West Coast Soft Wear et al. v. China National Petroleum Corporation et al.

China National Petroleum Corporation and its subsidiaries have settled two pending class action suits that alleged insider trading and conspiracy related to the Chinese company’s purchase of Calgary-based energy firm PetroKazakhstan Inc. in 2005. The defendants agreed to put almost $10 million into a settlement fund, but did not admit to any wrongdoing.

The suits were filed on behalf of separate plaintiffs in Alberta and Ontario. A provincial court in Alberta approved the settlement on October 29, 2010; an Ontario court approved it on November 19. The suits were the first insider trading class actions in Canada. The Alberta action was certified for settlement purposes.

The plaintiffs claimed that in June and July 2005, defendant 1000128 Alberta Ltd. acquired shares of PetroKazakhstan through stock exchanges in Toronto and New York while allegedly in possession of undisclosed material facts relating to the potential acquisition of PetroKazakhstan. The defendant is a wholly owned subsidiary of CNPC International (Canada) Ltd.

The plaintiff in the Alberta action, William Ball Wheeler, is the cofounder and chairman of Vancouver-based Leith Wheeler Investment Counsel Ltd., an investment firm that has more than $10 billion under management. West Coast Soft Wear Ltd. was the plaintiff in the Ontario action. Both plaintiffs asserted claims on behalf of everyone who sold shares of PetroKazakhstan between June 17, 2005, and August 12, 2005.

For plaintiffs West Coast Soft Wear Ltd. (Vancouver) and William Ball Wheeler (Vancouver)

Siskinds: Dimitri Lascaris, Charles Wright, and asso­ciates Daniel Bach and Anthony O’Brien. (They are in London, Ontario.)

Abells Regan: Robert Abells. (He is in Edmonton.)

For defendants China National Oil & Gas Exploration & Development Corporation (Beijing) and CNPC International Ltd. (Beijing)

Osler, Hoskin & Harcourt: Tristram Mallett, Christopher Naudie, and associate Kelly Osaka. (They are in Calgary.)

For defendant China National Petroleum Corporation (Beijing)

University of Toronto: Ed Morgan. He is a law professor.

For defendants CNPC International (Canada) Ltd. (Calgary) and 1000128 Alberta Ltd.

Carscallen Leitch: Lillian Pan. (She is in Calgary.)

Kuwait Airways v. Iraq

On October 10, 2010, the Supreme Court of Canada issued a ruling on the application of the Canadian State Immunity Act that could have implications for foreign embassies and high commissions. Under the act, a foreign state is immune from the jurisdiction of any Canadian court, unless the proceedings relate to commercial activity of the foreign state.

The decision followed an application by Kuwait Airways Corporation to enforce in Quebec a U.K. judgment that had been issued against the Republic of Iraq.

During the Gulf War in 1990–91, Saddam Hussein ordered Iraqi Airways Company to appropriate the aircraft and equipment of Kuwait Airways. Kuwait Airways recovered only some of its assets at the end of the war, and sued Iraqi Airways and Iraq in the United Kingdom; Iraq was soon dropped from the suit.

Iraqi Airways was ordered to pay more than $1 billion to Kuwait Airways after it was found that perjured evidence had been submitted to the British courts. Kuwait Airways requested that Iraq be added as a defendant for costs, based on its control, funding, and supervision of Iraq Airways’s defense. U.K. courts found that Iraq’s control of Iraqi Airways’s legal defense fell under the commercial exception provision of the U.K.’s State Immunity Act. Iraq was ordered to pay the costs of the action, about $84 million.

Subsequently, Kuwait Airways discovered property owned by Iraq in Quebec, along with some undelivered airplanes that Iraq was buying from Montreal-based Bombardier Aerospace. The Kuwaiti airline sought to enforce the U.K. judgment for costs against assets owned by Iraq in Quebec. Iraq argued that it was entitled to immunity under the Canadian State Immunity Act, and therefore the U.K. judgment could not be enforced in Canada.

Kuwait Airways lost in Quebec trial and appellate courts in 2008 and 2009, respectively, but had better luck with Canada’s top court. The Supreme Court remanded the case to the trial court for a hearing. A trial is expected later this year. The Quebec court will determine whether the U.K. judgment meets the criteria set out by the Civil Code of Quebec for recognition and enforcement of foreign judgments.

For plaintiff Kuwait Airways Corporation (Kuwait City)

Fasken Martineau Dumoulin: Christopher Gooding. (He is in London.) Gooding has represented Kuwait Airways in the case since 1990.

Stikeman Elliott: Patrick Girard, Laurent Fortier, Yves Martineau, and associate Joseph Reynaud. (They are in Montreal.) The firm was referred to Kuwait Airways by Christopher Gooding.

For defendant Iraqi Airways Company (Baghdad)

Heenan Blaikie: Patrick Ferland, Serge Gaudet, and Marie-Josée Hogue. (They are in Montreal.)

For third-party garnishee Bombardier Inc. (Montreal)

Ogilvy Renault: Michel Sylvestre and associate Mercedes Glockseisen. (They are in Montreal.)

Merck et al. v. Apotex et al.

On December 22 the Federal Court ruled that the Canadian patent covering Merck & Co., Inc.’s drug lovastatin is valid, and had been infringed by Canadian generic giant Apotex Inc. The court found that while some of Apotex’s lovastatin had been made in Manitoba using its own noninfringing process, the company had also sold lovastatin manufactured in China that had been made with Merck’s patented process.

In 1978 Merck scientists discovered a way to make lovastatin, the first cholesterol-lowering statin, by fermenting a microfungus called Aspergillus terreus. In 1984 Merck’s Canadian patent was granted. At that time, a since-eliminated idiosyncrasy in Canadian law prevented the patenting of the lovastatin molecule itself. Merck­ was allowed to patent only the process for making lovastatin with Aspergillus terreus, and the compound when made by that process. As a result, other companies could make and sell lovastatin in Canada if they did so using a noninfringing process.

In 1997 lovastatin was genericized. Apotex had developed a noninfringing process to make the drug using a microfungus called Coniothyrium fuckelii, rather than Aspergillus terreus. The company obtained Canadian regulatory approval to market and sell its version of lovastatin. Apotex sold lovastatin made by its Winnipeg affiliate using the noninfringing Coniothyrium fuckelii process. But it also sold lovastatin made by a Chinese pharmaceutical manufacturer named Blue Treasure. Merck alleged that some of the Chinese lovastatin was made using the patented Aspergillus terreus process.

On the basis of investigative evidence submitted by Merck, the Federal Court ultimately agreed. The trial court ruled that Merck was entitled to damages for certain lots of lovastatin manufactured in China after a given date. The judgment also ordered a reference as to the extent of infringement and amount of damages suffered by the plaintiffs; the reference is ongoing. The defendants have appealed the judgment to the Federal Court of Appeal.

For plaintiffs Merck & Co., Inc. (Rahway, New Jersey) and Merck Frosst Canada Ltd. (Montreal)

McCarthy Tétrault: Andrew Reddon, associate David Tait, and counsel Glynnis Burt. (They are in Toronto.)

For defendant Apotex Inc. (Toronto)

Goodmans: Harry Radomski, David Scrimger, Jerry Topolski, and associate Ben Hackett. (They are in Toronto.)

For defendant Apotex Fermentation Inc. (Winnipeg)

Taylor McCaffrey: Nicole Merrick, John Myers, Patrick Riley, and Rodrique Roy. (They are in Winnipeg.)

Attorney General of Canada v. TeleZone

In a unanimous decision on December 23, the Supreme Court of Canada said communications consortium TeleZone Inc. could sue the federal government for damages without going through a judicial review process.

TeleZone unsuccessfully bid for a license from Industry Canada in 1995 to operate a mobile phone company. Four years later, it filed a claim against the federal government, alleging losses of $250 million because of negligence, breach of contract, and unjust enrichment. The claim was one of the largest ever filed against the federal government.

Judicial review is a legal process to determine whether an administrative decision was correct or reasonable; it cannot award any damages. The federal government maintained that TeleZone had to apply for a judicial review at the federal court.

Superior and appeal courts in Ontario had already ruled that TeleZone could sue the federal government without going through a judicial review, but the federal government appealed to the Supreme Court of Canada.

“This appeal is fundamentally about access to justice,” the Supreme Court said in dismissing the government’s appeal. “People who claim to be injured by government action should have whatever redress the legal system permits that minimize unnecessary cost and complexity. The court’s approach should be practical and pragmatic with that objective in mind.”

For plaintiff TeleZone Inc. (Toronto)

Stikeman Elliott: Peter Howard, Eliot Kolers, and Nicholas McHaffie. (Howard and Kolers are in Toronto; McHaffie is in Ottawa.)

York University: provost Patrick Monahan.

For defendant Attorney General of Canada (Ottawa)

Department of Justice: Bernard Letarte, Alain Prefontaine , and Christopher Rupar. (They are in Ottawa.)

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