The August 7, 2014 decision of the Ontario Court of Appeal in  Sistem Mühendislik A.S. v. Kyrgyz Republic illustrates that an automatic stay pending appeal of an “order for the payment of money” is only triggered if the order is for just that – the payment of money. Declarations that may have the indirect effect of leading to a payment of money do not fall within the ambit of Rule 63.01(1) of Ontario’s Rules of Civil Procedure (which prescribes this automatic stay). At the same time, the case recognizes that practical effects of such orders are to be taken into consideration when determining whether to grant a stay under the traditional RJR Macdonald test.

The appeal arose from an order, enforcing a foreign arbitral award, that Kyrgyzstan pay a sum of money to a company (“Sistem”). Sistem took legal steps to enforce the order against Kyrgyzaltyn JSC (“the Company”), a company wholly owned by Kyrgyzstan and which holds shares in Centerra Gold, a Canadian public corporation.

In April 2014, Thorburn J. of the Ontario Superior Court declared that Kyrgyzstan has an equitable interest in the Centerra Gold shares issued in the name of the Company and ordered that the Sheriff could seize monies held in trust by Centerra Gold to satisfy the award. The Company appealed that order and brought a motion before Juriansz J.A. for:

  1. A declaration that Thorburn J.’s order was subject to the automatic stay provided by rule 63.01(1); and
  2. In the alternative, an order staying Thorburn J.’s order.

On the question of whether there was an automatic stay, Juriansz J.A. held, quite simply, that the order under appeal was not for the repayment of money:

[8]       … There is no order of “repayment” in this case. The only order that requires the payment of any money is the order of Echlin J., which ordered the Republic to pay money to Sistem [enforcing the foreign arbitral award against Kyrgyzstan]. Echlin J.’s order was not appealed. The order under appeal does not order the Company to “pay” or “repay” any monies to anyone.

Turning to the question of whether a stay should be imposed, however, Juriansz J.A. considered what the practical effects of the order were – this weighed heavily in his determination that the balance of convenience favoured granting the stay, subject to the appellant taking steps to minimize the risk of harm to the respondent:

[10]     It is conceded that the appeal raises a serious issue to be decided.

[11]     If the order is not stayed the Company will clearly suffer irreparable harm. Sistem has no business and no assets in Canada. If the Company is successful on appeal it will be unable to recover any monies that the Sheriff pays out to Sistem.

[12]     On the other hand, if the order is stayed, Sistem faces harm. There is the prospect that other international arbitration creditors will also seek to enforce their awards against the Republic in Canada as Sistem has done. Sistem submits it will be prejudiced if any monies seized by the Sheriff must be shared proportionately among several execution creditors.

[Juriansz J.A. rejected the appellant’s argument that the harm Sistem faced was not legally cognizable.]

[15]     I conclude that the balance of convenience in this case would be best served by staying the order under appeal on the term that the company file a letter of credit in the amount of the outstanding judgment against the Republic. Should the company fail to file the letter of credit in 15 days of this decision, Sistem may proceed to enforce the order under appeal.

[16]       Costs of the motion are reserved to the panel hearing the appeal.