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BP shareholders in the United States are alleging that the company misled them about the severity of the 2010 Deepwater Horizon spill, above.Dave Martin/The Associated Press

Ontario shareholders who bought stock in BP PLC on the New York Stock Exchange should not be able to sue the British oil giant here over its massive 2010 oil spill in the Gulf of Mexico, the Ontario Court of Appeal has ruled.

BP still faces massive litigation in the United States over the catastrophic spill, including a class action launched by U.S. shareholders alleging the company misled them about the severity of the disaster.

But a similar proposed class action launched in Ontario on behalf of BP shareholders has received attention mostly from other lawyers curious about whether Ontario courts would allow a securities case involving a purchase on a foreign stock exchange, and against a foreign company, to proceed.

A lower court judge had previously ruled that the case could go ahead. But in a ruling released on Thursday, the Court of Appeal overturned that decision. Both courts agreed that Ontario technically has jurisdiction over the case. But the Court of Appeal sided with lawyers for BP, who argued that Ontario was not the appropriate venue for the court battle, since shareholders here can already take part in the U.S. class action.

Bay Street lawyers who defend corporations against shareholder class actions had expressed concern that extended the jurisdiction of Canadian courts over cases involving foreign firms and foreign stock exchanges could turn the country into an "overflow jurisdiction" for cases rejected elsewhere.

That concern intensified after a 2010 ruling by the U.S. Supreme Court, called Morrison v. Australia Bank Limited, ruled out future securities class actions involving a stock exchange outside the United States.

Canadian courts have generally been much less ready than their U.S. counterparts to stretch jurisdiction. However, this kind of decision usually hinges on the facts of each case. In 2012, in a proposed class-action against Kitchener, Ont.-based Canadian Solar Inc., the Ontario Court of Appeal ruled that Ontario shareholders who bought stock on the U.S.-based Nasdaq could sue the company in Ontario.

In May, the U.S. shareholder class-action lawsuit against BP over the Gulf of Mexico spill won certification, or a green light to proceed, from a federal judge in Houston.

BP shares, which are listed on the London and Frankfurt exchanges, trade on the NYSE in the form of "American depository shares," which are foreign shares denominated in U.S. dollars. This kind of BP share also briefly traded on the Toronto Stock Exchange, but was delisted in 2008 due to low volume. BP concedes that Ontario shareholders who bought stock on the TSX would be able to launch their own case.

Lawyers for the plaintiff in the case could not be reached. Lawyer Larry Lowenstein of Osler Hoskin & Harcourt LLP, who acted for BP in the case, said the appeal ruling sends the message that courts here are not going to allow securities class actions that would only duplicate or interfere with cases elsewhere.

"The whole gravitational force of the litigation is in the United States," Mr. Lowenstein said. "And [the Canadian case] is very much a Johnny-come-lately."

Follow Jeff Gray on Twitter: @jeffreybgrayOpens in a new window

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