In Consolidated Contractors Group S.A.L. (Offshore) v. Ambatovy Minerals S.A., a decision of the Court of Appeal for Ontario, a USD$258 million project for the construction of a slurry pipeline from a nickel mine in the mountains of Madagascar to the coast lead to arbitration between the appellant (the contractor) and the respondent (tendered the project). After mutually agreeing to by-pass the adjudication stage of their three-stage dispute resolution process and go straight to a Tribunal, the appellant was only awarded $7M of its $91M claim and the respondent was awarded nearly $25M on its counterclaim. These awards were challenged on appeal as being made without jurisdiction, in breach of procedural fairness, and violating public policy.
However, the appeal was dismissed. Judicial intervention in international arbitral awards under the United Nations Commission on International Trade Law (UNCITRAL) Model Law (the “Model Law”) – though given the force of law by the International Commercial Arbitration Act and the Commercial Arbitration Act – is limited in scope by Article 34.
Domestic courts can only set aside international commercial arbitral awards in the following specific narrow circumstances (set out at para 20):
a) incapacity of a party or legal invalidity of the agreement
b) procedural unfairness
c) absence of jurisdiction
d) non-compliance with the arbitration agreement concerning the tribunal’s composition or procedure
e) non-arbitrability of the dispute
f) a conflict between the award and the domestic public policy
Strathy C.J.O points out that a high degree of deference is afforded and the standard of review is dependent on the specific Model Law ground being appealed. For example, true jurisdiction challenges involve a correctness standard – what falls into this category is narrowly construed, and in this case a true jurisdiction challenge was not established. Furthermore, there is nothing in Model Law that requires the Tribunal to give reasons, as stated at para 62.
In terms of procedural fairness, the conduct of the Tribunal “must be sufficiently serious to offend our most basic notions of morality and justice” and judicial intervention is only warranted when “the Tribunal’s conduct is so serious that it cannot be condoned under the law of the enforcing State” (para 65). In this case, the appellant’s concerns regarding a lack of procedural fairness for the retention monies, hydro seeding, and costs were rejected.
Lastly, the threshold for setting aside an arbitral award as contrary to public policy is that the award “must fundamentally offend the more basic and explicit principles of justice and fairness in Ontario or evidence intolerable ignorance or corruption on the part of the arbitral tribunal” (para 97). This high threshold was not met in this case.
Consolidated Contractors Group S.A.L. (Offshore) v. Ambatovy Minerals S.A. provides a concrete basis for understanding when Courts can refuse the recognition of an arbitral award in Ontario that falls under the International Commercial Arbitration Act. It provides a clear account of both the role and content of Article 34 of UNCITRAL Model Law. For example, though not explicitly stated in this decision, the high thresholds that must be met in order to refuse the recognition of an arbitral award in Ontario may represent the Court reinforcing their commitment to international comity in light of globalization trends. After all, international business interactions have become common place, and the Court may be taking a pragmatic approach to encourage such interactions. In this way, the relevance of Consolidated Contractors Group S.A.L. (Offshore) v. Ambatovy Minerals S.A. cannot be understated.
Please see Gilbertson Davis LLP’s related practice areas webpages on International Commercial Arbitration, on Cross-Border Litigation, and on the Recognition and Enforcement of Foreign Arbitration Awards.
If you require legal advice regarding these practice areas, please contact Gilbertson Davis LLP for an initial consultation.