Appealing an Arbitral Award – Are we “Finally Settled”?
Why this case matters
This is but the most recent case addressing the circumstances under which an arbitration award can be appealed. For a number of years, parties have disputed the significance of words like “binding” and “final” when seeking to determine whether an award can be appealed. In this recent Ontario Court of Appeal (“ONCA”) decision, the Court brings some much needed common sense to those words.
In Baffinland Iron Mines LP v. Tower-EBC G.P., S.E.N.C, 2023 ONCA 245 (“Baffinland”), the ONCA upheld the Ontario Superior Court’s (“ONSC”) decision that leave to appeal an arbitral award was unavailable to Baffinland Iron Mines (“BIM” or the “Appellants”) under s. 45(1) of the Arbitration Act, S.O 1991, c. 17 (the “Act”), as the Court found that the phrases “finally settled” and “final and binding” meant the same thing and, in both cases, the parties intended to preclude appeal rights following an arbitration.
The dispute giving rise to the arbitration award at issue arose from BIM’s 2018 termination of two contracts (the “Contracts”) entered into with Tower-EBC G.P./S.E.N.C. (“TEBC” or the “Respondents”).
TEBC commenced the arbitration in 2018, challenging BIM’s right to terminate the contracts and claiming damages arising from the termination. The arbitral tribunal unanimously found that BIM had wrongfully terminated the Contracts and awarded TEBC damages exceeding $70 million (the “Award”).
BIM Seeks Leave to Appeal the Arbitral Award – The ONSC Decision
BIM sought leave to appeal the tribunal Award, arguing that the tribunal committed errors of law. The ONSC denied leave, finding that the parties’ arbitration agreement precluded appeals on questions of law. In particular, the Court found that the reference in the arbitration agreements to disputes being “finally settled” through arbitration, as well incorporation into the arbitration agreements of International Chamber of Commerce (“ICC”) Rule 35(6) – which binds the parties to their arbitral award and denies them any form of recourse – rendered leave to appeal the Award unavailable under s. 45(1) of the Act.
The application judge rejected BIM’s argument that the use of the phrase “final and binding” in relation to decisions by the Dispute Adjudication Board (the “DAB”) – words recognized by Ontario courts to preclude arbitral appeals – when compared to the phrase “finally settled” in relation to arbitrations, meant that the parties intended a different, non-final interpretation for the latter.
BIM Appeals the ONSC Decision to Refuse Leave
BIM appealed the ONSC’s denial of leave to the ONCA, requesting that the ONCA: (i) reverse the decision that the arbitration agreement precluded appeals on questions of law; (ii) grant leave to appeal on the errors BIM raised; and (iii) send the appeal itself back to be determined by the ONSC.
BIM argued that the ONSC misinterpreted the arbitration agreement by equating the term “final and binding” – used in the Contracts to preclude appeals from some DAB decisions – to “finally settled”, used in relation to arbitral decisions. BIM asserted that the application judge’s misinterpretation was due to the misapplication of two principles of contractual interpretation: the principle that presumes consistent expression and the principle that apparently inconsistent terms are to be reconciled in accordance with the express priority provided by the parties’ agreement.
The ONCA Upholds the ONSC Decision
The ONCA upheld the ONSC decision to refuse leave, concluding that the ONSC correctly interpreted the arbitration agreement as precluding appeals on questions of law.
In reaching its decision, the ONCA reviewed the principle of consistent expression in contractual interpretation and found that it favored a consistent meaning to the repeated word ‘final’ (or ‘finally’) when it was used with ‘binding’ and when it was used with ‘settled’.
Accordingly, the Court held that “finally settled” and “final and binding” meant the same thing and, in both cases, the parties intended to preclude appeal rights following an arbitration. A more detailed analysis of the Court’s consideration of the principle of consistent expression in Baffinland can be found here.
The Baffinland decision is a reminder for parties to take due care in considering the words used in their arbitration agreement, especially as it pertains to the finality of arbitral decisions and awards. If the parties intend that an arbitral award be appealable on errors of law, this should be expressly set out in the arbitration agreement.
For further reading on the Court’s decision in Baffinland, from a contractual interpretation lens, please see our Appeals Monitor blog post linked here: https://www.mccarthy.ca/en/insights/blogs/canadian-appeals-monitor/ontario-court-appeal-considers-presumption-consistent-expression-contractual-interpretation.
2023 ONCA 245 at para 5 and 17; ICC Rule 35(6) states that “[e] very 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.”
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