Canadian courts confirm that ICC Rules preclude appeals from arbitral awards

Ira Nishisato

Borden Ladner Gervais, Toronto

inishisato@blg.com

Erin Peters

Borden Ladner Gervais, Toronto

epeters@blg.com

In Baffinland Iron Mines LP v Tower-EBC GP/SENC, the Ontario Superior Court of Justice and subsequently the Court of Appeal for Ontario considered the availability of an appeal from an arbitral award made in a domestic arbitration conducted under the auspices of the International Chamber of Commerce (‘ICC’) and pursuant to the ICC Rules of Arbitration as in force from 1 March 2017 (the ‘ICC Rules’). The Ontario courts held that the parties were bound by the ICC Rules, as a result of incorporating them by reference into the arbitration agreement. Since ICC Rule 35(6) provides that every arbitration award is binding, and the parties are deemed to waive ‘their right to any form of recourse’, both levels of court agreed that this precluded an appeal.

The arbitration

Baffinland Iron Mines (BIM) and Tower-EBC (TEBC) entered into two contracts in 2017 that provided for TEBC to perform earthworks for BIM’s construction of a railway to transport iron ore from its mine on Baffin Island, Nunavut, to a nearby port.

The contracts were based on the Fédération Internationale des Ingénieurs-Conseils (‘FIDIC’) standard form construction contracts, with particular terms negotiated by the parties. The dispute resolution provisions provided that disputes would be resolved by a Dispute Adjudication Board (‘DAB’), whose decisions would be ‘final and binding’, if left uncontested. However, contested DAB decisions would be ‘finally settled’ by arbitration under the ICC Rules of Arbitration (the ‘Arbitration Agreement’).

Rule 35(6) of the ICC Rules provides that:

‘Every award shall be binding on the parties. By submitting the dispute to arbitration under the Rules, the parties undertake to carry out any award without delay and shall be deemed to have waived their right to any form of recourse insofar as such waiver can validly be made.’

TEBC commenced the arbitration after BIM unilaterally terminated the contracts following delays in obtaining the permits required under Nunavut law. TEBC was successful in the arbitration, obtaining an award of over $100min damages.

The Ontario Courts consider the right of appeal

Following TEBC’s success in the ICC arbitration, BIM applied to appeal and set aside the award before the Ontario Superior Court of Justice. The appeal was framed to raise issues of law, and the set aside was framed to raise issues of jurisdiction and procedural fairness.

Although the parties provided for the ICC Rules to apply, the arbitration was a domestic arbitration and not an international one. Under the relevant statute for domestic arbitrations, the Arbitration Act 1991, (the ‘Act’), an appeal is permitted, on a question of law, with leave of the Court, where the Arbitration Agreement does not preclude appeals.[1] The court therefore had to consider whether the Arbitration Agreement precluded an appeal.

BIM argued that the Arbitration Agreement did not preclude an appeal on a question of law. In BIM’s submission, the Arbitration Agreement used the ‘universally recognized’ term ‘final and binding’ only in respect of a DAB decision, which stands in contrast to the term ‘finally settled’ used in respect of arbitration. As a result, BIM argued that the principle of consistent expression in contractual interpretation applied and led to the conclusion that the parties had no intention of prohibiting a future appeal. Further, BIM argued that in light of an alleged conflict between the phrase ‘finally settled’ and the language contained in Article 35(6) of the ICC Rules, the wording of the Arbitration Agreement takes precedence over the provisions of the ICC Rules which were incorporated by reference.

In its decision, the Superior Court recognised, and noted that BIM had effectively conceded, that standing on its own, Article 35(6) of the ICC Rules precludes an appeal from an ICC arbitration award.2   It determined that the words ‘final and binding’ and ‘finally settled’ mean the same thing based on their ordinary grammatical meaning and context, and found that ICC Rule 35(6) was part of the Arbitration Agreement. Since there was no conflict between the Arbitration Agreement and the ICC Rules, the Superior Court held that the Arbitration Agreement precluded an appeal on a question of law, or otherwise from the arbitral award, and dismissed BIM’s application in its entirety. The Superior Court also dismissed BIM’s application to set aside the award2 on jurisdictional and procedural fairness grounds.

BIM sought leave to appeal the decision on the set aside issues to the Court of Appeal for Ontario and sought to appeal the issue of the availability of appeals under the Arbitration Agreement ‘as of right’, on the basis that the Superior Court had ‘declined jurisdiction’. The central issue in the case was whether the Arbitration Agreement precluded the parties from seeking leave to appeal on alleged errors of law.

BIM argued that the application judge misinterpreted the arbitration agreement as precluding appeals and therefore mistakenly declined jurisdiction to consider whether leave to appeal should be granted under the Act.

Ultimately, the Ontario Court of Appeal determined that the Arbitration Agreement was properly interpreted to preclude appeals, just as the wording of ICC Rule 35(6) does. Thus, ‘[t]o the question of whether appeals are permitted, both provisions give the same answer: no, they are precluded’. The Court of Appeal held that the additional terms ‘binding’, ‘settled’, and the wording of Rule 35(6) all reinforced that same intention. As a result, the Court of Appeal concluded that the application judge had made no reversible error and dismissed BIM’s appeal.  The Court of Appeal also denied leave to appeal on the set aside issues.

Implications

Canada is consistently recognised as an arbitration-friendly jurisdiction. A key reason for this has been the limited rights to appeal an arbitral award. These decisions in the context of recognition and enforcement proceedings confirm the limited nature of rights to appeal and serve to reinforce the UNCITRAL Model Law on International Commercial Arbitration and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which provide narrow grounds for judicial intervention in commercial disputes that are subject to arbitration agreements. The fact that the arbitration at issue was a domestic arbitration under the ICC Rules does not change the clear meaning and intent of the ICC Rules with respect to appeals.

This case is a recent expression of Canadian judicial approval of these principles, with both levels of court ultimately deferring to the arbitral tribunal for determinations regarding the tribunal’s own jurisdiction and complex issues of fact and law. The Ontario courts were clear that where the ICC Rules are incorporated by reference into the Arbitration Agreement by the parties, Rule 35(6) precludes appeals. In rejecting creative arguments based on alleged ambiguities and uncertainties in wording between the Arbitration Agreement and Rule 35(6), the Ontario courts reinforced that parties will be held to their choices, including to incorporate the ICC Rules. Ultimately, in narrowly interpreting the grounds to set aside and appeal an arbitral award, this case maintains the high burden on arbitral award debtors to prove any allegation of injustice or impropriety that could render an award unenforceable.