Simon's Megalomaniacal Legal Resources

Arbitration - International Commercial Arbitration Act (Ontario)

. All Communications Network of Canada v. Planet Energy Corp.

In All Communications Network of Canada v. Planet Energy Corp. (Ont CA, 2023) the Court of Appeal considered the 'public policy' defence, a principle of international arbitration law [and of the: 'UNCITRAL Model Law on International Commercial Arbitration (“the Model Law”)'] that allows a 'public policy' challenge to an arbitrated contract:

[12] Planet brought an application to the Superior Court to set aside the arbitral award on the basis that, among other things, the arbitrator deprived Planet of the opportunity to present its case, and the award to ACN was contrary to public policy because it violated the Energy Consumer Protection Act, 2010, S.O. 2010, c. 8 (“ECPA”). ACN brought a separate application for an order recognizing and enforcing the award.

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3. The Arbitrator’s Approach to the ECPA Issue

[66] Planet argued before the arbitrator that ordering it to make commission payments to ACN is illegal under the ECPA and would expose Planet to penalties.

[67] Planet claimed that the amendment to the ECPA on January 1, 2017 (at s. 9.3, along with Regulation O. Reg. 389/10) provides that the remuneration to salespersons selling electricity or gas to consumers must not include any remuneration based on a commission or the value or volume of sales. Planet also relied on a memorandum from staff of the OEB (the “OEB Memorandum”) which expressed the view that “a salesperson may not be remunerated for any new, renewed or extended contract based on a commission…including the renewal/extension of contracts entered on or before January 1, 2017.”

[68] Planet argued that according to the plain language of the Agreement, ACN was only entitled to commissions on sales to ACN’s customers with the amount of such commissions to be calculated based on these customers’ usage across all products. In short, payment of the arbitral award would put Planet in breach of the ECPA. Planet submitted that the arbitrator “rewrote” the terms by ordering Planet to pay over $19 million of commissions to ACN after improperly relying on extrinsic evidence of ACN’s witness who was involved in the negotiation of the Agreement.

[69] ACN claimed that its entitlement to commissions arose from the acquisition of the customer, not the marketing and signing of new customer contracts and that, as such, there was no breach of the ECPA.

[70] The arbitrator considered the relevant provisions of the ECPA, along with submissions of both parties and concluded that the ECPA does not preclude payment of commissions for renewals that became effective on/after January 1, 2017. She also considered that the Agreement provides that customer contact rests exclusively with Planet, and that the OEB Memorandum was written on the understanding that ACN would be doing the retail sales for Planet and did not consider that Planet could directly contact its customers.

[71] In so doing, the arbitrator addressed the language of the statute and regulation, the submissions of the parties, the OEB Memorandum, and the fact that the statute is consumer protection legislation. She disagreed with the Planet’s interpretation of the Agreement in light of her factual findings to which deference is owed. She found that the Agreement was clear and unambiguous on gross margin payments and the negotiation history of the Agreement showed “a consistent and uniform course of conduct with respect to ACN’s entitlement to commissions from renewals.” The arbitrator concluded that for any customer referred by ACN to Planet through their online portal, ACN was entitled to continue receiving commissions for as long as that customer remained with Planet, regardless of the means by which the relationship with Planet was renewed.

[72] The application judge noted that the public policy defence should be invoked “only if the judgment involves an act that is illegal in the forum or if the action involves acts repugnant to the orderly functioning of the social or commercial life of the forum”: Depo Traffic v. Vikeda International, 2015 ONSC 999, at para. 47. The public policy defence is a high standard, and the onus is on the claimant to demonstrate that such enforcement “offends our local principles of justice and fairness in a fundamental way”: Consolidated Contractors, at para. 99, citing Schreter v. Gasmac Inc. (1992), 1992 CanLII 7671 (ON SC), 7 O.R. (3d) 608 (Sup. Ct., at p. 623).

[73] The application judge correctly observed that the arbitrator addressed the issues raised by Planet in relation to the claim for unpaid commissions and directed her mind to the arguments raised by experts and the weight to be given to their evidence. He also correctly held that the arbitrator did not disregard the ECPA; rather, she considered the statutory provision and its purpose and applied it to the evidence available. He held that,

The Arbitrator’s interpretation of the ECPA and the regulation in this context is a reasonable one. Planet has not shown that the Arbitrator made an error in her factual findings with respect to the basis for the views of OEB staff. Planet has not shown that as a result of the Arbitrator’s decision, the Award fundamentally offends the principles of justice and fairness in Ontario. The Arbitrator’s decision on the question of statutory interpretation is entitled to deference.

. All Communications Network of Canada v. Planet Energy Corp.

In All Communications Network of Canada v. Planet Energy Corp. (Ont CA, 2023) the Court of Appeal canvasses some provisions of international arbitratione under Ontario's International Commercial Arbitration Act, 2017:

THE RULES OF ARBITRATION

[16] This was an international arbitration governed by Ontario’s International Commercial Arbitration Act, 2017, S.O. 2017, c. 2, Sched. 5 (the “Act”) and administered under the rules of the International Center for Dispute Resolution (the “ICDR rules”).

[17] The United Nations Commission on International Trade Law (“UNCITRAL“) Model Law on International Commercial Arbitration (1985) (the “Model Law”) is a multilateral instrument designed to provide consistent, stable, and predictable rules respecting the conduct of international commercial arbitrations and how they are dealt with by domestic courts.

[18] The Model Law is incorporated into Ontario law as Schedule 2 to the Act.

[19] Article 5 of the Model Law provides that, “no court shall intervene except where so provided in this Law.” This is consistent with the trend in favour of limiting court involvement in international commercial arbitration as the parties made a conscious decision to exclude court jurisdiction in favour of international arbitration. The Model Law provides for court involvement only where a party challenges and seeks the termination of the mandate of an arbitrator (articles 11, 13 and 14), challenges the jurisdiction of the arbitral tribunal (article 16), or seeks to set aside the arbitral award (article 34).

[20] Article 18 provides that each party be given a full opportunity to present its case and article 19 lays out the rights and powers of the parties to determine the rules of procedure and guarantees the parties' freedom to agree on the procedure to be followed in conducting the arbitration, subject to a few mandatory provisions. This includes the power to determine the admissibility, relevance and weight of the evidence.

[21] Article 34(1) of the Model Law provides that “[r]ecourse to a court against an arbitral award may be made only by an application for setting aside in accordance with paragraphs (2) and (3) of this article” (emphasis added). Article 34(2) of the Model Law provides that:

An arbitral award may be set aside by the court specified in article 6 only if:

(a) the party making the application furnishes proof that:

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(ii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

(iii) the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration… or

(b) the court finds that:

(i) the award is in conflict with the public policy of this State. [Emphasis added.]

. Husky Food Importers & Distributors Ltd. v. JH Whittaker & Sons Limited

In Husky Food Importers & Distributors Ltd. v. JH Whittaker & Sons Limited (Ont CA, 2023) the Court of Appeal considered an International Commercial Arbitration Act, 2017 case, specifically what standard of proof (test) applies to the stay of a court-order Ontario court application [ICAA s.9] in favour of arbitration:

V. FIRST ISSUE: WHAT STANDARD APPLIES TO THE QUESTION OF WHETHER AN ARBITRATION AGREEMENT EXISTS?

[19] As re-affirmed by the Supreme Court of Canada most recently in Peace River Hydro Partners v. Petrowest Corp., 2022 SCC 41, it is well established in Canadian law that, absent legislated exceptions, a court normally should refer challenges to an arbitrator’s jurisdiction to the arbitrator: at para. 41; Seidel v. TELUS Communications Inc., 2011 SCC 15, at para. 29. This follows from the adoption and application of the competence-competence principle that gives precedence to the arbitration process: Peace River, para. 39. The competence-competence principle, however, is not absolute: a court may resolve a challenge to an arbitrator’s jurisdiction if the challenge involves pure questions of law or questions of mixed fact and law that require only superficial consideration[2] of the evidentiary record: Peace River, at para. 42; Uber, at paras. 31-36; Seidel, at para. 29; Rogers, at para. 11; Dell, at paras. 84-85. Where questions of fact alone are in dispute, a court should normally refer the case to arbitration: Uber, at para. 32.

[20] Ontario legislation gives arbitrators broad scope to determine issues of their jurisdiction. Both art. 16(1) of the Model Law and s. 17(1) of the Arbitration Act, 1991 provide that an arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the “existence or validity” of the arbitration agreement.

[21] Section 9 of the ICAA and art. 8 of the Model Law provide the mechanism by which a party can seek to stay a court proceeding in favour of referring the dispute to arbitration. Section 9 of the ICAA states:

Where, pursuant to article II (3) of the Convention or article 8 of the Model Law, a court refers the parties to arbitration, the proceedings of the court are stayed with respect to the matters to which the arbitration relates.

Art. 8(1) of the Model Law provides:

A court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.

[22] Husky Food submits that when considering a request to stay an action under either s. 7 of the Arbitration Act, 1991 or s. 9 of the ICAA, a motion judge must apply the analytical framework set out by this court in Haas v. Gunasekaram, 2016 ONCA 744 and ask the following questions: (1) Is there an arbitration agreement? (2) What is the subject matter of the dispute? (3) What is the scope of the arbitration agreement? (4) Does the dispute arguably fall within the scope of the arbitration agreement? (5) Are there grounds on which the court should refuse to stay the action?

[23] The 2016 Haas framework has been superseded by the framework adopted by the Supreme Court in 2022 in Peace River, a decision on which neither party made submissions to us. In that case,[3] the Supreme Court identified two general components common to stay provisions in provincial arbitration legislation: (i) the technical prerequisites for a mandatory stay of court proceedings; and (ii) the statutory exceptions to a mandatory stay of court proceedings. The applicant for a stay must establish the technical prerequisites “on the applicable standard of proof”; if the applicant does so, the party seeking to avoid arbitration then must show that one of the statutory exceptions applies, such that a stay should be refused: at paras. 76-79.

[24] The technical prerequisites concern whether the stay applicant has established the arbitration agreement engages the mandatory stay provisions. As the Supreme Court observed in Peace River, at para. 83, provincial arbitration legislation typically contains four relevant technical prerequisites:

(a) an arbitration agreement exists;

(b) court proceedings have been commenced by a “party” to the arbitration agreement;

(c) the court proceedings are in respect of a matter that the parties agreed to submit to arbitration; and

(d) the party applying for a stay in favour of arbitration does so before taking any “step” in the court proceedings.

[25] If all the technical prerequisites are met, the mandatory stay provision is engaged. The court should then move on to the second component of the analysis, which concerns the statutory exceptions to granting a stay, such as whether an arbitration agreement is “void, inoperative or incapable of being performed”: see Peace River, at paras. 88-89 and 172. Issues under the second component do not arise in the present case.

[26] While the Peace River framework was crafted in the context of domestic arbitration legislation, in my view it applies equally to stays sought under s. 9 of the ICAA in respect of international commercial arbitration agreements.

[27] Common to both the old Haas framework and the governing Peace River framework is the prerequisite that an arbitration agreement exists. Husky Food contends a party moving for a stay must demonstrate, on a balance of probabilities, that an arbitration agreement exists. As a result, the motion judge erred by applying a lower standard of whether it was “arguable” that an arbitration agreement exists.

[28] Husky Food’s submission ignores how the Supreme Court in Peace River decided the issue of the standard of proof applicable to establishing the technical prerequisites to a mandatory stay. Peace River states, at para. 84:

It is important to note that the standard of proof applicable at the first stage is lower than the usual civil standard. To satisfy the first component, the applicant must only establish an “arguable case” that the technical prerequisites are met (McEwan and Herbst, at § 3:47; Sum Trade Corp. v. Agricom International Inc., 2018 BCCA 379, 18 B.C.L.R. (6th) 322, at paras. 26 and 32, citing Gulf Canada Resources Ltd. v. Arochem International Ltd. (1992), 1992 CanLII 4033 (BC CA), 66 B.C.L.R. (2d) 113 (C.A.), at paras. 39-40).[4] [Emphasis added.]

[29] The Supreme Court adopted a different standard of proof for the second component of the analysis. At that stage, the party seeking to avoid arbitration must show, on a balance of probabilities, that a statutory exception applies: Peace River, at para. 88.

[30] In Peace River, the Supreme Court approved the “arguable case” standard to establish the technical prerequisites for a mandatory stay previously articulated by the British Columbia Court of Appeal in Sum Trade.[5] In the present case, the motion judge adopted and applied Sum Trade’s arguable case standard. In so doing, she obviously applied the correct legal principle as the Supreme Court subsequently approved Sum Trade’s arguable case standard in Peace River.

[31] Accordingly, the motion judge did not apply the wrong legal test when considering whether to grant a stay under s. 9 of the ICAA.

. China Yantai Friction Co. Ltd. v. Novalex Inc.

In China Yantai Friction Co. Ltd. v. Novalex Inc. (Div Ct, 2021) the Divisional Court considered a motion for leave to appeal involving the International Commercial Arbitration Act (Ontario). I include it here to give an example of how this infrequently used statute operates.

. Uber Technologies Inc. v. Heller

In Uber Technologies Inc. v. Heller (SCC, 2020) the Supreme Court of Canada considers a conflict between Ontario's International Commercial Arbitration Act and it's Arbitration Act:

[20] The ICAA and AA are exclusive. If the ICAA governs this agreement, the AA does not, and vice versa (AA, s. 2(1)(b)). As the Superior Court correctly identified, whether the ICAA governs depends on whether the arbitration agreement is “international” and “commercial”. That the agreement here is international is not in dispute. Whether the agreement is commercial is contested. To answer this question, one must understand the legislative scheme of the ICAA.

[21] The ICAA implements two international instruments: the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, Can. T.S. 1986 No. 43, adopted by the United Nations Conference on International Commercial Arbitration in New York on June 10, 1958 (“Convention”) and the UNCITRAL Model Law on International Commercial Arbitration, U.N. Doc. A/40/17, Ann. I adopted by the United Nations Commission on International Trade Law on June 21, 1985, as amended by the United Nations Commission on International Trade Law on July 7, 2006 (“Model Law”). Only the Model Law is relevant here.

[22] Section 5(3) of the ICAA states that the Model Law applies to “international commercial arbitration agreements and awards made in international commercial arbitrations”. The meaning of “commercial” in this section of the ICAA must be the same as the meaning of “commercial” under the Model Law, as the latter states that it “applies to international commercial arbitration” (art. 1(1)).

[23] While the Model Law does not define the term “commercial”, a footnote to art. 1(1) provides some guidance:

The term “commercial” should be given a wide interpretation so as to cover matters arising from all relationships of a commercial nature, whether contractual or not. Relationships of a commercial nature include, but are not limited to, the following transactions: any trade transaction for the supply or exchange of goods or services; distribution agreement; commercial representation or agency; factoring; leasing; construction of works; consulting; engineering; licensing; investment; financing; banking; insurance; exploitation agreement or concession; joint venture and other forms of industrial or business cooperation; carriage of goods or passengers by air, sea, rail or road.

(Model Law, art. 1(1), fn. 2)

[24] The Analytical Commentary on Draft Text of a Model Law on International Commercial Arbitration: Report of the Secretary-General further explains that “labour or employment disputes” are not covered by the term “commercial”, “despite their relation to business”:

Although the examples listed include almost all types of contexts known to have given rise to disputes dealt with in international commercial arbitrations, the list is expressly not exhaustive. Therefore, also covered as commercial would be transactions such as supply of electric energy, transport of liquified gas via pipeline and even “non-transactions” such as claims for damages arising in a commercial context. Not covered are, for example, labour or employment disputes and ordinary consumer claims, despite their relation to business.

(United Nations Commission on International Trade Law, Analytical Commentary on Draft Text of a Model Law on International Commercial Arbitration: Report of the Secretary-General, U.N. Doc. A/CN.9/264, March 25, 1985, at p. 10 (emphasis added); see also p. 11.)

[25] Two points emerge from this commentary. First, a court must determine whether the ICAA applies by examining the nature of the parties’ dispute, not by making findings about their relationship. A court can more readily decide whether the ICAA applies (or an arbitrator can more readily decide whether the Model Law applies) by analysing pleadings than by making findings of fact as to the nature of the relationship. Characterising a dispute requires the decision-maker to examine only the pleadings; characterising a relationship requires the decision-maker to consider a variety of circumstances in order to make findings of fact. If an intensive fact-finding inquiry were needed to decide if the ICAA or the Model Law applies, it would slow the wheels of an arbitration, if not grind them to a halt.

[26] The second point to draw is that an employment dispute is not covered by the word “commercial”. The question of whether someone is an employee is the most fundamental of employment disputes. It follows that if an employment dispute is excluded from the application of the Model Law, then a dispute over whether Mr. Heller is an employee is similarly excluded. This is not the type of dispute that the Model Law is intended to govern, and thus it is not the type of dispute that the ICAA is intended to govern.

[27] This result is consistent with what courts have held (Patel v. Kanbay International Inc., 2008 ONCA 867, 93 O.R. (3d) 588, at paras. 11-13; Borowski v. Fiedler (Heinrich) Perforiertechnik GmbH (1994), 1994 CanLII 9026 (AB QB), 158 A.R. 213 (Q.B.); Rhinehart v. Legend 3D Canada Inc., 2019 ONSC 3296, 56 C.C.E.L. (4th) 125, at para. 27; Ross v. Christian & Timbers Inc. (2002), 2002 CanLII 49619 (ON SC), 23 B.L.R. (3d) 297 (Ont. S.C.J.), at para. 11). It is also consistent with the Model Law’s reference to “trade” transactions, which, as Gary B. Born observes, “arguably connot[es] involvement by traders or merchants, as distinguished from consumers or employees” (International Commercial Arbitration, vol. I, International Arbitration Agreements (2nd ed. 2014), at p. 309). Further, one could draw a negative inference from the definition’s omission of “employment” relations (p. 309, fn. 454). It seems unlikely to us that the drafters of the Model Law would have included such a thorough list of included commercial relationships and not considered whether to include “employment”.

[28] Employment disputes, in sum, are not covered by the ICAA. The AA therefore governs.