The Ontario Superior Court of Justice recently released a decision in CUSO International v Pan American Development Foundation on April 27, 2021, (the “Ruling”) with respect to the important preliminary issue of whether the Ontario courts have the requisite jurisdiction to adjudicate a matter, especially given a pre-existing agreement to this effect in the “forum selection” clause of the Agreement (explained below). The central dispute in these proceedings involved a dispute between a Canadian charity (“CUSO”) and a US charity (“PADF”) concerning the delivery of charitable anti-poverty and capacity building programs in Colombia through the Colombian office of PADF (“FUPAD”).

CUSO had an agreement with Global Affairs Canada to create local training centres and provide employment opportunities for poor and vulnerable youth in cooperation in Colombia. CUSO subsequently entered into an agreement with FUPAD (the “Agreement”), according to which FUPAD would be responsible for the implementation of training and other employment initiatives in Colombia. 

A dispute, however, had since arisen between CUSO, PADF, and FUPAD, involving the types of expenses for which CUSO would reimburse FUPAD. With respect to the Agreement, reimbursement required documentation from FUPAD. The Agreement included a clear jurisdiction or forum selection clause (the “Forum Selection Clause”) which expressly provided that the “construction, interpretation, and performance of the Agreement” were to be governed by the laws of Ontario and Canada, and that all disputes arising therefrom were to be submitted to the jurisdiction of an Ontario court. Despite the Forum Selection Clause in the Agreement, FUPAD took initial steps to commence litigation in Colombia with respect to its own ongoing dispute with CUSO (the “Colombian Litigation”). Shortly thereafter, CUSO commenced an action in Ontario against both PADF and FUPAD, relying on the Forum Selection Clause (the “Ontario Action”).

PADF and FUPAD subsequently brought a motion in the Ontario Action seeking a stay of the same until the Colombian courts determined whether they would hear the merits of the Colombian Litigation in light of the Forum Selection Clause. In bringing this motion, PADF and FUPAD argued that the Forum Selection Clause should not be enforced because the Agreement was part of a larger network of agreements between CUSO, FUPAD, and the Government of Colombia, which were predominantly in Spanish and subject to the jurisdiction of Colombian courts, and that, the Colombian Litigation was already underway and should be permitted to proceed following a stay of the Ontario Action. Conversely, CUSO argued that its obligations to FUPAD were only governed by the Agreement between the two parties, which was drafted in English, in Ontario, and contained a clear and enforceable Forum Selection Clause.

In reaching his decision, Justice MacLeod looked to the established case law here in Ontario regarding forum non conveniens principles when analyzing the proper forum of the proceeding (even without the benefit of the Forum Selection Clause) and stated that a trial of this matter in Ontario would not be impossible or impracticable, despite the fact that the work under the Agreement was performed in Colombia and much of the documentary evidence was expected to be in Spanish. The Ruling noted that decisions are often rendered by Ontario courts using translated documents, evidence received through interpreters and with witnesses testifying remotely, and this was not necessarily an impediment. Further, the Colombia Litigation had not yet progressed beyond any initial stage, and as such, the Colombian court had not yet reached a decision as to whether it would hear the merits of the dispute.

As a result, in the Ruling the court held that it would not be fundamentally unfair to FUPAD to hold it to its bargain and permit the litigation to proceed in Ontario, and declined to stay the Ontario Action to await the decision in Colombia, declaring that CUSO could proceed with the Ontario Action.

In closing the Ruling, Justice MacLeod made specific note on “how unfortunate it is that two charitable organizations with similar objectives are now locked in expensive litigation in two countries”, and reminded the parties of their obligation under the Ontario Rules of Civil Procedure to make good faith efforts to resolve or narrow the issues, urging them to find a mediated solution and focus on their charitable objectives in the public interest. This is consistent with a long line of jurisprudence in Ontario: the courts do not enjoy seeing charitable assets used on expensive and time-consuming litigation unless there are absolutely no other options. The Ruling is a good reminder of why getting legal counsel to assist in understanding the law on forum or jurisdiction law in international contracts can be essential and proactively save the organization significant resources.