The Ontario Court of Appeal's recent decision in Baffinland Iron Mines LP v. Tower-EBC G.P./S.E.N.C.,1 has clarified the impact of certain contractual language in arbitration agreements or clauses that may preclude appeals to the court on questions of law.
By way of background, the Ontario Arbitration Act, 1991 addresses three scenarios regarding an appeal to the court on a question of law: when the arbitration agreement expressly permits such an appeal, when the arbitration agreement is silent, and when the arbitration agreement precludes such an appeal. In the first scenario, an appeal is granted automatically; in the second scenario, an appeal requires leave from the court; and in the third scenario, there is no appeal or right to seek leave to appeal at all.
The Baffinland case hinged on whether the phrase "finally settled" in the arbitration agreement held the same meaning as "final and binding" in relation to arbitral decisions – a phrase used elsewhere in the agreement and previously held to preclude appeals. The court emphasized the importance of practicality and common sense in its interpretation, concluding that the use of "final" in both phrases meant that there could be no further recourse by way of appeal.
The Baffinland decision underscores the importance of carefully drafting and negotiating arbitration agreements to ensure that the parties' intentions are accurately reflected, including any limitations on appeal rights. It also suggests that the Court of Appeal is likely to take a practical approach in interpreting arbitration agreements.
Background
The majority of a three-member arbitral tribunal awarded damages in excess of $100 million against Baffinland Iron Mines (BIM), while a dissenting arbitrator would have reduced the award by $54 million based on disagreements about the law of Ontario which governed the contract.2
BIM sought leave to appeal the arbitral award to the Ontario Superior Court, arguing that it had the right to do so since the arbitration agreement was silent on appeals.3 However, the application judge determined that the arbitration agreement precluded appeals and declined to exercise any jurisdiction. The agreement stated that disputes would be "finally settled" through arbitration under the Rules of Arbitration of the International Chamber of Commerce (ICC Rules), including rule 35(6), stating that parties undertake to carry out any award without delay and shall be deemed to have waived their right to any form of recourse.4
BIM appealed the application judge's decision to dismiss its request for leave to appeal to the Ontario Court of Appeal. The threshold issue was whether BIM had the right to appeal directly to the Ontario Court of Appeal from the Superior Court's denial of leave to appeal. The main substantive issue was whether the arbitration agreement precluded BIM from seeking leave to appeal on errors of law.
Threshold Issue – Appealing From a Denial of Leave to Appeal
On the threshold issue, the Ontario Court of Appeal concluded that, in the circumstances of this case, an appeal lay to the Ontario Court of Appeal directly from an application judge's denial of leave to appeal the arbitral award.
The court affirmed the general rule that no appeal lies from a denial of leave to appeal by the Superior Court; however, the court relied on an exception to that rule explained in Denison Mines Ltd. v. Ontario Hydro,5 which permits appeals on a question of whether the application judge "mistakenly" declined jurisdiction.6
Substantive Issue – Impact of Contractual Language on Appeal Rights
(i) Presumption of Consistent Expression
First, BIM argued that the application judge failed to apply the presumption of consistent expression in deciding whether the phrase "finally settled" (used in the agreement in relation to arbitral decisions) held the same meaning as the phrase "final and binding" (used elsewhere in the agreement in relation to certain matters). BIM contended that only the latter phrase precluded appeals while the former did not.7
The court dismissed the argument that "finally settled" and "final and binding" had distinct meanings in this case. It cautioned against treating the presumption of consistent expression as a dominating technical rule of construction, pointing out that different phrases can be used to convey the same meaning. The court stressed that contractual interpretation should be grounded in practicality and common sense, with the primary concern being to give effect to the intent of the parties.8
(ii) Priority of Terms
BIM also argued that the phrase "finally settled" used in the agreement was inconsistent with rule 35(6) of ICC Rules, which precludes appeals, and that priority had to be given to be given to the contract. The court rejected this argument on the basis that, on its interpretation, "finally settled" was not inconsistent with rule 35(6), as both precluded appeals.9
Key Takeaways
This decision clarifies the scope of appeals arising from arbitral awards and the interpretation of arbitration agreements and clauses. It highlights the importance of paying extra attention to dispute resolution clauses or arbitration clauses in contracts and carefully drafting and negotiating them so that they accurately reflect the parties' intention. Further, the words of such clauses should be carefully considered in the broader context of arbitration practice and procedure.
Footnotes
1. 2023 ONCA 245 [Baffinland Iron Mines].
2. Baffinland Iron Mines at para. 3.
3. Baffinland Iron Mines at para. 4.
4. Baffinland Iron Mines at paras. 12, 13 and 17.
5. 2001 CanLII 5681 (ONCA).
6. Baffinland Iron Mines at para. 27.
7. Baffinland Iron Mines at para. 35.
8. Baffinland Iron Mines at paras. 37-38.
9. Baffinland Iron Mines at para. 47.
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