April 18, 2017

Unpacking Ontario’s International Commercial Arbitration Act: What’s new and what you need to know

Ontario's international commercial arbitration regime recently received a welcome makeover, bringing some much needed clarity and modernisation to its governing legislation. It is hoped that with these changes, the province's marketability as a seat for international commercial arbitrations will continue trending upwards in the years to come.

On March 22, 2017, Bill 27, Burden Reduction Act, 2017, received Royal Assent which, among a host of other legislative changes, gave immediate effect to the International Commercial Arbitration Act, 2017[1] (ICAA 2017). The ICAA 2017 replaces the International Commercial Arbitration Act[2] (ICAA) which had been in effect since 1990. The legislative changes are part of a broader initiative to 'reduce the regulatory burden on business and to achieve a cost savings for government[3].'

The ICAA 2017 introduces several noteworthy changes regarding the rules governing international commercial arbitrations in Ontario and arbitral awards sought to be enforced before its courts.

The ICAA 2017 gives the force of law to the New York Convention

The ICCA 2017 adopts the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, ratified by the United Nations Conference on International Commercial Arbitration on June 10, 1958 (the New York Convention). Widely recognized as the crowning achievement for the recognition of international arbitration as a preferred dispute resolution mechanism, the New York Convention requires that contracting states (and in this case a province) give effect to arbitration agreements and awards rendered in foreign jurisdictions. The New York Convention is now entrenched in the ICAA 2017 as a schedule and has the force of law in Ontario in relation to all arbitral awards or arbitration agreements made either before or after its coming into force. Applications for recognition and enforcement of arbitral awards are to be brought before the Ontario Superior Court of Justice.

Giving the New York Convention the force of law in Ontario provides some welcome clarity for arbitration practitioners and their clients. The ICAA did not reference, or expressly adopt, the New York Convention, creating some uncertainty as to whether Ontario courts were required to show the same deference and protection to foreign arbitral awards afforded by the convention. The ICCA 2017 eliminates any such doubt and brings Ontario in line with several other Canadian provinces which had already given the New York Convention legislative force.

The ICAA 2017 adopts the 2006 amendments to the UNCITRAL Model Law

The ICAA 2017 also incorporates the Model Law on International Commercial Arbitration adopted by the United Nations Commission on International Trade Law (UNCITRAL) in 1985, as amended in 2006 (the 2006 Model Law). In doing so, Ontario becomes the first jurisdiction in Canada to adopt the 2006 Model Law. The 2006 Model Law is a schedule to the ICAA 2017 and applies to all international commercial arbitration agreements and awards, whether made before or after the coming into force of the ICAA 2017. In applying the 2006 Model Law, Ontario courts are given express authority to utilize certain extrinsic material, including UNCITRAL's official commentary on the 2006 Model Law and the 1985 version.

Noteworthy changes in the 2006 Model Law include revisions to Article 7 regarding acceptable forms of arbitration agreements. These were designed to reflect changes in international contract practice and technological developments. While under the 2006 Model Law arbitration agreements must still be in writing, they may be concluded orally and the written requirement can be satisfied by a recording 'in any form'. This includes electronic communication, or an exchange of statements of claim and defence in which an arbitration agreement is alleged by one party and not denied by the other.

In addition, under the 2006 Model Law, arbitral tribunals have powers similar to courts to award interim measures, provided that the parties to the proceeding have not agreed otherwise, and such measures are to be enforced regardless of what jurisdiction ordered them.

The 2006 Model Law provides that, where parties are unable to agree on the law applicable to a proceeding, the tribunal is to apply the law determined by the conflict of laws rules deemed to be applicable. Interestingly, the ICAA 2017 creates a carve out to this provision and provides tribunals with the authority to, in the absence of an agreement by the parties as to the applicable law, apply the rules of law considered to be appropriate in the circumstances, not just what conflict rules might dictate.

The ICCA 2017 extends and synchronizes the limitation period for enforcement of domestic and international awards

Also notable is that the ICAA 2017 modifies and harmonises the limitation periods applicable to proceedings to enforce an arbitral award for not only international arbitrations, but domestic as well. It grants a 10 year limitation period, starting from the date the award was released or the date upon which any proceedings to challenge the award were decided. Previously, enforcement proceedings for both international and domestic awards (which are governed by Ontario's Arbitration Act, 1991[4]) were subject to a two year limitation period. The ICAA 2017 amends the Arbitration Act, 1991 and the Limitations Act, 2002[5] to allow for harmonization of the limitation periods for enforcement of domestic and international arbitral awards.

Welcome changes

Practitioners will certainly want to take note of these important changes to Ontario's international commercial arbitration regime. In addition to providing some welcome clarity on matters where Ontario had lagged behind other provinces and jurisdictions, particularly with respect to adoption of the New York Convention, the ICAA 2017, with the adoption of the 2006 Model Law, presents some interesting new facets to international arbitrations seated in Ontario. The ICAA 2017 also affords significantly more time to bring enforcement proceedings by extending the limitation period to 10 years. Now that the ICAA 2017 is in effect, Ontario courts may see a spike in the number of enforcement proceedings, both domestic and international, brought forward which had been proscribed only a short time ago.

Overall, the changes ushered in by the ICAA 2017 help to bring Ontario's international commercial arbitration regime in step with a number of international best practices. It is also hoped that they will advance Ontario's reputation as an arbitration friendly jurisdiction and encourage parties and their counsel to consider naming Ontario as the seat of arbitration in their arbitration agreements and for disputes in general.

[1] S.O. 2017, c. 2

[2] R.S.O. 1990, c. I.9

[3] Bill 27, Burden Reduction Act, 2nd Sess, 41st Leg, Ontario, 2017, Explanatory Note

[4] S.O. 1991, c. 17

[5] S.O. 2002, c. 24, Sch. B