Doing Business in Canada: Dispute Resolution

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Dispute resolution in Canada follows procedures in line with other leading western legal systems, including those of the United Kingdom and the United States. The independence and impartiality of the Canadian judiciary is beyond question, and the litigation process is well-established and ably suited to complex commercial matters. In the last two decades, class actions across a broad range of subjects have become a common feature of the Canadian legal landscape. At the same time, a robust private alternative dispute resolution industry has also matured.

Independence of the Courts

As described in the chapter, “An Introduction to Canada’s Government and Legal System,” the Canadian judiciary consists of federal and provincial courts. Commercial disputes in Canada are typically litigated in the superior courts of a province, which include a trial and appellate level court. Justices of the superior courts, the federal courts, and the Supreme Court of Canada are all appointed by the federal government. All such appointments are drawn from experienced members of the legal profession.

The Canadian judiciary is widely regarded as non-partisan and independent of other branches of the Canadian government. The independence of the judiciary is assured by both explicit and implicit aspects of Canada’s Constitution. Three essential conditions of judicial independence in Canada include: security of tenure, financial security and institutional administrative independence. Not only must the judiciary actually be independent; equally importantly, it must also be seen to be independent. Independence of the judiciary in Canada is recognized as a fundamental requirement of the rule of law.

Litigating Through the Courts

Each province in Canada is a common law jurisdiction, with the exception of Québec, which follows the French civil system. Litigation in the common law provinces is similar to litigation in other common law countries. The process is governed by jurisdiction-specific rules of procedure that follow the same general pattern. First, pleadings are filed outlining each party’s position, following which the parties are required to exchange all documents and records relevant to the litigation. Depending on the matters at issue, this production may be extensive and includes both paper and electronic records.

Following production, parties have an opportunity to orally examine opposing parties, with different provinces having different rules as to the type and number of persons that may be examined. Before proceeding to trial, other steps may be required such as attending a mandatory dispute resolution process or a pre-trial conference with the court. If a matter is not resolved, it will proceed to trial. An appeal from a trial judgment by an unsuccessful party is allowed as of right from a superior trial court to the relevant appellate court. A further appeal to the Supreme Court of Canada is only permitted in a small number of cases deemed to be of national importance.

Notwithstanding similarity to other common law jurisdictions, the following characteristics of litigation in Canada are noteworthy:

  • Civil jury trials, while possible, are not common. Almost all commercial matters are heard by a judge alone.
  • General damage awards tend to be significantly lower than those in the United States. The Supreme Court of Canada has placed a cap on damages for pain and suffering in personal injury cases.
  • While punitive damages are available, Canadian courts have followed the English tradition of awarding these types of damages less frequently and in lesser amounts than in the United States.
  • While all lawyers are qualified as both barristers and solicitors, it is the virtually invariable practice in litigious matters to retain a litigation specialist.

Costs

The general rule in Canada is that the unsuccessful party is responsible for bearing the costs of the successful party, as well as its own costs. Costs include at least partial compensation for legal fees, plus disbursements. Two scales of recovery for legal fees are generally available: partial (also referred to as party and party costs) and substantial or full (also referred to as solicitor-client costs). The former scale is awarded in the vast majority of cases, with substantial or full indemnity costs typically being reserved for cases of egregious behaviour. Nevertheless, costs are almost always in the discretion of the court. Disbursements are generally substantially reimbursed. The most significant disbursement is often an expert’s fee. While different provinces treat disbursements differently, many allow full recovery for these expenses.

Class Actions

The Canadian class action regime is the most liberal in the western world in that a very wide range of subject areas has been accepted as appropriate for class treatment by the Canadian courts. Securities, price fixing, product liability and other consumer protection cases are all regularly certified as class proceedings. Further, there is a limited amount of public funding made available to plaintiffs to facilitate class actions. As a result, a specialized class action bench and bar has developed as the stakes for these complex proceedings tend to be significant. Although class actions are more heavily case managed and settlements require court approval, following certification, a class action will proceed as a traditional piece of complex litigation through discovery and trial. The above descriptions about Canadian litigation also apply to class proceedings.

Alternative Dispute Resolution

Canada has a sophisticated environment for dispute resolution outside the courts through arbitration, mediation and other ADR mechanisms. Arbitration is regularly selected in cross border transactions involving Canada, from one-off sale of goods contracts to multi billion-dollar investments in the oil sands. Canadian law allows businesses a virtually unfettered ability to tailor their commercial dispute resolution processes to meet their needs or particular requirements of a deal.

International agreements often incorporate external arbitration rules, such as rules of the ICC or AAA, with appropriate additions or clarifications. In some cases, provincial or federal laws or trade agreements (including the North American Free Trade Agreement) may require disputes to be arbitrated. Arbitration is a standard part of multi-step ADR clauses in long-term agreements, along with mandatory negotiations and mediation. Arbitration is often chosen to streamline the dispute resolution process, obtain industry expertise on the decision making tribunal and maintain confidentiality while ensuring the enforceability of the ultimate award.

Canadian arbitration legislation closely follows the UNCITRAL Model Law on International Commercial Arbitration. Canadian courts recognize the commercial arbitration process. They avoid unnecessary interference with commercial parties’ arbitration agreements and give deference to procedural orders and awards issued by both international and domestic tribunals. Foreign awards are enforced under the New York Convention and the Model Law, usually without judicial review of the merits.

Conclusion

Parties doing business in Canada can be confident that commercial disputes are resolved according to the rule of law in a fair and just manner. In some provinces, parties may take advantage of specialized commercial courts with commercially experienced judges; most provinces and territories have highly skilled commercial arbitrators. This expertise ensures that business disputes can be resolved and adjudicated on a timely and efficient basis and in accordance with recognized commercial principles.

Bennett Jones Commercial Litigation Group

The Bennett Jones LLP Commercial Litigation Group has extensive experience in all aspects of business litigation including commercial, securities, corporate, product liability, class action, regulatory, shareholder and partnership disputes. We understand our clients’ businesses and work with them to avoid disputes. Our Group forcefully and effectively represents our clients before courts, tribunals and regulatory bodies when disputes do arise. These core strengths assist our clients in achieving desired business results.