Ontario – Arbitral tribunal lacks power to order third-party discovery – #779

In Link 427 General Partnership v. His Majesty the King, 2023 ONSC 2433, the Court refused to enforce an arbitrator’s interim procedural order purporting to compel third-party discovery. This decision highlights the limits of an arbitral tribunal’s procedural authority over strangers to the arbitration agreement, the complexities of which I highlight in my Contributor’s Notes below.

Background – The Court’s endorsement provides no factual background to the dispute, stating only the following: 

The applicant seeks an order to enforce an interim order of [the] Arbitrator…, requiring two former employees, and non-parties to the arbitration… (“the respondents”), to attend to be examined for discovery. The applicant requires two or six hours to examine the respondents. The Arbitrator granted the motion and ordered the respondents to attend examinations for discovery for up to six hours each.”

Decision – The Applicant moved to enforce the Arbitrator’s order pursuant to subsection 29(4) of the Arbitration Act, 1991 [“Act”], which states, under the heading “Witnesses and taking of evidence”:

Court orders and directions

(4) On the application of a party or of the arbitral tribunal, the court may make orders and give directions with respect to the taking of evidence for an arbitration as if it were a court proceeding.”

The Respondents argued the Arbitrator lacked authority to make the order since they were not parties to the arbitration agreement. The Court agreed. 

It rejected the Applicant’s reliance on the Alberta Court of Appeal decision in Jardine Lloyd Thompson Canada Inc. v. SJO Catlin, 2006 ABCA 18 (leave to appeal refused, [2006] S.C.C.A. No. 87) [“Jardine”]. In that case arising under Alberta’s international arbitration statute, the Court of Appeal concluded that although the arbitral tribunal could not itself compel a non-party to submit to discovery, it could ask a court to make such an order in aid of the arbitration. The Court of Appeal based this decision on Article 27 of the Model Law (as adopted in the Alberta International Commercial Arbitration Act). It provides as follows:

27. Court assistance in taking evidence

The arbitral tribunal or a party with the approval of the arbitral tribunal may request from a competent court of this State assistance in taking evidence. The court may execute the request within its competence and according to its rules on taking evidence.”

The Court noted the arbitration at issue was domestic, not international. It also observed that arbitrators lack the Court’s inherent jurisdiction, and located the Arbitrator’s authority over witnesses in section 29 of the Act. Subsection 29(4)’s text indicates the provision’s purpose was not to enforce an arbitral order, but to seek the Court’s assistance in “mak[ing] orders and giv[ing] directions with respect to the taking of evidence for an arbitration as if it were a court proceeding”. This is not what the Applicant asked for. Instead, it asked the Court to simply enforce the Arbitrator’s order. For the Court, this was out of bounds. 

The Court went on to cite various cases holding that an arbitral tribunal lacks jurisdiction over third parties. Based on these authorities, the Court concluded the Arbitrator could not compel the non-parties to appear at examinations for discovery.

In the result, the Court dismissed the Application, with costs.

Contributor’s Notes:

First, the Court rightly recognized that an arbitral tribunal cannot directly compel a non-party to attend an examination for discovery. I commend to you the Alberta Court of Appeal’s reasoning in Jardine, which was quite detailed and merits a read. Though that was an international arbitration case, parts of the analysis apply equally to domestic arbitration under the Act. It is worth taking a deeper dive into the Act to situate the analysis within the legislation before the Court. After all, the Model Law and the Act are similar but not the same in all respects. Indeed, Model Law Article 27 and subsection 29(4) of the Act are functionally the same, but not identically drafted. 

Specifically, subsection 29(1) empowers the arbitral tribunal to issue a “notice” to “a person” (not limited to the parties) to “attend and give evidence at the arbitration”. Subsection 29(2) says this notice “has the same effect as a notice in a court proceeding requiring a witness to attend at a hearing or produce documents”. In other words, the “notice” is equivalent to a summons in court. 

The words “at the arbitration” (subsection 29(1)), and likening the notice to a similar notice in a court proceeding (subsection 29(2)), strongly suggest this power is limited to summonsing witnesses to testify at the evidentiary hearing itself. It is not meant to empower the arbitral tribunal to order discovery of a non-party. 

Subsection 29(4) uses different language. It says that where a party or the arbitral tribunal requests, “the court may make orders and give directions with respect to the taking of evidence for an arbitration as if it were a court proceeding”. The activities that take place “for an arbitration”, versus at an arbitration, include the pre-hearing steps leading up to the arbitration hearing.

Does the arbitral tribunal retain residual procedural discretion to order discovery of a non-party, despite the Act’s drafting? For procedural powers the Act does not expressly confer, the starting point is subsection 20(1): “The arbitral tribunal may determine the procedure to be followed in the arbitration, in accordance with this Act”. 

Subsection 20(1) confers a vast procedural discretion. That discretion must nonetheless respect inherent limits on the arbitral tribunal’s authority. One of those limits is that, as a general matter, the arbitral tribunal cannot compel a non-party to do anything, unless the Act says otherwise (as it does for compelling witnesses under subsection 29(1)). This is because non-parties are strangers to the arbitration agreement. They did not consent to participating in the arbitration, or being bound by any award. There is a rich body of case law supporting this conclusion, some of which the Court cited [see e.g.: Seidel v. Telus Communications Inc., 2011 SCC 15; Dian Musical Reproduction Rights Agency Limited v. Canadian Recording Industry Association, 2005 CanLII 62970 (ON SC);  and Pirner v. Pirner, 1997 CanLII 12165 (ON SC)]. As the Court pointed out, arbitral tribunals lack the Superior Court’s inherent jurisdiction. This means that even where the parties incorporate court rules into their arbitration agreement (as the parties did in this case), those provisions granting the Court power over non-parties to the litigation cannot apply mutatis mutandis.

One must also read the Act as a whole. In addition to the language in subsections 29(1), (2) and (4) implying that the tribunal can only summon non-parties to the evidentiary hearing (i.e., not discovery), another statutory clue points in that direction. The Act tells the Court when it can enforce an arbitrator’s procedural direction in subsection 25(6) and (7): 

Directions of arbitral tribunal

26(6) The parties and persons claiming through or under them shall, subject to any legal objection, comply with the arbitral tribunal’s directions, including directions to,

(a) submit to examination on oath or affirmation with respect to the dispute;

(b) produce records and documents that are in their possession or power.

Enforcement by court

(7) The court may enforce the direction of an arbitral tribunal as if it were a similar direction made by the court in an action.” [Emphasis added.]

These provisions contemplate procedural directions as against “the parties and persons claiming through them” relating to “submit[ting] to examination” and “produc[ing] records”. Those are the directions the Act says the Court “may enforce”. This impliedly excludes other directions or orders against non-parties. 

Although we must always approach the implied exclusion maxim with caution [Tétreault-Gadoury v Canada (Employment and Immigration Commission), 1991 CanLII 12 (SCC)], its application here aligns with the underlying principle that the arbitral tribunal generally can only bind the parties. The provision also allows for court interference in a procedural order in the midst of an arbitration, which is otherwise not permitted.

Second, though the Court frames this issue as “jurisdictional” (see paras. 8-13), there might be a preferable way to conceive of the question before the Court. The Court’s conclusion rests on the correct finding that the arbitral tribunal lacked jurisdiction over the non-parties. Subject to some narrow exceptions (e.g., veil piercing and agency), this is usually the case since it is the parties’ consent that nourishes the arbitral tribunal’s jurisdiction. But the analysis does not end there. 

The authorities the Court relied upon stand for the proposition that an arbitral tribunal cannot grant relief that binds third parties. The trouble is that the concept of “jurisdiction” is construed narrowly in arbitration. It refers only to the arbitral tribunal’s authority to adjudicate the dispute’s subject-matter (see for example: Mexico v. Cargill, Incorporated, 2011 ONCA 622; and Alectra Utilities Corporation v. Solar Power Network Inc., 2019 ONCA 254). This arguably entails the tribunal’s “jurisdiction” (perhaps the better term is “authority”) to grant final relief against a non-party. Some might say this confounds jurisdiction ratione materiea and ratione personae, but l sidestep this landmine for present purposes.

Even so, a procedural order, like the one at issue here, arguably falls outside that definition of jurisdiction. Ordering an examination for discovery says nothing about the scope of the subject-matter, nor does it grant a remedy against a non-party. Rather, it is an order requiring a non-party to play a procedural role in the proceedings. Although Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65 did away with jurisdictional questions as a discrete category in administrative law—at least as regards selecting the standard of review—jurisdictional questions remain alive and well in arbitration law. This is because an arbitral tribunal exceeding its jurisdiction is a statutory basis for setting aside awards under all domestic and international arbitration legislation in Canada (and beyond). Given the restrictive scope of what constitutes “jurisdiction” in arbitration, the question is likely better framed as assessing the contours of the arbitral tribunal’s procedural discretion. As noted, that discretion is broad and flows from section 20 of the Act (Procedure), as modified by the parties’ arbitration agreement.