Executive Summary: Key Legal and Evidentiary Issues

• Proper service of legal documents on foreign states is governed by the State Immunity Act rather than the Hague Convention on Service Abroad, where Canada's procedural law controls such matters
• Service on a signatory foreign state through diplomatic channels, as authorized under sections 9(1)(c) and (2) of the State Immunity Act, constitutes valid service
• An order validating service is classified as interlocutory and appealable only with leave to the Divisional Court, not as of right to the Court of Appeal, since it does not finally resolve substantive rights between parties
• Modern principles of statutory interpretation require courts to apply Parliament's clear language in the State Immunity Act without implying additional requirements from international treaties
• Substantive defenses, including those based on sovereign immunity, remain available to foreign states despite valid service being established in a proceeding
• Recognition and enforcement of foreign judgments in Ontario may proceed once procedural service requirements are satisfied

Background and procedural context

Petersen Energía Inversora, S.A.U., Petersen Energía, S.A.U., Eton Park Master Fund, Ltd., Eton Park Fund, L.P., and Eton Park Capital Management, L.P. sought recognition and enforcement in Ontario of a judgment granted by the United States District Court in the Southern District of New York against the Republic of Argentina. This case presented a technical but significant question regarding the proper method for serving court documents on a foreign state in Canadian proceedings.

The service dispute

On October 23, 2024, the moving parties transmitted their application record to Argentina through diplomatic channels, utilizing the procedure established under sections 9(1)(c) and (2) of the State Immunity Act, R.S.C. 1985, c. S-18. Argentina disputed the validity of this service, arguing that the moving parties were obligated to comply with the Hague Convention of 15 November 1965 on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters. Argentina contended that because service was not effected in accordance with the Convention, it had not been duly served and sought a declaration to that effect.

The motion judge's analysis

The motion judge rejected Argentina's position based on principled statutory interpretation. The court determined that procedural matters in Canadian litigation are governed exclusively by the laws of the forum state, and the State Immunity Act provides the comprehensive procedural framework applicable to actions commenced in Canada against foreign states. Since sections 9(1)(c) and (2) specifically authorize service on foreign states through diplomatic channels, the motion judge concluded that this method constituted valid service. The court rejected Argentina's argument that section 9(1) should be interpreted to require compliance with the Convention to ensure Canada's adherence to the treaty, finding such an interpretation contrary to modern principles of statutory interpretation and Parliament's express language. Accordingly, the motion judge found that Argentina had been duly served and dismissed Argentina's motion for a declaration to the contrary.

The appellate proceeding

Argentina appealed the motion judge's order to the Court of Appeal for Ontario. The moving parties sought to quash this appeal, arguing that the order was interlocutory rather than final and therefore appealable only with leave to the Divisional Court. Argentina countered that the order was final because it determined substantive rights under both the State Immunity Act and the Convention, particularly regarding state sovereignty and the framework for actions against foreign states.

The Court of Appeal's decision

The Court of Appeal for Ontario agreed with the moving parties and quashed Argentina's appeal. The court confirmed that orders confirming the validity of service are generally classified as interlocutory for purposes of determining the appropriate appellate route. Following its prior decisions in Xela Enterprises Ltd. v. Castillo and Shanghai Lianyin Investment Co. Ltd. v. Lu, the Court of Appeal held that the only "real matter in dispute" before the motion judge was the validity of service on Argentina, a procedural question rather than a determination of substantive rights. The court found no reason to apply a different rule in the context of service effected under the State Immunity Act, even though the order touched on questions of sovereign immunity. The court further noted that while the practical effect of the order was to allow the recognition and enforcement application to proceed in Ontario, it did not deprive Argentina of any jurisdictional or other defenses, including those relating to sovereign immunity, that it might otherwise be entitled to raise in the underlying proceeding. The moving parties were determined to be the successful parties and were awarded costs in the amount of $10,931.22 on a partial indemnity basis, all-inclusive.