Contributed By McEwan Partners
As a federal state, Canada has arbitral legislation both federally and in each of the ten provinces. There is also both domestic and international arbitral legislation in the various jurisdictions. Despite the multiplicity of statutes, however, the legislation throughout Canada is remarkably consistent and based on the UNCITRAL Model Law. In fact, in 1986, Canada was the first country in the world to adopt the Model Law. In relation to international arbitration in particular, the Model Law has been implemented across the country at the provincial level, generally as a schedule to the relevant legislation, with some slight variation. In general, the variations are not material such as to make one forum more favourable than another.
Since the adoption of the Model Law, there has been tremendous growth in Canada in the use of arbitration, both international and domestic. Concurrently, the courts in Canada have been increasingly supportive of arbitration as not only a legitimate but a preferred forum for dispute resolution, where the parties have entered into an arbitration agreement. For example, in recent years, Canadian courts have almost universally acted to stay court proceedings in favour of enforcing the parties' agreement to an international arbitration, where the issue has been brought before them due to one party seeking to resort instead to the processes of the courts.
This is consistent with the increasing rigour with which the recent Supreme Court of Canada jurisprudence has supported arbitration in general. This is illustrated by the current scepticism with which the courts approach any argument that an international arbitration agreement is “null and void, inoperative or incapable of being performed” within the meaning of Article 81 of the UNCITRAL Model Law. In the domestic sphere, the interaction between the operation of arbitration clauses and class proceedings involving commercial contracts was uncertain for a period, but the law has developed to the point that, even in this sphere, courts are very slow to find that the exceptions to the mandatory stay apply, absent the application of specific consumer protection legislation. This trend of Canadian courts to support and enforce arbitral clauses, and to give narrow compass to arguments seeking to set them aside, gives effect to the intent of the Model Law to form a consistent international platform in which commercial arbitration can be advanced.
The courts also have discretion to grant a stay of proceedings against parties to a proceeding who are not also party to an arbitration agreement, and may do so at the request of any party to a legal proceeding brought in the context of an arbitration clause. The principles applicable when this question arises include whether litigation issues are factually intertwined with arbitral claims and whether a threshold issue will serve to resolve other claims.
Similarly, and consistent with an approach that is deferent to agreements to arbitrate, the competence-competence principle is robustly applied. Recent authority, including from the Supreme Court of Canada, confirms that challenges to an arbitrator’s jurisdiction should normally be resolved first by the arbitrator, and that a court should depart from that principle only if the challenge involves a pure question of law or a question of mixed fact and law that requires only superficial consideration of the documentary evidence. As long as an arguable or prima facie case can be made that the dispute arises in connection with an arbitration agreement, claims will be stayed and it will be left to the arbitrator to determine the extent of his or her jurisdiction. All Canadian jurisdictions follow the Model Law in providing that the substantive law applicable to a dispute is first determined by the agreement of the parties and second, if there has been no such agreement, by applying the substantive law the tribunal considers to be appropriate, given all the circumstances of the dispute.
Finally, the friendly nature of Canada towards arbitration is reflected in the robust enforcement of awards. Canadian courts are cautious not to unduly interfere in the arbitral process, and take a restrictive interpretation to the grounds of refusal of enforcement.
There are no mandated restrictions concerning the selection of arbitrators for arbitrations seated in Canada. The one exception relates to arbitrations seated in British Columbia, where a court-appointed arbitrator may not be of the same nationality as of one of the parties, unless the parties agree. Challenges to arbitrators can generally be made on the basis of reasonable apprehension of bias and lack of qualifications that were agreed to by the parties. Arbitrators are required to be independent and impartial, to treat the parties fairly and to give each party an adequate opportunity to present their case. Otherwise, there is broad discretion in the tribunal to decide on the applicable procedures. In most of Canada’s common law jurisdictions, the applicable International Commercial Arbitration Act is silent on the matter of arbitrator immunity from suit. However, the courts in the common law jurisdictions have taken the position that, absent fraud and bad faith, arbitrators are immune from civil liability. In Quebec, this protection extends to “bad faith” or the commission of an “intentional or gross fault”.