Is Requiring Security for Costs for Foreign Residents Contrary to TRIPS?

Fraser v. Janes Family Foods Ltd. 2012 FCA 99 Noël JA: Blais CJ; Gauthier JA

Prothonotary Aalto ordered that the plaintiff / appellants post security for costs on the basis, inter alia, that they were “ordinarily resident outside Canada,” which is a factor set out in Rule 416(1)(a). On appeal to the FCA, the appellants raised the argument that this Rule is contrary to NAFTA and TRIPS. The FCA held that it is doubtful whether the Rule is contrary to the national treatment provisions of those agreements, as Rule 416(1)(a) turns not on nationality, but on the distinct concept of residency [9]-[11], so that in some circumstances a Canadian national could be required to post security on the basis of this Rule. The appellants argued that even if that was formally true, the effect of the Rule in practice would be to subject foreign nationals to differential treatment [12]. The FCA did not resolve that argument, as it held that even if the Rule was contrary to NAFTA or TRIPS for this reason, those agreements do not directly have the force of law [15], and the Rule is sufficiently clear that it cannot be brought into line with those agreements (assuming there is any conflict), by interpreting it in the manner urged by the appellants [19].

While this resolves the point of law, it leaves open the possibility that this Rule is in conflict with TRIPS and NAFTA, and so might require amendment. My initial impression is that even if some amendment were required, it would not have a significant practical impact. The factors set out in Rule 416(1) all go to the question of whether the payment of costs is likely to be problematic if the plaintiffs are unsuccessful. A general discretionary rule requiring posting of security for costs in circumstances were payment was likely to be problematic, is surely legitimate and would pass muster under NAFTA and TRIPS, and yet it is just as likely to differentially affect foreign nationals. By analogy, one factor in determining whether a Mareva injunction should be granted is whether assets are likely to be removed from the jurisdiction in order to avoid satisfaction of a judgment. This is not a strict rule, as the impact of reciprocal enforcement of judgment legislation must be considered, but it is likely to differentially impact foreign litigants. However, it is substantively neutral. Put another way, to require that the court ignore the fact that judgments and costs orders may be more difficult to collect against foreign litigants would not artificially disadvantage foreign litigants, but artificially privilege them.