S.C.R. 559 (Bell ExpressVu) at para. 26 [Respondent's Authorities Tab 8], adopting Driedger; see also Ruth Sullivan, Sullivan on the Construction of Statutes, 5th ed. (Markham: LexisNexis, 2008) (Sullivan) at 1 [Respondent's Authorities Tab 42]75 Sullivan at 411 [Respondent's Authorities Tab 42]76 Ibid.77 See, for example, the wording of the ICAA, including the appended New York Convention and Model Law; the Alberta Arbitration Act, R.S.A. 2000, c. A-43 [Appellant's Authorities Tab 1]; and the Alberta Reciprocal Enforcement of Judgments Act, R.S.A. 2000, c. R-6 (REJA), s. 1(1)(b) [Respondent's Authorities Tab 3]

- 17 -

where it was made, has become enforceable in the same manner as a judgment given by a court in that jurisdiction, but does not include …78 (emphasis added)

53. This makes it very clear that an "award" is not the same thing as a "judgment". It also

draws a distinction awards in general and those awards that have "become enforceable in the

same manner as a judgment given by a court." Both of these distinctions show that the

Legislature did not intend to include international arbitral awards within the phrase "judgment or

order for the payment of money."

54. Because the Legislature is presumed to know its statute book, it is presumed that the

Legislature does not intend to contradict itself; on the contrary, it is presumed to create coherent

schemes. Therefore, the Courts should adopt interpretations that avoid the possibility of conflict

or incoherence among different enactments.79

55. But if Yugraneft is right, and s. 11 applies to international arbitration awards, there is an

incoherent limitations scheme for enforcement of arbitral awards in Alberta. Section 11 cannot

apply to domestic arbitration awards, because their limitation period is governed by another

statute (two years under the Arbitration Act).80 Section 11 would also not apply to certain

awards issued in "reciprocating jurisdictions" under REJA, which has its own limitation period

(six years).81

56. So the result of what Yugraneft is saying is that "judgment or order for the payment of

money" really means "judgment or order for the payment of money AND foreign awards BUT

NOT domestic awards AND NOT foreign awards from reciprocating jurisdictions." There are

many words that might describe such a scheme: "coherent" is not one of them.

57. And there are other difficulties with Yugraeft's proposed reading of s. 11:

78 [Respondent's Authorities Tab 3]79 Sullivan at 412 [Respondent's Authorities Tab 42]80 Section 51 [Respondent's Authorities Tab 1]81 Section 2(1) [Respondent's Authorities Tab 3]

- 18 -

a. it would also result in foreign awards receiving more favourable treatment in

Alberta than awards granted in Alberta or elsewhere in Canada,82 and even more

favourable treatment than certain awards granted in reciprocating jurisdictions.83

There is no policy reason, and no legislative suggestion, that this should be the

case.

b. it would create significant difficulty in determining the limitation period

applicable to some international awards, as the Court would then be required to

determine whether the award in question dealt with "the payment of money" or

something else (for example, an award setting rates under a long-term contract, an

award determining that a right of first refusal had been triggered, etc.).

58. There is another way to read s. 11, and it is a reading that the words will reasonably bear:

perhaps what the Legislature meant by "judgment or order" in s. 11 was "judgment or order" and

nothing else.

B. Policy Reasons to Apply the Section 3 Limitation Period

59. There is no legislative support, and no other authority, that would suggest a foreign

arbitral award is equivalent to a domestic judgment for limitations purposes. In fact, there are

good policy reasons for applying the two-year discoverability limitation period to enforcement of

a foreign award.

60. A foreign award is subject to attack through the use of extrinsic evidence, for example to

show that the arbitration agreement was invalid, or that the arbitrators did not follow the agreed-

upon procedure, or one of the other grounds mentioned in Article V of the New York Convention

or Article 36 of the Model Law. According to Castel and Walker, the policy concerns that lie

behind limitation periods relating to the preservation of evidence equally apply in the case of

enforcement of a foreign judgment (and, analogously here, to an international arbitration

82 The Alberta Arbitration Act, s. 51 imposes a 2-year limitation period on applications to enforce these awards, with no provision for discoverability [Respondent's Authorities Tab 1]83 Awards that have "become enforceable in the same manner as a judgment given by a court" in a reciprocating jurisdiction face a limitation period of six years under the Reciprocal Enforcement of Judgment Act, s. 1(1)(b) [Respondent's Authorities Tab 3]

- 19 -

award).84 A domestic judgment, however, is not open to attack on these types of grounds and so

a longer 10-year limitation period is appropriate.

61. A longer limitation period would also open the door to fraud – for example, in a situation

where a party claims to have an award from a foreign arbitrator against a corporation whose

employees from the time period in question have all retired, so that there are no current

employees who can say whether the award is authentic or not, or whether the defences to

enforcement might apply. (Unlike judgments, there is no "central registry" for awards that these

employees could check.) These are the same concerns about timeliness, fairness and the

preservation of evidence that led to the enactment of limitations statutes in the first place. The

task of balancing these considerations, and of balancing the rights of plaintiffs and defendants, is

a legislative, not a judicial, choice.85

C. No Conflict Between Section 3 of Limitations Act and Convention

62. International arbitrations are ultimately contractual in nature: an agreement between the

parties to arbitrate the relevant dispute is a necessary pre-requisite.86 The popularity of

international arbitration arises in part from its function in allowing international business to

avoid the corruption perceived to be extant in some state judicial systems, which might favour

the local player over the international one or make determinations based on bribery and

corruption rather than law.

63. To provide for the enforcement of international arbitration awards in states other than the

seat (or "place") of the arbitration, on June 10, 1958, the United Nations Conference on

International Commercial Arbitration adopted the Convention on the Recognition and

Enforcement of Foreign Arbitral Awards (the New York Convention). The New York

Convention has now been acceded to by the vast majority of states, including Canada.87

84 Castel, Jean-Gabriel and Janet Walker, Canadian Conflict of Laws (6th Ed.) (Toronto: Butterworths, 2005) at §15.5.a [Respondent's Authorities Tab 32]85 Novak v. Bond, [1999] 1 S.C.R. 808 at para. 66 [Appellant's Authorities Tab 27]86 New York Convention, Article II(1), Schedule 1 to the ICAA87 United Nations Commission on International Trade Law, "Status – 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards" [Respondent's Authorities Tab 43]

- 20 -

64. Alberta adopted the New York Convention, along with the Model Law on International

Commercial Arbitration (the Model Law), in 1986 through the International Commercial

Arbitration Act (ICAA).88 The New York Convention is appended at Schedule 1 of the ICAA,

while the Model Law is appended at Schedule 2.

65. Article III of the New York Convention provides that international arbitral awards must

be enforced in accordance with local procedure:

Each Contracting State shall recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon, under the conditions laid down in the following articles. There shall not be imposed substantially more onerous conditions … on the recognition or enforcement of arbitral awards to which this Convention applies than are imposed on the recognition or enforcement of domestic arbitral awards.89 (emphasis added)

66. The leading texts on international arbitration explicitly recognize Article III provides that

local limitation periods are part of these "Rules of Procedure",90 as did the drafters of the Model

Law.91

67. Article III of the New York Convention requires that the procedures to enforce

international arbitral awards "shall not be substantially more onerous" than those imposed on the

recognition or enforcement of domestic arbitral awards. As noted above, Alberta's domestic

Arbitration Act provides a two-year limitation period for domestic awards, with no provision for

discoverability.92 The limitation period for international awards of up to 10 years (depending on

the discoverability date) under the Limitations Act is substantially less onerous than the one

imposed on domestic arbitral awards.

88 Now R.S.A. 2000, c. I-589 Schedule 1 to the ICAA, Appellant's Authorities, Tab 19, p. 790 Redfern and Hunter [Respondent's Authorities Tab 39]; A.J. van den Berg, "Striving for Uniform Interpretation", Enforcing Arbitration Awards Under the New York Convention (New York: United Nations, 1999) at 42 [Appellant's Authorities Tab 43]91 Working Group on International Contract Practices, Report of the Working Group on International Contract Practices on the Work of its Sixth Session, reproduced in Yearbook of the United Nations Convention on International Trade Law, 1984, Volume XV, p. 155 at pp. 160-161 [Respondent's Authorities Tab 46]92 Section 51 [Respondent's Authorities Tab 1]

- 21 -

68. There is therefore nothing about the New York Convention that requires this Court to

interpret the Alberta Limitations Act in a way that exempts applications to enforce international

awards from s. 3 of the Act.

D. Discoverability Ensures Adequate Time to Discover Assets

69. Yugraneft argued in the Court of Appeal that the s. 11 limitation period should be applied

because the s. 3 limitation period was too short. In particular, Yugraneft argued that two years

was not enough time for a claimant to discover the presence of assets in Alberta. The Court of

Appeal rightly noted that the discoverability principle built into s. 3 is a complete answer to this

concern: "Section 3 of the Limitations Act may answer the appellant's concerns as it provides for

a limitation period of two years after the claimant knew or ought to have known that the

judgment or order needs to be enforced in a foreign jurisdiction."93

70. What does this mean? The two-year period does not start to run until the claimant knows

or "ought to know" that its claim "warrants bringing a proceeding" in Alberta.94 As the Court of

Appeal noted, a claim to enforce an international award in Alberta would never be "warranted"

until the claimant knows (or ought to know) that there may be assets here to enforce against.95

71. The test for determining what a claimant "ought to have known" under Alberta's

Limitations Act is whether the claimant has exercised reasonable diligence in relation to the three

factors in s. 3(1)(a).96 The state of knowledge required to commence the running of a limitations

period is somewhere between mere suspicion and perfect knowledge. The Alberta Court of

Appeal summarized the law on this point in Nasrin Karim Professional Corp. v. Bank of Nova

Scotia:

The principle of discoverability does not require perfect knowledge; De Shazo v. Nations Energy Company Ltd.,, 2005 ABCA 241, 367 A.R. 267 at para. 31. Mere suspicion is not sufficient to trigger the running of a limitation period, the plaintiff can be said to have "known" of the claim only when he has some support for his

93 at para. 27 (Appellant's Record, Vol. I, p. 30)94 Limitations Act, s. 3(1)(a)(i)-(iii)95 See also John J. Chapman and Maanit Zemel, "More (Unanswered) Questions on the New Limitations Act, 2002" (2009), 35(4) Advocates' Q. 499 at 512–14 [Respondent's Authorities Tab 33]96 James H. Meek Trust v. San Juan Resources Inc., 2005 ABCA 448 at para. 21 [Respondent's Authorities Tab 19]

- 22 -

suspicion: Photinopoulos v. Photinopoulos (1988), 92 A.R. 122, at para. 26(C.A.).97 (emphasis added)

72. The Alberta Court of Appeal has also considered the meaning of the term "warrants

bringing a proceeding" in the context of the Limitations Act:

The critical question is whether the Respondent knew in 1994 that the injury warranted bringing a proceeding within the meaning of s. (3)(1)(a)(iii). To "warrant" is defined in Webster's Third New International Dictionary of the English Language, Unabridged … as follows: "to serve as or give sufficient ground or reason for: require or permit as a consequence: justify." We do not construe s. 3(1)(a)(iii) in a narrow economic sense confined to monetary considerations … 98 (emphasis added)

73. Applying similar discoverability rules, the Ontario Court of Appeal in Lax v. Lax

concluded that knowledge (or presumed knowledge) of the judgment debtor's residence in

Ontario was necessary before the limitation period for enforcement of a foreign judgment would

begin to run.99

74. While it is an interesting topic that provides context to the limitations rules at play here,

the manner in which the law of discoverability should be applied to applications to enforce an

international award is not at issue in this case. Yugraneft at all times knew that Rexx is an

Alberta corporation, and Yugraneft has introduced no evidence to meet its statutory burden of

proof100 to show that the existence of assets in this jurisdiction was not discoverable at the time

the Award was issued.

75. As a result, in this case the two-year limitation period began to run when the Award was

issued, and had expired by the time Yugraneft actually sought to enforce its award in Alberta

some 3½ years later. The precise content of the discoverability rules in arbitration cases can

therefore be left to determination in future cases where discoverability is actually in issue.

97 Nasrin Karim Professional Corp. v. Bank of Nova Scotia, 2007 ABCA 10 at para. 56 [Respondent's Authorities Tab 22]98 N. (J.) v. Kozens, 2004 ABCA 394 at para. 11 [Respondent's Authorities Tab 21]99 (2004), 186 O.A.C. 20 at paras. 37-40 [Appellant's Authorities Tab 25]100 Limitations Act, s. 3(5)(a)

- 23 -

E. Not Time to Change Law Relating to Foreign Judgments

76. As an alternative way of trying to shoehorn its claim into s. 11 rather than s. 3, Yugraneft

says that this Court should (1) change the long-standing interpretation of "actions upon a

judgment" to include foreign judgments; (2) change the manner in which foreign judgments are

recognized and enforced; and then (3) apply this new law, by analogy, to foreign arbitration

awards.

77. This issue does not really arise in this Appeal. Foreign judgments and foreign arbitration

awards are not the same thing. Unless this Court decides they are (a tremendous leap of logic for

which Yugraneft cites no authority), this issue does not need to be decided here at all.

78. Even if the issue does arise, many recent cases recognize that a change of this nature is so

significant it would have to be made by legislative action, not by judicial amendment of the

Limitations Act.

1. Presumption of Legislative Intention to Make No Change

79. The new Limitations Act did not reform the limitation period applicable to "actions on a

judgment", which has a long-established judicial meaning.101 This Court has held that "a

Legislature is not presumed to depart from the general system of the law without expressing its

intention to do so with irresistible clearness, failing which the law remains undisturbed."102

80. There is no such "irresistible clearness" here. On the contrary, s. 11 is nearly identical to

s. 4(1)(f), its predecessor in Alberta's Limitation of Actions Act, which read:

4(1) The following actions shall be commenced within and not after the time respectively hereinafter mentioned: …

101 The Ontario Court of Appeal in Lax [Appellant's Authorities Tab 25] at paras. 11-25, discussed the long-standing interpretation of "action upon a judgment" and the equally long-standing principle that foreign judgments are enforced as actions upon a debt for limitation purposes, tracing the latter principle back to this Court's decision in Rutledge v. United States Savings & Loan Co. (1906), 37 S.C.R. 546 [Appellant's Authorities Tab 33]102 Goodyear Tire & Rubber Co. of Canada Ltd. v. T. Eaton Co., [1956] S.C.R. 610 at 614, as cited in Parry Sound, infra [Respondent's Authorities Tab 27]

- 24 -

(f) actions on a judgment or order for the payment of money, within 10 years after the cause of action thereon arose; …103

81. Traditionally, the common law rule was that judgments expired after a relatively short

period of time. Statute modified this rule, creating an "action upon a judgment". The Statute of

Westminster, passed in 1285, authorized the issuance of a new judgment when the old one had

expired by bringing an action based upon the original judgment.104 Limitation periods on these

types of actions began to be introduced in 1833 and procedural changes were made over the

years to simplify the procedure for bringing an action on a judgment.105

82. The limitation period for "actions on a judgment" in various Canadian limitations statutes

has historically been interpreted to mean actions on a domestic judgment.106 Actions to enforce

foreign judgments have always been regarded as actions on a debt, and so courts (including this

Court) have applied the limitation period for debt actions to actions to enforce foreign

judgments. The fact that the Legislature re-enacted s. 11 without change gives rise to a

presumption that the Legislature did not intend to change the meaning of s. 11 to include foreign

judgments (or foreign arbitral awards). As Iaccobucci J. put it in Parry Sound:

To begin with, I think it useful to stress the presumption that the legislature does not intend to change existing law or to depart from established principles, policies or practices. In Goodyear Tire and Rubber Co. of Canada v. T. Eaton Co., [1956] S.C.R. 610, at p. 614, for example, Fauteux J. (as he then was) wrote that the "legislature is not presumed to depart from the general system of the law without expressing its intentions to do so with irresistible clearness, failing which the law remains undisturbed". In Slaight Communications Inc. v. Davidson, [1989] 1 S.C.R. 1038, at p. 1077, Lamer J. (as he then was) wrote that: "In the absence of a clear provision to the contrary, the legislator should not be assumed to have intended to alter the pre-existing ordinary rules of common law."107

83. This presumption is not overcome here because the wording of s. 11 of the Limitations

Act is identical to s. 4(1)(f) of the former Act, signalling a legislative intention to leave

103 1986 Report at 191 [Respondent's Authorities Tab 31]104 1986 Report at 186-187 [Respondent's Authorities Tab 31]105 This history is surveyed in the Institute's 1986 Report at 186-193 [Respondent's Authorities Tab 31106 Supra, note 101107 Parry Sound (District) Social Services Administration Board v. O.P.S.E.U., Local 324, [2003] 2 S.C.R. 157 at para. 39 [Respondent's Authorities Tab 27]

- 25 -

unchanged the common law that "judgment" in s. 11 and its predecessors means a domestic

judgment only.

2. Institute Did Not Recommend Change

84. The Appellant's suggestion that the Institute intended, by using language identical to

s. 4(1)(f) of the previous Act, to change the law to include foreign judgments and arbitral awards

in s. 11 is also not supported by a careful review of the Institute's reports:

a. The Institute originally recommended removing s. 4(1)(f) from the new Act as it

believed it was "overkill" for the Limitations Act to extinguish a judgment at the

end of the 10 year period.108 Instead of s. 4(1)(f), the Institute recommended

modifying the Alberta Rules of Court to allow new judgments to be issued in

order to ensure that Alberta judgments could continue to be enforced in foreign

jurisdictions. 109

b. However, the Institute did not ultimately adopt its tentative recommendation to

eliminate s. 4(1)(f). The 1986 Report was issued for comment, and three years

later the Institute changed its position and recommended the re-enactment of

s. 4(1)(f) as s. 11.110 In explaining this change, the Institute said the new Act

would "continue the requirement, in s. 4(1)(f) of the present Alberta Act".111 It

also recommended against changing the law in this area, saying "abolishing the

common law action on a judgment would interfere with the enforcement of

judgments or orders granted in jurisdictions that are not recognized under

reciprocal enforcement legislation in Alberta."112

c. The continuing distinction between an action on foreign and domestic judgments

is made clear from a review of the Institute's 1986 Report, which clearly

expresses its intention not to change the limitation period applicable to foreign

108 1986 Report at 193 [Respondent's Authorities Tab 31]109 1986 Report at 196 [Respondent's Authorities Tab 31]110 Section 11 is a near-exact duplicate of the language recommended in the Institute's 1989 Report: the only difference is that the Legislature used "on" in the place of "upon" [Appellant's Authorities Tab 40]111 1989 Report at 42 [Appellant's Authorities Tab 40]112 1989 Report at 42-43 [Appellant's Authorities Tab 40]

- 26 -

judgments: "An action on a foreign judgment in Alberta is treated as an action on

a simple contract debt. As such, it will be subject to the new Alberta Act."113

3. This Court Should Not Change the Meaning of Section 11

85. The law since at least 1906114 has been that the limitation period for actions to enforce a

foreign judgment is the same as the limitation period for breach of contract, the rationale being

that the foreign judgment creates an implied promise to pay, the breach of which gives rise to an

action in contract. This Court recently reaffirmed that this continues to be the law in Pro Swing

Inc. v. Elta Golf Inc.115 where the Court said:

The foreign judgment is evidence of a debt. All the enforcing court needs is proof that the judgment was rendered by a court of competent jurisdiction and that it is final, and proof of its amount. The enforcing court then lends its judicial assistance to the foreign litigant by allowing him or her to use its enforcement mechanisms. Professor Vaughan Black explains the consequences of recognition and enforcement of a money judgment at common law in Enforcement of Foreign Non-Money Judgments: Pro Swing v. Elta (2006), 42 Can.Bus.L.J. 81, at p. 89:

That is, [the Canadian court] always uses its own rules on such matters as the availability of garnishment, the effect of garnishment on employment, the effect of a payment into court, the date of conversion from a foreign currency into the local money, and the proper procedure for seizure and attachment. Likewise, even when enforcing a money judgment from [a foreign court, the Canadian court] employs its own exemptions legislation, its own rules for controlling competition among judgment creditors, and its own rules on post-judgment interest. In short, when a Canadian court recognizes a foreign judgment that says the defendant must pay the plaintiff a sum of money, that foreign judgment is simply evidence of a debt. The recognizing court goes about collection (or limiting collection) of that debt in its own way. (bold emphasis added, italic emphasis in original)

86. This same principle has been confirmed by all three of the provincial appellate courts that

have considered it in recent years: Ontario,116 Alberta (in this case), and Nova Scotia.117

113 1986 Report at 197-198 [Respondent's Authorities Tab 31]114 Rutledge v. U.S. Savings and Loan Co., [1906] 37 S.C.R. 546 [Appellant's Authorities Tab 33]; see also Livesley v. E. Clemens Horst Co., [1924] S.C.R. 605 at para. 12 [Respondent's Authorities Tab 20]115 2006 SCC 52, [2006] 2 S.C.R. 612 at para. 11 [Appellant's Authorities Tab 31]116 Lax v. Lax (2003), 70 O.R. (3d) 520 (C.A.) [Appellant's Authorities Tab 25]

- 27 -

Similarly, the Institute, which extensively studied and drafted Alberta's new Limitations Act, said

it did not intend to change the long-standing judicial interpretation of "judgment or order for the

payment of money" as excluding foreign judgments.

a. Girsberger Wrongly Decided

87. Yugraneft says this law should change. It relies on Girsberger,118 a case that was

overruled by the Ontario Court of Appeal in Lax and has not been followed by other Canadian

courts. Leading academic writers also say that Girsberger was wrongly decided. Professor

Castel says in the latest edition of his text:

A foreign judgment is regarded as creating a debt between the parties to it, which is said to be based on the judgment debtor's implied promise to pay the amount of the foreign judgment; this explanation describes the sense in which any lis between the parties regarding liability or the amount owing has been resolved by the court that issued the judgement and is not subject to re-litigation in an enforcement proceeding. The debt so created is a simple contract debt and not a speciality debt, and it is subject to the appropriate limitation period. This characterization was challenged in a 2000 decision [citing Girsberger] that suggested that foreign judgments should be treated like local judgments for the purposes of the limitation periods that apply to enforcing them. However, the Court of Appeal for Ontario has since held that a distinction between them was an appropriate one based on: the historical distinction made between foreign and domestic judgments for limitations purposes; the consistency of the limitations period on an action for debt with the limitations period in the statutory schemes for registering judgments; and the rationale that the process for enforcing foreign judgments is different from the process for enforcing local judgments. The last of these rationales is particularly compelling. The defences to foreign judgments are rarely invoked and are even more rarely successful, but they distinguish foreign judgments from local judgments, against which the sole recourse is an appeal.119 (emphasis added)

88. Girsberger's suggestion that the limitation period for recognition and enforcement of

foreign judgments should be changed was made in obiter, as the Court found that Ontario

limitations law did not apply in any event.120 And in Lax, the Ontario Court of Appeal went

117 Ross Ritchie Ltd. v. Sydney Steel Corp., 2001 NSCA 100 [Respondent's Authorities Tab 28]118 Girsberger v. Kresz (2000), 47 O.R. (3d) 145 (Sup. Ct.) [Appellant's Authorities, Tab 22]119 Castel and Walker, Canadian Conflict of Laws (6th Ed.) (Toronto: Butterworths, 2005) at §14.3 [Respondent's Authorities Tab 32]120 at para. 55 [Appellant's Authorities Tab 22]; see also Girsberger v. Kresz (2000), 143 O.A.C. 228 at paras. 11-12 [Respondent's Authorities Tab 18]

- 28 -

further and explicitly overruled Girsberger, rejecting the suggestion that the phrase "action upon

a judgment" in the Ontario Limitations Act should be interpreted to include a foreign judgment

(the same argument Yugraneft is making here).121

89. The Banque Nationale case122 is the only Canadian case that purports to follow

Girsberger. But it did so before Girsberger was overruled in Lax. And the consideration of the

limitations issue in Banque Nationale was obiter: the Alberta Court of Appeal made that clear

when it heard the appeal in Banque Nationale and held that Quebec limitations law applied, so

that any consideration of Girsberger was unnecessary.123

90. In Lax, also interpreting "actions upon a judgment", the Ontario Court of Appeal

correctly recognized that the issue before it was not about changing a common-law rule, but

rather about overriding a long-standing interpretation of a statute:

For me, the question raised in this appeal is whether there are circumstances that make it appropriate for the court to reinterpret provisions of a statute that have been given a particular meaning and application over a very long period of time.124

91. Citing Sullivan's text on statutory interpretation, the Lax Court concluded:

In my view, although there is merit in the philosophical approach advocated by Cumming J. [in Girsberger], in order to achieve the type of parity between domestic and foreign judgments that he is advocating, more significant changes must be made to the enforcement scheme than interpreting "judgment" in [the equivalent of s. 11] to include a foreign judgment. This would require legislative action.125

92. Three other lower courts that have refused to follow Girsberger explicitly acknowledge

that a change to the limitation period for enforcement of foreign judgments would require

121 at para. 31 [Appellant's Authorities Tab 25]122 Banque Nationale de Paris (Canada) v. Opiola (2000), 78 Alta. L.R. (3d) 92 (Q.B.) [Appellant's Authorities Tab 14]123 Banque Nationale de Paris (Canada) v. Opiola, 2001 ABCA 25 at para. 40 [Respondent's Authorities Tab 7]124 at para. 17 [Appellant's Authorities Tab 25]125 Lax at para. 31 [Appellant's Authorities Tab 25]

- 29 -

legislative, and not judicial, action.126 This is the same approach taken in several articles about

the Court of Appeal's decision in this case, all of which point out that the solution to any

problems created by applying domestic limitation periods to international awards must be

legislative, not judicial.127

b. Girsberger Rationale Not Persuasive

93. In any event, the reasons given for changing the law in Girsberger do not stand up to

careful scrutiny. One of these reasons was that in Morguard, this Court elevated the value to be

given to the principle of comity.128 Yet comity is about whether the domestic court should

recognize the foreign court's sovereignty within its own borders; it has nothing to do with how

long a litigant should have to bring the foreign court's judgment to the domestic forum for

recognition and enforcement.

94. And the other reason given in Girsberger, that "Canadian courts must move away from

the idea that foreign judgments must be re-litigated",129 is even harder to understand. It is not the

law of Canada that foreign judgments must be "re-litigated" on their merits before they will be

enforced. And limitation periods have nothing to do with "re-litigation" of foreign judgments at

all: they are simply a reflection of a policy decision that because there are defences and

procedural steps with respect to foreign judgments (and foreign arbitral awards) that do not exist

with respect to domestic ones (a distinction no court can abolish), a different limitation period

applies to the two types of judgments.

95. In any event, comity is a principle that courts use to recognize the limits of their

territorial jurisdiction and respect the territorial jurisdiction of other courts.130 It is not a

principle that applies at all with respect to foreign arbitration awards, which ultimately derive

their legitimacy from private commercial contracts.

126 Pollier v. Leushway, 2006 N.S.S.C. 165 at para. 25 and 26 [Appellant's Authorities Tab 30]; Girsberger v. Kreesz (2000), 151 Man. R. (2d) 17 (Q.B.); Canada Mortgage and Housing Corp. v. Horsfall, 2004 MBQB 124 at para. 13 [Respondent's Authorities Tab 10]127 A.J. van den Berg, "Striving for Uniform Interpretation", Enforcing Arbitration Awards Under the New York Convention (New York: United Nations, 1999) at 42-44 [Appellant's Authorities Tab 43]; Pengelley at 124 [Respondent's Authorities Tab 38]; Gray and Wisner at 263-264 [Appellant's Authorities Tab 36]128 Girsberger, supra, at para. 48 [Appellant's Authorities Tab 22]129 Ibid.130 Morguard [1990] 3 S.C.R. 1077 at para. 31 (eCarswell) [Appellant's Authorities Tab 26]

- 30 -

F. Enforcement of Yugraneft's Award Would Violate Public Policy

96. Yugraneft's failure to comply with the applicable limitation period is not the only reason

for this Court to refuse recognition and enforcement. A mountain of uncontroverted evidence

shows that the Award was obtained as part of a large scale scheme of fraud and criminal activity

on the part of TNK and the Russian oligarchs who control it (and who control the Russian

Arbitrazh Courts). If the Chambers Judge had allowed Yugraneft to enforce its Award in

Alberta, he would have been allowing TNK and its unlawfully acquired subsidiary, Yugraneft, to

use the Alberta courts to carry out the fraud they started in Russia.

97. If this Court allows this Appeal on the limitations issue, there are three ways this Court

can deal with the public policy issue:

a. the Court can decide the issue in Rexx's favour given Yugraneft's failure to

answer any of Rexx's evidence of fraud and corruption,

b. the Court can direct a trial of the issue before the Alberta Court of Queen's Bench,

or

c. the Court can stay enforcement of the Award pending the outcome of the RICO

case in the United States, which raises many of the same factual issues as the

public policy arguments in this case.

1. The New York Convention and Defences to Enforcement

98. Both the New York Convention and the Model Law say that any court asked to recognize

and enforce an award may refuse to do so if the party against whom the award is invoked was

unable to present its case, or if enforcement would be contrary to the public policy of the

domestic forum. The New York Convention states it this way in Article V:

1. Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that:

a) The party against whom the award is invoked … was otherwise unable to present his case;

…

- 31 -

2. Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought, finds that:

a) the subject matter of the difference is not capable of settlement by arbitration under the law of that country; or

b) the recognition or enforcement of the award would be contrary to the public policy of that country.

2. Rexx was Unable to Present its Case

99. The New York Convention is applicable only where the parties have agreed to arbitrate.

Article II provides:

1. Each Contracting State shall recognize an agreement in writing under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration.

2. The term "agreement in writing" shall include an arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams.

100. In this case, Rexx believed the "agreement in writing" between it and Yugraneft was

unenforceable for two reasons: (1) the agreement referred to an arbitration tribunal that did not

exist; and (2) the agreement had been frustrated and rendered void as a result of TNK's illegal

takeover of Yugraneft.

101. Rexx was able to present its argument on the first ground to the arbitration panel in

Russia,131 but the evidence shows its only right of appeal was to a hopelessly corrupt court. And

there is conflicting evidence on whether Rexx was denied a hearing to argue the second

ground.132 At a minimum, there must be a judicial determination of this factual issue before any

Canadian Court can enforce this Award.

131 Appellant's Record, Vol. II, pp. 119-123132 Respondent's Record, Vol II, pp. 269-277

- 32 -

3. Enforcement of Award Contrary to Public Policy

102. In addition, this Court should refuse to enforce the Award on public policy grounds. In

Beals, this Court said an assessment by the Canadian Court of whether recognition and

enforcement would be contrary to Canadian public policy is mandatory.133

103. Article V of the New York Convention and Article 36 of the Model Law do not put the

burden of proving a violation of public policy on the party resisting enforcement. Public policy

may be invoked "if the court finds that recognition or enforcement of the award would be

contrary to public policy." This differs from Article 36(1)(a) of the Model Law and Section 1 of

Article V of the New York Convention (bias, excess of jurisdiction etc.), where the defendant

must "furnish to the competent authority … proof" of the ground relied on. This difference

emphasizes that the Court must make its own independent evaluation of public policy

considerations when asked to enforce an award.

104. The categories of public policy are not closed. In the UNCITRAL Report, which is an

interpretive aid to the Model Law,134 the Committee said about the public policy defence:

296. In discussing the term "public policy", it was understood that it was not equivalent to the political stance or international policies of a State but comprised the fundamental notions and principles of justice….

297. It was understood that the term "pubic policy", which was used in the 1958 New York Convention and many other treaties, covered fundamental principles of law and justice in substantive as well as procedural respects. Thus, instances such as corruption, bribery or fraud and similar serious cases would constitute a ground for setting aside. It was noted, in that connection, that the wording "the award is in conflict with the public policy of this state" was not to be interpreted as excluding instances or events relating to the manner in which an award was arrived at. 135 (emphasis added)

105. This Court recognized in Beals that while existing grounds for refusal on public policy

grounds "are the most recognizable situations in which an injustice may arise," examples

133 Beals v. Saldanha, 2003 SCC 72 at para. 62 [Appellant's Authorities Tab 15] This Court's analysis in Beals, which dealt with recognition and enforcement of a foreign judgment, has been applied equally to the recognition and enforcement of foreign arbitral awards. Bad Ass Coffee Co, supra, at para. 67 [Respondent's Authorities, Tab 8]134 ICAA, s. 12135 [Respondent's Authorities Tab 47]

- 33 -

provided by the existing case law "are not exhaustive" and "unusual situations may arise that

might require the creation of a new defence to the enforcement of a foreign judgment."136 The

Court went on to find that for the public policy defence to be invoked, the Court must be

satisfied that the underlying facts "would shock the conscience of the reasonable Canadian."137

106. If the facts here do not shock the conscience of the reasonable Canadian, it is hard to

imagine what would. All of the events in question took place with the aid and assistance of a

thoroughly corrupt national court system. And the evidence of this corruption comes not from

some sore loser in the foreign courts, but rather from leading experts with extensive first-hand

experience of the Russian legal system — including a Stanford law professor who co-authored

Russia's corporations law and a retired Russian judge. And their evidence stands unchallenged

and unimpeached.

107. Beals says that one of the purposes of the public policy defence is to "guard against the

enforcement of a judgment rendered by a foreign court proven to be corrupt or biased."138 Here,

Yugraneft is trying to enforce an arbitration award that was rendered possible by a corrupt court

system — the same court to which Rexx would have had to take any appeal of the Award.

108. So there was no basis for the Chambers Judge to suggest, as he did, that Rexx should

have raised these matters in the arbitration.139 Rexx could have appealed to the Russian courts

for relief, but these are the same Russian courts that Professor Black opined were "thoroughly in

the hip pocket" of TNK – in fact, these were the same Russian courts TNK used as an instrument

of fraud in its illegal takeover strategy.

109. Rexx's complaints about the Russian Courts are not unique. Several recent judicial

decisions and governmental reports have found, on the facts before them, that the Russian Courts

are not likely to afford a fair trial, particularly in cases where a foreign party (like Rexx) is in

litigation with an oligarch. For example:

136 at paras. 41-42 [Appellant's Authorities Tab 15]137 at para. 77 [Appellant's Authorities Tab 15]138 at para. 72 [Appellant's Authorities Tab 15]139 at para. 80 (Appellant's Record Vol. I, p. 19

- 34 -

a. in Norex et al v. Chubb Insurance et al. (a case arising out of the illegal takeover

of Yugraneft), Brooker J.of the Alberta Court of Queen's Bench found "a real risk

that Norex could be unable to obtain justice in this case from the Russian Courts"

as a result of the potential for judicial corruption,140

b. in Cherney v. Deripaska, the English Court of Queen's Bench (affirmed by the

Court of Appeal) concluded that there was a significant risk that justice would not

be done in Russia because "the arbitrazh courts cannot be expected to perform

their task fairly and impartially",141

c. in Films by Jove, the United States District Court for the Eastern District of New

York found clear evidence of improper government interference in a case pending

before the Arbitrazh Courts that was so serious the U.S. Court refused to

recognize the Russian Court's decision,142 and

d. in a very recent case, the Amsterdam Court of Appeal ruled that it would not

recognise the decisions of the corrupt Russian courts because to do so would be

contrary to Dutch public policy.143

110. This Court cannot allow its processes and procedures to be used to carry out an unlawful

scheme. The public policy defence, the inherent mandate of this Court to prevent the use of its

orders as an instrument of fraud, and Yugraneft's refusal to answer any of the evidence against it

are independent grounds on which enforcement of the award should be refused and this appeal

should be dismissed.

111. This Court could also remit the case to another chambers judge to determine the public

policy issue. The Chambers Judge here simply failed to consider whether a trial of an issue was

appropriate in spite of his acknowledgement that there was some conflicting affidavit evidence

140 2008 ABQB 442 at para. 116 [Respondent's Authorities Tab 26]141 [2008] EWHC 1530 (Comm) at para. 239 [Respondent's Authorities Tab 12], aff'd [2009] EWCA Civ 849 [Respondent's Authorities Tab 13]142 Films by Jove, Inc. v. Berov, 2003 U.S. Dist. LEXIS 6233 [Respondent's Authorities Tab 17]143 Anthony Sinclair, "Enforcement of Annulled Awards", summarizing Yukos Capital S.A.R.L. v. OAO Rosneft(Amsterdam Court of Appeal, 28 April 2009) [Respondent's Authorities Tab 40]

- 35 -

before him, and he does not appear to have examined the voluminous evidence of the corrupt

court proceedings in any detail or at all.

G. Alternatively, Stay until RICO Action Complete

112. The RICO Action brought by NoreX in the United States raises similar issues regarding

the illegality of the TNK takeover of Chernogorneft and Yugraneft.144 For this reason, Rexx

argued before the Chambers Judge that judicial economy might be best served if these

proceedings were stayed pending the outcome of the RICO Action.

113. The Chambers Judge did not appear to consider the law that applies to such applications.

His statement that Rexx is not a party to the RICO Action and that the relief sought is an award

of damages in favour of NoreX is not determinative, because the RICO Action results will be

binding on Yugraneft.145 They probably also bind Rexx, as a "privy" of NoreX. The Alberta

Courts can and should defer hearing the same factual issues unless and until they are heard in the

United States.

114. Although the RICO case was dismissed on jurisdictional grounds,146 an appeal from that

decision was heard before the Second Circuit of the United States Court of Appeals on

February 4, 2009 and judgment was reserved. A previous dismissal on similar grounds was

overturned by that Court on Appeal,147 and so there is at least a reasonable prospect the same

result will occur in the pending appeal as well. If it does not, and if the U.S. Courts decline

jurisdiction, it is then a simple matter for the Alberta Courts to proceed to hear the public policy

issues and try the underlying facts.

H. Conclusion

115. Yugraneft's proposed interpretation of s. 11 of the Limitations Act does not make sense.

Nor does its suggestion that this Court should resurrect Girsberger and then twist it to apply to

144 Complaint dated February 26, 2002, Respondent's Record, Vol. I, pp. 9-80145 Bumper Development Corp. v. Home Insurance Co. (1989), 101 A.R. 264 at para. 49 [Respondent's Authorities, Tab 9]146 Norex Petroleum Ltd. v. Access Industries, Inc., 540 Fed Sup.2d 438 (S.D.N.Y. 2007) [Respondent's Authorities Tab 25]147 Norex Petroleum Limited v. Access Industries, Inc., 416 F.3d 146 (2nd Cir. 2005) [Respondent's Authorities Tab 24]

- 36 -

international arbitration awards. If the Court did so, there would not be parity of treatment

between domestic and international awards in Alberta – but the Girsberger court was advocating

for such parity when it recommended changing the law.

116. The type of radical surgery Yugraneft wants performed on the Limitations Act must be

undertaken by the Legislature, not the courts. And there is no need for such a drastic change.

Enforcement of the clear terms of the Limitations Act is not out of line with international

expectations, and the built-in discoverability safeguards in the Limitations Act ensure that anyone

who needs to enforce an award in Alberta will have adequate time to do so.

117. This case provides a good example of why the Court of Appeal's decision to apply s. 3

makes good sense. There is a dispute here over what happened before and during the arbitration

hearing, and there is no record of the arbitration. Unlike parties to a final judgment from a

domestic court, these parties have a dispute that is not over. Evidence and witnesses, who must

depend on their recollections, would be needed to resolve it. This is the very type of evidence

limitations statutes are meant to preserve.

118. Finally, even if this Court agrees with Yugraneft and allows the appeal on limitations, it

cannot turn a blind eye to the uncontroverted evidence of fraud, corruption and violence that led

to Yugraneft procuring the Award. This Court's decision in Beals requires that at least one

independent and impartial Court take a hard look at what happened in Russia before enforcing

this Award – a review that Rexx has so far been denied. This is a review that this Court has both

the power and duty to require, and it ought to do so here.

IV. COSTS

119. The Respondent seeks its costs of this Appeal.

120. Yugraneft says in its factum that it wants to set off any costs award against its limitation-

barred and fraudulently obtained arbitration award. It cites no authority that would allow it to do

so.

121. A set off is an enforcement of the award by another name. This is why the Alberta Rules

of Court require a set-off claim to be advanced as a counterclaim – a claim it is too late for

Yugraneft to bring. If Yugraneft is not allowed to enforce its award directly, it should not be

- 37 -

permitted to resurrect that claim as a set-off and enforce it indirectly.148 Any attempt to do so

would be an abuse of process.

V. ORDERS SOUGHT

122. The Respondent seeks an Order of this Court:

a. that the Appeal be dismissed,

b. alternatively, that the case be remitted to the Court of Queen's Bench for a

determination of the public policy and stay of proceedings issues or stayed

pending the outcome of the RICO Action, and

c. awarding the Respondent costs of the Appeal.

RESPECTFULLY SUBMITTED: September 25, 2009

BURNET, DUCKWORTH & PALMER LLP

Per:David R. Haigh, Q.C.

Per:Michael J. DonaldsonCounsel for the Respondent

148 See, for example, Pierce v Canada Trustco Mortgage Co. (2005), 197 O.A.C. 369 (C.A.)

- 38 -

VI. TABLE OF AUTHORITIES

RespAuth. TAB #

App.Auth. TAB #

Statutes Para #

1 Arbitration Act, R.S.A. 2000, c. A-43 51, 55, 57, 67

2 Limitation Act, R.S.B.C. 1996, c. 266 37

3 Reciprocal Enforcement of Judgments Act, R.S.A. 2000, c. R-6 51, 52, 55, 57

4 9 U.S.C.S §§ 201-208 37

Case LawPara #

5 Agromet Motoimport v. Maulden Engineering Co. (Beds.) Ltd., [1985] 1 W.L.R. 762 (Q.B.D.)

45

6 Bad Ass Coffee Co. of Hawaii Inc. v. Bad Ass Enterprises Inc., 2007 ABQB 581

102

14 Banque Nationale de Paris (Canada) v. Opiola (2000), 78 Alta L.R. (3d) 92, 2000 Carswell Alta 293 (Q.B.)

89

7 Banque Nationale de Paris (Canada) v. Opiola, 2001 ABCA 25 89

15 Beals v. Saldanha, 2003 SCC 72 102, 105, 106

8 Bell ExpressVu Limited Partnership v. Rex, [2002] 2 S.C.R. 559 49

9 Bumper Development Corp. v. Home Insurance Co. (1989), 101 A.R. 264 (Q.B.)

113

10 Canada Mortgage and Housing Corp. v. Horsfall, 2004 MBQB 124 92

11 Castillo v. Castillo, 2005 SCC 83 39

12 Cherney v. Deripaska, [2008] EWHC 1530 (Comm) 109

- 39 -

13 Cherney v. Deripaska, [2009] EWCA Civ 849 109

14 Compania Maritima Villa Nova S.A. v. Northern Sales Co., [1992] 1 F.C. 550 (C.A.)

36, 42, 45

15 Daniels v. Mitchell, 2005 ABCA 271 43

16 Dell Computer Corp. v. Union des consommateurs, 2007 SCC 34 48

17 Films by Jove, Inc. v. Berov, 2003 U.S. Dist. LEXIS 6233 109

22 Girsberger v. Kresz (2000), 47 O.R. (3d) 145, 2000 CarswellOnt 349 (Sup. Ct.)

87, 88, 93, 94

18 Girsberger v. Kresz (2000), 143 O.A.C. 228 88

19 James H. Meek Trust v. San Juan Resources Inc., 2005 ABCA 448 71

25 Lax v. Lax (2004), 186 O.A.C. 20, 2004 CarswellOnt 1633 73, 79, 82, 86, 88, 90, 91

20 Livesley v. E. Clemens Horst Co., [1924] S.C.R. 605 85

26 Morguard Investments Ltd. v. De Savoye, [1990] 3 S.C.R. 1077, 1990 CarswellBC

93, 95

21 N. (J.) v. Kozens, 2004 ABCA 394 72

22 Nasrin Karim Professional Corp. v. Bank of Nova Scotia, 2007 ABCA 10

71

24 Norex Petroleum Ltd. v. Access Industries Inc., 416 F. 3d 146 (2nd

Cir. 2005) 114

25 Norex Petroleum Ltd. v. Access Industries, Inc., 540 F.Supp.2d 438 (S.D.N.Y. 2007)

114

26 Norex Petroleum Ltd. v. Chubb Insurance Company of Canada, 2008 ABQB 442

109

27 Novak v. Bond, [1999] 1 S.C.R. 808, 1999 CarswellBC 1027 61

27 Parry Sound (District) Welfare Administration Board v. O.P.S.E.U., Local 324, [2003] 2 S.C.R. 157

79, 82

- 40 -

30 Pollier v. Laushway, 2006 NSSC 165, 244 N.S.R. (2d) 386m, 2006 CarswellNS 218

92

31 Pro Swing Inc. v. Elta Golf Inc., 2006 SCC 52, [2006] 2 S.C.R. 612, 2006 Carswell Ont 7203

85

28 Ross Ritchie Ltd. v. Sydney Steel Corp., 2001 NSCA 100 86

33 Rutledge v. U.S. Savings & Loan Co. (1906), 37 S.C.R. 546, 1906 CarswellYukon 34

79, 85

29 Tolofson v. Jensen, [1994] 3 S.C.R. 1022

30 Yellowbird v. Samson Cree Nation No. 444, 2008 ABCA 270

Secondary Sources Para #

31 Alberta Law Reform Institute (formerly Institute of Law Research and Reform), Limitations (Report for Discussion No. 4) (Edmonton: Institute of Law Research and Reform, 1986)

44, 80, 81, 84

40 Alberta Law Reform Institute, Limiations: Report No 55 (Edmonton: ALRI, September 1989)

44, 84

32 Castel, Jean-Gabriel and Janet Walker, Canadian Conflict of Laws(6th Ed.) (Toronto: Butterworths, 2005)

60, 87

33 Chapman, John C. and Maanit Zemel, "More (Unanswered) Questions on the New Limitations Act, 2002" (2009), 35(4) Advocates' Q. 499 at 512–14

70

34 Counsel of Europe: Parliamentary Assembly, "Allegations of politically motivated abuses of the criminal justice system in Council of Europe member states", provisional version (June 2009)

35 Hague Conference on Private International Law, "Status Table –Convention of 1 February 1971 on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters" http://hcch.e-vision.nl/index_en.php?act=conventions.status&cid=78

36 Gray, Wayne D. and Robert Wisner, "The Russians Are Coming, But Can They Enforce Their Arbitral Award?" (2009), 47 Can. Bus. L.J. 244

36, 40, 45, 92

37 McEwan, J. Kenneth and Ludmila B. Herbst, Commercial Arbitration in Canada: A Guide to Domestic and International Arbitrations,

- 41 -

looseleaf (Aurora, Ont: Canada Law Book, 2008)

38 Pengelley, Nicholas, "Alberta Says Nyet! Limitation Act Declares Russian Arbitral Award DOA: Supreme Court to Give Kiss of Life?" (2009), 5 J. P. Int'l L. 105

36, 37, 92

39 Redfern, A. and M. Hunter, Law & Practice of International Commercial Arbitration, 4th Ed. (London: Sweet & Maxwell, 2004), at pp. 437–438

36, 37, 66

40 Sinclair, Anthony, "Enforcement of Annulled Awards", summarizing Yukos Capital S.A.R.L. v. OAO Rosneft (Amsterdam Court of Appeal, 28 April 2009)

109

42 Sullivan, Ruth, Sullivan on the Construction of Statutes, 5th ed. (Markham: LexisNexis, 2008)

49, 50, 54

43 United Nations Commission on International Trade Law, "Status –1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards" <http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/NYConvention_status.html>

63

43 van den Berg, A. J. "Striving for Uniform Interpretation", Enforcing Arbitration Awards Under the New York Convention (New York: United Nations, 1999) at 42

37, 66, 92

44 van den Berg, A. J. (ed.), Y.B. Comm. Arb., Vol. XXVIII (2003), p. 645

37

46 Working Group on International Contract Practices, Report of the Working Group on International Contract Practices on the Work of its Sixth Session, reproduced in Yearbook of the United Nations Convention on International Trade Law, 1984, Volume XV, p. 155 at pp. 160-161

37, 91

47 Report of the United Nations Commission on International Trade Law on the work of its eighteenth session, reproduced on Yearbook of the United Nations Convention on International Trade Law, 1985, Volume XVI, p. 2

104

- 42 -

VII. STATUTORY PROVISIONS

International Commercial Arbitration Act, R.S.A. 2000, c. I-5

Limitations Act, R.S.A. 2000, c. L-12