In order to protect the integrity of the arbitration process, arbitrators are generally found to be immune from civil liability arising from their role in an arbitration. Many institutional arbitration rules provide for a limitation of an arbitrator’s liability,[1] and courts have routinely held that arbitrators are immune from legal action with respect to acts performed by them in the exercise of their functions.

In a recent decision, the Austrian Supreme Court determined that pursuant to Austrian law, an arbitrator can only be held liable for damages to one of the parties if the arbitrator’s decision is overturned by a court and the party demonstrates that the arbitrator was grossly negligent. [2]

Other countries, including Canada, have taken an even more expansive view of the immunity that arbitrators possess. Borrowing predominantly from English cases, Canadian courts have adopted the position that absent proof of bad faith or fraud, an arbitrator enjoys immunity from civil liability similar to that of a judge.

This immunity applies to contractual liability that may arise out of the arbitration agreement, and to tort liability that may arise from the arbitrator’s acts or omissions.

For example, in Flock v. Beattie, 2010 ABQB 193, an arbitration agreement required the arbitrator to provide his award no later than 60 days after the receipt of written submissions, but the arbitrator took nearly three years to do so. One of the parties to the arbitration sought to overturn the award and a new hearing was ordered before a different arbitrator. The other party subsequently sued the first arbitrator for breach of the arbitration agreement. The arbitrator claimed immunity from the lawsuit.

In its reasons for judgment, the Alberta Court of Queen’s Bench adopted reasoning from the Québec Court of Appeal[3] holding that an arbitrator was immune from both contractual and tort liability absent fraud or bad faith. With neither established, the Court ultimately dismissed the claim against the arbitrator.

In order to address situations similar to Flock v. Beattie, the International Chamber of Commerce announced in 2016 that arbitrators who fail to submit a draft decision within 3 months will have their fees reduced.[4]

The approach by Canadian courts to arbitrator immunity reflects a policy decision to encourage the use of arbitration as an alternative dispute resolution method. By ensuring that arbitrators are free from potential liability, save the for the most extreme cases of intentional misconduct, the courts are protecting the finality of arbitral awards.

As Flock v. Beattie demonstrates, ultimate immunity from liability does not necessarily guarantee immunity from lawsuits which can be time-consuming and expensive to defend. As a result, legal professionals who act as arbitrators may want to review their professional liability insurance policies to ensure that they have appropriate coverage. The mandatory professional liability policies for legal professionals in Ontario and British Columbia specifically include additional coverage for individuals who act as either an arbitrator or a mediator.[5] Individuals who carry a professional designation from one of the various provincial arbitration institutes are also required to carry professional liability insurance.[6]