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Aphorisms in Arbitration Law (and an aside on Vavilov)

3 minute read

Arbitration is often lauded for the flexibility it can provide to allow parties to customize their arbitration procedure to fit their dispute.  However, as a recent decision of the British Columbia Court of Appeal shows, there are dangers in deviating too far from the procedural basics.  Nolin v Ramirez, 2020 BCCA 274, cautions parties against making unwise decisions about process in an effort to increase the expediency and thereby reduce the costs of the arbitration.  It highlights the importance of a reasoned final arbitral award.

The appeal in this case arose from the order of a motion judge dismissing an appeal from a family law arbitrator’s award.  The issues on appeal related to whether the arbitrator had made errors with respect to his decision on certain property matters.

In the introduction to its Reasons for Judgment, the Court issued a caution:

By agreement, the arbitrator issued brief or “summary reasons” for his conclusions.  The idea was to save money. Unfortunately, the brevity of those reasons led to an appeal in the [British Columbia] Supreme Court, and now to an appeal in this Court. The phrase, “penny-wise and pound-foolish” comes to mind.

This term of the parties’ agreement led to two appeals of the arbitrator’s award, which outcome was directly contrary to the parties’ intention to streamline the process and reduce costs.

It is often said that a reasoned award is made for the benefit of the losing party, which will want both the assurance that it has been heard and an understanding of why it lost.  While parties may contract out of the requirement of a written reasoned award (see ss. 3 and 38 of the Ontario Arbitration Act, 1991, S.O. c.17, for example), this case is a reminder that it may be counter-productive for them to do so.

As an aside, in a previous blog, “Vavilov: Does it apply to commercial arbitrations?” I analyzed the Vavilov decision and the subsequent cases considering whether the administrative law standard of review analysis is to be applied to court reviews/appeals of arbitral awards in commercial arbitrations.

My blog concluded that it was not clear and that the cases have been divided on this issue.  The British Columbia Court of Appeal also considered this issue in this case.  It noted that Vavilov had “altered the landscape of administrative decision-making” and that reasonableness is now the “presumptive standard”, to be derogated from only where required by rule of law or a clear legislative intent such as an appeal mechanism which would signal the application of appellate standards (either standard of correctness or palpable and overriding error, depending upon the question).

Further, the “question borne by Vavilov is whether the dictates of the Court extend beyond judicial review of administrative decisions, and to arbitration appeals”.  The Court also noted that the Supreme Court of Canada in Vavilov did not refer to the two prior key decisions concerning arbitration appeals:  Sattva Capital Corp. v Creston Moly Corp., 2014 SCC 53, and Teal Cedar Products Ltd. v British Columbia, 2017 SCC 32, which established that the standard of review from an arbitral award is “almost always” reasonableness. Nor did the Court even mention the word “arbitration”.

In Nolin v Ramirez, the B.C. Court of Appeal found that it would have allowed the appeal whether the standard of review was reasonableness or palpable and overriding error. Therefore, it was “unnecessary to decide the obviously complex question”.

In other words, this question remains unresolved.

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Lisa C. Munro, Q.Arb

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