Commercial Arbitration: Guidance from Canadian, US, UK and Australian Appellate Courts

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Back in March, I wrote in this space that the Supreme Court of Canada had decided to hear a commercial arbitration case from British Columbia.

We’re now halfway through 2013 and there have been some intriguing appellate court decisions on commercial arbitration in Canada and in the highest courts in the U.S., U.K. and Australia – common law jurisdictions where Canadian judges commonly turn for guidance and lawyers look for ideas and inspiration.

Foreign cases are obviously not binding on Canadian courts. Sometimes they’re not even persuasive authorities, because the national circumstances are different – applicable legislation varies, the constitutional and historical context is not sufficiently comparable, and so on.

In some respects, international arbitration law is exceptional, because conventions (the UNCITRAL Model Law and the New York Convention) are prominent sources of law in so many countries worldwide. But common points of principle do come up all over the developed world in both domestic and international arbitration law. When will a court intervene because a tribunal made a legal error, or reached an unjust result? What is the scope of a tribunal’s powers? If arbitration is a consensual process to resolve disputes, when is a party not bound – for example, what if a party wants to commence a class action?

For issues like these, we keep an eye out for decisions from high courts around the world.

Here’s a quick rundown of some noteworthy cases from Canada and three English-speaking foreign sources up to June 30th. If you’re keeping score at home, or are a lawyer with mild insomnia, the case names and citations are listed at the end.  They’re all available online.

Canada

In February, the Federal Court of Appeal held that a statutory damages claim under Canada’s antitrust statute, the Competition Act, is capable of resolution by arbitration. No application for leave to appeal to the Supreme Court was filed.

Another commercial arbitration case may be headed to Ottawa, however, after a March decision by the Newfoundland and Labrador Court of Appeal. The arbitration concerned the value of power generating assets at the end of a 47-year lease to the City of St. John’s. The tribunal majority valued all of the undertaking as a going concern, including water and land rights held by Newfoundland Power. The third tribunal member held that only the physical assets should be valued. A judge declined to interfere, but the Court of Appeal held that the tribunal majority’s decision was “unreasonable and unsupportable based upon the wording of the lease and the context in which the agreement was made”. Newfoundland Power applied for permission to appeal to the Supreme Court on May 21. Expect a decision on that application in late summer and if granted, an appeal decision in 2014.

In the commercial arbitration case from British Columbia I described in March, oral argument has been tentatively set for 12 December 2013 at the Supreme Court.

United States

In Washington, the U.S. Supreme Court has continued its active decision-making on commercial arbitration:

  • On June 20, the Court decided a class action vs. arbitration case that has attracted a lot of attention from US lawyers and industry. Italian Colors Restaurant, a merchant that accepted American Express cards, commenced a class action in court alleging Amex’s standard merchant agreement breached the Sherman Act, a key American antitrust statute. Amex countered that the agreement required arbitration of all disputes. The agreement also contained a class action waiver (there “shall be no right or authority for any Claims to be arbitrated on a class action basis”).Over a strongly-worded dissent penned by Justice Kagan, the Court (Justice Scalia writing for the 5-3 majority) sided with Amex, upholding the class action waiver. The Court reversed the Court of Appeals for the Second Circuit, which had ruled for the merchant three separate times.
  • On June 10, the Court unanimously upheld an arbitrator’s conclusion that parties had agreed in a contract to resolve their dispute by class arbitration. Justice Kagan described the limited circumstances under which an arbitrator’s decision may be vacated by US courts under the US Federal Arbitration Act on the ground that the arbitrator exceeded his powers.
  • Also on June 10, the Court decided that it would hear a case involving a challenge to a $185 million arbitral award made against Argentina under a bilateral investment treaty. In the D.C. District Court, Argentina unsuccessfully challenged the award in favour of BG Group and BG obtained an order enforcing the award. But Argentina succeeded on appeal. The parties’ written arguments at the Supreme Court are to be filed by 15 November. A number of others have been granted status to make arguments.

United Kingdom

In London, the U.K. Supreme Court held on June 13 that an English court could grant an “anti-suit” injunction against foreign court proceedings to enforce a commercial arbitration agreement. The Court granted the injunction against a party that had previously sued in the courts of Kazakhstan, even though there was no current dispute between the parties (either in any court or before a tribunal).

Australia

In Canberra, the High Court of Australia upheld the constitutionality of Australia’s arbitration laws on March 13. A party argued that the statutory implementation of the UNCITRAL Model Law (1985, with 2006 amendments) was an affront to Australian federal courts’ judicial power. The High Court was not convinced. The fact that federal judges could not refuse to enforce an award where the arbitrator had made an error of law neither undermined the institutional integrity of the Federal Court nor delegated judicial power on the arbitral tribunal.

Author’s Note: The cases mentioned above are, in order of appearance: Murphy v Amway Canada Corporation, 2013 FCA 38; St. John’s (City) v. Newfoundland Power Inc., 2013 NLCA 21; Creston Moly Corp. v. Sattva Capital Corp., 2012 BCCA 329 and 2010 BCCA 239; American Express Co. v. Italian Colors Restaurant, 570 US __ (2013); Oxford Health Plans v. Sutter, 569 US __ (2013); Republic of Argentina v. BG Group PLC, 665 F.3d 1363 (DC Circ. 2013); Ust-Kamenogorsk Hydropower Plant JSC v AES Ust-Kamenogorsk Hydropower Plant LLP, [2013] UKSC 35; and TCL Air Conditioner (Zhongshan) Co Ltd v. Judges of the Federal Court of Australia, [2013] HCA 5.\

Topics:  Arbitration, Arbitration Agreements, Binding Arbitration, Canada, UK

Published In: Alternative Dispute Resolution (ADR) Updates, General Business Updates, International Trade Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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