notes on new arbitration cases in Canada
In 2024, parties raised various novel and creative grounds (and also some more traditional grounds) to seek annulment or resist the homologation of arbitral awards in Québec.
Continue reading “Philippe’s 2024 Hot Topic – Québec courts rejected creative challenges to arbitral awards – #887”
In 9327-6269 Québec inc. and Banque de Montréal, 2024 QCCS 3399, the Court dismissed the Creditor Applicants’ demand to lift the stay of proceedings under the Loi sur les arrangements avec les créanciers des compagnies (LACC)/ Companies’ Creditors Arrangement Act (CCAA) so that they could file proceedings against one of the Debtors (Laboratoires C.O.P. inc.) in a New York-seated arbitration, where they sought to be declared owners of potential tax credits and refunds to which they alleged they were entitled as part of the selling price under a Sale Purchase Agreement between the Applicants and the Debtors’ shareholders. The Sale Purchase Agreement contained an arbitration clause. The Applicants argued that under New York law the Sale Purchase Agreement created a constructive trust in their favour, as a result of which the tax credits and refunds received or to be received by the Debtor were never included in the Debtor’s assets. Therefore, the Applicants argued that they should not be subject to the CCAA. The Court dismissed the Applicants’ motion. Even if the Applicants obtained a favourable ruling from the arbitration tribunal, it would be ineffective because the constructive trust concept is not recognized under Québec law and it would be detrimental to other creditors of the Debtor. In any event, the arbitral award would not modify the distribution order of the Debtors’ assets to their creditors under the CCAA because, when a conflict of law arises, the CCAA’s application is governed by the lex fori, in this case Québec. Foreign law should not alter the outcome of the CCAA’s implementation due to its rehabilitative purpose. Therefore, lifting the stay would not help the Applicants and would only cause the CCAA procedure to be delayed.
Continue reading “Québec – Peace River not considered where referral to arbitration sought under LACC/CCAA – #877”
In Sociedad Concesionaria Metropolitana De Salud S.A. v Webuild S.P.A, 2024 ONSC 4491 the Court considered whether to grant an application to enforce an arbitral award against a non-party to the arbitration. The non-party had purchased assets of the unsuccessful party to the arbitration as part of a restructuring proceeding in Italy. The successful party to the arbitration and the non-party disagreed on whether the asset purchase included the transfer of the unsuccessful party’s obligations under the award to the non-party. The Court stayed the enforcement application pending a determination of that threshold issue by the Italian courts.
Continue reading “Ontario – Application to enforce award against non-party to arbitration stayed – #875”
Crosby Molasses Company Limited v. Scot Stuttgart (Ship), 2024 FC 1358 highlights a little-known provision in Canadian maritime law that is being interpreted in a way that ignores arbitration law principles and overrides arbitration clauses in the context of international maritime carriage of goods. The provision, section 46(1) of the Marine Liability Act, SC 2001, c 6 (“Marine Liability Act”) states that, “if a contract for the carriage of goods by water provides for the adjudication or arbitration of claims… in a place other than Canada, a claimant may institute judicial or arbitral proceedings in a court or arbitral tribunal in Canada...”
Continue reading “Federal Court – Section 46(1) of Marine Liability Act gives claimant option to avoid arbitration – #870”
In Bains and 10031670 Manitoba Ltd. v. Tworek et al, 2024 MBKB 111, the Court dismissed a motion to stay two court proceedings in favour of arbitration. In doing so, the Court ran afoul of some settled principles in Canadian (and international) arbitration law. These include interpreting the scope of the arbitration agreements, the test for a stay of proceedings in favour of arbitration, the separability presumption and concerns over inefficiency and multiplicity of proceedings where the dispute concerns both signatories and non-signatories to the arbitration agreement.
Continue reading “Manitoba – Court denies stay in favour of arbitration for several (suspect) reasons – #868”
In Clayton v. Canada (Attorney General), 2024 ONCA 581, the Court dismissed an appeal from an order dismissing an application to set aside an arbitral award made under Chapter 11 of NAFTA (“the Award”). The appellants sought to set aside the award on the grounds that the tribunal exceeded its jurisdiction and that the award violated public policy. The Court rejected both arguments. In the underlying arbitration, which was bifurcated into liability and damages hearings, the tribunal found that the respondent had breached the relevant NAFTA provisions, but that the appellants did not establish that the breach caused the damages sought. The appellants applied to the Ontario Superior Court to set aside the Award, arguing that the tribunal exceeded its jurisdiction by not properly applying the law, and that the Award violated public policy because it was “so unreasonable as to be unenforceable”. The Superior Court dismissed the application. The Court of Appeal dismissed the appeal. Challenges to arbitral awards on jurisdictional grounds are restricted to “true jurisdictional questions”, and there is a very high burden to set aside an award for public policy reasons.
Continue reading “Ontario – Alleged error in applying the law not a jurisdiction issue – #865”
In B Smart Technology Inc. v Norstan Communications Inc., 2024 QCCS 2416 (“B Smart”), the Court considered an application by Norstan Communications Inc. (“Norstan”) to dismiss originating applications of B Smart, in which B Smart sought an order to replace the arbitrator who was appointed to resolve their dispute. B Smart alleged that the arbitrator was biased and that his appointment was improper. What was important to the Court’s analysis was that B Smart had brought an earlier application before the Court to challenge this same arbitrator’s appointment. That judge held that the arbitrator was impartial and that his appointment was proper. Given those findings, the Court found that res judicata applied as a full answer to B Smart’s allegations and the application was dismissed. The Court also found that B Smart’s multiple attempts to challenge the arbitrator were an abuse of process.
Continue reading “Québec – Multiple arbitrator challenges res judicata and abuse of process – #859”
In Port Autonome de Douala v. Douala International Terminal Co. (original French, my translation), the French Court of Cassation (France’s Supreme Court) upheld the Paris Court of Appeal’s decision (original French, my translation) to set aside an arbitral award rendered by a three-arbitrator tribunal based on doubts as to the impartiality of the presiding arbitrator. Those doubts arose from a eulogy he gave of the lead counsel for one of the parties, which revealed that they were close personal friends and that the presiding arbitrator consulted that counsel “before making any important decision”.
Continue reading “International – Award set aside after eulogy reveals friendship between tribunal president and counsel – #856”
In Eurobank Ergasias S.A. v. Bombardier inc., 2024 SCC 11, the Court held that a call on a bank guarantee in contravention of an order of an arbitral tribunal in a pending ICC arbitration amounted to fraud under Canadian law, such that the bank that issued a related counter-guarantee was required to refuse payment.
Continue reading “Québec – Attempt to circumvent ICC Tribunal order amounts to fraud (in Canada) – #834”
In Johnston v. Octaform Inc., 2024 BCSC 537, the Court dismissed a petition to have an arbitrator removed from an ongoing arbitration on the basis of an alleged reasonable apprehension of bias. The circumstances relied on by the petitioners arose from the arbitrator’s issuance of a freezing order and other procedural directions, in a hard fought and contested arbitration. The fact that the freezing order required the arbitrator to make findings of credibility and preliminary merits determinations did not give rise to bias. Also, the trigger for the 15-day period to challenge an arbitrator for bias is not an “open and fluid concept”.
Continue reading “B.C. – No arbitrator bias where prima facie merits and credibility determinations made – #833”