Alberta – Arbitrator’s Resignation does not terminate arbitration – #882

In Belanger v Pokol, 2024 ABKB 646, the Court dismissed an application by a party to the dispute to “be released from arbitration.” The Applicant argued that the resignation of the arbitrator following allegations of reasonable apprehension of bias effectively terminated the arbitration. The Court found that since the arbitration agreement provided for the appointment of a substitute arbitrator in the event of the arbitrator’s resignation, the arbitration was not terminated, and the parties were bound to continue. He ordered the parties to attempt to agree on a new arbitrator, failing which either party could apply to the Court to have one appointed.

Procedural Background – This matter arises from the terms of a Consent Order granted by the Court in March 2023 by which the Applicant, Belanger, and the Respondent, Pokol, agreed to deal with all outstanding issues arising from the dissolution of their marriage by way of med/arb. The Consent Order provided for the following process: (1) the parties would attend mediation with only one of two designated persons; and (2) the parties would attend arbitration with only one of three (different) designated persons.

In May 2023, Belanger commenced divorce proceedings, and the parties consented to a procedural order, which provided for the parties’ agreement to attend mediation and arbitration before a single person, selecting one of the individuals they had listed as a potential mediator in the Consent Order (“the Arbitrator”), marking a change from the terms of the original Consent Order (the “Agreement”).

The Arbitrator rendered an Award in June 2024 in respect of applications brought by the parties in May or June 2024.  

After the Award was issued, Belanger told the Arbitrator she would seek the Arbitrator’s removal due to an alleged reasonable apprehension of bias. The Arbitrator responded that she didn’t agree with Belanger’s concern, but that addressing it would delay the important issues in the arbitration. The Arbitrator therefore resigned.

The Award was not appealed, and the resignation was not challenged by either party.

Belanger turned instead to the Court, filing an application to be “released from the arbitration process”.

Decision of the CourtBelanger relied on the legal effect of the resignation to support her position that the arbitration was terminated and that the parties should be released from the terms of the Agreement. The Court accordingly addressed the following two issues: (i) what is the effect of the Arbitrator’s resignation; and (ii) are the parties bound to continue arbitration?

(i) Effect of the Arbitrator’s Resignation – The Court explained that the Arbitrator’s resignation was based on Sections 13 and 14 of the Alberta Arbitration Act (RSA 2000, c A-43). Section 13 gives a party to an arbitration the right to challenge the arbitrator on the grounds of reasonable apprehension of bias. Section 14 provides that an arbitrator’s mandate can be terminated when the arbitrator resigns.

The analysis then turned to Section 16 of the Arbitration Act, which provides for the substitution of an arbitrator upon termination of an arbitrator’s mandate. That section provides that the substitute arbitrator will be either appointed using the same procedure as the parties used to name the initial arbitrator or, alternatively, by the Court if no procedure exists in the arbitration agreement or where it is not engaged. Section 16 does not apply, however, “if the arbitration agreement provides that the arbitration is to be conducted only by a named arbitrator” (Section 16(5) of the Arbitration Act, my emphasis added). In fact, where the mandate of a named arbitrator ends, so does the arbitration (Section 41(1)(c) of the Arbitration Act).

The judge hearing the application had recently rendered a decision regarding the interpretation of sections 16(5) and 42(1)(c) of the Arbitration Act in another action (see Alberta – SCC Wastech decision applies to exercise of arbitrator’s discretion to resign – Arbitration Matters Case Note #647). In SZ v JZ, 2022 ABQB 493 (“SZ”), he found that the arbitration agreement at issue made it clear that the parties were “wedded” to the identity of the arbitrator. In that case, the central element of the agreement was not to refer a dispute to arbitration regardless of who the arbitrator might be. Rather, the agreement was to refer the dispute to a specific arbitrator.  

In SZ, the agreement made clear that it was important for the parties to agree to a specific arbitrator. In that case, the judge found that this created an unenforceable agreement to agree. As such, the intention of the parties to arbitrate was conditional on their ability to agree on the arbitrator. Further, in SZ, the arbitration agreement did not provide for a process to replace an arbitrator who had resigned. The autonomy of the parties required that the Court not impose something to which the parties did not agree. As a result, the judge found that following the resignation of the arbitrator in the SZ matter, the arbitration was terminated.

The question of whether an arbitration agreement provides for the former or the latter is a question of contractual interpretation. Indeed, it is the interpretation of the Agreement that distinguished this case, in the Court’s view, from SZ.

First, the language of the Agreement was different than in SZ. The Court considered that the language used here showed that the parties were not wedded to one specific arbitrator.

Second, the Agreement expressly provided for a procedure to replace an arbitrator who resigned: “In the event that the Mediator/Arbitrator resigns or dies, the parties must appoint a substitute Mediator/Arbitrator within 10 business days.” In arriving at this conclusion, the Court considered the context of the Consent Order and the evolution of the intention of the parties who, by the time they entered into the Agreement, had agreed that the mediator and the arbitrator would be the same person, and that a substitute would be appointed in the event of their resignation or death.

Consequently, and unlike SZ, while the Arbitrator’s mandate terminated upon her resignation, the arbitration did not. The parties therefore remained bound to arbitrate.

(ii) The Agreement was binding. The Court therefore required that the parties continue their arbitration. Relying on the Court’s jurisdiction under Section 6 of the Arbitration Act to assist and ensure that the arbitration is carried out in accordance with the arbitration agreement, the parties were directed to attempt to appoint a new mediator. Failing an agreement, either party was authorized to apply to the Court to have a substitute mediator/arbitrator appointed.

Contributor’s Notes:

First, at the outset of the reasons, the Court noted that Belanger did not argue for the Court to exercise its parens patriae jurisdiction to release her from the Agreement. Parens patriae jurisdiction can be exercised in family law matters, notwithstanding an arbitration agreement, when the best interests of a child require that the Court act to protect their physical, emotional and psychological safety, security and well-being. This was neither argued nor established in this case.

Belanger did, however, raise an alleged financial inability to continue the arbitration. But seeing as she did not tie it to the best interests of the children involved, the Court found it insufficient to trigger the Court’s parens patriae jurisdiction.

Here again, the Court distinguished this case from SZ, where the application before the Court was to vary a Consent Order on parenting and decisioning-making issues.  In SZ, the judgment terminating the arbitration was based on interpretation of the parties’ agreement. The judge indicated in SZ, however, that even if his conclusions were incorrect, he could have relied on his residual parens patriae jurisdiction.

It is interesting that the judge chose to engage in a discussion of parens patriae jurisdiction here, despite the fact that it wasn’t raised by the parties themselves. His comments, in obiter, appear to underscore the limited use of this residual jurisdiction and serve as an express reminder that too readily turning to parens patriae jurisdiction to set aside arbitration agreements in the family law context would be antithetical to the principle of party autonomy and the limited role for court intervention in arbitration.

Second, this case and SZ demonstrate yet another reason for careful drafting of the arbitration agreement so that it is consistent with the parties’ intentions. It may be that the parties are prepared to have their dispute arbitrated only if a specific arbitrator is available and willing to do so.  But if the parties wish to arbitrate, whether or not their first choice arbitrator can or will do so, that must be reflected in the language of the arbitration agreement.  Parties who want the confidentiality of arbitration will be unhappy if they have to go to court to get an arbitrator appointed.