The requirement to give reasons is generally considered an
inherent and fundamental component of the arbitrator's role.
However, the Ontario Superior Court of Justice recently enforced an
international commercial arbitral award despite the fact that the
award did not include written reasons. In doing so, the decision
upholds the freedom of parties to tailor arbitral proceedings,
including the form of award, to suit their circumstances.
In Activ Financial Systems, Inc. v Orbixa Management
Services, Inc., 2011 ONSC 7286, the two companies were parties
to a software licence agreement. Activ claimed payment for licence
fees during a period in which Orbixa alleged the agreement had been
terminated. The software licence agreement provided for disputes to
be settled pursuant to the commercial arbitration rules of the
American Arbitration Association. These rules do not require a
written award unless requested by the parties or determined by the
arbitrator to be appropriate. In this case, the parties had
expressly agreed that, as a cost-saving measure, the arbitration
hearing would proceed without a court reporter and the parties
would accept a standard award format that did not necessarily
include written reasons. The arbitrator awarded in favour of Activ
in the amount of approximately US$550,000.
After obtaining a judgment in New York which confirmed the
award, Activ then applied to enforce this judgment in Ontario.
Although the award was a commercial arbitral award made outside
Canada, Activ did not rely on the International Commercial
Arbitration Act (ICAA)to enforce its award, but
instead relied on the common law regarding enforcement of foreign
judgments. Orbixa's arguments in response to enforcement, among
others, were as follows:
The enforcement of the award was governed exclusively by the
ICAA and could not be enforced at common law; and
The award was unenforceable because it contained no reasons and
the ICAA required written reasons.
Justice Perell agreed that the enforcement of foreign arbitral
awards must take place exclusively under the ICAA rather
than the common law. He noted that it would be an unnecessary
source of confusion and expense to have two enforcement mechanisms.
Further, as a matter of statutory interpretation, he found that the
Ontario Legislature intended to introduce a complete code regarding
the enforcement of foreign arbitration awards under the
ICAA. It is notable that all provinces but Quebec have
legislation similar to the ICCA. Justice Perell allowed
Activ to amend its application to rely on the ICAA.
Orbixa's second argument was rejected by Justice Perell. He
noted that Article 31(2) of the UNCITRAL Model Law, which is
appended to and forms part of the ICAA, states that
"the award shall state the reasons upon which it is based,
unless the parties have agreed that no reasons are to be
given". Justice Perell concluded that, where agreed to by the
parties, the absence of reasons is not grounds to categorically
refuse enforcement of an award under the ICAA. Any
concerns regarding the ability of the parties to determine whether
the arbitrator strayed beyond their jurisdiction or whether
enforcement would be contrary to public policy could be resolved by
a review of the record. Here, there was no doubt that the
arbitrator decided a dispute within his jurisdiction and applied
essentially the same law as would apply in Ontario. Therefore, the
award in favour of Activ was enforced pursuant to the
This decision is an example of judicial deference to the ability
of parties to tailor the international commercial arbitral process
to their unique needs and circumstances. It should be noted that
the requirement for written reasons may not be so easily dodged in
the domestic arbitration context. Provincial arbitration statutes
typically require awards to be in writing though, depending on the
specific legislation at issue, it may be possible for parties to
contract out of this requirement.
About Fraser Milner Casgrain LLP (FMC)
FMC is one of Canada's leading business and litigation law
firms with more than 500 lawyers in six full-service offices
located in the country's key business centres. We focus on
providing outstanding service and value to our clients, and we
strive to excel as a workplace of choice for our people. Regardless
of where you choose to do business in Canada, our strong team of
professionals possess knowledge and expertise on regional, national
and cross-border matters. FMC's well-earned reputation for
consistently delivering the highest quality legal services and
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