Canadian arbitrator lacks jurisdiction to make orders affecting rights of third parties

by Ellyn Law LLP
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Arbitration is a dispute resolution process based on agreement between the parties. The arbitrator’s jurisdiction must be found in the arbitration agreement. Typically, the agreement refers to the laws of a jurisdiction and to arbitration rules, which refer set out the arbitration procedure and other topics which have not been specifically agreed between the parties.

Sometimes the arbitration agreement, the law and arbitration rules do not cover all circumstances. Does an arbitrator in a commercial arbitration have jurisdiction to make an Order ex parte, i.e., without notice to one of the parties? Does an arbitrator have jurisdiction to make an Order for a Mareva injunction (an injunction restraining the defendant from disposing of assets pending the determination of the issues in the case)?

In this March 2011 decision by the Hon. Justice Paul Perell, a noted judge based in Toronto, Canada and a member of the Superior Court of Justice of the Province of Ontario, the Court ruled on these interesting legal issues. Justice Perell decided that an arbitrator does not have jurisdiction to make an order which could affect the rights of persons who are not parties to the arbitration agreement. The arbitrator did not have jurisdiction to grant a protective injunction against the defendants without notice on the facts of this case. An arbitrator does not have all the powers of a judge. The arbitrator’s order was unenforceable and was set aside.

This court decision is submitted by the law firm of Ellyn Law LLP Business Litigation & Arbitration Lawyers, Toronto, Canada. Partner Orie Niedzviecki and Associate Evelyn Perez Youssoufian were counsel for the applicants who were largely successful.

Ellyn Law LLP, www.ellynlaw.com, founded in 1973 when senior partner Igor Ellyn, QC, CS, FCIArb., began his practice, is a boutique firm whose law practice is focussed on complex business litigation and commercial arbitration, shareholder disputes and the enforcement of foreign judgments. The firm is a member of the prestigious International Network of Boutique Law Firms (www.INBLF.com) as the Toronto designated firm for shareholder litigation and international commercial arbitration. The firm is also a member of the Toronto Commercial Arbitration Society and of the Canadian Arbitration Committee of the International Chamber of Commerce (www.chamber.ca).

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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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