Quelques pas de plus vers la clarté : commentaires judiciaires récents au sujet de l’indemnisation de l’ensemble des frais accordée en arbitrage national
Inching Towards Clarity: Recent Judicial Commentary on Full Indemnity Cost Awards in Domestic Arbitrations
This article discusses recent comments of the courts in British Columbia and Alberta about full indemnity domestic arbitration cost awards, and challenges to those awards.
It is not uncommon for successful parties in domestic commercial arbitrations to be awarded their actual reasonable legal fees and disbursements on a full indemnity basis. The opportunity to recover full indemnity costs is often viewed as a significant benefit of commercial arbitration. Almost all Canadian provinces and territories have domestic arbitration legislation that expressly confers discretion on arbitrators to award such costs.
Despite this broad statutory discretion, unsuccessful parties faced with full indemnity cost awards sometimes challenge them on the basis that arbitral tribunals should follow traditional court rules that limit such awards to exceptional circumstances. This article contrasts recent judicial commentary about full indemnity domestic arbitration cost awards, and challenges to those awards, in British Columbia and Alberta.
British Columbia’s domestic arbitration legislation has long conferred broad discretion on arbitral tribunals to issue full indemnity costs awards. British Columbia’s new Arbitration Act provides that arbitral tribunals may determine a costs award by reference to actual reasonable legal fees, expenses, and witness fees.[i] It also allows arbitral tribunals to summarily determine the amount of costs. This is a change that overrides prior decisions that indicated that summary determination of legal fees, without ordering production of the solicitor’s file, amounts to a breach of natural justice.[ii]
Beyond confirming the broad discretion of arbitral tribunals to issue full indemnity costs awards, British Columbia’s Supreme Court has acknowledged that the award of full indemnity costs is the normal rule in commercial arbitrations. The Court recently stated that “[w]hile costs fall within an arbitrator’s discretion, the ‘normal rule’ in arbitrations is that the successful party is entitled to ‘indemnification costs unless there are special circumstances that would warrant some other type of costs.’”[iii] Accordingly, British Columbia courts have rejected arguments that exceptional circumstances, such as a finding of misconduct, are a prerequisite to an award of full indemnity costs in the domestic arbitration context.[iv]
Like in British Columbia, Alberta’s domestic arbitration legislation confers broad discretion on arbitral tribunals to award full indemnity costs. Alberta’s Arbitration Act provides that arbitral tribunals may award all or part of the costs of an arbitration on a solicitor-and-client basis, a party-and-party basis, or any other basis.[v] It provides, however, that costs shall be determined on a party-and-party basis when an arbitral tribunal does not specify the basis for a costs award.[vi]
While Alberta courts have not gone so far as to classify full indemnity costs as the normal rule in commercial arbitrations, they have nevertheless given significant deference to full indemnity costs awards issued in domestic arbitrations. In 2018, the Alberta Court of Queen’s Bench confirmed that Alberta’s Arbitration Act gives arbitral tribunals a “great deal of discretion” to award costs. The Court concluded that the combined effect of that legislation and the parties’ agreement suggested that the arbitrator had full discretion as to costs and was not bound by traditional rules regarding costs awards.[vii]
More recently, the Court in K-Rite Construction Ltd v. Enigma Ventures Inc noted the argument made by one of the litigants that indemnity costs were the norm in arbitration. “[C]aselaw cited by the Respondent suggests that full indemnity is the norm regarding commercial arbitration, and that this is consistent with the proposition that the parties intended the Arbitrator havediscretion to award solicitor and client costs.”[viii] The Court, however, stopped short of confirming that arbitral tribunals in domestic arbitrations are not bound by the traditional rules regarding an award of costs by a court in Alberta. Instead, the Court concluded that, even if arbitrators may be bound by those principles in other cases, the agreement between the parties in that case gave broad discretion to the arbitrator to award costs.[ix]
The availability of full indemnity costs awards for successful parties in commercial arbitrations may motivate parties to arbitrate their disputes. However, while Canadian courts may one day broadly recognize indemnity costs as the norm in commercial arbitrations, court decisions about this issue remain context-specific and vary between jurisdictions and statutory regimes.
Given the incentive for unsuccessful parties to oppose and challenge full indemnity costs awards, practitioners should pay close attention to costs provisions in applicable domestic arbitration legislation and the wording of individual arbitration agreements, including any institutional rules adopted in those agreements. To avoid ambiguity, parties seeking certainty in domestic arbitrations should consider explicit language in their arbitration agreements, either confirming the scope of discretion to award costs in their arbitration agreements, or stipulating that costs will be awarded to the successful party on a specified scale.
[iii] Allard v. The University of British Columbia, 2021 BCSC 60 at para. 78, citing Goel v. Sangha, 2019 BCSC 1916 at paras. 66-69 and Teal Cedar Products Ltd. v. British Columbia (Ministry of Forests), 2011 BCSC 360 at paras. 78 and 85 (varied on other grounds, 2012 BCCA 70).
Ariel Solose is a commercial litigation and arbitration lawyer based in Vancouver, British Columbia, specializing in domestic and international infrastructure arbitrations.
Sean Gallagher is an associate at the Vancouver office of Blake, Cassels & Graydon LLP, practicing in the areas of corporate/commercial litigation, arbitration, and dispute resolution.