A Preliminary Study of Ontario Arbitral Awards on Jurisdictional Issues

How do the courts react on the arbitral jurisdictional issues in Ontario?

The jurisdiction of a consensual arbitrator flows from the authority given by the parties to the agreement. According to the competence-competence principle, the arbitral tribunal possesses jurisdiction to decide the scope of disputes between the parties according to the common intention consolidated in the arbitration agreement signed by those parties who agree to be bound by the arbitral process.

The competence-competence principle gives precedence to the arbitration process and holds that “arbitrators should be allowed to exercise their power to rule FIRST on their own jurisdiction” (Dell Computer Corp. v. Union des consommateurs2007 SCC 34 [2007] 2 S.C.R. 801). Thus, it is established that the court would systematically refer to arbitral tribunal to rule on its own jurisdiction.

Further, Deschamp J. stated in the above-mentioned decision that the court may rule on the jurisdictional issues first ONLY WHEN the challenge to the arbitrator’s jurisdiction is based SOLELY on the questions of laws OR on the questions of mixed law and fact where “the questions of fact require only superficial consideration of the documentary evidence in the record”. Deschamp J. also elaborated the justifications for these exceptions as follows:

  1. the courts’ expertise on questions of law/legal questions; AND
  2. the efficiency to be achieved by having the issue dealt with when the request for a stay and referral is made.

Now, it’s important to note that, in Ontario, referring the issue of jurisdiction to the arbitrator in the first instance does not eliminate the possibility of judicial review. S. 17 (8) of Ontario Arbitration Act provides for judicial review of a preliminary ruling on jurisdiction. S. 46 (1) stipulates that an arbitral award may be set aside if it strays beyond what is covered by the arbitration agreement.

Then, what is the standard of review of the arbitral awards on jurisdictional issues in Ontario?

When the court reviewed an arbitral award on its jurisdiction to join two other parties into the arbitration proceeding of Covanta and CPP, the application judge concluded that an application for review properly lay to the court according to s. 17 (8); and that the standard of review was correctness (2016 ONCA 558). Accordingly, the application judge made an order setting aside the arbitrator’s ruling adding the other two parties to the arbitration proceedings. And according to s. 17 (9), there should be no appeal from this decision.

On the other hand, it’s worth to mention that s. 17 is concerned only with the arbitrator’s jurisdiction to entertain the SUBJECT MATTER of the dispute (Inforica Inc. v. CGI Information Systems and Management Consultants Inc.2009 ONCA 642). Asking an arbitrator to decide whether he has jurisdiction to order security for costs does NOT correspond to asking him whether he has jurisdiction to conduct the arbitration. In these situations, the Court has no jurisdiction to entertain the application to set aside the arbitral award according to s. 17 (8).

(Reminder: The purpose of this article is to provide general legal information. It does not contain a full analysis of the law nor does it constitute a legal advice on the points of law discussed. To minimize the legal risk for your business, you must take specific legal advice from a lawyer on any particular matter which concerns you. Thanks for your attention. ?)