McCarthy Tétrault LLP PO Box 48, Suite 5300 Toronto-Dominion Bank Tower Toronto ON M5K 1E6 Canada Tel: 416-362-1812 Fax: 416-868-0673 Enforcement of International Arbitral Awards in Canada DAVID I. W. HAMER BREANNA L. J. NEEDHAM
Enforcement of International Arbitral Awards in Canada David I. W. Hamer, Breanna L. J. Needham I. Background The enforcement of international arbitral awards in Canada is governed primarily by legislation in each of the provinces and territories of Canada. Canada is a federal state, with the responsibilities of the federal and provincial governments set out in the Constitution Act. 1 The provincial legislatures have power over matters related to property and civil rights. 2 As a result of this separation of powers, each province in Canada has jurisdiction to enact the appropriate legislation to govern the enforcement of arbitral awards, both domestic and international. Canada is a party to the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the New York Convention ), the UNCITRAL Model Law on International Commercial Arbitration 1985 (the UNCITRAL Model Law ),and the UN Convention on Transparency in Treaty-based Investor-State Arbitration 2015. In recognition and enforcement proceedings, Canadian courts treat the applicable provisions of the UNCITRAL Model Law and the New York Convention as being incorporated into the applicable domestic statute. In the rare and exceptional case where an arbitration and award do not fall within the requirements of international and commercial, as defined in the New York Convention and the UNCITRAL Model Law, the applicable domestic arbitration legislation of the province would govern, or, if inapplicable on the facts, the approach to enforcement would be dictated by the common law. 3 II. Preliminary Proceedings and Interim Measures The arbitration statutes in Canada do not contain an express definition of the term arbitral award. Additionally, neither the UNCITRAL Model Law nor the New York Convention provide an express definition. Since interim measures are not technically awards, they are generally not enforceable in most jurisdictions in Canada. While the provinces have adopted the UNCITRAL Model Law into provincial legislation, the vast majority of Canadian jurisdictions have not adopted the 2006 UNCITRAL amendments that would allow for the recognition and enforcement of interim measures. Notable exceptions to this general proposition include the provinces of British Columbia and Ontario. For example, the legislation in Ontario treats an interim measure as an award, and allows for an enforcement of an order for an interim measure 1 Constitution Act, 1867 (UK), 30&31 Vict, c. 3 (formerly the British North American Act). 2 Constitution Act, 1867 (UK), 30&31 Vict, c. 3 at s. 92(13). 3 Norske Atlas Ins. Co. v. London Gen l Ins. Co. (1927) 43 T.L.R. 541 sets out this approach, which would require: (1) The parties must have agreed to submit to the arbitration process that took place; (2) The arbitration must have been conducted as per the agreement; (3) The agreement to arbitrate must have been valid as per the laws of the State in which the arbitration occurred; and (4) The award must be both final and conclusive. Any attempts to resist enforcement would be governed by the applicable common law grounds for resisting enforcement of foreign judgments.
of protection and the provision of security as described in Article 17 of the UNCITRAL Model Law. 4 III. Enforcement The Applicable Statutory Framework A) Federal While Canada does have a federal court system, the federal court has a limited statutory jurisdiction to review a more narrow scope of legal issues, whereas the superior courts of the provinces have plenary jurisdiction. The federal court has jurisdiction over commercial arbitration awards that fall within the purview of applicable federal legislation, where one of the parties is a Crown or federal government agency, and items that are within the scope of admiralty or marine law. The New York Convention was incorporated into the federal United Nations Foreign Arbitral Awards Act 5, which functions to govern foreign awards that are within the jurisdiction of the federal government. The UNCITRAL model law has been implemented into the various provisions of the federal Commercial Arbitration Act, 6 which is applicable to international arbitrations that are within the purview of federal jurisdiction where one party is a Crown corporation, department of the federal government, or the issue relates to matters of marine and admiralty law. B) Provincial Each province (and territory) in Canada has legislation to govern arbitrations and the enforcement of international arbitral awards, with each adopting the New York Convention. Domestic arbitration legislation, while very similar, tends to be closely aligned with the UNCITRAL Model Law, although several jurisdictions have legislation that is more closely based on the English Arbitration Act 1889. 7 In each province, the legislation for the enforcement of international arbitral awards is separate from that for domestic awards. For example, the province of Ontario has the International Commercial Arbitration Act 8 and the Arbitration Act, 1991 9, to govern international and domestic arbitrations and awards, respectively. In Ontario, the former legislation directly incorporates UNCITRAL, including the language from Article 35 indicating that awards shall 4 International Commercial Arbitration Act, R.S.O. 1990, c I. 9, section 9 reads, An order of the arbitral tribunal under article 17 of the Model Law for an interim measure of protection and the provision of security in connection with it is subject to the provisions of the Model Law as if it were an award. See also Section 2(1) of the British Columbia International Commercial Arbitration Act, R.S.B.C. 1996, c. 233, which includes interim award in the definition for arbitral award. 5 United Nations Foreign Arbitral Awards Act, R.S.C. 1985, c. 16 (2 nd Supp.). 6 Commercial Arbitration Act, R.S.C. 1985, c. 17 (2 nd Supp.). 7 English Arbitration Act, 1889, 52&53 Vict., c. 89. See, for example, the Newfoundland and Labrador Arbitration Act, R.S.N.L. 1990, c A-14. 8 R.S.O 1990, c. 19. 9 S.O. 1991, c. 17.
be recognized, with the court having little to no discretion to refuse enforcement unless one of the grounds for refusing recognition and enforcement from Article 36 can be shown. Enforcement occurs by application to a court of competent jurisdiction, which must be supplied with the original documents that reflect the award, or alternatively, certified copies. 10 The procedural steps for enforcement of an award in Canada are further detailed below in Section VII. IV. Types of Enforceable Awards A) Monetary Awards Monetary awards, otherwise described as damages, are generally always enforceable. B) Declaratory Awards Canadian courts will enforce declaratory awards to the extent that they are a declaration of rights as they are related to the parties to the arbitration. Awards that attempt to declare the rights of third parties will not be enforced by the courts, as the third party cannot have been considered to have attorned to the jurisdiction of the arbitral tribunal. C) Injunctive Awards If an injunction constitutes a final award, it will be considered an enforceable award. Injunctions granted as interim measures are only enforceable in British Columbia and Ontario for the reasons indicated above in Section II. D) Other Remedies The courts have the discretion to consider a wide range of remedies that can be awarded based on the applicable legal and equitable principles. For example, Canadian courts can enforce costs awards or awards for specific performance, with the same caveat that these must be final awards in order to be enforceable in most provinces. E) Part Performance The courts will allow a party to seek part performance of an award. This can occur in circumstances where the award has already been partially performed, and as a result, only partial enforcement is required. 10 The province of Quebec, being a civil law jurisdiction, has slightly different requirements than the rest of the provinces. In Quebec, the award must first be homologated, which the court cannot refuse unless there was a lack of qualification to enter into the agreement, the agreement is invalid, there was a lack of notice associated with the arbitration, the dispute falls outside the scope of the arbitration, or the appropriate procedure for the arbitration was not followed. See the Code of Civil Procedure, C.Q.L.R. c. c-25, Article 946.4.
V. Grounds for Refusing Enforcement The applicable provincial legislation in the provinces generally follows the enumerated grounds listed in Article 36 of the UNCITRAL Model Law for refusing the enforcement or recognition of a foreign award. Under Article 36(1)(a), the usual process-driven grounds are made available. Under Article 36(1)(b), non-arbitrability in the Canadian jurisdiction and Canadian public policy are provided as grounds. The court has discretion in considering the grounds for refusal. The onus of establishing the grounds for refusal rests on the party attempting to resist enforcement. In Canada, the most common basis for refusing enforcement arises where the subject matter is not considered to be arbitrable in the province, or where there exists a pending challenge to the award in the originating jurisdiction. In the latter situation, in the interests of comity, the Canadian courts generally tend to adjourn the enforcement proceedings to allow the challenge to proceed to its conclusion. If an application has been made in the originating jurisdiction to have an award set aside or suspended (as articulated by Article 36(2)), as a condition of adjourning the Canadian enforcement proceedings, the court may also order that security be provided. This approach can be followed where there is an actual merits appeal pending in the originating jurisdiction, or merely a procedure-based challenge to an award. The courts first consider the threshold issue of whether there is apparently an issue to be tried in the foreign challenge, and then consider whether discretion should be exercised to adjourn an enforcement application followed by whether further discretion should be exercised in ordering that security be posted. 11 For example, in Empresa Minera Los Quenuales S.A. v. Vena Resources, an application was brought in the province of Ontario for recognition and enforcement of an award that had been rendered in Peru. An annulment application had been brought in Peru to have the award set aside, although Peruvian law dictated that, despite the annulment application, there was still an entitlement to pursue enforcement. The annulment application was not an appeal, but was merely a procedural review with a small chance of success. The court stated that, if there is an issue to be tried, then the choice between immediate enforcement and adjournment was to be made on the balance of convenience. In this case, even though the chance of success of receiving the annulment was very low, it was not without any prospect of success. 12 Despite this finding, the court ordered that security be posted as both a show of good faith and to provide an incentive to expedite the annulment decision and to avoid any future steps that would somehow delay it. 13 11 Powerex Corp v. Alcan Inc., 2004 BCSC 876 at paras. 26-27. 12 Empresa Minera Los Quenuales S.A. v. Vena Resources, 2015 ONSC 4408 (Ont. S.C.J.) at paras. 33-36. 13 Empresa Minera Los Quenuales S.A. v. Vena Resources, 2015 ONSC 4408 (Ont. S.C.J.) at para. 41.
VI. Public Policy Unlike the approach taken in many other jurisdictions, public policy grounds are not generally considered by the courts in Canada. A reconsideration of the case on its merits is never appropriate, and refusal on public policy grounds is exceptional. The Ontario Superior Court of Justice has stated that, to succeed on public policy grounds, an award must be egregious, in the sense that it must seriously or fundamentally offend the most base and foundational principles of justice and fairness. 14 The reasoning behind this approach is: The concept of imposing our public policy on foreign awards is to guard against enforcement of an award which offends our local principles of justice and fairness in a fundamental way, and in a way which the parties could attribute to the fact that the award was made in another jurisdiction where the procedural or substantive rules diverge markedly from our own, or where there was ignorance or corruption on the part of the tribunal which could not be seen to be tolerated or condoned by our courts. 15 In addition to high-handed conduct or decisions that can be considered abhorrent in nature, the public policy ground for refusal can also be met by showing that the situation is one of double recovery. 16 Double recovery is contrary to the general moral outlook of Canada, and is also considered contrary to public policy when Canadian policy is considered within the context of the international approach to enforcement of arbitral awards as a whole. 17 Parties can contract out of the grounds for refusal through an express waiver. This will be effective on the basis that respect must be given to the clear intentions of the parties in creating their agreement. 18 The Canadian approach to refusing enforcement, while strict, is not as deferential as the view taken in the United States, where the standard is high and infrequently met, with a refusal to enforce being found only in the clearest of cases and, where such decisions are narrowly confined, with the courts enforcing the decision of the arbitrator unless it violates basic notions of justice. 19 14 Corporation Transnational de Inversiones S.A. de C.V. v. STET International S.p.A., 136 O.A.C. 113 (Ont. C.A.) at para 3 [emphasis added]. 15 Scheter v. Gasmac Inc., [1992] O.J. No. 257(Ont. Gen. Div.) at para 50. 16 Subway Franchise Systems of Canada Ltd v. Laich, 2011 SKQB 249. 17 Lambert, Re, [2001] O.J. No. 2776 (Ont. S.C.J.) at para 76. See also, Boardwalk Regency Corp. v. Maalouf (1992), 51 O.A.C. 64 at para. 21 for a general discussion on public policy in Canada. 18 Food Services of American Inc. v. Pan Pacific Specialties Ltd., [1997] B.C.J. No. 1921 (B.C.S.C.) at para. 16. 19 TermoRio S.A. E.S.P. v. Electranta S.P., 487 F.3d (D.C.Cir.2007) at 928, 926, 938-939.
VII. Enforcement Proceedings To enforce a foreign award, an application for enforcement is commenced by issuing a notice of application under the applicable legislation to the appropriate court. 20 These applications are generally done on notice, although a motion may be brought ex parte in limited circumstances, such as where there is a good reason to believe that the other party would use notice primarily to frustrate the process or where there is neither time nor means to provide meaningful notice. 21 There are no provisions in the New York Convention or the UNCITRAL Model Law as to limitation periods. In Canada, the provincial rules for limitation periods are applicable in the enforcement of international arbitral awards, and enforcement applications are subject to the provincial discoverability rules. 22 In some jurisdictions, this means that an application must be made within two years of the date of the award. 23 Other provinces allow the two year period to run from the date of expiry of the final appeal period. 24 The courts are generally unwilling to extend limitation periods beyond those indicated. For example, in Yugraneft Corp. v. Rexx Management Corp., the Alberta Court of Appeal held that the attempt at enforcement that came three years post-award fell well outside the general two year limitation period that was applicable in the province; this decision was later affirmed by the Supreme Court of Canada. 25 All applications require the original award and agreement or certified copies; any authorization must conform with Article 35(2). If the award is not in one of the official languages of Canada (either English or French), then the copy of the award must be accompanied by an official, duly certified translation. Enforcement proceedings can take anywhere from several months to several years, depending on the complexity of the matter and the issues being argued. Fees related to filing and other items are assessed according to published court fee schedules. 26 A judgment for enforcement can be enforced in a number of ways, including by an examination in aid of executive, garnishment, and through a writ of seizure and sale. 20 This includes the application being made to the appropriate court considering the provincial or federal law that governs the subject matter of the arbitration. Subject matter governed by federal law falls within the jurisdiction of the Federal Court Trial Division. See, for example, Compania Maritime Villa Nova S.A. v. Northern Sales Co., 29 F.T.R.136). Applications for matters governed by provincial law are made to the superior court of first instance. 21 Robert Half Canada Inc. v. Jeewan, [2004] O.J. No. 2903 (Ont. S.C.J.); see also Sprott Resource Lending Corp, Re, 2013 ONSC 4360 (Ont. S.C.J.). 22 Yungraneft Corp. v. Rexx Management Corp., 2010 SCC 19. 23 See, for example, the Ontario legislation, s. 4 of the Limitations Act. 24 See, for example, the Saskatchewan legislation, The Limitations Act, S.S. 2004, c. L-16.1. 25 Yungraneft Corp. v. Rexx Management Corp., 2008 ABCA 274, aff d by the Supreme Court of Canada, 2010 SCC 19. 26 For example, in Ontario, the Administration of Justice Act, R.S.O. 1990, c. A. 6 contains a fee schedule, available online at: https://www.ontario.ca/laws/regulation/920293.
VIII. Conclusion The Canadian approach to the enforcement of international arbitral awards is based upon deference to the essential purposes of commercial arbitration, although the courts are not without discretion in the appropriate circumstances. While the varying provincial legislation can potentially carry different implications depending on the jurisdiction in which the application is brought, generally, the approach to enforcement in Canada is as uniform as can be expected in a federal state. While the ability to refuse enforcement on the basis of public policy is available, and the approach is slightly more liberal than that of the United States, it is seldom exercised. While Canadian law is ever-evolving, there are currently no proposed major changes to the system as it exists today, and there is no reform of any substantial nature currently being discussed.