In Canada (Minister of Citizenship and Immigration) v Vavilov, 2019 SCC 65, (Vavilov) the Supreme Court of Canada (“SCC”) set about to resolve the framework for the appropriate standard of review to be applied by courts when reviewing statutory appeals of administrative decisions. However, as discussed here, Vavilov failed to explicitly address whether the new framework also applied to statutory appeals of commercial arbitration awards. This has resulted in the development of contradictory authorities at the trial court level across Canada on whether commercial arbitration decisions are subject to the framework in Vavilov, which represents a departure from previous SCC jurisprudence on the standard of review for commercial arbitral awards. This blog post discusses two decisions released in early 2021, Northland Utilities (NWT) Limited v Hay River (Town of), 2021 NWTCA 1, (“Northland”)and Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District, 2021 SCC 7, (“Wastech”) which further indicate how the SCC’s recent decisions on the issue result in continued uncertainty.
A(nother) finding that Vavilov applies to commercial arbitration
Northland involved a commercial arbitration that was governed by the Northwest Territories Arbitration Act. The underlying arbitral award permitted the respondent town to purchase assets involved in the supply, transmission and distribution of electricity at a certain price. Upon receiving the award, the applicant challenged the arbitrator’s decision pursuant to the appeal rights in s. 27 of the Arbitration Act. There were also contractual appeal rights in the underlying arbitration agreement however these were not commented upon in the proceedings. The applicant’s challenge was on grounds that the Arbitrator had allegedly made an error of law or errors of mixed fact and law. The Supreme Court of the Northwest Territories held the arbitrator’s decision was correct or reasonable. Shortly thereafter, the SCC rendered its decision in Vavilov. The applicant then appealed the chambers judge’s decision to the Court of Appeal, arguing that Vavilov required the review to be redone on the standard of correctness and the arbitral award was incorrect.
Bielby J.A. undertook a detailed review of the standard of review, and expressly noted that “[c]ompeting trial court level authorities have since developed on the issue of whether commercial arbitration decisions are exempt from the application of” Vavilov.[1]According to the Court, Vavilov’s omission of any mention of commercial arbitration is “silence [that] cuts both ways” and the key issue was whether the revised framework in Vavilov applied to commercial arbitration awards reviewed pursuant to a statutory right to appeal. The Court of Appeal held that as per Vavilov the same meaning ought to apply to “appeal” regardless of whether the appeal was under an administrative law statute or in a criminal or commercial context.[2] Thus where the review is occurring pursuant to a statute that provides a right of appeal, in light of Vavilov’s direction that the existence of a statutory appeal mechanism is an indication of legislative intent that a matter be reviewed with reference to the nature of the question, the revised standard of review framework from Vavilov applies to commercial arbitration.[3] Here, because the “legislation does not limit the right of appeal to questions of law, an appellate standard of review is to be applied to all issues raised, including not only questions of law reviewed for correctness, but questions of fact or of mixed fact and law which will continue to be reviewed on a standard of palpable and overriding error”.[4] Justices Veldhuis and Strekaf in their reasons concurred in both the result and reasons on the applicable standard.
The SCC divides on the issue
While the appeal in Wastech involved contractual discretion and issues of good faith, which we have written on here, it also involved the standard of review with respect to the underlying commercial arbitration award. To provide a brief background on this point, the parties had a long-standing contractual relationship under which Wastech transported waste for the municipality. The parties had agreed that any disputes under the contract would proceed to arbitration. It was an arbitral award that the municipality appealed to the Supreme Court of British Columbia on grounds that the Arbitrator erred in law by misapplying the applicable legal principle in determining that the municipality had breached a contractual duty of good faith. The Supreme Court allowed the appeal and set aside the award on the basis that there was no contractual basis for finding that the municipality failed to have appropriate regard for Wastech’s commercial interests. Wastech appealed to the British Columbia Court of Appeal who dismissed the appeal on the basis that the arbitrator had made several errors in law. Wastech subsequently appealed to the Supreme Court of Canada.
The parties raised two preliminary issues before the SCC about the applicable standard of review for an appeal of a commercial arbitration award: one, whether the appeal was confined to only extricable questions of law as a result of earlier jurisprudence;[5] and, two, whether questions of law were subject to review on the reasonableness standard or a correctness standard.[6] These issues provided the Court with an opportunity to consider the decision in Vavilov and its impact on the standard of review principles applicable to statutory appeals of commercial arbitration awards. Ultimately, the Court dismissed the appeal finding that as the municipality was exercising its discretion under the contract reasonably, there was no breach of the duty of good faith and the arbitrator’s decision could not stand, regardless of whether the standard was correctness or reasonableness. Accordingly, the majority chose to “leave [the consideration of the effect, if any, of Vavilov] to another day,”[7] on the basis that the issue was not fully argued (the appeal was heard before the decision in Vavilov was released), and the application of one standard of review over the other would not result in a different outcome.
In their joint concurring reasons Justices Brown and Rowe, (Côté J. concurring), concluded that the growing number of conflicting decisions in lower courts on the issue, including the Northland decision, indicated that the question of the appropriate standard of review ought to be resolved.[8] Brown and Rowe JJ. noted there are differences between commercial arbitration and administrative decision-making, but concluded that those differences do not affect the standard of review where a statutory right of appeal is provided by legislation.[9] Accordingly, Brown and Rowe JJ. Concluded:
Factors that justify deference to the arbitrator, notably respect for the parties’ decision in favour of the alternative dispute resolution and selection of an appropriate decision-maker, are not relevant to this interpretive exercise. What matters are the words chosen by the legislature, and giving effect to the intention incorporated within those words. Thus, where a statute provides for an “appeal” from an arbitration award, the standards in Housen apply. To this extent, Vavilov has displaced the reasoning in Sattva and Teal Cedar.Concluding otherwise would undermine the coherence of Vavilov and the principles expressed therein.[10]
Takeaways
In Northland, Bielby JA found it “difficult to follow the argument that the reliability of Canada as a forum for resolution of local and global business disputes would be rendered less grounded in the rule of law […] by employing an appellate review standard.”[11] In addition, she held that “there is no reason to have an otherwise anomalous standard of review that applies only to arbitration decisions when all other decisions are reviewable on the appellate standard.”[12] This aligns with the minority’s efforts in Wastech to strive for “coherence”. The practical impact of recent jurisprudence is, however, one of further uncertainty. Parties involved in or considering domestic arbitration will want to pay careful attention to where the law is trending on this point in their jurisdiction until settled by the SCC.
[1] At para 28.
[2] At para 44.
[3] Ibid.
[4] Ibid.
[5] At para 43, citing Sattva Capital Corp v Creston Moly Corp, 2014 SCC 53, [2014] 2 SCR 633, and Teal Cedar Products Ltd v British Columbia, 2017 SCC 32, [2017] 1 SCR 688.
[6] At para 3.
[7] At para 46.
[8] At para 117.
[9] At para 119.
[10] At para 120.
[11] At para 41.
[12] At para 40.
