Canada: Review Of Arbitral Awards: Where Is Sattva Taking Us?

Last Updated: September 8 2015
Article by Thomas Heintzman

The decision of the Supreme Court of Canada in Creston Moly Corp. v. Sattva Capital Corp., 2014 SCC 53 (Sattva) is a seminal decision in the review of arbitral awards. That decision apparently set a wide net of protection around arbitral awards. It did so by ruling that an arbitral award interpreting a contract should usually be considered to be based upon mixed fact and law. Accordingly, such an arbitral decision may not be appealed if the only ground of appeal is an error of law. Moreover, if the decision is otherwise reviewable by the court, then the standard of review is reasonableness, not correctness. However, the Supreme Court said that, if a separate issue of law can be discerned in the arbitral award, then the decision can be reviewed on a standard of correctness. The Sattva decision has been reviewed in my previous article dated August 10, 2014.

The Sattva decision was recently applied by the British Columbia Court of Appeal in Teal Cedar Products Ltd. v. British Columbia. The Teal decision is important because the two decisions in Sattva and Teal both arose from appeals from decisions of the British Columbia Court of Appeal. The Teal case was sent back by the Supreme Court of Canada to the B.C. Court of Appeal to be re--‐considered in light of the Sattva decision.

The Background To The Teal Decision

The Teal decision was reviewed by me in an article dated December 1, 2013 relating to an earlier decision of the Supreme Court of Canada relating to the award of compound interest.

Teal had been issued timber licenses by the province of British Columbia under the B.C. Forest Act. By ministerial order, Teal's allowable annual cut and cut areas were reduced. Teal was entitled to compensation and its claim was submitted by the parties to arbitration. That claim included a claim for interest. In the original decision of the B.C. Court of Appeal, the majority of that court held that the arbitrator had mis--‐interpreted the statutory provisions applicable to Teal's substantive claim and the provisions relating to interest. That decision was appealed to the Supreme Court of Canada. In light of its decision in Sattva, the Supreme Court ordered that the appeal in Teal v. B.C. be re--‐heard by the B.C. Court of Appeal.

Second Teal Decision

The B.C. Court of Appeal noted that Sattva involved an arbitrator's interpretation of a contract, not a statute. The court said that, according to Sattva, an arbitrator's decision interpreting a statute should be reviewed on a standard of reasonableness when "the error of law is within the expertise of the arbitral tribunal and is not a question of law of central importance to the legal system as a whole." Teal argued that the decision of the arbitrator in the present case fell into neither exception and that therefore the arbitrator's decision should be given deference and only set aside if it was unreasonable.

The B.C. Court of Appeal disagreed. It said:

"None of the criteria that might justify the deference associated with the reasonableness standard of review in respect of statutory interpretation is present here. Specifically, it is not suggested the arbitrator had any specialized expertise in forest legislation or forestry tenures and it certainly could not be said the Act was his "home" statute. Although the parties chose the arbitrator (the Court is not privy to the reasons for his selection), it is significant that arbitration was statutorily required (Act, s. 6(6)). As the Province says, the statutory interpretation question that arose — the meaning of compensation in s. 6(4) — was an issue of importance to compensation statutes generally, and arose for the first time under the Act in this arbitration. We agree with the Province these factors point to a standard of correctness..."

Furthermore, the B.C. Court of Appeal said:

"In any event, Sattva did not explicitly restrict, or provide an exhaustive list of, the exceptional circumstances in which an arbitrator's award based on a question of law would be reviewable on a standard of correctness. The Court was providing examples that cannot be read as excluding the interpretation of a statute."

In the result, the court held that the interpretation of the Forestry Act was a question of law to which a correctness standard applied. Since the arbitrator's interpretation of the Act was not correct, it was properly set aside in the prior decision.

In any event, the court held that the arbitrator's decision was unreasonable and should be set aside under the unreasonableness test. According to the court, the arbitrator's decision "provides for a substantial publicly financed windfall, which would serve no purpose". The arbitrator's award was based upon "the depreciated replacement value of all of the improvements made to Crown land in the affected areas of each of Teal's three tenures" while the proper interpretation of the Act only provided compensation for the holder's "actual financial loss."

In determining what a "reasonable" decision of an arbitrator is, the B.C. Court of Appeal adopted its prior decision in British Columbia Hydro and Power Authority v. British Columbia (Workers' Compensation Board), 2014 BCCA 353, in which it had given the following meaning to the word "reasonable":

"A reasonable decision must be both factually and legally defensible. Where the legal issue under examination is one of statutory interpretation, the common objective of both administrative decision makers and courts must be to ascertain the intent of the legislature by applying the "modern principle" of statutory interpretation. This requires an examination of the words of the provision under consideration according to their grammatical and ordinary sense, in their entire context, and in harmony with the scheme and object of the Act. The fact that the choice between reasonable interpretations falls to the administrative decision maker does not absolve it from following this cardinal principle...".

Since the Forestry Act provided for "compensation", the arbitrator's award of an amount which was "in no way linked to Teal's actual financial loss" was not consistent with this principle and was therefore unreasonable.

The B.C. Court of Appeal then turned to the question of whether its prior decision dealing with interest should be upheld in light of the Sattva decision. The arbitrator had allowed interest despite a clause in the arbitration agreement that the Province submitted precluded interest. The Chambers judge had held that the arbitrator's interpretation of the contract was based upon a consideration of the surrounding circumstances, and therefore amounted to a question of mixed fact and law, not a question of law. Since the arbitration statute in British Columbia only permits an appeal on a question of law, there was no right of appeal.

In its prior decision, the B.C. Court of Appeal had held that the decision of the arbitrator raised a pure question of law. It had held that the arbitrator's decision had changed the plain meaning of the arbitration agreement, which precluded the award of interest, and that decision therefore amounted to an error law. Accordingly, the court had set aside the arbitrator's decision.

In its present decision, the B.C. Court of Appeal held that nothing in Sattva required its prior decision to be changed, for three reasons:

  1. In Sattva, the Supreme Court had adopted the B. C court of Appeal's approach to identifying a question of law. In the present decision, the B. Court of Appeal said:

    "It seems clear that what the Court did in Sattva was to largely endorse the approach to ascertaining what constitutes a question of law and of mixed fact and law in contractual interpretation that has in recent years been taken by some courts as reflected in the authority cited which includes the Hayes Forest Services and Otter Bay decisions of this Court. As indicated, that is the authority upon which the reasons given for the majority [in the previous Teal decision] are predicated in determining that the arbitrator's interpretation of the Settlement Framework Agreement and Addendum #2 raise a question of law."

    In other words, the B.C. Court of Appeal held that the Supreme Court in Sattva endorsed the B.C. Court of Appeal's approach to identifying a discrete point of law in an arbitrator's decision, thereby entitling a reviewing court to review the decision based upon an error of law.

  2. In Sattva, the Supreme Court had not suggested or found that an error of law cannot be found in an arbitrator's decision just because the arbitrator had regard to the surrounding circumstance. The B.C. Court of Appeal said:

    "To the contrary, it is because contractual interpretation is an exercise in applying legal principles to the express language of an agreement considered in the circumstances that questions of law can arise."

    Accordingly, the B.C. Court of Appeal held that in its prior decision it had been correct in identifying a question of law even though the arbitrator's interpretation of the agreement was based upon the surrounding circumstances.

  3. In Sattva, the Supreme Court had reiterated that the extraneous circumstances cannot over--‐ride the plain meaning of the contract. That is the principle that the B.C. Court of Appeal had applied in its prior decision.

    Accordingly, the B.C. Court of Appeal upheld its prior decision setting aside the arbitrator's award of interest on the ground that that decision was contrary to the plain meaning of the Settlement Framework Agreement.


The initial impression of Sattva was that it would substantially reduce the scope of review of arbitral decisions because the Supreme Court held that the interpretation of an agreement is normally a matter of mixed fact and law. Many arbitration statues only permit appeals on a question of law, not mixed fact and law. Accordingly, it was thought that Sattva had substantially eliminated appeals from arbitral decisions interpreting agreements.

This decision of the B.C. Court of Appeal in Teal v. B.C. may lead to the opposite conclusion for numerous reasons:

  1. The B.C. Court of Appeal has confirmed that Sattva has opened wide the evidence that must be considered in interpreting a contract. Now, the surrounding circumstances may and should be considered in interpreting the contract. While those circumstances cannot "overwhelm" the plain meaning, they may be considered, and once considered it is obvious that there is a wider basis for controversy or dispute, and uncertainty, about the real meaning of the contract.
  2. The B.C. Court of Appeal has held that if the arbitrator is considering a statute, then the standard of review is correctness, not reasonableness. So now there are two different standards of review, one for contracts and one for statutes.
  3. The B.C. Court of Appeal has adopted a very strict test of "reasonableness". The test appears to adopt almost all the ingredients of the correctness test. It is hard to imagine an interpretation of a statute that, under its test, will be found to be an incorrect but reasonable interpretation.
  4. Even though the arbitrator has considered the surrounding facts, that does not preclude the court from finding or identifying an error of law. It is not the arbitrator's process that is important. It is not a question of whether the arbitrator found or operated upon a principle of law that is incorrect. Rather, it is a question of whether the court can identify in, or distill from, the arbitral decision an error of law. If it can, then that decision may be set aside. Indeed, the B.C. Court of Appeal found that in Sattva, the Supreme Court had approbated its prior approach in identifying errors of law in arbitral decisions.
  5. The B.C. Court of Appeal has said that the decision in Sattva does not provide an "exhaustive list" of those circumstances in which an arbitral award may be reviewed on the basis of correctness. This means that courts may find other grounds for applying the correctness standard.

When all these ingredients are added up, the principles applied by the B.C. Court of Appeal seems to be very much the same as those which courts have historically applied in reviewing arbitral decisions. So perhaps, plus ca change....

Teal Cedar Products Ltd. v. British Columbia, 2015 BCCA 263, 2015 CarswellBC 1550

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions