February 18th, 2021
After a year of speculation, we now have an answer to the burning question among arbitration practitioners in 2020: does the Supreme Court of Canada’s decision on the standard of review on appeals in the administrative law context, established in Canada (Minister of Citizenship and Immigration) v Vavilov, 2019 SCC 65, apply to appeals of commercial arbitration awards? And the answer is……maybe, but maybe not.
This is my second blog on the recent Supreme Court of Canada decision of Wastech Services Ltd. v Greater Vancouver Sewerage and Drainage District, 2021 SCC 7. You can read my blog post about the application and clarification of the Bhasin principles to this decision here.
The important issue we hoped to be resolved by Wastech was whether the standard of review for commercial arbitrations as decided in the leading cases Sattva Capital Corp. v Creston Moly Corp., 2014 SCC 53, and Teal Cedar Products Ltd. v British Columbia, 2017 SCC 32, had been overturned by Vavilov.
Pre-Wastech: Sattva & Teal, then Vavilov
In Sattva and Teal Cedar, the Supreme Court held that the standard of review applicable to appeals under s. 31 of the B.C. Arbitration Act, R.S.B.C. 1996, c. 55 (now repealed and replaced by the Arbitration Act, S.B.C. 2020, c. 2, s. 59) is “reasonableness” in most cases, which was consistent with historical precedent.
Vavilov set out a revised framework for determining the standard of review of administrative decisions and found that appellate standards of review will apply in various contexts wherever the legislature has provided for a statutory right of appeal. But Vavilov did not advert to either Sattva or Teal Cedar, “decisions which emphasize that deference serves the particular objectives of commercial arbitration”.
So, did new Vavilov framework apply to appeals of arbitral awards or not?
The Wastech decision
In Wastech, the appeal was brought pursuant to s. 31 of the former B.C. Arbitration Act, which provided that either by consent of the parties or leave of the Court, a party to an arbitration may appeal an arbitrator’s award to the Court on a question of law. The plaintiff argued that the arbitrator’s award should stand as it was reasonable. The appeal raised both questions of law reviewable on the “reasonableness standard” in accordance with Sattva and matters of contract interpretation, which involve questions of mixed fact and law and are not reviewable on appeal. The defendant argued that at issue were questions of law reviewable on the “correctness standard”, which the arbitrator answered incorrectly (and, in the alternative, unreasonably).
The 6-justice majority of the Supreme Court did not decide the proper standard of review, on the grounds that it was not relevant to the outcome of the appeal, because the Court’s decision would be the same whether the standard of review was “reasonableness” or “correctness”. Further, the Court did not have the benefit of submissions from the parties or reasons on point from the courts below. (And this silence was not to be interpreted as agreement with the minority.)
However, the 3-justice minority (concurring in the result) held that the Court should clarify the applicable standard of review because of the conflicting lines of authority that have arisen since Vavilov. The minority held, quite simply, that despite the differences between commercial arbitration and administrative decision-making, appellate standards of review will apply wherever the legislature has provided for a statutory right of appeal. This is a matter of statutory interpretation. As in Vavilov, there is no convincing reason to presume that legislatures ascribed a different meaning to the word “appeal” in different contexts. Factors that justify deference to an arbitrator are irrelevant to this exercise of statutory interpretation. Therefore, “to this extent”, Vavilov has displaced the reasoning in Sattva and Teal Cedar. Unfortunately, it is not clear what the words “to this extent” mean.
Is the minority decision to be read that the policy objectives of commercial arbitration - deference, efficiency and finality - which caused the Court in Sattva to establish a standard of review of reasonableness, must give way to an appellate standard of review on the ground that it is the clear intention of the legislature in all contexts?
A divided Court and continued uncertainty
While the minority’s position has some attractiveness in its simplicity, what is unsettling is that the Court was considering exactly the same appeal provision in exactly the same arbitration legislation as was relevant in both Sattva and Teal Cedar and the minority reached a different conclusion. Moreover, in Sattva, the Court articulated very clear reasons why, for policy reasons, appeals of arbitral awards should not be considered analogous to administrative law appeals and that the framework established in that context by the Court in Dunsmuir v New Brunswick, 2008 SCC, which was revised in Vavilov, did not apply. Neither of these vexing issues was addressed by the minority. Nor were the potential implications to other court reviews of arbitral awards such as enforcement and set aside applications.
Wastech suggests a deep divide within the Court on the appropriate standard of review, which will likely lead to continued uncertainty and inconsistent case law on this important issue. This divide is evident from the fact that 4 of the justices who sat on the Sattva and Teal Cedar appeals (Abella, Moldaver, Karakatsanis, and Wagner JJ) decided not to determine the standard of review issue in Wastech. However, the 3 justices in the minority in Wastech, who had been in the majority in Vavilov (Cote, Brown, and Rowe JJ), were willing to apply Vavilov to appeals of commercial arbitration awards.
Despite the opportunity that Wastech presented to the Supreme Court to clarify the application of Vavilov to appeals of arbitral awards, we remain in the same place as before the release of Wastech: waiting for clear direction from the Supreme Court of Canada, supported by doctrinal analysis, on the applicable standard of review of appeals of arbitral awards.