Contributed By Lawson Lundell LLP
Arbitration is widely used in Canada as an alternative to litigation.
Historically, Canadian governments and courts have adopted a pro-arbitration stance in line with modern international practices. In 1986, Canada became the first jurisdiction to adopt the UNCITRAL Model Law on International Commercial Arbitration. Canadian courts have since issued over 200 written decisions under arbitration legislation based on the Model Law.
Every province and territory, with the exception of Québec, has a separate statute for domestic and international arbitration. In Québec, arbitration legislation is set out in the Civil Code of Québec and the Code of Civil Procedure, which are generally consistent with the Model Law.
There are also many arbitral institutions and facilities in Canada which support both domestic and international proceedings.
Unless stated otherwise, the sections below address international arbitration matters.
Similar to other jurisdictions, COVID-19 has significantly impacted the conduct of international arbitral proceedings, particularly the increased use of video conference hearings.
Due to COVID-19, limitation periods for civil actions were suspended by the Canadian federal government, British Columbia, Alberta, Ontario, Québec, New Brunswick, Newfoundland and the Yukon. These changes may impact the limitation periods applicable to claims agreed to be resolved by arbitration.
Arbitral institutes and courts across Canada adapted their procedures to meet public health protocols. With certain exceptions, arbitrations and related court proceedings continued to be heard during the pandemic.
In Canada, international arbitration is commonly used in the following industries: mining, oil and gas, construction, information technology, forestry, and shareholder disputes.
All industries are experiencing an increased demand for arbitration, which was accelerated by the pandemic. Arbitration proceedings proceeded without interruption during the pandemic, while the courts in Canada had various limits or closures that made them less accessible to litigants.
There are many arbitral institutions in Canada, including the ADR Institute of Canada Inc. (ADRIC), the Vancouver International Arbitration Centre (VanIAC, formerly BCICAC), the Canadian International Internet Dispute Resolution Centre (CIIDRC, a division of VanIAC), the Canadian Arbitration Association (CAA) and the International Centre for Dispute Resolution of Canada (ICDR – Canada).
In 2020, VanIAC amended its domestic arbitration rules (in conjunction with the province of British Columbia’s new domestic Arbitration Act, SBC 2020, c. 2). VanIAC has announced plans to amend its international arbitration rules in 2021.
There are no specialised courts in Canada designated to hear arbitration-related disputes. These matters are typically heard by the provincial superior courts, in accordance with their rules of civil procedure.
Canadian courts are accustomed to dealing with domestic and international arbitration matters, and have issued over 200 written decisions under the Model Law.
Each of the provinces and territories, except Québec, has enacted an International Commercial Arbitration Act based on the Model Law.
Alberta, Saskatchewan, Manitoba, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland, Yukon, Nunavut and Northwest Territories (pursuant to Nunavut’s legislation) have adopted the 1985 version of the Model Law, while British Columbia and Ontario adopted the Model Law with amendments as adopted in 2006.
British Columbia has enacted a reworked version of the Model Law, while the other provinces and territories attach it as a schedule with small variations to their International Commercial Arbitration Act.
In Québec, the Model Law has not been incorporated. Arbitration in the province is governed by the Civil Code of Québec and the Code of Civil Procedure, which are generally consistent with the Model Law.
The Commercial Arbitration Act, RSC 1985, c. 17 (2nd Supp.) is a federal statute based on the 1985 version of the Model Law. This statute applies only (i) where at least one of the parties to the arbitration is the Crown, a federal departmental corporation or a Crown corporation, or (ii) in relation to a maritime or admiralty matter.
There have been no significant changes to the international arbitration statutes in Canada in the past year.
On 1 September 2020, a new domestic Arbitration Act, SBC 2020, c. 2, came into force in British Columbia.
Arbitration agreements are governed by statute. With the exception of Ontario and Québec, the requirements for an international arbitration agreement are those contained in the 1985 version of the Model Law. Ontario has adopted the requirements set out in the 2006 version of the Model Law.
All of the international arbitration statutes in Canada require that an arbitration agreement is in writing.
With some limited exceptions (discussed below), all commercial disputes can be resolved by arbitration, provided that the parties agreed to do so.
Legislatures and courts have decided that certain matters are not arbitrable in Canada. These include:
Generally speaking, Canadian courts take a pro-enforcement stance with respect to arbitration agreements.
Consistent with the Model Law, Canadian courts will typically enforce an arbitration agreement unless it is void, inoperative, or incapable of being enforced.
In accordance with Section 16(2) of the Model Law, Canadian courts enforce the rule of separability and treat an arbitration clause as an agreement independent of the other terms of the contract.
There are no statutory limitations on the selection of arbitrators in Canada. Arbitrators are not required to be legally qualified.
The parties have broad autonomy with respect to the selection of arbitrators, including the procedure to be followed, the number of arbitrators and any specific qualifications required.
Under the international arbitration laws in each province and territory, the default procedures for selecting an arbitrator are consistent with Article 11 of the Model Law.
However, these provisions only apply if the parties did not agree to a procedure in the contract or in a set of arbitral rules.
Canadian courts will only intervene in the selection of an arbitrator if a party makes a request to the court in accordance with Article 11 of the Model Law.
The challenge or removal of an arbitrator is governed by the Model Law, or the procedure agreed to by the parties or contained in the applicable arbitral institution’s rules.
In most Canadian jurisdictions, parties will make a request to challenge or remove an arbitrator in the first instance to the arbitral panel, and if unsuccessful, an application could be made to the provincial superior court (the trial-level court).
In accordance with Article 12 of Model Law, an arbitrator must disclose any circumstances likely to give rise to justifiable doubts as to his or her impartiality or independence. That obligation applies throughout the arbitration proceedings.
The parties may also agree to additional requirements with respect to an arbitrator’s independence, or use a set of arbitral rules that do so.
For example, the VanIAC International Arbitration Rules contain provisions requiring: (i) a written declaration that arbitrators must sign regarding their independence and impartiality; and (ii) limits on the parties’ communication about the disputes with any arbitrator or any candidate for appointment as an arbitrator.
See 3.2 Arbitrability.
The principle of competence-competence is recognised by courts across Canada.
Under Canadian arbitration legislation, an arbitral tribunal can rule on its own jurisdiction as a preliminary matter, or in a final award. A party may apply to a superior court for a review of the tribunal’s ruling, whether the arbitration proceedings have concluded or not.
In 2020, the Supreme Court of Canada established a new exception to the competence-competence principle based on access to justice considerations (Uber Technologies Inc. v Heller, 2020 SCC 16).
Under this new exception, courts should not refer a jurisdictional challenge to the arbitrator if there is a real prospect that the challenge would never be resolved, unless the court determined the issue. For example, this exception was found to arise where the costs that a party faced to participate in the arbitration and challenge jurisdiction were more than the amount of damages the party sought.
A court can intervene in matters relating to arbitral jurisdiction in the following circumstances.
First, a party may bring an application before the court to stay an action and refer the matter to arbitration under Article 8 of the Model Law.
Generally speaking, the courts will refer jurisdictional issues to the arbitral tribunal in the first instance. A court may depart from this general rule only if the following criteria are met:
As discussed in 5.2 Challenges to Jurisdiction, the Supreme Court of Canada recently established a new exception on access to justice grounds.
Second, following the issuance of an arbitral award, a party may bring an application to set it aside pursuant to Article 34 of the Model Law.
Third, the court can address jurisdiction on applications to recognise and enforce an award pursuant to Article 36 of the Model Law.
Consistent with Article 16 of the Model Law, jurisdiction must be challenged not later than the submission of the statement of defence. The circumstances when a court may intervene are set out in 5.2 Challenges to Jurisdiction and 5.3 Circumstances for Court Intervention.
Generally speaking, courts in Canada take a deferential approach to the review of arbitral awards. It is not a trial de novo.
However, there has historically been a divergence in Canada on whether the review by a court of a jurisdictional decision of an international arbitration tribunal attracts: (i) the deferential “reasonableness” standard; or (ii) the “correctness standard”, which provides no deference to an arbitral award.
For example, a correctness standard was applied in a line of Ontario decisions (United Mexican States v Cargill, 2011 ONCA 622). In contrast, a reasonableness standard was applied in another line of cases (ACE Bermuda Insurance Ltd. v Allianz Insurance Company of Canada, 2005 ABQB 975 and lululemon athletica Canada inc. v Industrial Color Productions Inc., 2021 BCSC 15).
As discussed in 3.2 Arbitrability, consistent with the Model Law, Canadian courts will enforce an arbitration agreement unless it is void, inoperative, or incapable of being enforced.
Where a party commences court proceedings in breach of an arbitration agreement, the other party may seek a stay of the court action consistent with Article 8 of the Model Law. In such cases, the courts will typically refer the matter to arbitration.
Generally speaking, only parties to an arbitration agreement will be bound by its terms. As the Supreme Court of Canada has recognised, mutual consent is the foundation of private dispute resolution (TELUS Communication Inc. v Wellman, 2019 SCC 19).
However, non-signatories/third parties may be subject to an arbitration agreement where:
Except for Québec, Ontario and British Columbia, Article 17 of the Model Law (1985 version) applies in Canada. It affords an arbitral tribunal the discretion to order any party to take such interim measures of protection as the arbitral tribunal may consider necessary.
In Québec, an arbitrator’s jurisdiction to grant interim measures is codified in Article 638 of the Code of Civil Procedure.
In Ontario and British Columbia, the 2006 version of Article 17 of the Model Law applies, meaning that interim measures can be issued to:
Unlike the 1985 version of the Model Law, the 2006 version of the Model Law does contemplate the issuance of preliminary orders.
Article 17 of the 2006 version of the Model Law permits a party to apply without notice for an interim measure and a preliminary order directing a party not to frustrate the purpose of the interim measure requested. The arbitral tribunal may grant the preliminary order without notice where disclosure of the request for the interim measure to the affected party risks frustrating its purpose.
Court intervention is limited under Article 5 of the Model Law. Article 9 of the Model Law provides that it is not incompatible with an arbitration agreement for a party to request an interim measure of protection from a court. In Québec, Article 638 of the Code of Civil Procedure permits a party to ask the court to homologate an arbitrator’s provisional measure to give it the same force and effect as a judgment of the court.
Institutional rules in Canada also reflect the principle in Article 9 of the Model Law. For example, Article 16(6) of the VanIAC Rules provides that “it is not the intention of these Rules to preclude a party from seeking interim relief from a court...” Similarly, Article 27(3) of the ICDR Rules provides that a request to court for interim measures is not incompatible with an arbitration agreement and shall not be deemed a waiver of the right to arbitrate.
Unique to British Columbia, the B.C. Act also expressly provides that the court has the same powers to issue an interim measure as it has in relation to court proceedings; however, the court may refer the request to an arbitral tribunal if the court considers it proper.
With respect to preliminary orders issued under the 2006 version of the Model Law, Article 17C(5) expressly states that a preliminary order is not an arbitral award and is not subject to enforcement by a court (this will apply in the provinces of Ontario and British Columbia under Section 17.03(6) of the B.C. Act).
Similarly, Article 639 of the Québec Code of Civil Procedure provides that a provisional order of an arbitrator is binding on the parties and cannot be homologated by the court.
The appointment of emergency arbitrators is not contemplated by the legislation. For those arbitrations governed by the ICDR Rules, Article 7 provides that the administrator may appoint an emergency arbitrator and that, once the arbitral tribunal is constituted, the emergency arbitrator has no further powers.
The Model Law is silent on an arbitral tribunal’s power to order security for costs (except as noted below regarding interim measures).
However, the parties may grant the arbitral tribunal the power to order security for costs in the arbitration agreement.
In British Columbia, the International Commercial Arbitration Act grants the arbitral tribunal discretion to order security for costs as an interim measure.
With respect to interim measures, Article 17 of both the 1985 and 2006 versions of the Model Law give the arbitral tribunal the discretion to require any party to provide “appropriate security” in connection with an interim measure. Further, in Ontario, where a party applies for a preliminary order under Article 17B of the 2006 version of the Model Law, Article 17E(2) stipulates that the arbitral tribunal must require the applying party to provide security in connection with the preliminary order, unless the arbitral tribunal considers it inappropriate or unnecessary to do so.
Article 638 of the Québec Code of Civil Procedure grants the arbitrator the power to require that a suretyship is provided to cover costs “and the reparation of any prejudice” from a provisional measure.
The institutional rules provide for the depositing of costs. For example, Article 40 of the VanIAC Rules permits the arbitral tribunal to require each party to deposit an equal amount in advance for costs. Similarly, Article 39 of the ICDR Rules permits the administrator to request that the parties deposit an advance for costs.
As noted in 2.1 Governing Law, the Model Law is incorporated into Canada’s provincial international commercial arbitration statutes.
Article 19 of the Model Law provides that subject to its provisions, the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting the proceedings and, failing such agreement, the arbitral tribunal may conduct the arbitration in such manner as it considers appropriate.
There are no other provincial laws or rules governing international arbitration procedure. However, Section 14 of New Brunswick’s International Commercial Arbitration Act, RSNB 2011, c. 176, provides that the province’s Rules of Court enacted apply (except where they may conflict with the provisions of that Act).
There are no particular procedural steps expressly required to be followed under the Model Law or the provincial international commercial arbitration statutes.
However, the institutional rules (VanIAC Rules and ICDR Rules) contain mandatory procedural steps.
An arbitrator must be impartial and independent and possess the qualifications agreed to by the parties. These duties are contemplated in Article 12 of the Model Law and in the international commercial arbitration statutes (see, for example, Section 12(3) of the B.C. Act).
The institutional rules also impose on an arbitrator the duty to be impartial and independent and to possess those qualifications agreed to by the parties: see VanIAC Rules, Article 11, and ICDR Rules, Article 14.
The Canadian legal profession is self-regulated, and legal practitioners must meet the qualifications set by the professional regulators of the province in which they practise.
The Model Law is silent regarding the qualifications or requirements of legal representatives appearing as counsel on international commercial arbitrations governed by it.
Unique to British Columbia, the International Commercial Arbitration Act contemplates that a party may be represented by any person of their choice, including a legal practitioner from another state.
Parties are free to determine the procedure applicable to the collection and submission of evidence, failing which the arbitral tribunal can determine the procedure.
Where the parties have not agreed on a procedure with respect to evidence, this issue will typically be addressed in a pre-hearing conference. Increasingly, the IBA Rules on the Taking of Evidence are often referenced or considered in establishing the specific procedures to be used.
Consistent with international practice, documents are often attached to pleadings, with the parties exchanging requests for the relevant documents using a Redfern schedule. Witnesses’ evidence is commonly submitted in detailed written statements with questioning by opposing counsel only at the hearing stage.
Expert evidence is typically exchanged prior to any hearing on the merits.
Practices for evidence taking is often adapted based on the experience of counsel and the specifics of the dispute. Pre-hearing oral discovery (a typical feature of court litigation in Canada) is, however, increasingly uncommon in international arbitration.
As set out in Article 19(2) of the Model Law, an arbitral tribunal may determine the admissibility, relevance, materiality and weight of any evidence. The statutory rules of evidence in the federal and provincial Evidence Acts do not apply to international arbitration seated in Canada.
Under the Model Law, an arbitral tribunal, or a party with the tribunal’s consent, can seek the court’s assistance to compel evidence. The courts can compel witnesses to attend for questioning or to produce documents.
With respect to non-parties, the court may (i) issue summons for witnesses located in Canada; or (ii) request the assistance of foreign courts for witnesses outside Canada.
Typically, the courts will assist evidence-taking for arbitration proceedings, provided that the request is consistent with local evidentiary rules.
The Model Law does not address confidentiality.
Unlike arbitration legislation that adopts the Model Law directly, British Columbia's International Commercial Arbitration Act was amended in 2018 to provide that, unless otherwise agreed, the parties and tribunal must not disclose:
In Canada, the “open court” principle generally does not apply to arbitration proceedings (Fontaine v Canada (Attorney General), 2014 ONSC 4585, var’d 2016 ONCA 241, aff’d 2017 SCC 47).
Parties are free to agree on confidentiality requirements. Even if an arbitration agreement is silent on confidentiality, the governing international arbitration institutional rules may require it.
For example, VanIAC’s International Arbitration Rules stipulate that, subject to certain exceptions, the parties must keep the following confidential:
However, if the parties to an arbitration decide to appeal an arbitral award, or otherwise apply to the court for relief, the record of arbitration proceedings will no longer be private and confidential (2249492 Ontario Inc. v Donato, 2017 ONSC 4975).
In certain cases, courts may issue sealing orders in ongoing arbitrations (Stewart v Stewart, 2021 BCSC 1212).
British Columbia's International Commercial Arbitration Act expressly provides in Section 36.01 (added in 2018) that, unless otherwise agreed by the parties, the parties and the arbitral tribunal must not disclose arbitral proceedings (or their component parts) or the award.
An arbitral award is subject to the legal requirements under Article 31 of the Model Law. This includes:
There is no time limit requirement on the delivery of the award in the Model Law. These requirements may be contained in arbitral rules. For example, the ICDR Rules specify that the final award shall be made no later than 60 days after the closing of the hearing (unless otherwise agreed by the parties, specified by law or determined by the ICDR Administrator).
The arbitration agreement itself and the institutional rules adopted by the parties may contain additional requirements for the award.
No limits are imposed on the types of remedies that an arbitral tribunal may award under the Model Law or international commercial arbitration statutes. However, the parties may limit the types of remedies that can be awarded in the arbitration agreement.
The ICDR Rules amended and effective 1 March 2021 no longer restrict an arbitral tribunal governed by the ICDR Rules from awarding punitive, exemplary or similar damages.
An arbitrator’s powers to award pre- or post-award interest is not expressly addressed in the Model Law.
Canadian courts have determined that the awarding of pre- or post-award interest is a matter of substantive law. The arbitrator’s mandate to resolve the parties’ dispute encompasses the power to award interest.
The institutional rules also address the awarding of interest (Article 34(7) of the VanIAC Rules and Article 34(4) of the ICDR Rules).
The Model Law does not address costs. However, the B.C. Act specifically provides in Section 31(8) that, subject to the parties’ agreement, the arbitral tribunal may award costs, which include legal fees and expenses, the fees and expenses of the arbitrators and expert witnesses, administrative fees, and other expenses related to the arbitration.
The institutional rules may also permit an arbitral tribunal to award costs (eg, Article 37 of the VanIAC Rules and Article 34 of the ICDR-Canada Rules).
Canada’s international commercial arbitration statutes permit a party to an arbitration to apply to the courts to have the award set aside on specific grounds.
However, an application to set aside an arbitral award is not the same as an “appeal” of the judgment in a commercial case. When the decision of a trial judge in a commercial case is appealed in Canada, the grounds on which it may be reviewed are not limited or restricted.
For a discussion about the setting aside of a domestic arbitral award on similar grounds and the distinction with a civil appeal, see Alectra Utilities Corporation v Solar Power Network Inc., 2019 ONCA 254.
Article 34 of the Model Law limits the grounds on which an arbitral award may be set aside. In particular, Article 34 of the Model Law provides that an arbitral award may be set aside if the applying party proves:
Article 34(2)(b) further permits the court to set aside an arbitral award if the court finds that the subject matter of the dispute is not capable of settlement by arbitration under the relevant law, or if the arbitral award conflicts with public policy.
An application to set aside an arbitral award is not the same an appeal and is limited to the grounds set out in Article 34 of the Model Law (or its statutory equivalent). Parties to an arbitration cannot agree to exclude or expand the scope of the application to set aside the award.
The traditional approach of Canadian courts has been to show deference to arbitral awards; when reviewing arbitral awards, the courts will apply the deferential standard of “reasonableness”, subject to a narrow set of exceptions.
For example, the least deferential “correctness” standard has been applied where the question is one of jurisdiction (that is, whether an arbitral decision was on matters beyond the scope of the submission to arbitration), following the 2011 decision of the Ontario Court of Appeal in Cargill (United Mexican States v Cargill, Inc., 2011 ONCA 662). See the discussion on divergence in the case law in 5.5 Standard of Judicial Review for Jurisdiction/Admissibility.
As a result of two recent decisions of the Supreme Court of Canada, the question of the correct standard of review from an arbitrator’s jurisdictional decision is unsettled, and likely to be the subject of further jurisprudence (Canada (Minister of Citizenship and Immigration) v Vavilov, 2019 SCC 65 and Wastech Services Ltd. v Greater Vancouver Sewerage and Drainage District, 2021 SCC 7).
In February 2021, the British Columbia Court of Appeal noted that the question of the correct standard of review of an application to set aside an arbitral award under the Model Law (or international commercial arbitration statutes) is unresolved when it granted a stay of execution pending an appeal from the lower court’s refusal to set aside a jurisdictional order in lululemon athletica Canada inc. v Industrial Color Productions Inc., 2021 BCCA 108. We anticipate that Canadian appellate courts will attempt to resolve the issue in forthcoming cases.
Canada is a signatory to the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards, and it entered into force in Canada on 10 August 1986.
Under the Convention, Canada declared one reservation: that it would apply the Convention only to differences arising out of legal relationships, whether contractual or not, that were considered commercial under the laws of Canada, except in Québec, where the law did not provide for such limitation.
In addition to the New York Convention, Canada is a party to (i) the Convention on the Settlement of Investment Disputes between States and Nationals of Other States of 1965 (ICSID); and (ii) numerous free trade agreements, foreign investment promotion and protection agreements, multilateral agreements, and World Trade Organization agreements.
The procedure for recognition and enforcement of a foreign award is set out in Articles 35 and 36 of the Model Law, which, generally speaking, serve as a complete code in Canada (CJSC “Sanokr-Moskva” v Tradeoil Management Inc., 2010 ONSC 3073).
In Canada, the court retains the discretion to refuse to recognise or enforce an arbitral award if the party against whom the award is invoked proves the existence of a ground under Article 36(1)(a) (Depo Traffic Facilities (Kunshan) Co. v Vikeda International Logistics and Automotive Supply Ltd., 2015 ONSC 999).
The Model Law limits the ability of national courts to interfere with international arbitration proceedings (Yugraneft Corp. v Rexx Management Corp., 2010 SCC 19). In addition to the grounds under Article 36(a) for refusing to enforce arbitral awards, the court retains discretion to refuse to recognise or enforce an arbitral award on the ground of public policy.
The public policy ground for resisting enforcement of an arbitral award has been narrowly construed in Canada (Corporation Transnacional de Inversiones S.A. de C.V. v STET International S.p.A., 1999 CanLII 14819 (Ont. Sup. Ct. J. [Commercial List]), aff’d 2000 CanLII 16840 (Ont. C.A.)).
There is no onus on a party to convince the court that the award is contrary to public policy; rather, such determination is made by the court itself (Depo Traffic Facilities (Kunshan) Co. v Vikeda International Logistics and Automotive Supply Ltd., 2015 ONSC 999).
Arbitration legislation in Canada does not provide for class-action arbitration or group arbitration.
There are no ethical codes in Canada that apply specifically to arbitration counsel. However, the law societies in each province and territory establish the professional and ethical obligations applicable to Canadian lawyers.
As discussed in 4.5 Arbitrator Requirements, arbitrators must be independent and impartial.
There is no Canadian legislation providing rules or restrictions on third-party funding. This issue is being addressed primarily in the context of court-based class action proceedings.
The Model Law does not provide for consolidation of arbitration proceedings. However, the international arbitration legislation in each province and territory generally allows for the court to order consolidation on application of the parties.
The instances in which third parties can be bound by an arbitration agreement or award are addressed in 5.7 Third Parties.