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Compelling Disclosure by a Non-Party Litigant in Violation of Foreign Bank Secrecy Laws: Recent Developments in Canada-United States Relations
Published online by Cambridge University Press: 09 March 2016
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- Notes and Comments / Notes et commentaires
- Information
- Canadian Yearbook of International Law/Annuaire canadien de droit international , Volume 23 , 1986 , pp. 261 - 284
- Copyright
- Copyright © The Canadian Council on International Law / Conseil Canadien de Droit International, representing the Board of Editors, Canadian Yearbook of International Law / Comité de Rédaction, Annuaire Canadien de Droit International 1986
References
1 Oct. 10, 1985, file 17603, not yet reported, affirming (1983) 145 D.L.R. (3d) 344, 2 C.C.C. (3d) 526 (C.A.) setting aside a decision of a judge of the Supreme Court of Ontario (1982) 8 W.C.B, 11 which had quashed a decision of a Provincial Court judge ordering the witness to testify.
2 See s. 10 of the Bank and Trust Companies Regulations Act, 1965, 1965 Bah. Acts, No. 64, as am. by Bank and Trust Companies Regulations (Amendment) Act, 1980, 1980 Bah. Acts. No. 3.
3 Constitution Act 198a, Schedule Β of Canada Act, 1982, c. 11 (U.K.), s. 7.
4 Supra note 1.
5 S. 10(1) (iii) of the Bahamian law, supra note 2, to that effect except with respect to tax matters.
6 Castel, , Canadian Conflict of Laws (2nd ed., 1986), para. 88Google Scholar; Williams, and Castel, , Canadian Criminal Law: International and Transnational Aspects 436 et seq. (1981).Google Scholar
7 The Ontario Court of Appeal held obiter that s. 10 of the Bahamian law was not intended to apply to foreign nationals testifying in foreign courts as there exist two well-established presumptions: (1), that an offence creating section is not intended by Parliament to cover conduct outside the territorial jurisdiction of the Crown and ( 2 ), that a statute will not be construed as applying to foreigners in respect of acts done by them abroad. The court cited Lord Scarman in Air India v. Wiggins, [1980] 2 All E.R. 593, at 597.
8 See Restatement of the Law, Second, Foreign Relations Law of the United States (1965), s. 6, hereinafter referred to as Restatement Second.
9 Castel, , Canadian Conflict of Laws (2nd ed., 1986), para. 91.Google Scholar See also Carter, , “Rejection of Foreign Law: Some Private International Law Inhibitions” (1984) 55 Br. Y.B. Int’l L. in, at 122 et seq. Google Scholar
10 (1977), 17 O.R. (2d) 388, 8 D.L.R. (3d) 393.
11 (1977); 17 O.R. (2d), at 399. The Court of Appeal quoted with approval Lord Justice Scrutton, who in a different context had said: “this country should not in my opinion assist or sanction the breach of the laws of other independent states (Ralli Bros. v. Compania Naviera Sota Y Aznar, [1920] 2 K.B. 287, at 304 (CA.)).
12 Ibid., at 399–400. See also Re MacDonald and Briant (1982), 35 O.R. (2d) 161, at 162 (M), where the witness refused to answer any questions regarding Mr. Briant’s affairs on the ground that, as a resident of the Bahamas, he was subject to the laws of the Bahamas prohibiting such disclosure. The court held that “the legislation enacted by the Parliament of the Bahamas has been shown to be applicable to the facts of this case and, on the authority of Frischke … that privilege is one which ought to be recognized by the Court.” In Foseco International Ltd. v. Bimac Canada (1980), 51 C.P.R. (2d) 51 (F.C.T.D.), the plaintiff’s in a patent infringement suit sought an order to protect confidential information in a form corresponding to an order in a companion U.S. case. Walsh, J. held that the terms of the American order should be followed: “If this were not so, this Court would be in a position of permitting the parties here to violate the laws of another country” (at 55).
13 United States v. Frank et al., 494 F.2d 145, at 156–57 (2nd Cir. 1974). See also In Re Grand Jury Proceedings. United States v. Field, 532 F.2d 404, at 410 (5th Cir. 1976), cert. den. 429 U.S. 940, 97 S. Ct. 354, 60 L.Ed. 2d 309 (1976): “In a world where commercial transactions are international in scope, conflicts are inevitable. Courts and legislatures should take every reasonable precaution to avoid placing individuals in the situation [the Bank] finds [it] self. Yet, this court simply cannot acquiesce in the proposition that United States criminal investigations must be thwarted whenever there is conflict with the interest of other states.”
14 Re Grand Jury Subpoena Duces Tecum Addressed to Canadian International Paper Company, 72 F. Supp. 1013, at p. 1020 (S.D. N.Y. 1974).
15 For a short summary of the situation in the United States of America, see Castel, , “The Extraterritorial Effects of Antitrust Laws” (1981), 179 Recueil des Cours 11, at 58.Google Scholar
16 691 F.2d 1384 (nth Cir. 1982), cert. den. sub nom. Bank of Nova Scotia v. United States, 103 S. Ct. 3086, 77 L.Ed. 2d 1348 (1983). For a comment see Caggiano, (1983), 7 Suffolk Trans. L.J. 565.Google Scholar
17 No documents were found at the Antigua branch. Accordingly the court dealt with documents in the Bahamas only.
18 See supra note 2.
19 Apparently the U.S. government could have obtained an order of judicial assistance from the Supreme Court of the Bahamas allowing disclosure by the Nassau branch only if the subject matter of the grand jury investigation was a crime under Bahamian law and not solely criminal under United States tax laws.
20 Such as due process. See Société Internationale pour Participations Industrielles et Commerciales v. Rogers, 357 U.S. 197, 78 S. Ct. 1087, 2 L.Ed. 2d 1255 (1958). The Court of Appeals held that the bank had failed to bring itself within the holding of that case. See also Browne, , “Extraterritorial Discovery: An Analysis Based on Good Faith” (1983), 83 Col. L. Rev. 1320.CrossRefGoogle Scholar
21 Supra note 13.
22 S. 40 provides:
Limitations on Exercise of Enforcement Jurisdiction
Where two states have jurisdiction to prescribe and enforce rules of law and the rules they may prescribe require inconsistent conduct upon the part of a person, each state is required by international law to consider, in good faith, moderating the exercise of its enforcement jurisdiction, in the light of such factors as
-
(a)
(a) vital national interests of each of the states,
-
(b)
(b) the extent and the nature of the hardship that inconsistent enforcement actions would impose upon the person,
-
(c)
(c) the extent to which the required conduct is to take place in the territory of the other state,
-
(d)
(d) the nationality of the person, and
-
(e)
(e) the extent to which enforcement by action of either state can reasonably be expected to achieve compliance with the rule prescribed by that state.
23 740 F.2d 817 (nth Cir. 1984), after remand 722 F.2d 657 (11th Cir. 1983), cert. den. 105 S. Ct. 778 (1985). For a comment see Paikin, , “Bank of Nova Scotia II: The American Subpoena and the Multinational Enterprise” (1984), 9 Can. B.L.J. 497.Google Scholar
24 As no documents existed at its Antigua branch and the Bahamas authorized the bank to release the documents found there, only the Grand Cayman documents were at issue in this case.
25 S. 3A(1)-(2), Confidential Relationships (Preservation) Law 1976 (Law 16 of 1976) as am. in 1979 (Law 26 of 1979). This action and subsequent disclosure by the bank did not exonerate it from liability for past contempt.
26 Supra note 23. The fact that the Grand Court of the Cayman Islands had ordered the bank not to produce the documents or disclose the information did not afford a valid defence to the bad faith charge. Cf. Société Internationale pour Participations Industrielles et Commerciales v. Rogers, supra note 20.
27 Supra note 22.
28 The law of the Cayman Islands contains many exceptions. In Re Confidential Relationships (Preservation) Law, United States v. Carver (Jamaica Ct. App. 1982), the court said:
[T] here is nothing in the statute to suggest that it is the public policy of the Cayman Islands to permit a person to launder the proceeds of crime in the Cayman Islands, secure from detection and punishment.
29 See also Brief of the Government of Canada as Amicus Curiae in Support of Petition for Writ of Certiorari, Oct. 23, 1984, pp. 4–7.
30 The Court of Appeals cited First National City Bank of New York v. International Revenue Service, 271 F.sd 616, at 620 (2nd Cir. 1959), cert, den. 361 U.S. 948, 80 S. Ct. 402, 4 L.Ed. 2d 381 (1960), where the Court of Appeal said:
If the Bank cannot, as it were, serve two masters and comply with the lawful requirements both of the United States and Panama, perhaps it should surrender to one sovereign or the other the privileges received therefrom.
31 For an analysis of these principles as bases for the exercise of jurisdiction see Williams and Castel, op. cit. note 6, at 126–36.
32 (1961), 18 U.S.T. 1407, T.I.A.S. 6298, 520 U.N.T.S. 204, ratified by the United States in 1967, as am. by Protocol of Mar. 25, 1972, ratified by the United States in 1975, 26 U.S.T. 1439, T.I.A.S. 8118. Canada is also a party to this Convention.
33 For a survey see Onkelinx, , “Conflict of International Jurisdiction: Ordering the Production of Documents in Violation of the Law of the Situs” (1969), 64 Northwestern U.L. Rev. 487 Google Scholar; Blejec, , “Extraterritorial Jurisdiction of U.S. Courts Regarding the Use of Supoenas Duces Tecum to Obtain Discovery in Transnational Litigation: The Search for a Limiting Principle” (1984), 16 N.Y.U.J. Int’l L. & Pol. 1135 Google Scholar; Olsen, , “Discovery in Federal Criminal Investigations” (1984), 16 J. Int’l L. & Pol. 999.Google Scholar
34 United States v. First National Bank of Chicago, 699 F.2d 341 (7th Cir. 1983). The court held that compliance with an Internal Revenue Service summons to produce records located at the Athens branch of the First National Bank of Chicago was not required because the persons who could make the records available would be subject to criminal prosecution under Greek law. For a comment see Hight, , “ United States v. First National Bank of Chicago: Limiting American Extraterritorial Authority to Order the Production of Documents in Violation of Foreign Law” (1983), 33 Depaul L. Rev. 183.Google Scholar
35 For an analysis of governmental interests and policies in a different context, see Currie, , Selected Essays on the Conflict of Laws (1963).Google Scholar
36 403. Limitations on Jurisdiction to Prescribe
-
(1)
(1) Even when one of the bases for jurisdiction under 40z is present, a state may not exercise jurisdiction to prescribe law with respect to the activities, relations, status, or interests of persons or things having connections with another state or states when the exercise of such jurisdiction is unreasonable.
-
(2)
(2) Whether the exercise of jurisdiction is reasonable or unreasonable is judged by evaluating all the relevant factors, including, where appropriate,
-
(a)
(a) the extent to which the activity (i) takes place within the regulating state, or (ii) has substantial, direct, and foreseeable effect upon or in the regulating state:
-
(b)
(b) the connections, such as nationality, residence, or economic activity, between the regulating state and the persons principally responsible for the activity to be regulated, or between that state and those whom the law or regulation is designed to protect;
-
(c)
(c) the character of the activity to be regulated, the importance of regulation to the regulating state, the extent to which other states regulate such activities, and the degree to which the desirability of such regulation is generally accepted;
-
(d)
(d) the existence of justified expectations that might be protected or hurt by the regulation in question;
-
(e)
(e) the importance of the regulation in question to the international political, legal or economic system;
-
(f)
(f) the extent to which such regulation is consistent with the traditions of the international system;
-
(g)
(g) the extent to which another state may have an interest in regulating the activity; and
-
(h)
(h) the likelihood of conflict with regulation by other states.
-
(3)
(3) When more than one state has a reasonable basis for exercising jurisdiction over a person or activity, but the prescriptions by two or more States are in conflict, each state is expected to evaluate its own as well as the other state’s interest in exercising jurisdiction in light of all the relevant factors, including those set out in Subsection (2); and to defer to the other state if that state’s interest is greater.
-
(a)
See also s. 436 [419]
436 [419]. Foreign Government Compulsion
-
(1)
(1) A person generally may not be required by a state
-
(a)
(a) to do an act in another state that is prohibited by the law of that state or by the law of the state of which he is a national; or
-
(b)
(b) to refrain from doing an act in another state that is required by the law of that state or by the law of the state of which he is a national.
-
(a)
-
(2)
(2) A person of foreign nationality may generally be required by a state
-
(a)
(a) to do an act in that state even if it is prohibited by the law of the state of which he is a national; or
-
(b)
(b) to refrain from doing an act in that state even if it is required by the law of the state of which he is a national.
-
(a)
This section applies the principle of s. 403(3). See also Rosenthal, and Vale-Loehr, , “Two Cheers for the ALI Restatements Provisions on Foreign Discovery” (1983), 16 J. of Int’l L. & Pol. 1075 Google Scholar; Robinson, , “Compelling Discovery and Evidence in International Litigation,” [1984] Int’l L. 533.Google Scholar
37 See In Re Electric & Musical Industries Ltd., 155 F. Supp. 892 (S.D.N.Y. 1957): cf. Matter of Arawak Trust Co. (Cayman) Ltd., 489 F. Supp. 162 (E.D.N.Y. 1980), where it was held that jurisdiction could not be exercised over a foreign company that had no office in the United States, did not hold itself out as transacting business there and had no significant property in the forum except a bank account. The United States grand jury’s power could not extend further than that of the court of which it was an arm. In Canada see Bowlen v. R. (No. 2), [1978] 1. F.C. 798, 5 C.P.C. 215 (F.C.T.D.), where the court held that Federal Court Rule 464(1) which deals with the production of documents in the possession of a person not a party to the action does not cover the production of documents within the possession of and representing the property of a partially controlled or even a wholly-owned subsidiary company of the company or person to whom the court’s order is directed. The court refused to pierce the corporate veil.
38 S.C. 1984–85, c. 49. See also Business Records Protection Act, R.S.O., 1980, c. 56 and Business Concerns Records Act, L.R.Q. 1977, c. D-12.
39 For a review of possible solutions in the antitrust field, see Castel, op. cit. supra note 15, at 105 et seq. Note that in 1985 a Subpoena Working Group comprising legal officials of Canada and the United States was created which provides an informal “early warning” mechanism and forum for consultations on practical approaches that may avoid the conflicts caused in the Bank of Nova Scotia case.
40 Note that in the 1984 Bank of Nova Scotia case the Court of Appeals refused to apply a “Gentleman’s Agreement” between the United States and the Cayman Islands on the ground that it was not a formal intergovernmental agreement and was not considered binding by the parties. At most it was a simple understanding as to how informal requests for assistance were to be channelled between the parties.
41 Memorandum of Understanding between the Government of Canada and the Government of the United States of America as to Notification, Consultation and Cooperation with Respect to the Application of National Antitrust Laws, Mar. 9, 1984 (1984), 23 Int’l Leg. Mat. 275.
42 Canada and the United States are members of the Organization for Economic Cooperation and Development. See Convention on the Organization for Economic Cooperation and Development, Dec. 14, 1960, entered into force Sept. 30, 1961, ra U.S.T. 1728, T.I.A.S. 4891, 888 U.N.T.S. 179.
43 C. (79) 154 Final.
44 23 U.S.T. 2555, T.I.A.S. 744, 28 U.S.C.A. 1781, 658 U.N.T.S. 163. For a case applying the Convention see Graco Inc. v. Kremlin Inc. and SKM S.A. (1985), 8 European Com. Cas. 195 (U.S. D.C., N.D. I11. E.D.). The case also involved a foreign blocking statute.
45 Art. 15. Also arts. 11, 12.
46 Mar. 15, 1977, 28 U.S.T. 2463, T.I.A.S. 8567. No longer in force.
47 E.g., 1961 Single Convention on Narcotic Drugs, 1964 C.T.S. No. 30, 18 U.S.T. 1407, T.I.A.S. 6298, 520 U.N.T.S. 204, as am. by 1972 Protocol, 26 U.S.T. 1439, T.I.A.S. 8118, art. 35(e). In the Bank of Nova Scotia cases, supra note 23, mention was made of an Agreement in the form of an Exchange of Letters between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the United States of America concerning the Cayman Islands and Matters Connected with, Arising from, Related to or Resulting from any Narcotics Activity Referred in the Single Convention on Narcotic Drugs 1961, as amended by the Protocol Amending the Single Convention on Narcotic Drugs 1961 signed at London on July 26, 1984 (1985), 24 Int’l Leg. Mat. mo. On Aug. 27, 1984, legislation was passed in the Cayman Islands which brought into effect this Agreement: Narcotic Drugs (Evidence) (United States of America) Law, 1984, Law 17 of 1984, Extraordinary Gazette, Aug. 29, 1984, Supplement No. 4 (1984), 24 Int’l Leg. Mat. 937.
48 Organization for Economic Cooperation and Development, PRESS/A (84)28, para. 36 (May 18, 1984).
49 Organization for Economic Cooperation and Development, International Investment and Multinational Enterprises: The 1984 Review of the 1976 Declaration and Decision 26 (1984).
In the banking field the Basle Concordat, formally known as Principles for the Supervision of Banks’ Foreign Establishments (1975 rev. 1983) (see (1983), 12 Int’l Monetary Fund Survey 201), to which the central banks of Canada, the Federal Republic of Germany, France, Italy, Japan, Luxembourg, The Netherlands, Sweden, Switzerland, the United Kingdom, and the United States are parties, has established the framework of an international supervisory system of transnational banking operations. Under this Concordat, gaps in regulations are to be filled by either host or home state, and overlaps are to be worked out between the regulatory authorities of the two states having jurisdiction so as to avoid conflicts and uncertainty.
50 April, and Fried, , “Compelling Discovery and Disclosure in Transnational Criminal Litigation: A Canadian View” (1984), 16 N.Y.U.J. Int’l L. & Pol. 961, at 968.Google Scholar
51 Treaty between the Government of Canada and the Government of the United States of America on Mutual Legal Assistance in Criminal Matters, signed at Quebec City on Mar. 18, 1985, not yet in force (1985), 24 Int’l Leg. Mat. 1092. The offences contemplated by the Treaty are found in Article 1 and in the Annex. See also United States-Switzerland Treaty on Mutual Assistance in Criminal Matters, May 25, 1973, 27 U.S.T. 2019, T.I.A.S. 8302 entered into force Jan. 23, 1977, and 1982 Memorandum of Understanding.
52 Art. 4.
53 Art. 5.1 (b).
54 Supra note 44, art. 12(b).
55 Supra note 38.
56 Art. 6.
57 Art. 7.
58 Ibid.
59 Art. 9. “Central Authority” means for Canada the Minister of Justice or officials designated by him and for the United States of America, the Attorney General or officials designated by him (Art. 1).
60 Art. 17.
61 Ibid.
62 See Castel, op. cit. supra note 9, para. 88.
63
Supra note 44. Note that Canada is bound by 19 treaties, mainly with European states regarding Legal Proceedings in Civil and Commercial Matters, which provide for the transmission and the service of documents as well as the execution of letters of request:
In Quebec, see also 1977 Entente between Quebec and France Regarding Judicial Mutual Aid in Civil, Commercial and Administrative Matters, L.Q. 1978, c. 20.
Most provinces have adopted an Interprovincial Subpoena Act which facilitates the enforcement of a subpoena or other document from a court outside the province requiring a person to attend as a witness. The legislation does not apply to a subpoena issued with respect to a criminal offence under an Act of Canada. See, for instance, S.A. 1981, c. I-8.1; R.S.B.C. 1979, c. 396; S.M. 1975, c. 3; S.N.B. 1979, c. I-13.1; S.N. 1975–76. No. 33; O.N.W.T. 1976 (2nd), c. 2; R.S.O. 1980, c. 220; R.S.S. 1978, c. I-12.1; O.Y.T. 1981 (1st), c. 7.