Why The Words In Your Business Contract's Arbitration Clause Matter
Author | Mr Marco P. Falco |
Law Firm | Torkin Manes LLP |
Published date | 22 May 2023 |
One of the most overlooked provisions in a commercial contract is an arbitration clause.
These clauses typically set out the resolution mechanism the parties devise to resolve any dispute under the contract.
The effect of an arbitration provision is to divorce the commercial proceeding from the Courts and shift the duty of adjudication to an arbitrator - this protects the privacy of the litigation and typically guarantees a timely result.
Ontario's Arbitration Act, 1991, S.O. 1991, c.17 (the "Act") seeks to protect the benefits of arbitration by limiting recourse to the Courts once an arbitral award has been made.
For example, if parties choose not to provide any appeal rights to the Courts from an arbitration decision, the Act significantly limits their ability to appeal the decision.
A recent decision of the Ontario Court of Appeal, Baffinlands Iron Mines LP v. Tower EBC G.P. / S.E.N.C.,2023 ONCA 245, clarifies how judges will approach commercial arbitration provisions that do not provide for a right of appeal under the Act.
Baffinlands establishes that where an arbitration provision precludes appeals by specifying that the arbitration decision is "final and binding", there is no appeal to the Ontario Superior Court.
"Finally Settled" Means "Final and Binding"
Baffinlands involved two agreements in which the respondent, TEBC, agreed to provide earthworks for the construction of a railway at the appellant BIM's ore mine in Nunavut. The agreements were standard-form construction contracts.
The dispute resolution clauses in the contracts provided that if a dispute could not be settled amicably and there was no final and binding decision to settle the dispute by a dispute adjudication board ("DAB"), the dispute "shall be finally settled by international arbitration" and "finally settled by the Rules of Arbitration of the International Chamber of Commerce [the "ICC Rules"]". The ICC Rules provided that every award was "binding on the parties" and the parties waived any form of further recourse.
In 2018, BIM terminated the contract as a result of construction delays. When the matter could not be resolved amicably and there was no final and binding decision of the DAB, TEBC commenced an arbitration against BIM before a tribunal of three arbitrators. TEBC alleged that BIM had improperly terminated the agreement and sought damages for breach of contract.
The majority of the arbitration panel awarded TEBC more than $100 million in damages. However, the...
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