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Canadian Law on Jurisdiction in Cyberspace

Written and Researched by Arlan Gates
Presented by Paul Tackaberry and Adam Balinsky




"Real and Substantial Connection"

Forum non conveniens



1. Taxation

2. Securities

3. Intellectual Property

4. Payment Systems/Banking

5. Privacy

6. Sale of Goods

7. Sale of Services

8. Advertising/Consumer Protection

9. Public Law/Gaming

This document provides an overview of current law and emerging trends in the Canadian law relating to jurisdiction in cyberspace. Parts I-III outline general principles; Part IV surveys developments in specific areas of the law. The law is described as at April 1999.


Canada is a federal state administered by a Constitution that specifies a division of powers between the national and provincial governments. The Government of Canada has prescriptive jurisdiction over most areas of legal concern in electronic commerce ("e-commerce"), including tax, intellectual property, banking, and privacy. Securities and gaming, however, are regulated provincially. Provinces also have jurisdiction over provincially-incorporated companies, which comprise the majority of incorporations in Canada.

Whether the Internet and e-commerce in general are matters of federal or provincial jurisdiction has not been conclusively decided. Statutory interpretation and government practice, however, suggest that both likely fall under federal jurisdiction.

Section 92(10) of the Constitution Act (1867) grants the federal Parliament exclusive jurisdiction over interprovincial works and undertakings related to transportation or communication. This has provided an interpretive basis for the extension of federal jurisdiction over telecommunications and television and radio broadcasting. The nature of the Internet as an interprovincial and international communications system posits a strong argument in favour of federal jurisdiction over related works and undertakings - notwithstanding the possibility that Internet telephony and Web broadcasting, for example, may also fall under traditional federal regulatory scrutiny. Federal jurisdiction could in theory extend to matters relating to the management and operation of Internet works and undertakings, or to Internet content.(1)

A conclusive legal determination of federal jurisdiction over the Internet or e-commerce would substantially limit the scope of provincial governments to legislate in these areas. Such a determination is not likely to be made unless to resolve a major conflict between the provinces and the federal government. In 1997, an exceptional conflict arose when Québec enforced a controversial language law against a web site run by a small business. Bill 101 requires French text on commercial signs in the province to be twice the size of any English text. The conflict was never adjudicated, but arose at the intersection of the presumed federal jurisdiction over communications and the well-established provincial jurisdiction over provincially-incorporated businesses and most aspects of consumer protection.(2)

In practice, initiatives directed at the development and regulation of the Internet in Canada have proceeded without a formal jurisdictional determination, and have primarily been federal. In September 1998, Industry Canada launched a national electronic commerce strategy(3) that identified jurisdiction as an issue to be addressed in business-to-business and business-to-consumer e-commerce relationships. Also in fall 1998, the Canadian Radio-Television and Telecommunications Commission (CRTC) conducted public hearings on "new media" with a view to exploring the obligations that the Internet and other new technologies may place on the regulator under the Broadcasting Act (1991) and Telecommunications Act (1993).(4) A formal decision issued 17 May 1999(5) had the effect of confirming CRTC jurisdiction over telecommunications and broadcasting services, including those distributed over the Internet, but did not extend CRTC jurisdiction to the Internet generally.

Federal initiatives thus far indicate that the Canadian government is interested in promoting rather than regulating electronic commerce and the Internet.


Adjudicative jurisdiction in Canada is broadly similar to that in United States law, with some important differences. In Ontario, for example, an originating process may be served on an extraterritorial defendant, without leave, where a breach of contract or tort has been "committed in Ontario" or where damages have been "sustained in Ontario", among other enumerated categories.(6) Ontario, as other provinces, also permits its courts to assume jurisdiction on matters not named in the statute, where a connection exists between the action and the forum.

The breadth of this discretion is constrained by two doctrinal thresholds, one positive and one negative. The positive threshold requires that there be a "real and substantial connection" between the cause of action and the jurisdiction. The negative threshold requires that the jurisdiction in question not be forum non conveniens, and functions as a test of the appropriateness of one jurisdiction over other possible jurisdictions. It is probable, although somewhat unclear, that these thresholds are more demanding than the statutory criteria outlined above. The statutory criteria for service may also be seen as expositive of the "real and substantial connection" requirement.(7)

"Real and Substantial Connection"

The "real and substantial connection" requirement is based on the long-established Canadian legal principle of order and fairness, and plays a role similar to the "minimum contacts" test in United States law.(8) The leading Supreme Court of Canada case on the doctrine, Morguard Investments,(9) was interpreted by the Supreme Court in a later case, Hunt, not to be "a rigid test" but rather one "intended to capture the idea that there must be some limits on the claims to jurisdiction".(10) LaForest J. in Hunt remarked on the need for "greater comity in our modern era when international transactions involve a constant flow of products, wealth and people across the globe". He further prescribed that "jurisdiction must ultimately be guided by the requirements of order and fairness, not a mechanical counting of contacts or connections".(11)

The application of these general principles to contract, criminal/civil and tort contexts reveals important implications for jurisdiction in cyberspace. Even prior to Morguard and Hunt, Canadian courts began moving away from a strictly territorial approach to jurisdiction in contracts, criminal, and civil cases, acknowledging that some aspects of the connection are geography-neutral.(12) This predicts considerable continuity between the established approaches to determining jurisdiction and future cases on Internet jurisdiction.

By contrast, Canadian tort law is based on a strict lex loci delicti rule, articulated most recently by the Supreme Court of Canada in Tolofson.(13) This diverges from the "most significant relationship" test in United States law, which is less exclusively based on a territorial locus; it also conflicts with the increased flexibility of the jurisdictional test espoused by Morguard and Hunt. The court in Tolofson does qualify its conclusions with respect to "a wrong [that] directly arises out of transnational or interprovincial activity", where it notes that "other considerations may play a determining role".(14) A rigid interpretation of Tolofson, however, could lead to difficulties in Internet defamation or 'cyber libel' cases, or even, in the context of e-commerce, in some negligent misrepresentation cases. This lies in the fact that the lex loci delicti rule at Canadian law could be construed to render a tort actionable per se in every jurisdiction in which it has been read, heard or perceived.(15) Although a recent Canadian case concerning jurisdiction for Internet libel did not manifest this problem, it may surface in the future.(16)

In the application of the "real and substantial connection" test generally to Internet jurisdiction, two recent and highly relevant cases offer substantial clarification. In Craig Broadcast Systems,(17) the Manitoba Court of Queen's Bench commented obiter on the difficulty of determining whether an action had a "real and substantial connection" with the forum in cyberspace and suggested that "the issue will not be resolved by one or two factors, but by looking at the accumulation of factors in the particular case".(18)

More recently, the British Columbia Court of Appeal bore out this approach when it upheld North Carolina jurisdiction following a breach of a sale of goods contract by a Canadian company.(19) The court noted, inter alia, that the defendant company had "portrayed itself as a corporate citizen that operated internationally by virtue of its internet advertisements".(20) The court also noted that the purchase had been made, the equipment installed, and the losses suffered in North Carolina.

Forum non conveniens

Notwithstanding the "real and substantial connection" test, Canadian courts may surrender jurisdiction on the basis of forum non conveniens if they determined that another jurisdiction would be more appropriate to hear a case.(21) Although the forum non conveniens doctrine is recognized in all Canadian jurisdictions, few interpretive rules are prescribed by statute or at law. Factors Canadian courts have traditionally considered include: the physical location of the parties, witnesses, or evidence; the coordination of legal systems; the justice of the end result; the protection of justified expectations; the predictability and uniformity of results or of legal consequences; and the convenience, simplicity, ease in the determination, and application of the law to be applied.(22) The Canadian test usually involves a balancing of interests rather than the procedural guarantee provided by the due process requirements of the 14th Amendment. In some cases, this may result in less protection for an extraterritorial defendant in Canadian than in American courts.(23)

Two recent cases involving Internet jurisdiction suggest how Canadian courts may decide forum non conveniens in future e-commerce cases. In Kitakufe,(24) an Ontario court ruled against a forum non conveniens motion to transfer a proceeding to Uganda. The plaintiff, an Ontario physician, alleged libel against another Ontario resident who wrote for a newspaper published in Uganda and reproduced on the Internet. Although the court primarily relied on traditional forum non conveniens analysis, the Internet republication supported the court's central conclusion that the alleged damages were primarily suffered in Ontario.

In another case, Alteen,(25) the Newfoundland Supreme Court upheld a determination that Newfoundland was the appropriate forum to hear an action for misrepresentation brought by Newfoundland investors against a California company, Informix, in which the investors had purchased shares. The court rejected the traditional forum non conveniens arguments advanced by Informix(26) and instead relied substantially on the fact that investment information issued in the United States could have reached Canadian investors and the Canadian business press through the Internet, creating the foreseeability of Canadian shareholders.


Like the United States, Australia and other federal states, Canada has arranged for the reciprocal enforcement of judgements given by provincial courts within its borders. Assuming a foreign court has exercised jurisdiction legitimately, Canada normally follows the principle of comity and voluntarily submits to the jurisdiction of friendly nations and enforces foreign judgments in exchange for the promise of similar treatment.

Often Canadian courts will require that other conditions be fulfilled. In the only Canadian Internet jurisdiction case so far relating to enforcement,(27) the British Columbia Court of Appeal overturned the summary decision of another British Columbia court enforcing the default judgment of Texas court on an action for libel. Both the appellant and the respondent were domiciled in British Columbia, but the respondent had filed in Texas on the basis that alleged defamatory statements posted on an Internet discussion group affected its interests vis-à-vis existing and potential investors in Texas. The British Columbia Court of Appeal disagreed, finding no "real and substantial connection" in the "mere transitory, passive presence in cyberspace of the alleged defamatory material", and the "mere possibility that someone might have reached out to cyberspace to bring the defamatory material to a screen in Texas."(28)

Given the changing nature of Internet jurisdiction law, and the ease with which less cooperative nations (the so-called 'Internet paradises') can be used as e-commerce domiciles, the enforceability of Canadian and foreign judgments is likely be a key issue in future Canadian jurisprudence on e-commerce.


The Canadian government has demonstrated a strong commitment to the promotion of electronic commerce, including through the removal or resolution of legal barriers. A federal Task Force on Electronic Commerce was struck in 1998 to coordinate developments in particular industry areas.(29) The June 1998 conference of federal, provincial and territorial ministers responsible for the information highway agreed to promote and support the removal of legal, policy or regulatory obstacles to electronic commerce.(30) In October 1998 Canada hosted the ministerial conference on electronic commerce of the Organization for Economic Cooperation and Development. By the end of December 1998, the country was one of the first to have set out a comprehensive electronic commerce agenda addressing policy development in most key areas of legal concern. Specific policy and jurisprudential developments are discussed below.

1. Taxation

E-commerce raises two basic legal problems for Canadian tax policy. The first problem is the ability of e-commerce enterprises to carry on business in Canada while avoiding the maintenance of a fixed physical base in the country. According to Canadian tax treaties, a foreign resident is taxable on its Canadian business profits only if it carries on business through a permanent establishment in Canada. The second problem relates to the principle of neutrality as to source of income, which has produced a source-based taxation system that e-commerce threatens to render obsolete.(31)

In April 1998, the Minister of National Revenue released the report of an advisory committee on the administration of tax in e-commerce.(32) The report recommended, in part, that the taxation of e-commerce should be economically neutral as well as equitable, that taxes should be easy to administer and collect, that the tax system should not give rise to multiple taxation, and that the system should provide a fair allocation of tax base and revenues among jurisdictions.

2. Securities

Cyberspace jurisdiction raises a particular problem in securities law because, unlike in the United States, there is no body of Canadian case law, beyond general jurisdictional principles, that deals expressly with its extraterritorial reach. Thus long-standing jurisdictional challenges, such as the enforcement of registration requirements, may be expected to multiply in proportion to the growth of e-commerce.(33) The Internet also raise unique questions, such as when one must advert to the requirements of other jurisdictions. In 1997, the Ontario Securities Commission (OSC) shut down a web site that provided detailed stock advice.(34) The site was provided free of charge, and apparently run as a hobby by a Canadian investor who was unaware of the registration requirement. It is doubtful that the OSC could have enforced the regulation against a site operated from outside Canada by a Canadian, much less by a foreign national. This points to the need for a major review of securities regulations.

Securities regulators in Canada have not ignored the Internet. The Canadian Securities Administrators (CSA), the collective of provincial securities commissions across Canada, has collectively implemented an online system for the receipt, processing and distribution of disclosure documents.(35) In October 1998 the CSA issued an information bulletin warning investors of the potential on the Internet for fraud, unregistered trading, misrepresentations, manipulation, illegal distributions, and conflicts of interest.(36) The CSA also recently struck a committee to address the regulatory issues arising out of the use of the Internet and other electronic media by market participants. The goals of the committee are to foster development and innovation without compromising investor protection or investor confidence.(37)

Regulators will likely have to make extensive changes to rules developed for a physically delimited environment. On the other hand, some solutions may be straightforward. The British Columbia Securities Commission has indicated that a clear warning about jurisdictions from which an enterprise will or will not accept customers would be sufficient to suspend the registration and prospectus requirements of British Columbia securities law.(38)

Absent such a disclaimer, however, Canadian courts have shown a willingness to subject foreign defendants to Canadian jurisdiction . In Alteen,(39) the court allowed an action against an American company to proceed in Newfoundland even though the company had issued no public statements in Canada, made no direct solicitation in Newfoundland, and had no contact with investors in the province. This case should be contrasted with Braintech,(40) in which the British Columbia Supreme Court found that merely passive dissemination of information to individuals in another jurisdiction was insufficient to ground jurisdiction for a tort action.

3. Intellectual Property

Intellectual property raises numerous jurisdictional issues in the context of e-commerce. The prevailing Canadian policy analysis is a 1997 report commissioned by Industry Canada to analyze the state of Canadian law regarding liability for content circulating on the Internet, with a particular focus on copyright, trade-mark, civil liability, privacy, and criminal law issues affecting Internet Service Providers, Bulletin Board Services, newsgroups, and related services.(41)

More recently, Industry Canada released a consultation paper dealing with domain name system reform and related governance issues.(42) The consultation paper identified problems with first-come, first-served domain name registration and noted the Canadian government's desire to balance low entry barriers, such as efficient registration, with the protection of business interests.

4. Payment Systems/Banking

Payment systems and banking raise numerous issues of jurisdiction in e-commerce, among them: privacy (discussed below), cryptography, money laundering, and electronic money.

Industry Canada issued a policy document in February 1998 outlining current and prospective Canadian policy on cryptography.(43) The current Canadian policy consists entirely of controls on the export of cryptography pursuant to the 33-nation Wassenaar Arrangement that requires export controls on a long list of dual-use products, including cryptography, in order to prevent the movement of goods not in the strategic interest of the signatories.

The federal government, through Industry Canada, is now reviewing cryptography policy, focusing mainly on the issue of encryption for confidentiality. The government is committed to the development of a policy framework consistent with OECD Guidelines for Cryptography Policy. In particular, its goal is to shield private sector economic and financial information, protect individual privacy and freedom of expression, and ensure the government's ability to effect its law enforcement and national security responsibilities.

5. Privacy

Privacy arises as both a component concern of other areas of e-commerce and as a self-standing jurisdictional concern.

In January 1998, Industry Canada and Justice Canada issued a joint report on privacy in the context of e-commerce.(44) Partly in response to the report, in October 1998 the federal Industry Minister and the Attorney General introduced a bill to enact the Personal Information Protection and Electronic Documents Act.(45)

As proposed, Bill C-54 contains measures to protect personal information in the private sector and introduces electronic signatures to enable online transactions with federal institutions. The reach of the privacy provisions of the legislation are to be phased in, protection of personal information provisions applying first to the federally-regulated private sector, and after three years, applying more broadly to all personal information collected, used, or disclosed in the course of commercial activities. Where a province adopts legislation that is substantially similar, Bill C-54 provides for an exemption from the application of federal law.

As of June 1999, the bill had not been ratified as law.

6. Sale of Goods

Jurisdiction issues arising from the sale of goods over the Internet occur generally in the electronic ordering of tangible goods, as well as the online delivery of intangible goods such as downloadable software, music, video, text or images. Tangible goods sales also present problems when the goods carry geographically-based licensing or registration requirements, which are prevalent in Canada. In Ontario, for example, licensing or registration requirements apply generally to extra-provincial corporations and limited partnership, and specifically to sellers of liquor, books/periodicals, gaming products, agricultural goods, cattle & livestock, farm implements, grain, motor vehicles, tickets to sporting events, and direct sales goods.

The Personal Information Protection and Electronic Documents Act introduced in October 1998 included provisions on the admissibility of electronic evidence such as contracts, invoices, and receipts - all common sources of dispute in the sale of goods - as well as on the certification of electronic signatures.(46)

The only Canadian jurisprudence on cyberspace jurisdiction involving the sale of goods is the British Columbia Court of Appeal's decision in Old North State Brewing, in which a Canadian brewing equipment supplier was compelled to defend an action for breach of contract in the jurisdiction of the purchaser.(47) The case is consistent with traditional doctrines that support a finding of jurisdiction in the place at which a contract has been agreed, executed, and damages from a breach of contract suffered.

7. Sale of Services

The jurisdictional issues raised in the electronic sale of services are similar to those for the sale of goods. As with goods, geographically-based licensing and registration requirements apply widely in Canada to professional services such as architecture, medicine, psychology, law, and engineering, as well as to: collection agencies, consumer reporting agencies, insurance agencies, travel agencies, real estate brokers, securities and commodities brokers, post-secondary education, banking, insurance, loan and trust services, consumer lending, broadcasting, telecommunications, gaming services, and adoption agencies.

8. Advertising/Consumer Protection

Advertising and consumer protection policy in Canada is largely administered by provincial governments, with the federal Competition Bureau addressing anti-competitive activity such as abuse of dominant position, resale price maintenance, refusal to deal, exclusive dealing, market restriction, and tied selling, as well as criminal offences such as conspiracy and bid-rigging. The Competition Bureau has some extraterritorial jurisdiction in its ability to review mergers between Canadian and non-resident foreign enterprises. In general, however, e-commerce raises complicated jurisdictional questions for the enforcement of consumer protection and related legislation.

Industry Canada issued a report on consumer protection rights in the context of e-commerce in March 1998.(48) The report recommended, inter alia, that existing legislation be changed to deem online contracts to have been entered into at the address of the consumer. The report also recommended that the private sector be encouraged to develop "best practices" in dealing with complaints by online consumers, specifically through a code for the informal review and efficient resolution of consumer complaints. In aid of this, Industry Canada and the Treasury Board Secretariat have published a guide for the creation of voluntary codes.(49)

9. Public Law/Gaming

Gaming, like consumer protection, is largely administered by provincial governments. Although myriad jurisdictional issues are likely to arise from e-commerce relating to gaming, to date there has been no relevant public policy discussion or jurisprudence.

1. For elaboration, see Ogilvy Renault, "Jurisdiction and the Internet: Are Traditional Rules Enough?", July 1998, available online at

2. Luann LaSalle, "Language laws apply to Internet advertisements in Quebec", The Globe and Mail, 1998.04.28; Canadian Press, "Quebec store caught in language Web", The Globe and Mail, 1997.06.23. Both are available online through WestLaw.

3. Industry Canada, "The Canadian Electronic Commerce Strategy", September 1998, available online at

4. The Call for Comments for these hearings (Telecom Public Notice CRTC 1998-20 and Broadcasting Public Notice CRTC 1998-82) is available online at, as are written submissions and transcripts of the hearings.

5. The Decision (Telecom Public Notice CRTC 1999-14 and Broadcasting Public Notice CRTC 1999-84) is available online at

6. Ontario Annual Practice, R.R.O. 1990, Reg. 194, r. 17.02. Similar provisions appear in other provincial rules of procedure, and in Article 3148(3) of the Civil Code of Quebec.

7. This is discussed more fully in Chris Gosnell, "Jurisdiction on the Net: Defining Place in Cyberspace", Canadian Business Law Journal 29.3 (February 1998) 344-63 .

8. International Shoe v. Washington 236 U.S. 310 (1945).

9. Morguard Investments Ltd. v. De Savoye [1990], 3 S.C.R. 1077 (S.C.C.).

10. Hunt v. T&N plc [1993], 109 D.L.R. (4th) 16 (S.C.C.) at para 58.

11. Hunt, supra note 10, at para 53, 58.

12. The Supreme Court of Canada discussed this directly in a criminal case involving securities infractions, Libman v. R. [1985], 21 D.L.R. (4th) 174 (S.C.C.).

13. Tolofson v. Jensen [1994], 3 S.C.R. 1022, 120 D.L.R. (4th) 289.

14. Tolofson, supra note 13, at para 42.

15. See Gosnell, supra note 7.

16. Braintech, Inc. v. Kostiuk [1999], B.C.J. No. 622 (unreported B.C.C.A. decision, per Goldie J.A., March 18, 1999, court file no. CA024459).

17. Craig Broadcast Systems Inc. v. Frank N. Magid Associates Inc. [1997], M.J. No. 106 (unreported decision of the Manitoba Court of Queen's Bench, per Beard J., March 11, 1997, court file no. CI 95-01-92402).

18. Craig Broadcast Systems, supra note 17, at para 23.

19. Old North State Brewing Co. v. Newlands Services Inc. [1998], B.C.J. No. 2474 (unreported decision of the British Columbia Court of Appeal, per Finch J.A., October 27, 1998, court file no. CA 023872).

20. Old North State, supra note 19, at para 31.

21. The doctrine was recently considered and approved in Amchem v. British Columbia (Workers' Compensation Board) [1993], 1 S.C.R. 897.

22. David L. Johnston et al, Cyberlaw (Toronto: Stoddart, 1997) at 232.

23. This is discussed in more detail in Ogilvy Renault, supra note 1.

24. Kitakufe v. Oloya [1998], O.J. No. 2537 (unreported decision of the Ontario Court of Justice, General Division, per Himel J., June 18, 1998, court file no. 97-CV-133151).

25. Alteen v. Informix Corp. [1998] N.J. No. 122 (unreported decision of the Newfoundland Supreme Court, per Woolridge J., May 21, 1998).

26. These were, inter alia, that it had limited operations in Canada, and none in Newfoundland; that only a tiny fraction of its business had involved direct contact with Newfoundland residents; and that a number of class actions had already been brought in California.

27. Braintech, Inc., supra note 16.

28. Braintech, Inc., supra note 16, at para 62.

29. Documentation is available online at

30. Federal-Provincial-Territorial Conference of Ministers responsible for the Information Highway held in Fredericton, New Brunswick, June 1998, available online at

31. Vern Krishna, "International Income Taxation of Electronic Commerce", Canadian Current Tax 9.4 (January 1999).

32. "Report of the Minister's Advisory Committee on Electronic Commerce", 30 April 1998, available online at<>.

33. Jurisdiction issues have been prominent in recent disputes such as Bre-X.

34. Janet McFarland, "OSC shuts investment Web site", The Globe and Mail, 1997.06.21, available online through WestLaw.

35. Available online at

36. Canadian Securities Administrators, Investing and the Internet, October 1998. Available online at

37. Canadian Securities Administrators, Request for Comments 11-401, "Delivery of Documents by Issuers using Electronic Media", January 1999. Available online at

38. Douglas M. Hyndman, Chair, British Columbia Securities Commission, "Notice: Trading Securities and Providing Advice Respecting Securities on the Internet", NIN 97/9, 3 March 1997.

39. Alteen, supra note 25.

40. Braintech, supra note 16.

41. Michel Racicot et al, "The Internet Is Not A No Law Land", February 1997, available online at

42. Industry Canada, "Domain Name System Reform and Related Internet Governance Issues: A Consultation Paper", August 1998, available online at

43. Industry Canada, "A Cryptography Policy Framework for Electronic Commerce: Building Canada's Information Economy and Society", February 1998, available online at

44. Industry Canada and Justice Canada, "The Protection of Personal Information: Building Canada's Information Economy and Society", January 1998. The Report and related documents are available online at

45. Bill C-54, available online at

46. Bill C-54, supra note 45.

47. Old North State, supra note 19.

48. Industry Canada, "Consumer Protection Rights in Canada in the Context of Electronic Commerce", March 1998, available online at

49. Office of Consumer Affairs, Industry Canada and Regulatory Affairs Division, Treasury Board Secretariat, "Voluntary Codes: A Guide for Their Development and Use", March 1998, available online at

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