Northern Exposure

Where Will Disputes about Your International Employment Contracts Be Resolved?

This question can be a vexing one. Will disputes be resolved in the employee’s country of origin? In the country in which the employee is now working? In the country in which your head office is located? In the country in which the employment contract was executed? All of the above? And how will you know?

You could be forgiven for being confused about this. The courts have been, too. What’s more, the answer that Canadian courts give will not necessarily be the same as the answer of a U.S. or foreign court. Here I can at least provide a brief outline of how a Canadian court should look at this issue.

First, note that this question is not the same as the issue of what country’s laws apply to the contract of employment. The applicable law is not the same as the selection of the appropriate forum for dispute resolution. A Canadian court may enforce foreign laws, and a foreign court may enforce Canadian laws.

Failing a binding agreement on where and by whom a dispute will be resolved, how will this be decided? Canadian courts will look at two distinct issues in this regard:

  • Do they have jurisdiction to consider the dispute?
  • Are they a convenient forum for considering the dispute?

Somewhat different, but related, factors apply to each question. Therefore, even though a Canadian court concludes it could entertain a dispute insofar as it is within its jurisdiction to do so, it may still decide it should not do so if it’s not the most convenient forum.

Factors going to a Canadian court’s jurisdiction
In general, these factors may include some or all of the following:

  • The presence of one or both parties in the province or territory in which the court is located.
  • Whether the parties have consented, implicitly or explicitly, to have disputes resolved by that court.
  • Is there a real and substantial connection between the claim and the province or territory in which the court is located? For example:
    • Was the contract carried out in the province?
    • Did the alleged breach of contract occur in the province?
    • Were the damages suffered in the province?
    • Did the employee embark from or will he return to the province?
    • Does either party reside or do business in the province?
  • Would any unfairness befall either party if the court assumes jurisdiction? Would the party’s claim or defense be significantly prejudiced? Would the difficulty or expense of fighting the case be materially increased for one of the parties?
  • Would the judgment of the Canadian court be recognized abroad, to the extent that this may be important? For example, must the judgment be enforced in another country, and is that feasible?

Factors determining the convenient forum for dispute
The factors for determining whether the dispute should be heard by the Canadian court may include some or all of the following (some of which overlap with the jurisdiction factors outlined above:

  • Location where the contract was signed.
  • What is the applicable law of the contract? This may be stated explicitly or may be implied in the terms of the deal.
  • The location where the majority of witnesses reside.
  • The location where the bulk of the evidence is located.
  • The place where the dispute actually arose.
  • The residence or place of business of the parties.

What this means for you
It’s important to think through these and related issues before you send executives temporarily to Canada or from Canada to other countries. We can advise you on how Canadian law will apply, help you find foreign legal advisors if necessary, and advise you in the drafting of appropriate employment contracts or appointment letters.

These kinds of measures, in a well-drafted appointment letter or employment contract, can save you many headaches and potential liabilities.

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