Arbitration Parties Beware: The Supreme Court Of Canada Unpacks The Sattva Test For Appellate Review Of Arbitration Awards In Teal Cedar Products Ltd v British Columbia

Introduction

As litigants continue to experience delayed access to justice occasioned by a backlogged judicial system, Canadian courts continue the struggle to protect the legitimacy of commercial arbitration as an alternative dispute resolution process. The Supreme Court of Canada set out a three-step analysis for appellate review of arbitration awards in Creston Moly Corp v Sattva Capital Corp, 2014 SCC 53 ("Sattva") (i) assess the court's jurisdiction; (ii) determine the standard of review; and (iii) apply the standard of review. As easy as it may appear, applying the Sattva test to arbitral awards is not without challenges. In Teal Cedar Products Ltd v British Columbia, 2017 SCC 32 ("Teal"), the Supreme Court of Canada analyzed the components of the Sattva test, defined the three principal categories of questions to be determined at an appellate review (legal, factual, or mixed questions), and set out a fourth category of questions - extricable questions of law. While Teal provides a guide for the application of the Sattva test, more importantly, it underpins the court's endorsement of the efficiency and finality objectives of commercial arbitrations by reminding parties to arbitration agreements of the very narrow scope of appellate review of arbitration awards.

Background

In 2003, the province of British Columbia ("BC") implemented the Forestry Revitalization Act, SBC 2003, c 17 (the "Act"). As a result of the Act, three licenses owned by Teal Cedar Products Ltd. ("Teal Cedar") were affected negatively. As the areas of land covered by two of the licenses were reduced and all three licenses had a lower quantity of allowable harvest, Teal Cedar suffered significant losses. The Act contained a compensation scheme for the value of improvements made to Crown land (the "Improvements Compensation"). Teal Cedar and BC entered into negotiations to settle the compensation owed under the Act including a Settlement Framework Agreement which provided that no interest would be payable under any compensation BC would provide. These negotiations failed and Teal Cedar and BC subsequently entered into an Amended Agreement to submit the dispute to arbitration.

Issues

The issues submitted to arbitration were: the valuation method consistent with the Act (the "Statutory Interpretation/Valuation Issue"), whether BC was liable to pay interest regardless of the Agreement (the "Contractual Interpretation/Interest Issue"), and whether Teal Cedar was entitled...