[skissane]

Under international law, it is generally prohibited to sue a government in another country's domestic court system (state immunity). What exceptions to that general prohibition exist is a topic of great controversy, and different countries take different positions.

Exceptions for commercial cases–when a foreign government directly engages in international trade or commerce–are widely accepted. This case falls into that category, so Canada was not being particularly exceptional in allowing it.

Exceptions for human rights abuses, torture, terrorism, etc, are much more controversial. The US legal system is actually a bit of an outlier here (albeit not uniquely one) in being willing to entertain lawsuits against foreign governments on the later bases when most legal systems will not permit them.

[pyuser583]

Isn’t there some law from the 1700s that generically permits lawsuits against countries who violate “the law of nations?”

[skissane]

The Judiciary Act of 1789 says "The district courts shall have original jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States". That provision is known as the "Alien Tort Statute" or "Alien Tort Claims Act".

It is not clear what exactly the original meaning or purpose of this clause was, it was almost entirely ignored until the 1980s, when the US courts resurrected it as a basis for allowing victims of torture to sue the perpetrators in the US despite the fact that both victims and perpetrators were non-US citizens and the torture had no connection with the US. It is questionable whether this contemporary use of the clause is what its authors had in mind.

Most likely, the original intention was to permit foreign nationals to sue in US courts for wrongs committed against them by US citizens or in the US. For example, the US agreed in the peace treaty with Great Britain which ended the American Revolutionary War that British creditors would have their loans honoured, but several states refused to enforce those loans. In another case, in 1784, the top French diplomat to the US was physically attacked on a street in Philadelphia; the French government was upset that US law at the time did not allow the diplomat to sue his assailant. Cases such as these were likely the original intention of the clause, and its original authors probably never expected its later use, but the clause is so vaguely worded it permitted that later extension.