International Jurisdiction Of Quebec Courts In Matters Of Contractual Interpretation: The Court Of Appeal Rules

• Published date: 06 May 2020
• Author: Mr Sean Griffin and Lana Rackovic
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Contracts and Commercial Law, Trials & Appeals & Compensation, Personal Injury
• Law Firm: Langlois lawyers, LLP

The Court of Appeal recently ruled on the international jurisdiction of Quebec courts to hear a dispute in light of article 3148, para. 3 of the Civil Code of Quebec ("C.C.Q."), in the context of a dispute over the interpretation of a contract providing for the exercise of a party's recapture rights over reinsured insurance portfolios.¹

Summary of facts giving rise to the litigation

The parties, two insurance companies, had concluded several retrocession agreements (collectively, the "Agreement"). The Appellant is a foreign company based in the Bahamas, with no operations in Canada, while the Respondent is based in Montréal, with operations in Montréal.

The Agreement provided that the Appellant would share a portion of the risk reinsured by the Respondent, in return for a portion of the premiums paid by the insured in relation to two of the Respondent's portfolios. The Agreement also contained a non-competition clause prohibiting the Appellant from entering directly into the Canadian reinsurance market without notifying the Respondent at least 12 months prior to such entry. Within the terms of the Agreement, the Appellant relied on the clause that allowed it to give notice to the Respondent in order to enter the Canadian market as a reinsurer.

Following the entry of the Appellant into the Canadian market, the parties negotiated an Amendment to the General Agreement (the "Amendment"), which included a waiver of the non-competition clause with conditions.

This Amendment also provided that the Respondent could exercise recapture rights over all or part of the transferred portfolios in accordance with certain terms and conditions set out in an appendix to the Amendment, including the selection of assumptions for calculating the recapture value of the transferred portfolios. In the event that the parties failed to agree on a value, the Amendment provided for the submission of the calculation to an independent actuary.

Neither the Amendment nor the Agreement contained a forum selection clause, but they did allow for the application of Quebec law.

The Respondent provided the Appellant with notices of exercise of its recapture rights. The parties did not agree on the legality of the exercise notices or the value of the recapture rights. They therefore submitted the calculation of the recapture value to an independent actuary.

The Respondent also filed an application for a declaratory judgment, asking the Superior Court to declare that it had validly exercised its...