Six Points To Consider Before Commencing An Arbitration

On October 10, 2012, I gave a speech at an Advocates' Society program. The program was entitled Arbitration is the New Black. My presentation focused on seven issues which should be addressed when a party is contemplating the commencement of an arbitration.

Starting the arbitration seems like the easiest thing in the world. After all, the parties already have an arbitration agreement which provides for the arbitration. So what is the big deal?

That approach can lead to real problems. The commencement of arbitration is as important a step in the proceeding as the commencement of an action in court. In fact, it's more important because in the case of arbitration, there is no court in which to issue the initiating document. Therefore, no court official determines that the document initiating the arbitration is proper. The party starting the arbitration may be lulled into a false sense of security by the arbitration agreement and may be unaware of the formalities and the choices that are inherent in the arbitral process.

Here are Seven Points to Consider before Commencing an Arbitration:

1. The limitation period

   Some may think that the arbitration is not subject to limitation periods. It is. A limitation period for an arbitral claim may be established in two ways.

   First, the arbitration agreement may itself contain a limitation period. For example, insurance policies often contain limitation periods. If the period is missed, the claim may be lost.

   Second, an arbitral claim will be governed by the general law of limitation of actions. In Ontario, section 52(1) of the domestic Arbitration Act, 1991 provides that the law with respect to limitation periods applies to an arbitration as if the arbitration were an action and the claim made in the arbitration were a cause of action. Section 4 of the Ontario Limitations Act, 2002 establishes a general limitation period of two years from the date of discovery of the claim. So, unless another statutory limitation period applies, a domestic arbitral claim governed by Ontario law must be commenced within two years of the discovery of the claim.

   As far as international commercial arbitrations are concerned, the Ontario International Commercial Arbitration Act (ICAA)does not establish a limitation period for the commencement of an arbitral claim nor refer to a general limitation period. If the arbitral claim is subject to Ontario law, then the Ontario Limitations Act, 2002 will presumably apply. There may be arguments about which limitation law applies to a claim in an international commercial arbitration. The law of the place of the arbitration or the substantive law applicable to the contract are two candidates and the debate may be resolved differently by the courts in different jurisdictions. So the limitation issue may have to be considered carefully in international commercial arbitrations.

   Before leaving the limitation issue, it is well to remember that there is a limitation issue at the other end of the arbitration proceeding, namely, the limitation period for the enforcement of the award. For domestic arbitrations, section 52(3) of the Ontario Arbitration Act, 1991 provides that an application to enforce the award must be made within two years of the date that the applicant receives the award.

   The Ontario ICAA does not contain a limitation period for the enforcement of the award. The general two year general limitation period in Ontario Limitations Act, 2002 will presumably apply if the award is sought to be enforced in Ontario. In Yugraneft Corp. v. Rexx Management Corp., [2010] 1 SCR 649, the Supreme Court of Canada held that Alberta's general two year limitation period applied to the enforcement in Alberta of an international commercial arbitration award made in Russia. Alberta had no limitation period that specifically applied to international...