The Debate Over Vavilov’s Applicability to Commercial Arbitration Appeals Continues in Alberta

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Within the span of two weeks, two lower courts in different provinces have reached opposite conclusions about the standard of review for an arbitral decision on extricable questions of law in the era of Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65 and Bell Canada v. Canada (Attorney General), 2019 SCC 66.

In late January, 2020, the Manitoba Court of Queen’s Bench concluded in Buffalo Point First Nation v. Cottage Owners Association that the standard of review for an arbitral decision on an extricable question of law is now correctness given Vavilov/Bell. Our review and analysis of that decision can be found here. The Buffalo Point Court applied the Vavilov/Bell framework without hearing full arguments from the parties about whether the framework set out in those cases applies to commercial arbitrations.

However, less than two weeks later – on February 12, 2020 – the Alberta Court of Queen’s Bench reached the opposite conclusion in Cove Contracting Ltd. v. Condominium Corporation No. 012 5598 (Ravine Park), 2020 ABQB 106. Relying on the Supreme Court of Canada’s previous decisions in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 and Teal Cedar Products Ltd. v. British Columbia, 2017 SCC 32, Justice Dunlop held that Vavilov did not change the standard of review for commercial arbitration appeals. Thus, he concluded that extricable questions of law should continue to be viewed on a reasonableness standard unless they raise constitutional issues or issues of central importance to the legal system as a whole that fall outside the adjudicator’s expertise.

Given the release of conflicting decisions on this issue within such a short period of time, it is likely that appellate courts in Alberta and Manitoba (and perhaps elsewhere, as the issue arises) will soon weigh in on whether Vavilov/Bell apply to provincial legislation concerning (local) arbitrations. Evidently, there is confusion (or at least, uncertainty) about whether changing the standard of review for statutory appeals from administrative tribunals has affected the standard of review for statutory appeals from private arbitrations.

Nonetheless, as explained in our post on Buffalo Point, it remains the case that the potential impact of Vavilov/Bell is not likely to arise in the same way in the context of international arbitrations. In Canada, international arbitrations are governed by separate legislation that incorporates the UNCITRAL Model Law On International Commercial Arbitration and circumscribes the right of appeal much more narrowly than the statutory rights of appeal set out in legislation for local arbitrations, such as the Alberta Arbitration Act, RSA 200, c. A-43.

Background to Cove Contracting Ltd.

In Cove Contracting Ltd., the parties engaged in arbitration over the interpretation of a fixed price construction contract. The specific issue on arbitration was whether the contract included the cost of electrical infrastructure in the fixed price. The arbitrator concluded that the cost was included. Cove Contracting appealed the decision pursuant to section 44 of Alberta’s Arbitration Act, which permits appeals of an arbitration award to the Court of Queen’s Bench.

The parties were scheduled to argue the appeal, including the question of what standard of review applied, on December 19, 2019. That morning, the Supreme Court released the decisions in Vavilov and Bell. Justice Dunlop adjourned the hearing to January 31, 2020 and gave the parties the opportunity to file new briefs addressing the impact of the new Supreme Court cases, which they did.

Prior to December 19, 2019, both parties’ briefs stated that the standard of review was reasonableness, consistent with the Supreme Court’s decisions in Teal Cedar Products Ltd. v. British Columbia, 2017 SCC 32, and Creston Moly Corp. v. Sattva Capital Corp., 2014 SCC 53. Those cases establish that reasonableness is the presumptive standard of review for extricable legal questions in commercial arbitration appeals. Following the release of Vavilov and Bell, Cove Contracting argued that the standard of review was correctness on issues of law because the inclusion of a right to appeal in the Arbitration Act, RSA 200, c. A-43, evinced a legislative intention for appellate standards to apply when a court reviewed an arbitral award. (Incidentally, this was the same reasoning applied by the Manitoba Court of Queen’s Bench in Buffalo Point.)

Nonetheless, Justice Dunlop rejected Cove Contracting’s submissions that the Vavilov/Bell framework applied and concluded that the standard of review for arbitral decisions remains reasonableness. The Court observed that the framework established in Vavilov/Bell is based on the intentions of the legislatures as expressed in statutes creating administrative bodies, but that the same analysis does not apply in the arbitration context. Arbitrations arise when parties agree by way of contract to participate in arbitration as a means of alternative dispute resolution; which is fundamentally different from an administrative tribunal, the existence of which is entirely dependent on the tribunal’s home statute. Parties to commercial agreements are not required by any statute to participate in arbitration as a means of dispute resolution.

The Court also concluded that the Vavilov/Bell framework does not apply because the Supreme Court of Canada in Vavilov did not refer to its earlier decisions in Teal Cedar and Sattva, which establish that reasonableness is the presumptive standard of review for questions of law in commercial arbitration appeals. Implicit in the Court’s reasoning is the notion that if the Supreme Court intended to overrule its previous jurisprudence, it would have expressly done so. Indeed, that is exactly what happened in Vavilov and Bell: the Supreme Court recognized that creating a correctness standard of review when appeals arise by statute was inconsistent with some of its prior decisions but held that the new analysis would prevail over those decisions. However, according to Dunlop J., the decisions in Teal Cedar and Sattva provide compelling rationales for maintaining the reasonableness standard of review on commercial arbitration appeals, in that arbitrations are the result of the parties’ private intentions and a higher standard of review is consistent with the efficiency and finality objectives of commercial arbitration.

Why This Case Matters

In just two short weeks, Canadian courts in different provinces have reached opposite conclusions on whether the new standard of review framework for administrative tribunals, as set out in Bell and Vavilov, applies to local commercial arbitrations. The crux of the issue is whether the inclusion of a statutory right of appeal in provincial arbitration acts evinces a legislative intention for questions of law to be reviewed on a standard of correctness in the same way that a legislated right of appeal from an administrative tribunal does. If the Manitoba Court of Queen’s Bench was right in Buffalo Point, and the standard of review is now correctness, that would represent a significant departure from decades of case law confirming that the standard of review on appeals from arbitration decisions is reasonableness. As the Court in Cove Contracting pointed out, it is not clear that the Supreme Court intended Vavilov/Bell to apply to arbitration decisions, given that those cases do not consider or even mention the two leading Supreme Court cases on the standard of review on appeals from commercial arbitration awards.

It remains to be seen whether either Cove Contracting or Buffalo Point will be appealed, but, given the apparent confusion at the lower court level, it would be helpful for an appellate court to directly address the standard of review for appeals of arbitral awards in the post-Vavilov/Bell era. Until the issue is clarified, there will be uncertainty in the standard of review applicable to appeals of arbitral awards rooted in local provincial legislation such as Alberta’s Arbitration Act and Manitoba’s The Arbitration Act.

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