The Appeal In Teal: Challenging Commercial Arbitration Awards In Canada

How final is a final award in a commercial arbitration? The scope of appeal rights against commercial arbitration awards is again before the Supreme Court of Canada. Will this be the last word on the subject?

In 2014, the Supreme Court decided a case that made commercial arbitration awards harder to appeal, and those appeals harder to win—at least when the parties are private commercial entities who voluntarily agreed to arbitrate their dispute, and the dispute turned on the interpretation of their contract.

The Court's pending decision in Teal Cedar Products v. British Columbia will decide whether the same principles apply when one party is a government, provincial legislation requires the dispute to be arbitrated, and the merits of the case turn on the interpretation of a statute.

At stake are millions of dollars from the public purse in the specific case, and whether the Court will apply its 2014 ruling or alter it for the different circumstances. Also at stake is whether future arbitration appeals will argue about what standard of appellate review should apply to arbitration awards in each case.

This is not just a concern for arbitrating parties, litigation lawyers and judges. The scope of possible appeals to court affects whether to select arbitration in the first place, and how to draft arbitration clauses.

Limited Appeal Rights

Commercial arbitration awards are often hard to challenge in Canadian courts. In international commercial arbitrations seated in Canada and under federal legislation, there are no statutory appeal rights and limited other ways to challenge an award in court. For arbitrations under provincial legislation, appeal rights may be agreed; if not, appeals are usually limited to one or more "questions of law" and then only with permission of the court on a formal application.1

The Supreme Court's decision in Sattva Capital v. Crestor Moly (2014)2 decided that when private commercial entities arbitrate the interpretation of their contract, only unreasonable interpretations will be reversed by a court on appeal. That assumes a case even gets there: the Court also effectively narrowed the path to court by concluding that the interpretation of a contract is usually not a pure "question of law". Rather, most contract interpretation questions are questions of mixed law and fact.

In short, those who choose private dispute resolution now have limited recourse to publicly-funded courts. Finality of commercial arbitration...