At first glance, international parties looking to do business in Canada may think that the provincial arbitration regimes are more lenient in granting appeal rights than the UNCITRAL rules. Upon closer review, however, there is a clear movement in Canadian courts to grant increased deference to arbitrations and arbitral decisions. Accordingly, in terms of appeal rights, there may not actually be much of a difference in the application of the provincial arbitration acts and the UNCITRAL rules.

Limitation of Appeal Rights

In 2014, the Supreme Court of Canada released its decision in Sattva Capital Corp. v. Creston Moly Corp. (“Sattva”)[1]. Sattva held that:

Contractual interpretation involves issues of mixed fact and law as it is an exercise in which the principles of contractual interpretation are applied to the words of the written contract, considered in light of the factual matrix.[2]

This statement is important because most appeals of arbitral decisions arise from issues of contractual interpretation that, prior to Sattva, used to be questions of law. Now, most of these issues will be considered questions of mixed law and fact. Consequently, as most Canadian provinces have legislated that leave to appeal from an arbitration will only be granted where there is a question of law; Sattva should result in fewer leaves to appeal being granted.

Furthermore, even where leave to appeal is granted on a question of law, Sattva instructs courts to show deference to the original trier of fact by applying the reasonableness standard.[3]

Sattva clearly indicates that there is a trend away from judicial intervention in arbitrations.

Entrenchment of Res Judicata and Issue Estoppel in Arbitrations

In the same vein as Sattva, courts are also demonstrating deference to arbitrators by applying res judicata and issue estoppel to earlier arbitral decisions between the same parties. In Enmax Energy Corporation v TransAlta Generation Partnership[4], the Alberta Court of Appeal entrenched this principle by holding that:

  1. Prior arbitration decisions are binding on future arbitrations between the same parties; and
  2. The doctrines of res judicata and issue estoppel apply to arbitrations where (1) the same question was decided (2) in an earlier final decision, between (3) the same parties.[5]

Accordingly, parties in long term contractual relationships should consider their legal positions before entering into an arbitration, and decide if this position could adversely affect them in future proceedings.

The Summary Judgment Exception

In addition to the above indicators that the courts are trending towards less judicial oversight of arbitrations, the jurisprudence also indicates that, where an arbitration clause exists, courts will likely stay court proceedings in favour of arbitration.[6]

However, despite this trend of judicial deference to arbitration clauses, there are statutory exceptions in some Canadian provinces[7] suggesting that an arbitration may be stayed where “the matter in dispute is a proper one for summary judgment.”[8]

Until recently, the law in Alberta was that the summary judgment exception may only apply where, based on the evidence before the Court, a summary judgment motion would be successful if brought.[9] However, this high threshold may be challenged by the Supreme Court of Canada’s decision in Hryniak v Mauldin (“Hryniak”) where it was held that:

A trial is not required if a summary judgment motion can achieve a fair and just adjudication…and is a proportionate, more expeditious and less expensive means to achieve a just result than going to trial.[10]

Based on the decision in Hryniak, a court may be persuaded to lower the threshold required to grant the summary judgment exception if it can be shown that, in contrast to an arbitration, summary judgment would be a more efficient means of resolving the matter. Such an argument may be especially true in Alberta where the courts have shown a willingness to increasingly resolve matters through the use of summary judgment applications.

The Verdict

International companies conducting arbitrations in Canada, under domestic arbitration legislation, must be aware that although domestic legislation does provide for appeal rights, the courts are likely to refuse a leave to appeal application. Alternatively, if a leave to appeal is granted, the courts will still likely defer to the judgment of the original arbitrator. Accordingly, international parties entering into agreements under Canadian law should consider if they would benefit from increased appeal rights being written into their arbitration clause.