The Unruly Horse of Public Policy: BC Supreme Court Considers Whether the Public Policy Exception Extends to Post-Arbitral Domestic Enforcement
In Enrroxs Energy and Mining Group v Saddad, 2022 BCSC 285, Justice Crerar of the British Columbia Supreme Court had to determine whether the potential for double recovery justified refusing to recognize and enforce a foreign arbitral award based on the public policy exception.
Although the Court found that the public policy exception was not necessarily limited to the integrity and fairness of the foreign arbitral process, Justice Crerar also held that the facts did not require him to determine whether the exception could be extended to encompass situations where the effect of local enforcement offends public policy. As such, this important issue remains a question for another day.
The underlying dispute was the unravelling of a business relationship between parties that aspired to carry out oil and gas enterprises in the Middle East. From November 2017 to January 2020, the petitioner and respondent actively litigated and arbitrated various disputes, resulting in an arbitral award dated January 28, 2020, made in Geneva, Switzerland (the “Award”). The Award directed that the respondent pay the petitioner approximately $4.8 million CAD. The respondent did not appeal the Award and the petitioner moved to have the Award enforced in British Columbia.
After the Award was issued, the respondent commenced a claim in the courts of Dubai against the petitioner, seeking a declaration that he owned certain equipment that the petitioner had seized (and along with certain shares in a company that the parties had incorporated as part of their business plan) in 2015, which the respondent valued at approximately $2.56 million CAD (the “Equipment”). The Dubai Court found that the respondent was the owner of the Equipment, but declined to order its return, finding that the petitioner had seized the Equipment to secure payment of the Award. The respondent unsuccessfully appealed the Dubai Court decision up two levels of the Dubai judicial system, with the Dubai Court of Cassation confirming the original decision in January 2022.
Application to Enforce
The petition to enforce the Award in British Columbia was filed in November 2020. The respondent argued that enforcement of the Award, prior to a valuation and accounting of the shares and Equipment, was against public policy, since it would be tantamount to double recovery.
Justice Crerar noted that “decisions rejecting recognition and enforcement of a foreign arbitral awards (or, for that matter, the final order of a foreign court) are rare in this century”. He found that both subsection 35(1) of the International Commercial Arbitration Act and article 3 of the Foreign Arbitral Awards Act, contain mandatory language that requires a court to recognize an arbitral award, unless the award debtor can establish that an exception, such as the public policy exception, applies.
Justice Crerar observed that the public policy exception was generally focused on the integrity and fairness of the foreign arbitral process, and not on post-arbitral domestic enforcement. However, he noted that this was not necessarily a categorical limit on the public policy defense: “the broad wording of subsection 36(1)(b)(ii) of the British Columbia [International Commercial Arbitration Act] may well give the unruly horse of public policy a larger corral, to also apply where the effect of local enforcement offends public policy”. Ultimately, the Court decided that it did not need to make a definitive pronouncement on the scope of the exception, because enforcement in this case would not offend public policy in British Columbia.
Specifically, Justice Crerar found that the respondent had failed to establish that enforcement of the Award would in fact result in double recovery, since the petitioner confirmed that he would, in adherence with the Dubai judgment, return the Equipment once the Award was paid in full. Further, Justice Crerar found that it was not mathematically clear that enforcement in British Columbia would lead to double recovery:
The existence of actual or potential counterclaims or set-offs does not in itself serve as an impediment to execution or registration of a judgment or award. To bar registration in the face of potential counterclaims or set-offs would particularly undermine the policy objectives of efficiency and certainty exemplified in the international arbitration regime and jurisprudence.
Importantly, Justice Crerar held that the respondent’s arguments about valuation, set off, and potential double recovery should have been raised before the Swiss Arbitrator or the Dubai courts: “to paraphrase Cole Porter, the respondent’s argument comes in the wrong place, at the wrong time”. As such, the respondent had not met the heavy burden of showing that recognition and enforcement would be contrary to public policy.
Finally, Justice Crerar found that it was inappropriate to grant a stay of execution based on the hardship that it could cause the respondent, stating that it is not “unusual for execution of an award or judgment to inflict significant financial hardship on a debtor and his family”.
The willingness of the courts to recognize and enforce foreign arbitral awards is a key aspect of the international legal system. Enrroxs reiterates the principle that, absent exceptional circumstances, comity, coupled with the parties’ own agreement to resolve their disputes through private arbitration, weighs heavily in favour of an arbitral award being found to be recognized and enforceable in Canada.
Despite Justice Crerar’s observation that the public policy exception may not be limited to the integrity and fairness of the foreign arbitral process, his decision demonstrates that a respondent must still meet a heavy burden to fit within the exception. As it becomes more common for international commercial parties to litigate and arbitrate disputes in multiple fora, it is likely that issues of set off and double recovery will become more prevalent. This case shows that where a party intends to raise such defenses, they should be raised early and together with the substantive defences that will determine the quantum of the award, and not be left to be argued before the court enforcing the award.
 On November 26, 2020, the British Columbia Supreme Court granted the petitioner an ex parteMareva freezing order against the respondent, which was later upheld on an application to set aside or vary.
 Enrroxs Energy and Mining Group v Saddad, 2022 BCSC 285 at para. 41 [Enrroxs]
 Foreign Arbitral Awards Act, R.S.B.C. 1996, c. 154
 Enrroxs at paras. 42-49.
 Enrroxs at para. 54
 International Commercial Arbitration Act, R.S.B.C. 1996, c. 233.
 Enrroxs at para. 56
 Enrroxs at para. 63; see also Consolidated Contractors Group S.A.L. (Offshore) v. Ambatovy Minerals S.A., 2017 ONCA 939, leave to appeal ref’d  SCCA No 46; Abener Energia, S.A. v. Sunopta Inc., (2009) 2009 CanLII 30678 (ON SC), appeal dismissed by consent 2010 ONCA 57.
 Enrroxs at para. 70.
 Enrroxs at para. 91
international arbitration arbitration public policy enforcement recognition dispute