The Review of International Commercial Arbitral Awards and the New York Convention: Breaking the Link to Administrative Law.

• Date: 22 September 2021
• Author: Irish, Maureen

CONTENTS

The Review of International Commercial Arbitral Awards and the New York Convention: Breaking the Link to Administrative Law

Maureen Irish

1. Introduction 159

2. Background 161

3. Investor-State Awards in Canadian Courts 165

4. International Commercial Arbitration 176

   1. Review of International Arbitration Awards 177

   2. Administrative Law and Interpretation in the International Context 187

5. Domestic Commercial Arbitration 198

6. Conclusion 202

   Maureen Irish (*)

1. INTRODUCTION

   In 1986, Canada acceded to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention or Convention). (1) Both large and small businesses are increasingly involved in cross-border transactions. Arbitration is often chosen as the method of dispute settlement in international contracts, as an alternative to litigation. An arbitration clause or agreement can be drafted as the parties wish. Arbitration can follow procedures suitable to the parties' needs and can be before arbitrators with expertise relevant to the area of the contract. In a cross-border context, arbitration has the advantage of neutrality since involvement with the courts of either party is minimal. Courts may be called upon to ensure that the parties respect their agreement to arbitrate. As well, domestic courts have the role of enforcing an eventual award in the case of noncompliance or overturning an award that is successfully contested.

   This article discusses the approaches taken by Canadian courts to the review of international commercial arbitral awards, especially after the 2011 decision of the Ontario Court of Appeal in Mexico v Cargill, Incorporated, a dispute in international investment law brought by a private investor. (2) As explained below, the international commercial arbitration procedure is an option available in certain investment treaties for dispute settlement between investors and states. Canadian courts have used administrative law standards of review to deal with investment awards against states. For example, in United Mexican States v Feldman Karpa, in 2005, the Ontario Court of Appeal upheld an investment arbitral award after applying analysis from administrative law to determine that the tribunal was entitled to a "high degree of deference," (3) one of three standards in use at the time. Canadian administrative law changed in 2008 as a result of the Dunsmuir v New Brunswick decision, (4) which reduced the standards of review to just two: reasonableness and correctness. There was a further major reform of administrative law in the Canada (Minister of Citizenship and Immigration) v Vavilov decision of the Supreme Court of Canada in 2019. (5) In the Cargill investment decision, the Ontario Court of Appeal adopted the correctness standard of review, (6) while expressing hesitation about the application of domestic administrative law standards to an investor-state award. (7) After Cargill, the use of administrative law has continued, and is now appearing in decisions on international commercial arbitral awards when both sides are private parties.

   This article argues that the use of administrative law standards of review is not appropriate for international commercial awards. As international arbitral tribunals are not Canadian domestic administrative agencies, Canadian administrative law should not apply. Instead, approaches to interpretation should reflect the treaty-based framework supporting international commercial arbitration. In a treaty-based structure, the approach to interpretation should not depend on factors that are too specific to the domestic Canadian system. Our treaty partners are also interpreting the same treaty language. As we are all participating in a common undertaking, the methodology used should be suitable for the task of co-operative interpretation. If we would not expect courts in other jurisdictions to change their approaches to interpretation in response to each new development in Canadian administrative law, we should not base our decisions on standards of review drawn from that domestic area of law.

   The Part below outlines selected provisions of the New York Convention. Decisions on investor-state awards are addressed in Part III, as this is the area in which the link to administrative law appeared. Part IV then examines Canadian court decisions on international commercial arbitral awards between private parties since the implementation of the New York Convention, including analysis of recent cases that have begun to use administrative law standards of review. The next section discusses Canadian administrative law in more detail, presenting arguments on its lack of suitability for reviewing international commercial arbitral awards and the preferred approach to interpretation in the international context. After a brief survey of recent domestic arbitration cases in Canada, a final Part concludes and offers general remarks.

2. BACKGROUND

   The New York Convention promotes the use of arbitration for international commercial disputes between private parties. Under the Convention, if the parties have agreed on arbitration in their contract, then domestic courts are to hold them to that bargain. If one side attempts to undermine the agreement with litigation in a domestic court, that court is to refer the parties instead to arbitration, subject to some exceptions. (8) Once an arbitral tribunal has made an award, it can be enforced in domestic courts if the losing party fails to comply. (9) The Convention sets out grounds on which the losing party can resist such enforcement in Article V:

   1. Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that:

      1. The parties to the agreement... were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or

      2. The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case; or

      3. The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognized and enforced; or

      4. The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or

      5. The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.

   2. Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that:

      1. The subject matter of the difference is not capable of settlement by arbitration under the law of that country; or

      2. The recognition or enforcement of the award would be contrary to the public policy of that country. (10)

      The domestic court is to enforce the award, subject to a limited set of defences in Article V. The defences are largely jurisdictional and procedural. Was this a proper tribunal, set up under a binding agreement? Did it follow appropriate procedure? Did it respect its mandate? If so, the award is enforced. There is no review for alleged errors of fact or substantive law relating to the merits. In international commercial arbitration agreements, a choice of law clause often determines the applicable law governing the contract, which could easily be different from the law of a court asked to enforce an award. There is no reason to give the enforcing court the task of hearing appeals on the substantive law of the contract. Rather, the role of the enforcing court is to consider whether the award is from a properly established tribunal, operating fairly and in accordance with its mandate. As well, in the New York Convention, enforcement is subject to the fundamental public policy of the domestic court. There is no enforcement if this sort of dispute is not arbitrable in accordance with domestic law or if enforcement would be contrary to public policy as determined by that court.

      As a treaty, the New York Convention attracts the public international law presumption of consistency and can be used as an aid to interpretation, since courts presume that legislators do not intend to put Canada in breach of its international obligations. (11) Judges can also consider decisions of the courts of our treaty partners, by way of persuasive authority, giving the treaty framework a horizontal dynamic. All state parties will have an interest in implementation and compliance by others, in line with their goals in joining the treaty.

      Interpretation distinguishes between the grounds for review listed in the New York Convention and the standards of review that set the approach to interpretation. There is clearly some intended room in the New York Convention for the domestic law of the enforcing court concerning matters of arbitrability and public policy. Canadian courts may have begun to add an extra domestic gloss to overall interpretation by borrowing standards of review from administrative law.

      A party wishing to contest an award would defend any enforcement action on the basis of the grounds listed in Article V. As well, the party has the option of applying to have the award...