Canada: Russian Federation V. Luxtona Limited: Fresh Evidence On Jurisdiction

Can litigants introduce fresh evidence on an application to set aside a decision of an arbitral tribunal about whether it has jurisdiction to hear a dispute? According to the Ontario Court of Appeal's recent decision in Russian Federation v. Luxtona Limited, the answer is, with some important guidelines, "yes."

Case Background

In an arbitration seated in Toronto, Luxtona Limited (Luxtona) alleged that the Russian Federation (Russia) breached some of Luxtona's rights pursuant to the Energy Charter Treaty, 17 December 1994, 2080 U.N.T.S. 95 (Treaty), relating to protection of investments. Luxtona made this allegation in the context of its investment in a Russian energy company.

Pursuant to the competence-competence principle, the arbitral tribunal heard and decided arguments about whether or not it had jurisdiction to hear the dispute. The tribunal decided that it did. Russia then applied to the Ontario Superior Court of Justice to set aside the decision based on Articles 16(3) and 34(2) of the Model Law on International Commercial Arbitration (Model Law).

On the set-aside application, Russia filed new expert evidence about Russian law that had not been brought before the arbitral tribunal. Luxtona objected. The court at first instance held that Russia could not file new evidence as of right. Instead, it had to meet the strict test for the filing of fresh evidence. On an initial appeal, the Divisional Court overturned this decision. The matter was then appealed to the Ontario Court of Appeal.

Court of Appeal Decision

Before the Ontario Court of Appeal, Luxtona argued that the competence-competence principle required litigants to put all of their evidence before an arbitral tribunal so that the issue of jurisdiction could be determined definitively. The Court of Appeal disagreed, holding that the competence-competence principle was simply a rule of chronological priority. While a challenge to an arbitrator's jurisdiction must be resolved first by the arbitrator, it does not require special deference to the arbitral panel's determination on the issue.

As a result, the Court of Appeal held that a reviewing court is not limited to the record before the arbitral tribunal in determining the issue of jurisdiction. The Court of Appeal further commented that the weight of international authority does not limit a court's fact-finding power in assessing an arbitral tribunal's jurisdiction.

The Court of Appeal strongly cautioned, however, that this was not a licence to get "two evidential bites of the cherry." A failure to raise relevant evidence could undermine the weight given to it on an application to set aside an arbitral panel's decision on jurisdiction.

Key Takeaway

Parties need to continue to put their best case forward before an arbitral tribunal. In appropriate circumstances, however, the Court of Appeal's decision opens the door for parties to consider what additional evidence may be necessary on an application to set aside an arbitral decision on jurisdiction. Parties should bear in mind the Court of Appeal's caution that if such evidence was available but not advanced before the arbitrator, a reviewing court may properly decide to give it less weight.

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