In an appeal of an order dismissing an application to set aside an arbitral award, the Ontario Court of Appeal clarified the narrow scope of judicial oversight for arbitrations under the Commercial Arbitration Act. The threshold is high. Awards are not subject to reasonableness review and the Court will only set aside awards in exceptional cases where they offend public policy (ex: corruption or intolerable procedural rules) or where there are true questions of jurisdiction.
The tribunal at first instance held that the Respondent (Canada) breached NAFTA by conducting a flawed environmental assessment of the Appellants (Clayton), who sought to develop a quarry in Nova Scotia. However, it was not established that the Appellants would still have obtained project approval, or that their project would profit. The tribunal awarded only $7 million in damages, finding no link between the flawed assessment and the Appellants' requested $440 million damages.
The Appellants applied unsuccessfully to set aside the award. They then appealed on two issues; first, that the tribunal exceeded jurisdiction by applying an inappropriate test for assessing damages, and second, that enforcing a misapplication of law offends public policy.
Appeal dismissed. First, the critique of the tribunal's damages analysis is not a question of jurisdiction but invites scrutiny on the merits of the award. Second, Canadian public policy is one of judicial restraint for binding arbitration, particularly where parties select their tribunal. The award did not offend public policy, and an appeal cannot be used as a backdoor for reasonableness review.
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