In brief: arbitration formalities in Canada (Ontario)

Arbitration

Is the arbitration law based on the UNCITRAL Model Law?

Ontario has adopted the UNCITRAL Model Law into its domestic law.

What are the formal requirements for an enforceable arbitration agreement?

Section 1 of Ontario’s Arbitration Act defines an arbitration agreement as an agreement by which two or more persons agree to submit to arbitration a dispute that has arisen or may arise between them. Subsection 5(1) states that an arbitration agreement may be an independent agreement or part of another agreement. An arbitration agreement need not be in writing, and may be an oral agreement pursuant to subsection 5(3). Pursuant to subsection 5(5), an arbitration agreement may be revoked only in accordance with the ordinary rules of contract law.

An arbitration agreement will be upheld unless the agreement is void, inoperative, incapable of being performed or conflicts with established legal principles. In Uber Technologies v Heller, the Supreme Court of Canada considered the question of whether to refuse to enforce an arbitration agreement on the grounds of unconscionability or public policy, or both. The Court held that the arbitration clause was unconscionable in that case, because of (among other factors) a vast inequality in bargaining power and sophistication between the parties.

If the arbitration agreement and any relevant rules are silent on the matter, how many arbitrators will be appointed and how will they be appointed? Are there restrictions on the right to challenge the appointment of an arbitrator?

If the arbitration agreement is silent on the matter, the arbitral tribunal will be composed of one arbitrator. The arbitrator will be appointed by a court if the arbitration agreement provides no procedure for appointing the arbitral tribunal, or the person with power to appoint the arbitral tribunal has not done so after a party has given the person seven days’ notice to do so, as per section 10 of the Arbitration Act. Pursuant to subsection 10(2), there are no appeals from the court’s appointment of the arbitral tribunal. A party cannot revoke the appointment of an arbitration but may challenge an arbitrator only on one of the following grounds set out in subsection 13(1), namely, (1) circumstances exist that may give rise to a reasonable apprehension of bias; or (2) the arbitrator does not possess qualifications that the parties have agreed are necessary. If the party participated in the arbitrator’s appointment, the party may challenge the arbitrator only for grounds for which the party was unaware at the time of the appointment (section 13(2)).

What are the options when choosing an arbitrator or arbitrators?

There is no central listing of all arbitrators, but there several private and public lists of Ontario arbitrators. The ADR Institute of Ontario provides a directory for Ontario Dispute Resolution Professionals categorised by area of expertise, cities served, languages, occupations and services provided. In Ontario, there are a number of expert panels, including the ADR Chambers and Arbitration Place.

The pool of candidates often consists of experienced counsel, retired judges and arbitrators to meet the needs of complex arbitration such as commercial arbitration work.

Does the domestic law contain substantive requirements for the procedure to be followed?

The arbitral tribunal may determine the procedure to be followed in the arbitration in accordance with the Ontario Arbitration Act. The arbitration may be conducted on the basis of documents or a hearing with sufficient notice. The Statutory Powers Procedure Act, specifically sections 14, 15 and 16, apply to arbitration with necessary modifications as per section 21 of the Arbitration Act. The time, date and place of arbitration shall be determined in accordance with the parties’ convenience and other circumstances of the case as per section 22 of the Arbitration Act. Pursuant to subsection 25(1) of the Arbitration Act, an arbitral tribunal may require that the parties submit their statements within a specified period of time.

Certain ADR panels have their own rules of procedure, such as the ADR Chambers, and the ADR Institute of Canada. Often, the agreement providing for arbitration prescribes the rules that apply and whether the arbitration will be administered by an expert ADR Chambers.

What powers do national courts have to support the arbitral process before and during an arbitration?

Under section 6 of the Arbitration Act, no court shall intervene except to assist the conducting of arbitrations, to ensure that arbitrations are conducted in accordance with arbitration agreements, to prevent unequal or unfair treatment of parties to arbitration agreements or to enforce awards.

As may be noted, the section commences with a prohibition on intervention but for specific exceptions. As a practical matter, there is little jurisprudence on this section, and it is not used frequently. Nevertheless, the exceptions are broadly described and consideration should be given section 6 where the circumstances warrant it.

Section 8 outlines powers of court. The court’s powers with respect to the detention, preservation and inspection of property, interim injunctions and the appointment of receivers are the same in arbitrations as in court actions as per subsection 8(1). The court may also determine any question of law that arises during the arbitration on the application of the arbitral tribunal or on a party’s application if the other parties or the arbitral tribunal consent under subsection 8(2). Practically speaking, interim decisions of an arbitrator in the course of an arbitration are not subject to appeal or review.

Arbitration agreements may exclude court intervention such as appeals, and may specify the forum and governing law of an arbitration. However, arbitration agreements to do not otherwise override or oust the jurisdiction of the courts. Nevertheless, court intervention by way of review has been substantially limited by a number of decisions of the Court of Appeal. As a result, the courts are reticent to reverse a final decision of an arbitrator, except in rare circumstances. For example, an arbitrator can be wrong and will not be reversed as long as the decision is reasonable, that is, based on the evidence.

It is now certain that any challenge to an arbitrator’s jurisdiction must first be heard by the arbitrator, including whether or not the parties actually agreed to arbitrate their disputes.

The most frequent interference is contemplated in an application under section 7 of the Arbitration Act to stay an action on the basis the parties have elected arbitration by prior agreement. Almost always, these applications are granted, and the action stayed. In Ontario, the courts will also now bifurcate a proceeding and require the matters subject to arbitration to go to arbitration, and the other matters alleged proceed in an action. In other words, the court will not generally assess which route makes more sense in light of the matters alleged. This may lead to the same factual matrix being heard in two different forums.

Do arbitrators have powers to grant interim relief?

The arbitral tribunal may make one or more interim awards pursuant to section 41 of the Arbitration Act. Arbitrators can grant injunctive and procedural relief dealing with the parties to the arbitration. However, arbitral power to grant relief does not extend beyond the parties in an arbitration. Only courts can grant relief affecting third parties.

When and in what form must the award be delivered?

Under section 38 of the Arbitration Act, an award shall be made in writing and, except in the case of an award made on consent, shall state the reasons on which it is based. The award shall be dated and indicate the place where the award is made (section 38(2)). The award shall be dated and signed by all members of the arbitral tribunal, or by a majority of them if an explanation of the omission of the other signatures is included (section 38(3)). A copy of the award shall be delivered to each party (section 38(4)).

The arbitral tribunal may make an additional award to deal with a claim that was presented in the arbitration but omitted from the earlier award within 30 days (section 44(2)). The arbitral tribunal may correct typographical errors, errors of calculation and similar errors in the award, or amend the award to correct an injustice caused by an oversight on part of the arbitral tribunal within 30 days (section 44(1)).

The arbitrator also has jurisdiction to determine the costs of the arbitration, including the expense of an arbitrator, and award costs to a party.

On what grounds can an award be appealed or challenged in the courts?

Grounds for an appeal may be set out in the arbitration agreement. If so, the arbitration provision with respect to rights of appeal apply. Section 45 of the Arbitration Act sets out the default criterion for an appeal: only on a question of law with leave, and only if a court is satisfied that the importance of the matter appealed justifies an appeal, and the determination will substantially affect the rights of the parties.

In other words, it is very difficult to appeal a final decision of an arbitrator. If a party wants a broader right of appeal, it must be in the arbitration agreement or provision of a contract choosing arbitration.

In addition, section 46 of the Arbitration Act lists a number of criteria in respect of which an award may be set aside by a court. No leave is required, and section 46 cannot be contracted out of in an arbitration agreement. Primarily, it protects parties from a breach of natural justice on the part of the arbitral tribunal (subsection 5), fraud, reasonable apprehension of bias, and matters of formal validity, existence of the arbitration agreement. It echoes the grounds often used in applications for judicial review in other contexts. Any other challenge to the jurisdiction of the arbitral tribunal is required to first be brought before the arbitrator for determination.

An appeal from the Superior Court’s decision in an appeal of an award, an application to set aside an award, or an application for an invalidity declaration, may be made to the Court of Appeal, with leave (section 49).

What procedures exist for enforcement of foreign and domestic awards?

Foreign arbitral awards are enforceable through the International Commercial Arbitration Act (ICAA), as outlined in Costco Wholesale Corporation v TicketOps Corporation, 2023 ONSC 573. The ICAA provides that the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, and the Model Law on International Commercial Arbitration have force in Ontario. The recognition and enforcement can only be refused on the limited grounds set out in article V of the ICAA and article 34(1) of the Model Law.

The Arbitration Act governs the enforcement of domestic awards. An application is generally made on notice to the appropriate court with jurisdiction over the arbitration. For domestic awards, a party may apply to the court for enforcement under section 50 of the Arbitration Act.

The International Commercial Arbitration Act, 2017, expressly adopts the New York Convention on the recognition and enforcement of foreign arbitral awards, which is appended to the Act. Accordingly, Ontario is a New York Convention jurisdiction.

Can a successful party recover its costs?

The successful party can generally recover legal costs in arbitration in full on the grounds of reasonableness, unless the arbitration clause provides for how costs will be allocated. The arbitral tribunal may award the costs of an arbitration pursuant to subsection 54(1) of the Arbitration Act. A tribunal may consider various factors such as the behaviour of the parties in relation to the efficient conduct of the arbitration or the pursuit of unfounded arguments by a party.

Absent an award dealing with costs, each party is responsible for the party’s own legal expenses and for an equal share of the fees and expenses of the arbitral tribunal and of any other expenses related to the arbitration pursuant to subsection 54(4) of the Arbitration Act.

Pursuant to subsection 54(5) of the Arbitration Act, if a party makes an offer to another party to settle the dispute or part of the dispute, the offer is not accepted and the arbitral tribunal’s award is no more favourable to the second-named party than was the offer, the arbitral tribunal may take the fact into account in awarding costs in respect of the period from the making of the offer to the making of the award.

Costs may include legal fees and expenses, the fees and expenses of the arbitral tribunal and any other expenses related to the arbitration (Electek Power Services Inc v Greenfield Energy Centre Limited Partnership, 2022 ONSC 2437 at paragraph 24).