Canada: Arbitration

Last Updated: December 15 2016
Article by Jeffrey S. Leon, Gannon Beaulne and Ethan Schiff

This country-specific Q&A provides an overview of the legal framework and key issues surrounding arbitration law in the Canada including arbitration agreements, tribunals, proceedings as well as costs, awards and the hot topics concerning this country at present.

This Q&A is part of the global guide to Arbitration.

For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/index.php/practice-areas/arbitration/

  1. What legislation applies to arbitration in your country? Are there any mandatory laws?

    Each jurisdiction in Canada has enacted legislation regarding international and domestic arbitrations. The international arbitration statutes are:

    • Alberta – International Commercial Arbitration Act, RSA 2000, c 1-5;
    • British Columbia – International Commercial Arbitration Act, RSBC 1996, c 233;/li>
    • Federal – Commercial Arbitration Act, RSC 1985, c 17 (2nd Supp);/li>
    • Manitoba – International Commercial Arbitration Act, CCSM, c C-151;/li>
    • New Brunswick – International Commercial Arbitration Act, SNB 1986, c I-12.2;/li>
    • Newfoundland & Labrador – International Commercial Arbitration Act, RSN 1990, c I-15;/li>
    • Northwest Territories – International Commercial Arbitration Act, RSNWT 1988, c I-6;/li>
    • Nova Scotia – International Commercial Arbitration Act, RSNS 1989, c 234;/li>
    • Nunavut – International Commercial Arbitration Act, RSNWT (Nu) 1988 c I-6, duplicated under Nunavut Act, SC 1993 c 28, s 29;/li>
    • Ontario – International Commercial Arbitration Act, RSO 1990, c I-9;/li>
    • Saskatchewan – International Commercial Arbitration Act, SS 1988-1989, c I-10.2;/li>
    • Prince Edward Island – International Commercial Arbitration Act, RSPEI 1988, c I-5;/li>
    • Quebec – Code of Civil Procedure, RSQ, c C-25 (as am), arts 940-952; Quebec Civil Code, SQ 1991, c 64 (as am), arts 2638-2643, 3121, 3133, 3148 3168; and/li>
    • Yukon Territories – International Commercial Arbitration Act, RSY 2002, c 123./li>

    Regarding mandatory laws, the UNCITRAL Model Law (the "Model Law"), which is incorporated in Canadian arbitration law, requires that rules of natural justice must be satisfied and contains other mandatory provisions. In addition, some legislation expressly displaces the authority of pre-dispute arbitration agreements, such as consumer protection laws. Other mandatory laws may exist, depending on the jurisdiction.

  2. Is your country a signatory to the New York Convention? Are there any reservations to the general obligations of the Convention?

    Canada is a signatory to the New York Convention (the "Convention"). Every Canadian jurisdiction has enacted legislation to give it effect. Outside of Quebec, the Convention only applies to relationships considered "commercial" under the laws of Canada. There are no reservations to the general obligations of the Convention in Quebec.

  3. What other arbitration-related treaties and conventions is your country a party to?

    Canada is party to 33 bilateral investment treaties and 11 regional free trade agreements. Canada is also party to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States.

    Free Trade Agreements

    • Canada-Korea
    • Canada-Honduras
    • Canada-Panama
    • Canada-Columbia
    • Canada-Peru
    • Canada-Chile
    • North American Free Trade Agreement

    Bilateral Investment Treaties

    • Canada-Argentina
    • Canada-Armenia
    • Canada-Barbados
    • Canada-Benin
    • Canada-China
    • Canada-Costa Rica
    • Canada-Côte d'Ivoire
    • Canada-Croatia
    • Canada-Czech Republic
    • Canada-Ecuador
    • Canada-Egypt
    • Canada-Hong Kong
    • Canada-Hungary
    • Canada-Jordan
    • Canada-Kuwait
    • Canada-Latvia
    • Canada-Lebanon
    • Canada-Mali
    • Canada-Panama
    • Canada-Peru (Suspended)
    • Canada-Philippines
    • Canada-Poland
    • Canada-Romania
    • Canada-Russian Federation
    • Canada-Senegal
    • Canada-Serbia
    • Canada-Slovak Republic
    • Canada-Tanzania
    • Canada-Thailand
    • Canada-Trinidad and Tobago
    • Canada-Ukraine
    • Canada-Uruguay
    • Canada-Venezuela
  4. Is the law governing international arbitration in your country based on the UNCITRAL Model Law? Are there significant differences between the two?

    With the exception of Quebec, each jurisdiction in Canada has adopted the Model Law, with minor differences. Quebec law is consistent with the Model Law.

  5. Are there any impending plans to reform the arbitration laws in your country?

    The Uniform Law Conference of Canada ["ULCC"] adopted model international arbitration legislation to, among other things, incorporate the 2006 amendments to the Model Law. As of now, those amendments have not been enacted in Canadian legislation. Some provinces and territories are expected to adopt the amendments. There is similar movement regarding domestic legislation.

  6. What arbitral institutions (if any) exist in your country?

    Some of the arbitral institutions in Canada include:

    1. ADR Chambers;
    2. ADR Institute of Canada ("ADRIC");
    3. British Columbia International Commercial Arbitration Centre ("BCICAC");
    4. Canadian Arbitration Association;
    5. Canadian Commercial Arbitration Centre;
    6. International Centre for Dispute Resolution ("ICDR Canada"); and
    7. International Chamber of Commerce ("ICC").
  7. What are the validity requirements for an arbitration agreement under the laws of your country?

    Generally, the agreement must be in writing and follow domestic principles of contract formation. For international arbitrations, as provincial and territorial statutes include the Model Law, the agreement must be:

    • a document signed by the parties;
    • an exchange of letters, telex, telegrams, or other means of telecommunication that provide a record of the agreement; or
    • an exchange of pleadings in which the existence of an agreement is alleged and not denied.

    For domestic arbitrations, the requirements are set out in provincial legislation.

  8. Are arbitration clauses considered separable from the main contract?

    Canadian jurisprudence establishes that arbitration clauses are independent agreements, separable from the main contract. If a contract is found void, the arbitration clause remains effective unless found void itself.

  9. Can claims under more than one contract be brought in the one arbitral proceeding? Can an arbitral tribunal with its seat in your country consolidate separate arbitral proceedings under one or more contracts, and, if so, in what circumstances?

    Courts have the power to consolidate proceedings. The circumstances in which consolidation is permitted depend on the rules being used. Claims can generally be consolidated if:

    • the parties agree to do so;
    • where separate claims are made under the same arbitration agreement; or
    • where the parties are the same.
  10. How is the law applicable to the substance determined?

    The agreement may establish applicable law. If there is no agreement on applicable law, the tribunal will apply the principles under Article 28 of the Model Law and domestic choice of law rules to determine the applicable substantive law.

  11. Are any types of dispute considered non-arbitrable? What is the approach used in determining whether or not a dispute is arbitrable?

    Criminal and divorce matters are not arbitrable. Generally, all commercial matters are arbitrable, although some Canadian jurisdictions impose restrictions for consumer protection and employment matters. Depending on the jurisdiction, some other matters are also considered non-arbitrable.

  12. In your country, are there any restrictions in the appointment of arbitrators?

    There are no general restrictions on the appointment of arbitrators. Parties may agree on the appointment of arbitrators. Under Article 11 of the Model Law, a court may supervise the process if a party fails to act as required, if the parties or two arbitrators are not able to agree on the procedures or if a third party fails to perform its function under the procedure.

    Pursuant to the Model Law, if the parties have not agreed on the appointment of arbitrators, the appointment process varies depending on the number of arbitrators. If there is a single arbitrator, a court will appoint an arbitrator. If three arbitrators form the tribunal, each party appoints one arbitrator and the two arbitrators appoint the third. If there are failures in the process, a court may make an appointment at a party's request. The only restriction is that the arbitrators must be independent and impartial.

  13. Are there any default requirements as to the selection of a tribunal?

    If the agreement does not provide for the number of arbitrators in an international arbitration, the default number is three. The same is true of domestic arbitration in Quebec. In domestic arbitration in other provinces and territories, a single arbitrator is appointed by default.

  14. Can the local courts intervene in the selection of arbitrators? If so, how?

    Courts become involved in the selection of arbitrators only if the parties cannot agree or there is a challenge. Parties may request that a court appoint a tribunal if:

    • a party does not follow the agreed process;
    • a party does not name an arbitrator within the specified time; or
    • the process to choose the third arbitrator is not implemented in the specified time.
  15. Can the appointment of an arbitrator be challenged? Can an arbitrator be disqualified? What is the procedure for such challenge?

    The appointment of an arbitrator can only be challenged if the circumstances give rise to justifiable doubts about his or her impartiality or independence or if he or she does not possess the agreed on qualifications.

    Pursuant to the Model Law, the parties may agree to a procedure for challenging an arbitrator. Without an agreement, the challenging party must make a written statement of reasons for challenging within 15 days of learning of the appointment or learning of the basis for the challenge. The tribunal then must decide on the challenge. If the challenge fails, the challenging party may request a determination by a court within 30 days of the tribunal's decision. While the court's decision is pending, the tribunal proceedings may proceed with the challenged arbitrator.

  16. Are arbitrators immune from liability?

    Consistent with immunity for judges and other members of the judiciary, arbitrators are immune from liability absent bad faith or fraud.

  17. Is the principle of competence-competence recognised in your country? What is the approach of local courts towards a party commencing arbitration in apparent breach of an arbitration agreement?

    The principle of competence-competence is well-recognized in Canadian law. The principle permits arbitrators to rule on their jurisdiction before a party can challenge jurisdiction in a court. The Supreme Court of Canada affirmed its applicability in Dell Computer Corp v Union des Consommateurs unless the challenge to the arbitrator's jurisdiction is based solely on a question of law. The Model Law imports the principle under Article 16.

    A party can apply to the court for an order staying a court proceeding where an agreement to arbitrate is in place. Courts must stay the proceeding if the arbitration agreement is not void, inoperative, or incapable of being performed.

  18. How are arbitral proceedings commenced in your country? Are there any key provisions under the arbitration laws relating to limitation periods of which the parties should be aware?

    The parties may agree on a procedure to commence proceedings. If the parties have not agreed, pursuant to Article 21 of the Model Law, the arbitral proceedings commence on the date the respondent receives the request from the claimant for the dispute to be referred to arbitration.

    Generally, arbitration statutes do not address limitation periods. Limitation period laws in Canada are determined at the provincial level. Limitation periods under provincial statutes apply to arbitral proceedings in some provinces and territories. Limitation periods are considered substantive under Canadian private international law, but procedural for the purposes of enforcing a foreign arbitral judgment pursuant to the Convention. Consequently, provincial limitation statutes apply to the enforcement of an award from a foreign jurisdiction in Canada. The applicable periods vary considerably across the country. When and if implemented, the ULCC uniform law on international arbitrations will harmonize the limitation period for enforcement at 10 years from the date on which proceedings concluded or, if no proceedings took place, the date on which the time limit expired for commencement of such proceedings.

  19. What is the applicable law (and prevailing practice) where a respondent fails to participate in the arbitration? Can the local courts compel parties to arbitrate? Can they order third parties to participate in arbitration proceedings?

    Under Article 25 of the Model Law, the tribunal continues the proceedings if a party fails to appear at the hearing or produce documentary evidence. The tribunal may make an award based only on the evidence provided in a party's absence. Tribunals will give a party every opportunity to participate. The courts may assist in gathering evidence from third parties.

  20. In what instances can third parties or non-signatories be bound by an arbitration agreement or award (e.g. by joinder)?

    For parties to be bound by an arbitration agreement, generally there must be privity under the law of contract. Non-parties may be bound by the arbitration agreement through the law of contract by means of agency, assignment, or another recognised legal concept.

  21. What interim measures are available? Will local courts issue interim measures pending the constitution of the tribunal?

    Tribunals can order interim measures of protection and security for costs. Courts may grant injunctive relief in aid of the arbitration, including freezing assets and anti-suit injunctions.

  22. Are there particular rules governing evidentiary matters in arbitration? Will the local courts in your jurisdiction play any role in the obtaining of evidence?

    Tribunals are required to follow the Model Law regarding the exchange of statements, oral hearings, and document production. Absent an agreement, tribunals often refer to the IBA Rules on the Taking of Evidence in International Commercial Arbitration. Courts can make orders to ensure document disclosure and witness attendance at hearings.

  23. What ethical codes and other professional standards, if any, apply to counsel and arbitrators conducting proceedings in your country?

    There are no codes specific to arbitrations. Ethical codes imposed by law societies (the bodies regulating the legal profession) in the provinces and territories apply to members (licensed lawyers) acting as counsel in arbitration. In international arbitrations conducted in Canada, institutions and tribunals may refer to the IBA Guidelines on Conflicts of Interest and the IBA Rules of Ethics.

  24. How are the costs of arbitration proceedings estimated and allocated?

    Costs awards may be determined by agreement. Absent an agreement on costs, the tribunal has discretion to make a costs award. Tribunals often take an approach to costs similar to that of a Canadian superior court. Generally, the unsuccessful party will be ordered to pay part or substantially all of the successful party's reasonable fees and expenses.

  25. Can interest be included on the principal claim and costs incurred?

    A tribunal may order interest on the principal claim and costs.

  26. Does the law impose limits on the available remedies? Are some remedies not enforceable by the local courts?

    Unless otherwise agreed, generally an international arbitral tribunal may order any relief that a court may order. For domestic tribunals, some provinces and territories do not provide for jurisdiction to order equitable relief. Generally parties may agree that a tribunal may grant remedies that may not be available from a court.

  27. What legal requirements are there in your country for the recognition of an award?

    Canadian courts will recognize and enforce an arbitral award unless one of the grounds for refusal under the Convention and the Model Law is made out. The party seeking to enforce the award must file the award with evidence of the arbitration agreement. Limitation periods relating to proceedings for recognition and enforcement vary across Canada.

  28. Can arbitration proceedings and awards be appealed or challenged in local courts? What are the grounds and procedure?

    For international arbitration, an award cannot be appealed on its merits to a court. A court may set aside the award under Article 34 the Model Law:

    • if the party was legally incapable;
    • if the party was not given proper notice of the appointment of the arbitrator;
    • if the party was not given proper notice of the proceeding;
    • if the party was denied the opportunity to present its case; or
    • if the tribunal's decision went beyond the scope of what the parties agreed was arbitrable.

    An application to set aside an award must be brought to the court at the seat of the arbitration. Article 34(3) of the Model Law provides that an application to set aside may not be made after three months have elapsed from the date on which the party making that application received the award or, if request had been made under article 33, from the date on which that request was disposed of by the tribunal.

    For domestic arbitrations, there are limited rights of appeal, usually only on a question of law. Appeal rights vary by province and territory. Some provinces and territories do not provide for any right of appeal, whereas others provide a right to appeal after obtaining permission (leave) to appeal.

  29. Can the parties waive any rights of appeal or challenge to an award by agreement before the dispute arises (such as in the arbitration clause)?

    The ability of a party to waive rights of appeal or challenges by agreement varies by province or territory. For example, in Ontario, parties can agree to waive any right to appeal before arbitration commences, but that is not possible in Alberta. In an Ontario first instance decision, Re Noble China, the Court held that Article 34 of the Model Law is not a mandatory provision of the Model law, giving the parties power to agree to waive it.

  30. To what extent might a state or state entity successfully raise a defence of state or sovereign immunity at the enforcement stage?

    The state immunity defence is readily available to a state named as a defendant to a lawsuit, in an arbitration or in an action for recognition and enforcement of an arbitration. The federal State Immunity Act provides for limited exceptions to state immunity, such as if a state waives immunity, if a state submits to the court's jurisdiction, and for scheduled states deemed to support terrorism. If the circumstances do not fall into one of the exceptions, a state's defence will succeed. Additionally, under s. 5 of the State Immunity Act, a state is not immune from the jurisdiction of a court in any proceedings that relate to any commercial activity of the foreign state.

    S. 11(1) of the State Immunity Act further provides that a state must consent in writing to relief by way of an injunction, specific performance or the recovery of land or other property. Under s. 12(1), property of a foreign state located in Canada is immune from execution unless: (a) the state waives the immunity; (b) the property is used or is intended to be used for commercial activity or support of terrorism; (c) "the execution relates to a judgment establishing rights in property that has been acquired by succession or gift or in immovable property located in Canada"; or (d) the foreign state is listed as a state for which there are reasonable grounds to believe it has supported terrorism and "the attachment or execution relates to a judgment rendered in an action brought against it for its support of terrorism or its terrorist activity and to property other than property that has cultural or historical value".

  31. Are there rules or restrictions on third-party funders in your country?

    There are laws against maintenance and champerty, which may apply to funding arbitrations; however, third-party funding for arbitration (and litigation) is increasing in frequency in Canada and has been approved in several court cases, subject to certain imposed conditions. Some commentators have raised concerns, but there are currently no specific governing regulations.

  32. Is there a concept in your country providing for class-action or group arbitration? If so, are there any limitations to the arbitrability of such claims or requirements that must be met before such claims may be arbitrated?

    There is no authority on class or group arbitrations in Canada. There also appears to be no bar to proceeding with a class claim in arbitration, but there is no authority directly on point. One court noted that "there is no Canadian jurisprudence which even remotely suggests that class-wide arbitration can be ordered within the context of a class action". However, courts have involved arbitrators for certain determinations in class proceedings, "including the determination of individual damages and legal fees owing by a defendant".

  33. Is diversity in the choice of arbitrators (e.g. gender, age, origin) actively promoted in your country? If so, how?

    There is wide acknowledgment of the importance of diversity in the legal profession, which is developing regarding arbitrators. There is a movement to open arbitration to younger members of the legal profession. Arbitral institutions that operate in Canada are increasingly promoting diversity of arbitrators. Many of those involved in arbitration in Canada have signed the Equal Representation in Arbitration Pledge, which seeks to "increase, on an equal opportunity basis, the number of women appointed as arbitrators in order to achieve a fair representation as soon as practically possible, with the ultimate goal of full parity". The Young Canadian Arbitration Practitioners promotes the involvement of younger practitioners and organizations including ArbitralWomen promote the greater involvement of women in arbitration.

  34. Is emergency arbitrator relief available in your country? Is this actively used?

    Rules of various institutions operating in Canada, including ICDR, ICC and ADRIC, provide for emergency arbitrator relief if interim relief is required prior to constituting the tribunal.

  35. Have measures been taken by arbitral institutions in your country to promote transparency in arbitration?

    There has been no promotion of transparency in commercial arbitrations per se, but there is a trend toward greater transparency. At least one arbitrator, in a case involving a matter of public interest, ordered the arbitration itself be public, as the presumption of a private hearing may be rebutted. Canada has also made efforts to include transparency provisions for investment arbitrations under bilateral investment and free trade agreements. Canada's model bilateral investment treaty includes mandatory public access to hearings and documents and submissions by non-disputing parties. Canada was a proponent of the UNCITRAL Transparency Rules and has incorporated them into recent bilateral investment treaties.

  36. Are efforts being made by arbitration institutions or local courts to impose strict deadlines for the rendering of awards?

    Legislation varies by province or territory. Some domestic arbitration legislation provides flexible deadlines for when the award must be rendered. Arbitral institutions also may impose deadlines, such as the BCICAC's rule requiring that the tribunal make its final award within 60 days of the hearing closing. Parties are permitted to contract for time limits. If there is no legislation or agreement as to a deadline, the award should be made in a "reasonable" time. Ordinarily courts are not involved in this aspect of arbitration.

  37. Have steps been taken in your country to publish reasoned decisions on arbitrator challenges and provide more insight into the drivers behind arbitrator selection by institutions?

    There have not been any specific initiatives to increase the transparency of decisions on arbitrator challenges (except where they take place in court and therefore are public) nor to provide insight into the drivers behind institutions' arbitrator selection. The ICC's arbitration court now provides written decisions on arbitrator challenges, provided both parties agree. International developments may lead to the adoption of similar approaches in Canada in the future.

  38. Are there arbitral laws or arbitration institutional rules in your country providing for simplified procedures for claims under a certain value?

    Arbitral institutions' rules may provide for simplified procedure. For example, the ADRIC Rules provide for a simplified procedure, but it is based on agreement by the parties rather than lower value for the dispute. In addition, ADR Chambers and the Canadian Arbitration Association have expedited arbitration rules.

The authors thank Matthew Kronby for his comments on a prior draft of this article.

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.

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Gannon Beaulne
 
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