Québec – 10-year limitation for foreign award recognition and enforcement– #644

In Itani v. Société Générale de Banque au Liban SAL, 2022 QCCA 920, the Québec Court of Appeal (Schrager, Moore, and Kalichman JJA) considered the limitation period for recognition and enforcement of an arbitral award rendered outside Québec. The Court applied the Supreme Court of Canada’s decision in Yugraneft Corp. v. Rexx Management Corp., 2010 SCC 19, confirming that recognition and enforcement of a foreign arbitral award is governed by the rules of procedure applicable in the territory in which the application is made―so it differs from province to province. The Court of Appeal considered the applicable provisions of the Québec Civil Code and ruled that the application to recognize and enforce the arbitral award was subject to a 10-year limitation period, upholding the decision of Justice Poulin at first instance.

Background – In 2000, Rachad Itani (“Itani”) borrowed €1,000,000 from Société Générale de Banque au Liban SAL (the “Bank”), to finance the acquisition of a portfolio of securities managed by the Bank.

The parties signed a contract to guarantee the repayment of the loan and to set the conditions for the management of the securities (the “Trust Agreement”). The Trust Agreement included an arbitration clause.

In 2002, after Itani defaulted, the Bank commenced litigation in Paris seeking repayment of the loan. Itani counterclaimed, maintaining that the Bank had squandered his securities. The Paris courts denied jurisdiction.

The Bank then initiated arbitration before the Beirut Chamber of Commerce on the basis of the arbitration clause in the Trust Agreement for recovery of the loan plus interest. Itani argued that the arbitration should include his counterclaim for damages against the Bank. 

In August 2006, the arbitrator accepted the Bank’s claim and ordered the Itani to repay €1,319,733.27, including interest (the “Award”). The arbitrator, however, ruled that Itani’s counterclaim was based on a different contract not covered by the Trust Agreement arbitration clause.

In September 2006, the Tribunal de Grande Instance de Paris recognised the Award. The Cour d’appel de Paris rejected an appeal by Itani.

Itani had assets in Québec. In April 2016, the Bank filed an application in the Superior Court of Québec for recognition and enforcement of the Award―Itani argued the Bank’s recognition and enforcement application was time-barred.

Justice Poulin of the Québec Superior Court concluded the Bank’s application was not time-barred; less than 10 years had passed between the rendering of the Award and the application for recognition and enforcement.

Court of Appeal decision – On appeal, Itani argued that the limitation period was three years on the basis of the Supreme Court of Canada’s decision in Yugraneft Corp. v. Rexx Management Corp., 2010 SCC 19.

The Court of Appeal reviewed the decision of first instance and Yugraneft:

“[13]…it is the domestic law of the jurisdiction where the arbitral award is sought to be recognized, in this case the Civil Code of Québec (C.C.Q.), that applies. Since the C.C.Q. does not contain any specific provision on this subject…the issue…is whether the applicable limitation period is three years, if the claim that the Bank seeks to assert is a personal right (2925 C.C.Q.), or ten years, because the right in question results from a judgment (2924 C.C.Q.) or because the limitation period is not otherwise set by law (2922 C.C.Q.).” [Translated]

The Court of Appeal set out Itani’s argument:

“[23]…the judge erred in law by applying the ten-year limitation period of article 2924 C.C.Q. in particular because the arbitral award was not a judgment. In support of this argument, the appellant refers to the decision in Yugraneft Corp. v. Rexx Management Corp. In that case, the Supreme Court concluded that since an arbitral award is neither a judgment nor a court order for payment of a sum of money under Alberta’s Limitations Act the ten-year limitation period under section 11 of that Act does not apply to applications for recognition and enforcement of arbitral awards made in that province. According to the appellant, there are no relevant distinctions between the wording of Alberta’s legislation and the C.C.Q.[Translated]

The Court of Appeal disagreed. It reviewed the applicable provisions of the Québec Civil Code and found article 2925 C.C.Q. and its three-year limitation did not apply, meaning that the limitation period would be 10 years because the Bank was not asserting a personal right. The Court said it was necessary, however, to explain whether article 2924 C.C.Q. applied:

“[34] At the outset, let us be clear, an arbitral award is not a judgment. It does not emanate from the power of the state and is not “directly enforceable”. That said, as the Supreme Court noted in Yugraneft, there is nothing to prevent a provincial legislature from providing that an arbitral award is considered a judgment for a specific purpose. This was not the case with section 11 of Alberta’s Limitations Act at issue in Yugraneft. However, the provisions of the C.C.Q. dealing with extinctive prescription could provide otherwise, and that is precisely what had to be determined in the present dispute.” [Translated]

The Court of Appeal reviewed and interpreted other articles of the Québec Civil Code (2892, 2895 and 2896) and agreed with Justice Poulin: the word “judgment” contained in article 2924 C.C.Q., “[a] right resulting from a judgment is prescribed by 10 years if it is not exercised”, must be read as including a foreign arbitral award.

The Court rejected Itani’s contention that the Award should not be recognized due to the arbitrator’s alleged failure to rule on his counterclaim. The Court saw no error, let alone a manifest and decisive error, with respect to the conclusion that the arbitration clause did not apply to the counterclaim.

Contributor’s Note:

Justice Poulin’s decision at first instance, Société générale de Banque au Liban SAL v. Itani, 2019 QCCS 5266, was the subject of a previous Case Note: Québec – award treated as “judgment” subject to ten (10) year prescription (limitation) period – #259.

Three weeks before the Québec Court of Appeal released its reasons in this decision, the British Columbia Court of Appeal (Bennett, Fenlon, Grauer JJ.A.) also considered the application of Yugraneft in British Columbia (Employment Standards) v. Kwok, 2022 BCCA 196. At issue was the limitation period for filing a Certificate of Judgment in favour of the Director on Property of the Respondent Kwok. 

Although Kwok did not arise in an arbitration context, the decision is noteworthy, as the BCCA overturned a misapplication of Yugraneft at first instance. Justice Grauer explained:

“[48] In my respectful view, [Yugraneft] does not support the proposition advanced by Mr. Kwok and applied by the judge. Indeed, I read it as supporting the position of the Director [of Employment Standards]. As the Court [in Yugraneft] stated, an arbitral award is not enforceable (again that word) in Alberta unless it is first recognized by the Court of Queen’s Bench. The same is true in British Columbia: see Arbitration Act, SBC 2020, c 2, s 61; Arbitration Act, RSBC 1996, c 55, s 29. In contrast, a[n Employment Standards] determination does not require the court’s recognition before it can be filed with the registry. Like a court judgment, it is already directly enforceable and requires only the issuance of a Certificate of Judgment.

[49] The reference to the legislature specifically expressing its intention to make arbitral awards enforceable as “judgments” as in the British ColumbiaLimitation Act follows from the very different nature of an arbitral award as noted in theDell Computer case. In my opinion, given section 91 of the ESA, Yugraneft does not provide authority for the proposition that [an Employment Standards] determination filed in the Supreme Court is not a judgment within the meaning of the Limitation Act because the Limitation Act does not expressly make it so. The two acts must be read together, and in Yugraneft, there was no provision making the arbitral award in question enforceable in the same manner as a judgment of the Court of Queen’s Bench.”

In British Columbia, the Limitation Act, SBC 2012, c 13 expressly stipulates that arbitration to which the Arbitration Act, SBC 2020, c 2 applies and arbitral awards to which the Foreign Arbitral Awards Act, RSBC 1996, c 15 or International Commercial Arbitration Act, RSBC 1996, c 233 apply are “local judgments” subject to a 10-year limitation period.

In summary, this decision, Itani from Québec, like Kwok from British Columbia,confirms that Yugraneft should not be divorced from the statutory context in which it arose, namely, the particular wording of the Alberta Limitations Act, SA 2000, c L-12. The point is basic and essential: care is needed in applying arbitration decisions, whether from one jurisdiction to another (Itani and Kwok), or in non-arbitral contexts (Kwok). Both decisions show Courts of Appeal attentively considering these important distinctions.