Canada: Seminal Decision On International Commercial Arbitral Awards: Limitation Period For Recognition And Enforcement

Copyright 2008, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on Litigation/Dispute Resolution, August 2008

In a decision issued on August 5, 2008, the Alberta Court of Appeal filled the previous void in the case law regarding the limitation period governing the enforcement of international commercial arbitral awards. The court found that the deadline for such applications is the generally-applicable two-year discoverability period.


This decision arose from a dispute between Yugraneft Corporation (Yugraneft), a Russian company, and Rexx Management Corporation (Rexx), an Alberta company, based on Yugraneft's claim that it paid money for equipment not supplied. Yugraneft commenced international commercial arbitral proceedings against Rexx. On September 6, 2002, the International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation granted an award against Rexx in favour of Yugraneft in the amount of approximately US$1-million.

It was not until more than three years later, on January 27, 2006, that Yugraneft applied pursuant to the International Commercial Arbitration Act (Alberta) for an order recognizing and enforcing the arbitral award in the province of Alberta. Rexx sought the dismissal of the application on the basis that the applicable limitation period had expired and, alternatively, sought a stay of the application pending resolution of a related Racqueteer Influenced and Corrupt Organizations (RICO) case unfolding in the United States. Rexx alleged that Yugraneft had been fraudulently stolen by another company through conduct involving abuse of the Russian judicial system, forgery of shareholder meeting minutes, and seizing the offices of Yugraneft through a "machine-gun toting private army". It was on that basis that Rexx alleged that it would be contrary to the public policy of Alberta for the international commercial arbitral award to be recognized and enforced.

Analysis & Comment

In rendering their decisions in this matter, both the Alberta Court of Appeal and the Alberta Court of Queen's Bench identified the fact that there was no prior (Canadian) case law addressing the limitation period for the recognition and enforcement of an international arbitral award.

While the courts at both levels based their decisions on the applicable provisions in the Limitations Act (Alberta), consideration was also given to decisions by the Supreme Court of Canada and the courts in the provinces of Ontario, Nova Scotia, and Manitoba with respect to the recognition and enforcement of foreign court judgments, and to similar statutory provisions in the limitations legislation in force in those provinces.

The relevant provisions in the Limitations Act (Alberta) are:

1(i) "remedial order" means a judgment or an order made by a court in a civil proceeding requiring a defendant to comply with a duty or to pay damages for the violation of a right but excludes:

(i) a declaration of rights and duties, legal relations or personal status,

(ii) The enforcement of a remedial order,


3(1) Subject to Section 11, if a claimant does not seek a remedial order within

(i) 2 years after the date on which the claimant first knew, or in the circumstances ought to have known,

(i) that the injury for which the claimant seeks a remedial order had occurred,

(ii) that the injury was attributable to conduct of the defendant, and

(iii) that the injury, assuming liability on the part of the defendant, warrants bringing a proceeding; or

(ii) 10 years after the claim arose,

whichever period expires first, the defendant, on pleading this Act as a defence, is entitled to immunity from liability in respect of the claim.

11 If, within 10 years after the claim arose, a claimant does not seek a remedial order in respect of a claim based on a judgment or order for payment of money, the defendant, on pleading this Act as a defence, is entitled to immunity from liability in respect of the claim.

Having regard to these statutory provisions, the issues included whether Yugraneft's application was for a "remedial order" and, if it were, whether the "remedial order" sought was "in respect of a claim based on a judgment or order for the payment of money." The answers to these questions would determine whether section 3 or section 11 of the Limitations Act applied, and whether Yugraneft's application was subject to a limitation period of two years or 10 years.

Given that its application was not brought until more than three years after the issuance of the arbitral award, Yugraneft advanced a number of arguments to the effect that the applicable limitation period was 10 years, not two years. The Alberta Court of Appeal rejected those various arguments.

For instance, Yugraneft asserted that, through its application, it was not seeking a "remedial order". The effect of that argument, if successful, would have been no limitation period prescribed by the Limitations Act (Alberta), whether under section 3, section 11, or otherwise. Yugraneft attempted to achieve this result by arguing that its application sought merely declaratory relief, and therefore fell within the first exclusion from the definition of "remedial order". The Alberta Court of Appeal found that, while the aspect of Yugraneft's application seeking recognition of the arbitral award might properly be characterized as declaratory in nature, Yugraneft also was seeking enforcement of the arbitral award, as it was required to do for its application to have any practical effect. The consequence of the court's rejection of this argument was that, unless Yugraneft could persuade the court that its proceeding fit within section 11 of the Limitations Act (Alberta), it would face the two-year discoverability deadline set out in section 3.

In similarly rejecting the argument by Yugraneft that its application fell within section 11, the Alberta Court of Appeal found that seeking a "remedial order in respect of a claim based on a judgment or order for the payment of money" is in the nature of an application to renew an unsatisfied judgment. The court thereby limited the application of section 11 to the renewal of domestic judgments or orders, finding that this section does not apply to the initial recognition and enforcement of a foreign judgment or order. This would seem consistent with the overall policy considerations underlying limitation statutes, in that, if a judgment or order is already "grounded" domestically, then the judgment debtor is subject to enforcement proceedings on it, and therefore would (at least be presumed to) know about it. It is therefore sensible that an application for the renewal of a domestic judgment or order is governed by a longer limitation period than is applicable to the initial attempt to have a foreign judgment or order recognized and enforced domestically, to satisfy the prerequisite for any enforcement action to be taken domestically at first instance.

Even though it was an international commercial arbitral award that Yugraneft sought to have recognized and enforced, both the Alberta Court of Appeal and the court below included analysis with respect to the limitation period applicable to foreign court judgments. While, solely on the face of section 1(i) of the Limitations Act (Alberta), one might consider that an application for the recognition and enforcement of a foreign court judgment is excluded from the definition of "remedial order" (on the basis that such an application seeks "the enforcement of a remedial order"), established case law regarding applications for the recognition and enforcement of foreign court judgments makes clear that a foreign judgment is regarded as simple contract debt. Accordingly, an application for the recognition and enforcement of a foreign court judgment is subject to the same two-year limitation period as is a claim based on a simple contract debt. In this manner, the Alberta Court of Appeal supported its conclusion (that the two-year limitation period governed Yugraneft's application for the recognition and enforcement of its international commercial arbitral award), on the basis that an international commercial arbitral award can be in no better position than a foreign court judgment.

It should be noted that the two-year period prescribed by section 3 of the Limitations Act (Alberta) is a "discoverability" period, such that the deadline does not expire until two years after the later of the dates on which the claimant either actually knew, or in the circumstances ought to have known, of the necessary facts in relation to the claim.

While Yugraneft attempted to support its statutory interpretation argument on the basis that a two-year period would be unfair to parties in whose favour international commercial arbitral awards had been issued, it does not appear from the judgments of either of the courts in this case that Yugraneft proffered any evidence to advance such an argument as a matter of fact. For instance, it does not appear that there was any evidence that Yugraneft neither knew nor have ought to have known, until some later date, that the extent or whereabouts of the assets of Rexx warranted Yugraneft to bring the recognition and enforcement proceeding in Alberta, as may have been sufficient to lead to a determination that Yugraneft's application was indeed brought within the time period stipulated under section 3(1)(a) of the Limitations Act (Alberta).

Turning to the public policy issue that Rexx raised in the alternative, the court below found against Rexx and, given the Alberta Court of Appeal's determination on the limitation period issue, it expressly declined to decide or comment on the public policy considerations.


The overall effect of the decision of the Alberta Court of Appeal in Yugraneft v. Rexx is that applications made in Alberta for the recognition and enforcement of international commercial arbitral awards are governed by the generally-applicable two-year discoverability rule prescribed by the Limitations Act (Alberta). Given the decisions rendered by the courts in other Canadian provinces on the limitation period applicable to the recognition and enforcement of foreign court judgments, as well as the similarity in statutory provisions, it is expected that this decision will not be limited to Alberta in its effect.

Considering the variety of arguments that were advanced on behalf of Yugraneft, corporations that may be on the receiving end of an international commercial arbitral award should, upon the passage of the two-year discoverability period, take comfort from this decision in relation to whether their Canadian assets will be subject to enforcement proceedings. However, it may be possible for a party seeking to enforce an international commercial arbitral award to effectively lengthen the applicable limitation period beyond two years after the arbitral award is issued, depending on whether, as of when the award is issued, the claimant knew or ought to have known the necessary facts contemplated by section 3 of the Limitations Act (Alberta).

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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