Canada: The International Comparative Legal Guide To: International Arbitration 2016 - Canada

Last Updated: September 5 2016
Article by Louise Novinger Grant and Valerie E. Quintal

1 Arbitration Agreements

1.1 What, if any, are the legal requirements of an arbitration agreement under the laws of your jurisdiction?

Canada is a federal country in which each of the provinces and territories has jurisdiction over arbitration-related matters in its territory. Generally, each province has separate domestic and international commercial arbitration acts.

Typically, the international arbitration acts adopt the UNCITRAL Model Law ("Model Law"), which requires that an agreement to arbitrate be in writing (Model Law, Article 7).

1.2 What other elements ought to be incorporated in an arbitration agreement?

In drafting an arbitration agreement, the parties should address whether the arbitration will be ad hoc or institutional, which set of ad hoc or institutional rules applies, the number of arbitrators and method of appointment, the seat of the arbitration, the applicable law, and the language of the arbitration.

1.3 What has been the approach of the national courts to the enforcement of arbitration agreements?

Generally, Canada's courts are pro-arbitration and will enforce arbitration agreements. Unless the court finds that the arbitration agreement is void, inoperative, or incapable of being performed, the court will refer the parties to arbitration and stay court proceedings that relate to matters that are the subject of arbitration (Model Law, Article 8).

2 Governing Legislation

2.1 What legislation governs the enforcement of arbitration proceedings in your jurisdiction?

The enforcement of arbitration proceedings is governed by each province's legislation, as applicable. In most provinces, the legislation takes the form of an international commercial arbitration act. In Québec, enforcement of arbitration proceedings is governed by the Civil Code of Québec and the Code of Civil Procedure. Canada also has a federal Commercial Arbitration Act, RSC 1985, c 17 (2nd Supp). It applies only in relation to arbitrations where at least one of the parties is the Crown, a departmental corporation, or a Crown corporation, or in relation to maritime or admiralty matters.

2.2 Does the same arbitration law govern both domestic and international arbitration proceedings? If not, how do they differ?

Generally, each province has separate domestic and international commercial arbitration acts.

While differences vary between provinces, the main difference between domestic and international arbitration legislation is the degree of court intervention in the arbitral process. Typically, domestic statutes (a) contain a broader list of grounds on which a court can refuse to stay court proceedings, (b) permit the arbitral tribunal or a party (with the consent of the other parties or the arbitral tribunal) to ask a court to determine pure questions of law, and (c) allow a party to appeal an award on a question of law with leave.

2.3 Is the law governing international arbitration based on the UNCITRAL Model Law? Are there significant differences between the two?

Each province's international commercial arbitration legislation is based on the Model Law. Generally, the Model Law is simply attached as a schedule to the act.

In Québec, international commercial arbitration is governed by Québec's Civil Code and Code of Civil Procedure; however, interpretation of those codes is required to take into consideration the Model Law.

2.4 To what extent are there mandatory rules governing international arbitration proceedings sited in your jurisdiction?

Mandatory rules governing international arbitration proceedings are limited to those set out in the Model Law.

3. Jurisdiction

3.1 Are there any subject matters that may not be referred to arbitration under the governing law of your jurisdiction? What is the general approach used in determining whether or not a dispute is "arbitrable"?

Canadian courts will look at the subject matter of the dispute to determine whether a dispute is arbitrable. Courts may determine that a matter should not be arbitrated as a matter of public policy. For example, divorce proceedings and certain consumer protection disputes may not be arbitrable.

In addition, when the Crown is acting in its sovereign capacity (and not as a commercial party) any resulting dispute based on Canada's domestic laws must be brought to the courts. If the dispute arises from an alleged breach of an investment treaty, the dispute may be resolved in accordance with the dispute resolution provisions of the applicable investment treaty.

3.2 Is an arbitrator permitted to rule on the question of his or her own jurisdiction?

Under the international arbitration acts, the arbitral tribunal may rule on its own jurisdiction. The arbitral tribunal's finding on jurisdiction is subject to review by the courts (Model Law, Article 16(3), 34).

Courts will generally defer to the arbitral tribunal and allow it to determine its own jurisdiction. However, Canadian courts may, in limited circumstances, determine an arbitral tribunal's jurisdiction in the first instance. Typically, a court will only do so when the jurisdictional challenge is based solely on questions of law (or when any questions of fact are superficial), the lack of jurisdiction is clear and obvious, and the court is satisfied that the challenge is not a delaying tactic (Dell Computer Corp v Union des consommateurs, 2007 SCC 34).

3.3 What is the approach of the national courts in your jurisdiction towards a party who commences court proceedings in apparent breach of an arbitration agreement?

Generally, Canadian courts will stay court proceedings in apparent breach of an arbitration agreement, provided that the party seeking the stay does so no later than that party's first submission on the substance of the dispute (usually, its statement of defence).

3.4 Under what circumstances can a court address the issue of the jurisdiction and competence of the national arbitral tribunal? What is the standard of review in respect of a tribunal's decision as to its own jurisdiction?

On request, Canadian courts can address the issue of jurisdiction and competence of the arbitral tribunal (Model Law, Article 16(3), 34). In limited circumstances, a court may deal with jurisdiction in the first instance (Model Law, Article 8(1)); however, Canadian courts are generally pro-arbitration and will not unduly interfere in arbitration proceedings.

The standard of review with respect to an arbitral tribunal's decision as to its own jurisdiction is one of reasonableness, deference, and respect (ACE Bermuda Insurance Ltd. v Allianz Insurance Co. of Canada, 2005 ABQB 975).

3.5 Under what, if any, circumstances does the national law of your jurisdiction allow an arbitral tribunal to assume jurisdiction over individuals or entities which are not themselves party to an agreement to arbitrate?

Generally, the arbitral tribunal does not have jurisdiction over individuals or entities who are not parties to the arbitration agreement. A non-party may be bound by the arbitration agreement where, as between a party and non-party, (a) the corporate relationship is sufficiently close to justify lifting the corporate veil, (b) there is an agency relationship, (c) a contract incorporates the arbitration agreement by reference, assumption or assignment, or (d) the non-party is bound by equitable estoppel (McEwan & Herbst, Commercial Arbitration in Canada: A Guide to Domestic and International Arbitrations, Canada Law Book, at 2:110).

3.6 What laws or rules prescribe limitation periods for the commencement of arbitrations in your jurisdiction and what is the typical length of such periods? Do the national courts of your jurisdiction consider such rules procedural or substantive, i.e., what choice of law rules govern the application of limitation periods?

The international arbitration acts do not address limitation periods. They are matters of substantive law. The limitation period depends on which province's laws govern the contract. Typically, limitation periods are two years, but may vary from province to province.

3.7 What is the effect in your jurisdiction of pending insolvency proceedings affecting one or more of the parties to ongoing arbitration proceedings?

When the seat of arbitration is Canada, the arbitration proceedings are subject to Canadian law. Where a party is insolvent, the Bankruptcy and Insolvency Act, RSC 1985 c B-3 stays all "proceedings", which Canadian courts have interpreted as including arbitration proceedings.

4 Choice of Law Rules

4.1 How is the law applicable to the substance of a dispute determined?

Where parties have agreed on the substantive law applicable to the substance of the dispute, arbitral tribunals will apply that law. Where parties have not agreed on the applicable law, the arbitral tribunal will determine it by applying appropriate conflict of laws rules (Model Law, Article 28).

4.2 In what circumstances will mandatory laws (of the seat or of another jurisdiction) prevail over the law chosen by the parties?

Generally, the law chosen by the parties will apply to the arbitration proceeding unless it violates public policy in Canada.

4.3 What choice of law rules govern the formation, validity, and legality of arbitration agreements?

The question of which law applies to the formation, validity, and legality of the arbitration agreement is determined by general choice of law rules. Generally, consideration will be given to the express choice of law in the substantive contract, the implied choice of law, or the law which has the closest and most real connection to the arbitration agreement.

5 Selection of Arbitral Tribunal

5.1 Are there any limits to the parties' autonomy to select arbitrators?

Although there are no restrictions on the parties' freedom to choose arbitrators, an arbitrator must be independent and impartial.

5.2 If the parties' chosen method for selecting arbitrators fails, is there a default procedure?

For an institutionally administered arbitration, the institution's rules will typically provide a default procedure for appointing arbitrators. In the case of ad hoc arbitrations, if the parties have not agreed on a default procedure, the parties can apply to the court for assistance (Model Law, Article 11).

5.3 Can a court intervene in the selection of arbitrators? If so, how?

A court can only intervene to assist the parties in appointing the arbitral tribunal where the parties are unable to do so (Model Law, Article 11).

5.4 What are the requirements (if any) as to arbitrator independence, neutrality and/or impartiality and for disclosure of potential conflicts of interest for arbitrators imposed by law or issued by arbitration institutions within your jurisdiction?

The Model Law requires that arbitrators disclose "any circumstances likely to give rise to justifiable doubts as to their impartiality or independence" on an ongoing basis for the duration of the arbitration (Model Law, Article 12).

6 Procedural Rules

6.1 Are there laws or rules governing the procedure of arbitration in your jurisdiction? If so, do those laws or rules apply to all arbitral proceedings sited in your jurisdiction?

Generally, the international and domestic arbitration acts do not mandate specific procedures for arbitration proceedings. Typically, procedural matters are addressed by the parties, and, absent agreement, the arbitral tribunal.

6.2 In arbitration proceedings conducted in your jurisdiction, are there any particular procedural steps that are required by law?

The arbitral tribunal is required to treat the parties equally and fairly. Each party must be given an opportunity to present its case and respond to the other parties' cases.

6.3 Are there any particular rules that govern the conduct of counsel from your jurisdiction in arbitral proceedings sited in your jurisdiction? If so: (i) do those same rules also govern the conduct of counsel from your jurisdiction in arbitral proceedings sited elsewhere; and (ii) do those same rules also govern the conduct of counsel from countries other than your jurisdiction in arbitral proceedings sited in your jurisdiction?

There are no particular rules governing the conduct of counsel in international arbitration proceedings sited in Canada. The rules of the law society of each province govern the conduct of Canadian counsel in terms of ethical and professional obligations whether in arbitration proceedings sited in Canada or elsewhere. Such rules do not apply to the conduct of counsel from other countries in arbitration proceedings sited in Canada.

6.4 What powers and duties does the national law of your jurisdiction impose upon arbitrators?

The Model Law addresses the powers and duties of arbitrators. Arbitrators must be independent and impartial and treat the parties equally and fairly. Absent the parties' agreement on specific arbitration procedures, the arbitral tribunal holds broad discretion to determine the arbitration procedure.

6.5 Are there rules restricting the appearance of lawyers from other jurisdictions in legal matters in your jurisdiction and, if so, is it clear that such restrictions do not apply to arbitration proceedings sited in your jurisdiction?

Legislation is silent on the issue of qualification requirements for party representatives. Therefore, it would be a matter for Canada's provincial law societies (which govern the legal profession in Canada) to determine whether representing a party in an arbitration constituted the "practice of law" and fell within their purview. We are not aware of any provincial law society taking issue with lawyers from other jurisdictions appearing in international arbitrations in its territory.

6.6 To what extent are there laws or rules in your jurisdiction providing for arbitrator immunity?

Arbitrators are generally immune from liability. Still, they must act honestly and fairly as between the parties.

6.7 Do the national courts have jurisdiction to deal with procedural issues arising during an arbitration?

Courts in Canada may only intervene in arbitrations as permitted under the Model Law. Generally, they do not have jurisdiction to deal with procedural issues arising in arbitration proceedings and will not entertain appeals from an arbitrator's interim or procedural orders made in the course of the proceeding (Inforica Inc v CGI Information Systems Management Consultants, 2009 ONCA 642).

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