Introduction
NYSE v Orbixa
Assam v Canoro
Comment
Recent decisions of the British Columbia Supreme Court and the Ontario Court of Appeal have upheld the integrity of the arbitral process by enforcing international arbitral awards. Both courts applied the United Nations Commission on International Trade Law (UNCITRAL) Model Law and New York Convention, as adopted by the provinces of British Columbia and Ontario, noting the mandatory nature of the enforcement provisions and refusing to exercise their discretion to refuse enforcement on the limited grounds available.
In New York Stock Exchange LLC v Orbixa Technologies, Inc,(1) the Ontario Court of Appeal adopted the reasons of the Ontario Superior Court of Justice(2) in a single-page judgment, with costs to the victor. The Ontario Superior Court had rejected Orbixa's arguments that the enforcement proceeding was premature and otherwise offended the public policy of Ontario, and granted recognition and enforcement of an arbitral award made in New York in favour of the New York Stock Exchange (NYSE) (also with costs to the NYSE).
In Assam Company India Limited v Canoro Resources Ltd,(3) the British Columbia Supreme Court recognised and enforced the monetary aspects of an arbitral award (in the amount of over C$32 million) made in India in favour of Assam and against Canoro (also with costs to Assam). A complicating factor in the proceeding was that the British Columbia registrar of companies had dissolved Canoro, which led the court to refuse, at the time, to enforce the provision of the arbitral award which held that 52.9% of the shares in Canoro be transferred to Assam. The court invited the parties to determine a mechanism for enforcing the share-transfer aspect of the arbitral award, failing which Assam was granted leave to apply to the court for alternative mechanisms.
Both courts addressed complicated factual matrices in determining that the mandatory nature of the enforcement provisions of the relevant legislation (based on the UNCITRAL Model Law and the New York Convention) should prevail, absent a challenging party demonstrating that one of the narrow grounds for refusing enforcement existed.
Facts
On April 29 2013 an arbitral award was made in New York in favour of the NYSE. The award denied Orbixa's claims for injunctive relief to prevent the NYSE from terminating an agreement between the parties and for amounts it claimed it was overbilled. The decision granted the NYSE's counterclaim for amounts that it had invoiced Orbixa and a declaration that the NYSE had the right to terminate the parties' agreement.
The court first addressed Orbixa's position that the NYSE's application for recognition and enforcement was premature because the award was not "final and binding". Orbixa's position was based on the fact that it had applied to the US Securities and Exchange Commission (SEC) requesting, among other things, a review of the NYSE's decision to deny services to Orbixa by terminating the parties' agreement and a review of the decision of the arbitrator. In submissions, however, Orbixa confirmed that it was not requesting the SEC to review the arbitrator's decision and that there were no grounds for appeal of the award under the US Federal Arbitration Act. Indeed, although Orbixa had also filed an action on July 26 2013 in the US District Court for the Southern District of New York seeking to vacate the award, it withdrew its complaint and the case was closed on August 9 2013.
Decision
After noting the mandatory nature of the enforcement provisions of the UNCITRAL Model Law – adopted wholesale in Ontario – the court addressed the issue of whether the application was premature due to the award not yet being final and binding. The court held that the date for determining whether the award is final and binding is the date the matter comes before the court, not the date that the application is filed. The court also held that the SEC proceedings did not affect the final and binding nature of the award. The court noted that a party may run the risk of a court exercising its discretion to refuse enforcement if, when the matter comes before the court, the award is still not binding. The court did not say that refusal to enforce would be certain even if the arbitral award could be considered as not final and binding – it merely noted that the situation in the case before it was different because of its determination that the award was final and binding on the parties.
The court also held that Article 36(2) of the UNCITRAL Model Law – granting the court the power to adjourn the application for enforcement pending the determination of set aside proceedings – did not apply because Orbixa had made no application to set aside or suspend the award (Orbixa's application having been abandoned in New York). Finally, the court dismissed any suggestion that the award offended Ontario's "principles of justice and fairness in a fundamental way", and held that "Orbixa received a full hearing and argument and exercised its rights of review".
Facts
Assam and Canoro entered into a joint operating agreement with respect to a potential oilfield in India. A disagreement arose between the parties in relation to Canoro seeking to carry out an investment agreement with a third party, Mass Financial Corp. Under the Mass transaction, approximately 53% of Canoro's shares would be transferred to Mass Financial, despite Canoro not having offered Assam a right of first refusal under the joint operating agreement. Assam successfully obtained a lis pendens order in the High Court of Delhi, which permitted the Mass transaction to proceed subject to the findings of an arbitral tribunal should Assam pursue arbitration. Assam successfully pursued arbitration.
The issues addressed in the British Columbia court on Assam's application to enforce the arbitral award arose primarily with respect to Canoro's objection to the method of the appointment of the chair of the three-member tribunal. Both parties appointed retired justices of the Indian courts. When they could not agree on the chair, Assam – exercising its right under the parties' arbitration agreement contained in the joint operating agreement to appoint the chair – appointed a Malaysian barrister. Canoro disputed the validity of the appointment; it requested the tribunal to rule on its objection and filed a petition in the Supreme Court of India for relief. Canoro then abandoned both avenues of challenge and voluntarily chose to participate no further in the arbitration proceedings.
The tribunal unanimously ruled that the chair had been properly appointed in accordance with the parties' arbitration agreement (on the basis that the agreement specifically provided Assam with the right to appoint the chair in the circumstances). The tribunal then carried out the remainder of the proceedings, taking precautions to ensure that Canoro was advised of them. This included requiring Assam to take out ads in New Delhi newspapers advising Canoro of, among other things, the hearing schedule and requiring Assam to serve Canoro with notice at its offices in India and Canada. Canoro continued its non-participation. The tribunal's final award granted Assam's claims for damages under seven of 10 heads and dismissed three other claims.
Assam filed a petition in British Columbia for recognition and enforcement of the final award.
Decision
Canoro resisted enforcement of the final award on the basis of Sections 36(1)(a)(iii) and (v) of the International Commercial Arbitration Act (RSBC c 233), which mirror Articles V(1)(b) and (d) of the New York Convention, regarding the ability to present its case and the composition of the tribunal not having been in accordance with the parties' agreement or the laws of the place of arbitration (ie, India). Canoro also relied on Section 36(1)(b)(ii) of the International Commercial Arbitration Act, which mirrors Article V(2) of the New York Convention, regarding breaches of British Columbian public policy. The parties disagreed on the onus of proof pertaining to the public policy ground, which – in addition to all objections to enforcement – the court confirmed rested solely on Canoro's shoulders.
The court held that Canoro had been given a full opportunity to present its case and had various avenues open to it to challenge the procedure, including the appointment of the tribunal and the award. The court held:
"Canoro took a high risk strategic decision when it opted to abandon both its petition to the Supreme Court of India and its further participation in the arbitration. Having done so, it now seeks to re-litigate before this Court the same objections raised in India, labelling them as "triable issues" of the sort that warrant rejection of Assam's potion in favor of further discovery and ultimately a full trial here in British Columbia.
I find, however, that in accordance with the legal principles articulated above, Canoro is not entitled to re-litigate its case in British Columbia. It could have and should have pursued the procedural and legal options available to it in India. It did not do so and it must live with the consequences."
The court also held that:
"'contrary to public policy'… is to be narrowly construed and requires fundamental breaches of justice and fairness and conduct of a sort that could not be tolerated or condoned by our courts."
In granting recognition and enforcement of the award, the court held that no such breaches existed.
These cases confirm Canada's status as an arbitration-friendly jurisdiction, particularly in the context of the recognition and enforcement of international arbitral awards. Canada's courts have consistently deferred to the competence of arbitral tribunals, while giving effect to the principles that support international arbitration contained in the UNCITRAL Model Law and the New York Convention.
In NYSE, the Ontario courts gave short shrift to Orbixa's efforts to avoid the binding obligations on it under the arbitral award in favour of the NYSE. In Assam, the British Columbia court, as it has done recently and in the past, respected a foreign-based arbitral process and confirmed that a party which refuses to participate in arbitration proceedings for any reason does so at its own peril (for another example see "Refusing to participate in arbitration proceedings may have adverse consequences").
For further information on this topic please contact Craig R Chiasson at Borden Ladner Gervais LLP by telephone (+1 604 640 4084), fax (+1 604 622 5915) or email ([email protected]). The Borden Ladner Gervais LLP website can be accessed at www.blg.com.
Endnotes
