In this series, we have explored the costs and benefits of incorporating arbitration clauses into employment agreements, the enforceability of such clauses, and issues to consider when drafting. Let’s say you resolve a dispute under an arbitration agreement and the arbitrator has granted an award. Now what?
In this post, we discuss the options for enforcing and challenging an arbitral award in Canadian courts. While we focus on enforcement and challenge of awards in Ontario, similar procedures and provisions apply throughout the country.
Enforcement of Arbitral Awards
Each province has its own domestic arbitration legislation that sets out rules and procedures for the recognition and enforcement of arbitral awards. Under Ontario’s Arbitration Act (the “Act“), for instance, section 37 states that “an award binds the parties, unless it is set aside or varied under section 45 or 46 (appeal, setting aside award).” Generally, all you have to do to enforce an arbitral award under the Act is make a court application within two years receiving the award.
Procedures may differ slightly depending on whether the award is rendered in the same province or territory you want to enforce it in. Where an employment-related award is sought to be enforced in Ontario, the court will enforce it unless:
- the appeal period has not elapsed in the province or territory where the award was made (thirty days for awards made in Ontario);
- there is an appeal pending in the province or territory where the award was made; or
- the award has been set aside in the province or territory where it was made.
If an appeal is pending, the court can enforce the award or wait until the appeal is decided.
Courts are generally reluctant to interfere with arbitral awards. However, if the award gives a party a remedy that the court would not normally give or does not have the jurisdiction to give, courts do have the power to substitute a different remedy or ask the arbitrator to do the same.
Challenges to Arbitral Awards: Applications to Appeal or Set Aside Awards
Parties to an arbitration agreement can specify their rights to appeal to a court, limiting the right of appeal to factual issues, legal issues, both or neither. This is an area where the importance of careful drafting comes in – whether a clause removes the right of appeal and on what issues is a question of interpretation. For example, in Weisz v. Four Seasons Holdings Inc., the arbitration clause stated that the arbitrator’s decision would be “final and binding”. After considering the arbitration agreement as a whole, the Court determined that the parties did not intend to retain any rights of appeal. The fact that one party was dissatisfied with the award did not change that initial intention.
Where the agreement is silent on the issue of appeals, the Act will fill in the gap. For legal issues, parties must seek permission from the court to bring an appeal. The court will only grant permission if the matters at stake in the arbitration are sufficiently important to the parties and the determination of the legal issue will significantly affect the parties’ rights. For factual issues or questions about how the law applies to a particular set of facts, the Act does not allow appeals unless the arbitration agreement provides for it.
The rules regarding appeals in the various provinces and territories differ slightly. For example, in British Columbia, a party who seeks to appeal an award regarding a legal issue must obtain permission from the court and the consent of the other parties, but the parties cannot agree to exclude the right of appeal until the arbitration starts. In Alberta and Manitoba, parties cannot contract out of the statutory provision dealing with appeals, although permission is still required.
Even where a party is not permitted to appeal, one can still apply under the Act to have the court set aside the award for reasons related to fairness or procedure, including that:
- the employee was not legally capable of entering into the arbitration agreement, whether because he or she was a minor or was otherwise incapable of providing consent;
- the arbitration agreement is invalid or no longer exists;
- the award deals with a dispute or contains a decision that goes beyond the initial arbitration clause;
- the arbitrator or panel was not chosen in accordance with the agreement;
- the party was not treated equally and fairly by the arbitrator or panel;
- the arbitrator was biased or corrupt; or
- one of the parties obtained the award by engaging in fraud.
When faced with one of the above claims, a court can agree to set aside the award, sever parts of the award that fall outside the scope of the initial arbitration agreement or send the matter back to the arbitrator with directions. Alternatively, the court can refuse to set aside the award, which it can do if the party raising the complaint does not have a reasonable explanation for failing to raise the complaint before the arbitrator.
The arbitral process is a unique one in that it intersects the private and public spheres. Often, disputes are heard and decisions are made under an umbrella of confidentiality. At the same time, certain aspects of the process will be opened up for consideration and critique once a party seeks to enforce or challenge the ultimate award. Before deciding to incorporate arbitration clauses into employment agreements, employers should consider the costs and benefits from multiple angles, from the start of the process to the potential conclusion, to determine whether it is the appropriate strategic choice for the company.