A business dispute can be expensive and time-consuming to resolve in court. Arbitration offers an alternative: a private, binding process that is faster, more flexible, and more confidential than litigation. As the Ontario Court (General Division) put it in Mungo v. Saverino, a passage that has been widely cited ever since, “if you go to arbitration, you can get quick and final justice and you can get on with your life. If you go to court, you can get exquisitely slow and expensive justice and you can spend the rest of your life enduring it and paying for it.”
But arbitration is not a simple or informal process. It is governed by a detailed statutory framework, shaped by a substantial body of case law, and capable of generating awards that are binding and enforceable as court judgments. Whether you have just received a notice of arbitration, are negotiating a contract that includes an arbitration clause, or are considering challenging an arbitration award, understanding how the law works is essential.
This guide explains the arbitration framework in Ontario: what arbitration is, how it differs from litigation, how it is governed, what happens from the arbitration agreement through to the award, and how awards can be challenged or enforced.
What Is Arbitration?
Arbitration is a dispute-resolution process in which the parties choose one or more neutral third parties (arbitrators) to make a final and binding decision resolving their dispute. Like a court judgment, an arbitration award is enforceable and is res judicata, meaning the dispute cannot be relitigated once decided. Unlike a court judgment, an arbitration award is typically based on law and rendered privately, without public hearings or publicly available records.
Arbitration differs from litigation in several important ways. It is a contractual and voluntary process: it cannot take place without all parties agreeing to it, either before or after a dispute arises. The parties choose their arbitrator or arbitrators, and to a large extent, the procedure to govern the process. The arbitrator’s decision may not be subject to appeal on the merits, depending on what the parties have agreed and which legislation applies. Arbitration takes place behind closed doors, and the documents submitted and the award itself are generally not made public.
Arbitration also differs from other forms of alternative dispute resolution, most importantly mediation. A mediator assists the parties in reaching their own settlement and has no power to impose a decision. An arbitrator, by contrast, renders a binding decision that the parties must comply with regardless of whether they agree with it.
The reasons parties choose arbitration include expertise (the ability to appoint a decision-maker with specialized knowledge of the subject matter), speed, privacy, finality, and the preservation of commercial relationships. Those advantages do not always materialize in practice. The more the arbitration process resembles a full trial, the more complex and costly it becomes.
The Legislative Framework in Ontario
Arbitration in Ontario is governed by two distinct statutes, depending on the nature of the dispute.
Domestic Arbitration: The Arbitration Act, 1991
The Arbitration Act, 1991 governs domestic arbitrations in Ontario, meaning arbitrations between parties whose dispute does not have a significant international dimension. It applies to commercial disputes, shareholder disputes, construction disputes, and many other civil matters. The Act provides both mandatory rules that parties cannot contract out of and default rules that fill gaps where the parties’ agreement is silent.
The Act’s approach is one of calibrated judicial support for the arbitral process. Courts intervene only in defined circumstances: to appoint arbitrators, to grant interim relief, to hear challenges to arbitration awards, and to enforce awards. The guiding principle is respect for the parties’ agreement to arbitrate and the finality of the arbitral process.
International Commercial Arbitration: The International Commercial Arbitration Act, 2017
International commercial arbitrations in Ontario are governed by the International Commercial Arbitration Act, 2017, which incorporates the United Nations Model Law on International Commercial Arbitration (the “Model Law”) as amended in 2006, as well as the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”).
An arbitration is international if the parties have their places of business in different states, or if the place of arbitration, the place of performance, or the subject matter of the dispute is situated outside the state where the parties have their places of business, or if the parties have expressly agreed that the subject matter relates to more than one country.
An arbitration is commercial if it arises out of a relationship of a commercial nature. This term is given a wide interpretation, covering trade transactions, distribution agreements, joint ventures, construction, insurance, licensing, financing, banking, investment, and similar relationships. In Uber Technologies Inc. v. Heller, the Supreme Court of Canada held that an employment dispute was not “commercial” in the sense required to engage the international legislation, and so the domestic Arbitration Act, 1991 applied instead.
Federal Arbitration: The Commercial Arbitration Act
The federal Commercial Arbitration Act governs arbitrations in matters of federal jurisdiction, including disputes relating to federal undertakings (interprovincial transport, banks, broadcasting, and similar matters) and maritime disputes. It incorporates a Commercial Arbitration Code that is based on the Model Law. The federal government has also adopted the New York Convention through a separate statute, the United Nations Foreign Arbitral Awards Convention Act.
Canada was the first country to adopt the Model Law, and the first jurisdiction in the world to do so was British Columbia. All Canadian provinces and territories have since enacted legislation adopting the Model Law and the New York Convention.
The Arbitration Agreement
The foundation of every arbitration is the parties’ agreement to arbitrate. Without a valid arbitration agreement, there is no arbitration.
What an Arbitration Agreement Is
An arbitration agreement is a written agreement by the parties to submit to arbitration all or certain disputes that have arisen or that may arise between them in respect of a defined legal relationship, whether contractual or not. An arbitration agreement may take the form of a clause in a broader contract (an arbitration clause) or a standalone agreement. It is common to see arbitration clauses in commercial contracts, shareholder agreements, construction contracts, franchise agreements, and financial agreements.
The writing requirement is broadly interpreted. An agreement in writing includes a document signed by the parties, an exchange of letters, faxes, emails, or other means of telecommunication that provide a record of the agreement, and a reference in a contract to a document that contains an arbitration clause, provided the reference is such as to make that clause part of the contract. Courts have modernized the meaning of “telegrams” in the New York Convention’s definition to include email and text messages.
Scope: What Disputes Are Covered?
The parties have virtually unfettered autonomy in defining the scope of disputes subject to arbitration. Arbitration clauses range from narrow (covering only specific categories of dispute) to very broad (covering “any dispute arising out of or in connection with” the agreement). Canadian courts consistently give broad arbitration clauses a liberal interpretation, and will grant a stay of court proceedings where it is “arguable” that the dispute falls within the scope of the arbitration agreement. Courts avoid interpretations that would drive a hole through the arbitration clause by encouraging litigants to bring actions on related but technically unembraced matters.
Arbitrability: What Disputes Cannot Be Arbitrated?
Not all disputes may be resolved by arbitration. The concept of “arbitrability” sets limits to the consensual use of arbitration by requiring that the subject matter of the dispute be capable of resolution by arbitration under applicable law. The legislator, not the parties, has the final say on what types of disputes may be arbitrated.
The clearest example of a non-arbitrable subject matter is criminal law: no one can contract out of the criminal court system. Family law disputes, certain consumer claims, and disputes involving specific public interest remedies may also be non-arbitrable depending on the governing legislation. Competition law, copyright law, and insolvency law disputes are all arbitrable in Canada.
Where a legislature intends to exclude arbitration from a particular category of dispute, it must do so explicitly. Courts will not assume that Parliament or a legislature has limited the effect of arbitration clauses unless the exclusion is clear.
Separability: The Arbitration Clause Survives the Contract
The separability principle holds that an arbitration clause in a contract is treated as a separate and independent agreement, even if the underlying contract is challenged, terminated, or found invalid. A party cannot escape an arbitration obligation by claiming that the contract containing the arbitration clause has been terminated or was induced by fraud. Such challenges are for the arbitrator to resolve, not the court. Similarly, a party cannot invoke a contract while simultaneously denying that they are bound by the arbitration clause in it.
Separability has limits. Where the same circumstances that challenge the underlying contract also specifically challenge the arbitration clause itself, such as where a party claims the contract was never concluded at all, the separability principle may not apply.
Unconscionability and Consumer Disputes
Arbitration clauses in standard form consumer contracts attract particular scrutiny. The Supreme Court of Canada’s decision in Uber Technologies Inc. v. Heller established that an arbitration clause may be unconscionable where there is a significant inequality of bargaining power and the clause results in an improvident bargain. In Uber, the Court found that an arbitration clause requiring Uber drivers to arbitrate employment disputes in the Netherlands under Dutch law, at a cost exceeding their annual income, was unconscionable because it made the arbitration process inaccessible. The Court declined to enforce the clause and allowed the drivers’ class action to proceed.
Uber does not stand for the proposition that consumer arbitration clauses are generally unenforceable. In Zanin v. Ooma, Inc. and Difederico v. Amazon.com, Inc., courts distinguished Uber on the basis that the services involved were not essential, the arbitral process was accessible, the cost of arbitration was reasonable, and there was no “material information deficit” or “cognitive asymmetry” between the parties that would make the clause unconscionable.
Stays of Court Proceedings
When a party commences court proceedings with respect to a dispute that is the subject of an arbitration agreement, the other party may apply to the court for a stay of those proceedings in favour of arbitration.
Under the domestic Arbitration Act, 1991, a court shall stay proceedings if the party seeking the stay is a party to an arbitration agreement, the dispute appears to be one subject to the agreement, and the applicant is not in default under the agreement. The court retains discretion to refuse a stay in certain defined circumstances, including where the agreement is invalid, the dispute is not arbitrable, or it would not be reasonable to require the applicant to abide by the arbitration agreement.
Under the Model Law, a court before which an action is brought in a matter subject to an arbitration agreement must, if a party so requests not later than when submitting its first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative, or incapable of being performed. This standard is interpreted strictly: the agreement must be “manifestly tainted” to be considered null and void, inoperative, or incapable of being performed. The fact that a dispute may generate multiple proceedings or that arbitration may be expensive for a particular claimant does not make the clause incapable of being performed.
Where court proceedings are stayed in favour of arbitration, the arbitration may be commenced or continued, and an award may be made, while the stay is in place. Third parties who are not bound by the arbitration agreement cannot be compelled to arbitrate, but courts may stay third-party proceedings pending the outcome of the arbitration between the principal parties where it is just and equitable to do so.
The Arbitral Tribunal
Appointment of Arbitrators
The parties may agree on any number of arbitrators. Where they have not agreed, the default under the Model Law is three arbitrators. In a three-member tribunal, each party typically nominates one arbitrator, and those two nominees then appoint the chair or presiding arbitrator. If a party fails to appoint its nominee within 30 days of a request to do so, or if the two party-appointed arbitrators cannot agree on the chair within 30 days of their appointment, the court makes the appointment on application. Court-appointed arbitrators exercise the same jurisdiction as party-selected ones, and the appointment is final and not subject to appeal.
Arbitrations are either institutional or ad hoc. Institutional arbitrations are administered by a recognized arbitral institution such as the International Chamber of Commerce (ICC), the American Arbitration Association (AAA), the International Centre for Dispute Resolution (ICDR), or ADR Chambers. These institutions provide procedural rules, administer the appointment process, and supervise the arbitration. Ad hoc arbitrations follow rules chosen by the parties or, if none are chosen, determined by the arbitral tribunal. The most widely used ad hoc rules are the UNCITRAL Arbitration Rules. The choice between institutional and ad hoc arbitration involves trade-offs between the cost and structure that institutional administration provides and the flexibility and lower administrative fees of ad hoc proceedings.
The Arbitral Seat
The “seat” or “place” of arbitration is a legal concept of great practical importance. The seat determines which country’s or province’s arbitration law governs the arbitration, and before which courts set-aside applications may be brought. The seat is not necessarily the physical location of the hearings: parties and tribunals may hold hearings anywhere in the world while the seat remains fixed. Choosing Ontario as the seat of arbitration means that the Arbitration Act, 1991 or the International Commercial Arbitration Act, 2017 governs the proceedings, and that Ontario courts have supervisory jurisdiction over the arbitration.
Independence and Impartiality
Arbitrators must be independent and impartial. A potential arbitrator must disclose any circumstances likely to give rise to justifiable doubts as to their impartiality or independence before accepting an appointment, and must continue to disclose any such circumstances throughout the proceedings. The prevailing Canadian standard for disqualification is a reasonable apprehension of bias.
The International Bar Association (IBA) Guidelines on Conflicts of Interest in International Arbitration provide a practical framework for identifying and managing conflicts. The Guidelines establish three lists: a Red List of serious conflicts (divided into waivable and non-waivable categories), an Orange List of situations requiring disclosure that are waivable, and a Green List of circumstances that need not be disclosed at all. The non-waivable Red List includes situations such as an arbitrator who is a current officer, director, or employee of one of the parties. Orange List situations include a prior appointment as arbitrator by one of the parties, or service as counsel against one of the parties in a related matter.
Challenging an Arbitrator
A party who intends to challenge an arbitrator must, within 15 days after becoming aware of the circumstances, send a written statement of the reasons for the challenge to the arbitral tribunal. If the challenge is not resolved by agreement, the arbitral tribunal itself decides on the challenge. If the challenge is unsuccessful, the challenging party may, within 30 days, apply to the court to decide the matter. The court’s decision on the challenge is final and not subject to appeal. The arbitration may proceed while the challenge is pending.
Key Principles: Competence-Competence and Party Autonomy
Competence-Competence
The competence-competence principle gives arbitrators the power to rule on their own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement. When a jurisdictional challenge arises, the arbitrator decides it in the first instance, rather than the court. This prevents dilatory tactics: a party who wishes to avoid arbitration cannot do so simply by filing a court challenge to the arbitrator’s jurisdiction.
The Supreme Court of Canada has established a framework for determining whether a jurisdictional challenge should be decided by the arbitrator or by the court before the arbitration proceeds. Courts may decide jurisdictional challenges themselves where the challenge is based on a pure question of law, or on a question of mixed fact and law that requires only a superficial review of the documentary evidence and where the invalidity is “incontestable.” Where the facts are genuinely in dispute or the issue requires more than a superficial examination, the challenge must be decided by the arbitrator.
An important exception is the “Uber exception”: a court should decide a jurisdictional challenge itself where referring the challenge to the arbitrator would make it impossible for the challenge to be resolved, for example, where the arbitral process is so inaccessible that a party cannot realistically participate in it.
Party Autonomy
Party autonomy is an overarching principle of arbitration. The parties decide the scope of the arbitration agreement, design the arbitral process, choose the arbitrators, select the seat of the arbitration, and define the law governing the substance of the dispute. Courts protect party autonomy by enforcing arbitration agreements and interfering as little as possible in the arbitral process.
Party autonomy has two main limitations. First, once parties have validly agreed to arbitrate, they are bound by that agreement and cannot later choose to litigate instead. A losing party cannot refuse to comply with a valid award. Second, party autonomy cannot override the principle of arbitrability: parties cannot agree to arbitrate matters that the law has reserved for the courts.
Conduct of the Arbitration
Procedural Flexibility
The procedure in an arbitration is governed primarily by the parties’ agreement, supplemented where needed by the arbitral tribunal’s discretion. The tribunal may conduct the arbitration in whatever manner it considers appropriate, including deciding whether to hold oral hearings or to proceed on a documents-only basis. If a party requests a hearing, the tribunal must hold one.
The parties must be treated equally and each must be given a full opportunity to present its case and respond to the other’s case. These procedural requirements reflect the principles of natural justice and procedural fairness that apply to all arbitral proceedings.
Evidence
Arbitral tribunals have broad authority to determine the admissibility, relevance, materiality, and weight of any evidence. The rules of evidence that apply in court proceedings do not automatically apply in arbitrations. In international commercial arbitrations, the IBA Rules on the Taking of Evidence in International Arbitration have become widely accepted guidelines, though they are not mandatory unless the parties adopt them. Those rules address documentary production requests, witness statements, expert evidence, and exclusion of evidence on grounds such as privilege, relevance, confidentiality, or procedural economy.
In Ontario domestic arbitrations, certain evidentiary provisions of the Statutory Powers Procedure Act apply, but the parties may contract out of them. Arbitrators may hear and consider evidence and reject it without that rejected evidence influencing their determination of the merits. There is no absolute right to cross-examine the deponent of an opposing affidavit; refusal of cross-examination constitutes a denial of fairness only where it interferes with the party’s ability to address key issues.
An Ontario arbitral tribunal may require witnesses to attend and give evidence by issuing notices with the same effect as a court summons, but this power applies only to the hearing itself, not to pre-hearing discovery. Court assistance may be sought for pre-hearing evidence.
Interim Measures
Both the arbitral tribunal and the courts may grant interim measures before or during arbitral proceedings. A party may apply to the court for interim relief without waiving its right to arbitration. Courts have granted Mareva injunctions (asset freezes), preservation orders, and other relief in support of arbitration. The standard test for interlocutory relief applies: there must be a serious question to be tried, the applicant must face irreparable harm if the order is refused, and the balance of convenience must favour the order.
The arbitral tribunal itself may also order interim measures. Article 9 of the Model Law, which allows parties to seek interim relief from courts, prevails over Article 17, which allows the tribunal to do so. Parties may seek relief from a court without first having to request it from the tribunal.
Costs
Arbitrators have jurisdiction to award costs, which consist of the parties’ legal expenses, the fees and expenses of the arbitral tribunal, and any other related expenses. The ordinary rule in arbitration is that the successful party should recover reasonable legal fees, without reference to any court scale, unless the parties have agreed otherwise. An arbitrator’s costs award is part of the arbitration award for enforcement purposes. Courts reviewing costs awards are guided by whether the arbitrator exercised their discretion judicially and not irrationally or whimsically.
The Arbitration Award
Form and Requirements
An arbitration award must be made in writing, signed and dated by the arbitrator or arbitrators, and must state the reasons on which it is based (unless the parties have agreed otherwise or the award is on agreed terms). Where there is more than one arbitrator, the signatures of a majority suffice, provided the reason for any absent signature is stated. A copy of the award must be delivered to each party.
An award that disposes of the parties’ substantive dispute is the final award. Procedural decisions by the tribunal, including those on scheduling, adjournments, document production, admissibility, or similar matters, are procedural orders rather than awards, and are not subject to the same challenge mechanisms that apply to awards.
Settlement Awards
If the parties settle during the arbitral proceedings, the tribunal will, at their joint request, record the settlement in the form of an award on agreed terms. Such an award has the same status and enforceability as any other final award.
Corrections and Additional Awards
Within 30 days of receiving an award, a party may request the tribunal to correct any computational, clerical, or typographical errors. If the parties’ agreement permits, a party may also request an interpretation of a specific point. A party may request an additional award with respect to claims presented but omitted from the award. These time limits are strictly enforced and cannot be extended.
Challenging an Arbitration Award
Domestic Awards: Appeal and Set-Aside under the Arbitration Act, 1991
A party challenging a domestic Ontario arbitration award under the Arbitration Act, 1991 has two distinct avenues: appeal and set-aside. These are separate mechanisms with different grounds and standards.
Appeal on questions of law. Under section 45 of the Act, a party may appeal an arbitration award to the Ontario Superior Court of Justice on a question of law, but only if the parties’ arbitration agreement permits appeals, or if the court grants leave to appeal. Leave is granted only where the court is satisfied that the question of law is important to the parties and will significantly affect their rights, and that the arbitrator may have made an error on that question.
Whether a question is one of law, fact, or mixed fact and law determines both the availability of appeal and the standard of review. Questions of pure law include statutory interpretation, the correct legal test, and the application of binding precedent. Questions of fact, including credibility, the weight of evidence, and factual inferences, are not appealable without the parties’ agreement. Questions of mixed fact and law, including contractual interpretation in most cases, following the Supreme Court’s decision in Sattva Capital Corp. v. Creston Moly Corp., generally attract deference. An “extricable” question of law embedded in a mixed question can sometimes be isolated and appealed, but courts caution that this should be rare in the arbitration context, where deference to the parties’ chosen decision-maker is heightened.
The standard of review on appeal for questions of law is generally reasonableness, following Sattva. The correctness standard applies to questions of central importance to the legal system and to questions of true jurisdiction.
On a successful appeal, the court may confirm, vary, or set aside the award, or remit the matter to the tribunal with the court’s opinion on the question of law and directions as to the conduct of the arbitration.
Set-aside. Under section 46 of the Act, a party may apply to set aside an award within 30 days of receiving it, without needing leave. The grounds are exhaustive and the threshold is high. The grounds include: a party was under a legal incapacity; the arbitration agreement is invalid; the applicant was not given notice of the arbitration or was otherwise unable to present its case; the award deals with a dispute not covered by the arbitration agreement; the composition of the tribunal or the arbitral procedure was not in accordance with the agreement; the subject matter of the dispute is not capable of being arbitrated; and the award was obtained by fraud or corruption or the arbitrator was in a reasonable apprehension of bias.
Set-aside is not an alternate appeal route. It does not authorize a review of the correctness or reasonableness of the arbitrator’s decision on the substance of the dispute. It addresses the fairness and validity of the process, not the merits of the outcome. Courts have repeatedly emphasized this distinction: a party cannot use a set-aside application to “bootstrap substantive arguments attacking an arbitrator’s findings.”
Where a ground for set-aside is established, the court may nonetheless decline to set aside the award if the breach did not materially affect the applicant’s ability to present its case or the outcome.
International Awards: Set-Aside under the Model Law
For international commercial arbitration awards rendered in Ontario, the only recourse to a court is an application for setting aside under Article 34 of the Model Law. The grounds are closely analogous to those for domestic set-aside: incapacity of a party or invalidity of the arbitration agreement; inability to present one’s case; the award dealing with matters beyond the scope of the submission; improper composition of the tribunal or improper arbitral procedure; non-arbitrability of the subject matter; and conflict with public policy.
The public policy ground requires proof of egregious circumstances, such as corruption, bribery, or fraud in the arbitral process. The award must fundamentally offend the most basic and explicit principles of justice and fairness. A court reviewing an international award cannot set it aside simply because it believes the tribunal decided a point of fact or law incorrectly. The standard of review is “at the high end of the spectrum of judicial deference.”
An application to set aside an international award must be made within three months of the date of receiving the award. Even where a ground for setting aside is established, the court retains a residual discretion to uphold the award. The Model Law’s language is permissive: the court “may” set aside the award. This discretion must be exercised in accordance with the policy of the Act, which emphasizes the finality of arbitral awards and the importance of respecting the parties’ chosen method of dispute resolution.
Recognition and Enforcement of Awards
Domestic Awards
Under the Arbitration Act, 1991, an arbitration award may be enforced with leave of the court in the same manner as a court judgment. Once leave is granted, the award has the same force and effect as a Superior Court judgment. Applications for enforcement are made to the Ontario Superior Court of Justice.
International Awards: The New York Convention
Canada ratified the New York Convention in 1986. The Convention requires each contracting state to recognize and enforce arbitral awards made in the territory of another state, subject to a narrow list of grounds for refusal that mirrors the grounds for setting aside under the Model Law. Recognition or enforcement may be refused only on proof that: a party lacked capacity; the arbitration agreement is invalid; the party against whom the award is invoked was not given proper notice or was unable to present its case; the award deals with matters beyond the scope of the submission; the composition of the tribunal or the arbitral procedure was not in accordance with the parties’ agreement; the award has not yet become binding or has been set aside; the subject matter is not arbitrable; or recognition or enforcement would be contrary to public policy.
Canadian courts construe these grounds for refusal narrowly. The purpose of the New York Convention is to facilitate enforcement of arbitral awards globally, and Canadian courts have recognized that predictability in the enforcement of arbitration agreements and awards is an indispensable precondition to international business. Even if a foreign court has set aside an award, a Canadian court may still choose to enforce it, since Article 36 of the Model Law is discretionary.
Awards set aside at the seat of the arbitration may still be recognized and enforced in Canada. Foreign awards can be enforced in Canada irrespective of whether the state where they were made is a party to the New York Convention, since Canada did not enter a reciprocity reservation.
An application to enforce an international award in Ontario must be made within ten years of the award, or within ten years from the end of proceedings to set aside the award at the seat.
Arbitration Clauses in Practice
Drafting an Effective Arbitration Clause
A poorly drafted arbitration clause can undermine the parties’ intent to arbitrate, lead to satellite litigation over whether a particular dispute is arbitrable, and generate costly procedural disputes that an institutional arbitration clause might have avoided. An effective arbitration clause should address the following elements.
The scope of disputes subject to arbitration should be defined clearly. Broadly worded clauses covering “all disputes arising out of or relating to” the agreement reduce the risk of arguments that a particular claim falls outside the clause. If certain disputes are to be excluded, those exclusions must be explicit.
The seat of the arbitration should be specified. The seat determines which courts have supervisory jurisdiction and which law governs the arbitration. Choosing Ontario gives the parties access to the Ontario courts and the legislative framework described in this article.
The number of arbitrators should be specified. A sole arbitrator is less expensive and quicker; a three-member panel provides more deliberation and is preferable for large or complex disputes.
If an institutional arbitration is preferred, the institution and its rules should be identified. Popular institutions for international disputes include the ICC, the International Centre for Settlement of Investment Disputes (ICSID), the London Court of International Arbitration (LCIA), and ADR Chambers. For domestic Ontario disputes, domestic institutional rules or the UNCITRAL rules are commonly used.
The language of the arbitration and the substantive law governing the dispute should be addressed. These are not the same thing: the seat determines the procedural law of the arbitration, while the substantive law is the law the tribunal will apply to decide the merits.
Whether appeals are permitted, and on what grounds, should be addressed explicitly. Without an agreement on appeals, the default rules of the applicable legislation apply. Parties who want the arbitration to be truly final can exclude all appeal rights; parties who prefer a degree of appellate review can specify the grounds on which an appeal may be brought.
Arbitration Clauses and Class Actions
Arbitration clauses frequently include class action waivers, which require each party to arbitrate their claims individually and prevent them from participating in class proceedings. The enforceability of these waivers in Canada depends on the governing legislation. In provinces that have enacted consumer protection legislation expressly prohibiting class action waivers in consumer contracts, the waivers are unenforceable to that extent. In the absence of such legislation, class action waivers are generally enforced, including in arbitration clauses contained in standard form contracts and click-through agreements.
The Supreme Court’s decision in Seidel v. TELUS Communications Inc. established that courts will give effect to arbitration clauses in consumer contracts, but that claims involving public interest remedies expressly granted by statute may nonetheless be litigated in court notwithstanding an otherwise valid arbitration clause.
Practical Considerations for Businesses
Review your arbitration clause before a dispute arises. If your commercial contracts contain arbitration clauses, understand what they say before a dispute materializes. Know whether the clause is broad or narrow, whether it specifies a seat, which institution’s rules (if any) apply, and what rights to appeal exist. Many arbitration clauses are drafted for a different context or copied from another contract without being properly tailored.
Respond promptly to a notice of arbitration. Once you receive a notice of arbitration, time limits begin running. Jurisdictional objections must generally be raised not later than the submission of the statement of defence. Failure to raise a challenge at the right time can result in it being waived. Obtain legal advice promptly.
Select your arbitrator carefully. The selection of the arbitrator is often the most consequential decision in the arbitration. Consider the candidate’s subject matter expertise, availability, and reputation for conducting efficient proceedings. Check for potential conflicts of interest and require full disclosure.
Understand the limits of court intervention. Canadian courts strongly support the enforcement of arbitration agreements and the finality of arbitration awards. A losing party who did not obtain the result they wanted cannot use the courts to re-argue the merits. The grounds for setting aside or refusing to enforce an award are narrow, and courts apply them strictly.
Confidentiality is not absolute. While arbitration proceedings are generally confidential, arbitration-related litigation in court, including applications to enforce, set aside, or appeal an award, is conducted in public. Sensitive information disclosed in court proceedings in connection with an arbitration may become part of the public record.
Whether you are managing a notice of arbitration, seeking to enforce or challenge an award, or negotiating an arbitration clause in a commercial contract, our commercial litigation practice advises on arbitration law matters in Ontario. Contact Grigoras Law to discuss your situation.
Conclusion
Arbitration is a powerful dispute resolution tool that offers businesses an alternative to court litigation that can be faster, more private, and more flexible. But it is not a shortcut to an easy outcome. The process is governed by detailed legislation, shaped by a growing body of Canadian case law, and capable of producing awards that are enforceable around the world through the New York Convention.
The arbitration clause is the starting point for everything. A well-drafted clause gives the parties certainty, avoids satellite litigation, and ensures that the arbitral process they agreed to is the one they get. A poorly drafted clause creates exactly the kind of expensive procedural uncertainty that arbitration is supposed to prevent.
Once a dispute arises, the rules of the game are set. Courts will enforce arbitration agreements, the arbitral tribunal will be given priority to decide its own jurisdiction in most cases, and the final award will be difficult to challenge or refuse enforcement. Understanding those rules before the dispute arises is the most valuable thing a business can do.
