Principles Applicable to Court Decisions About Jurisdiction Rulings By Arbitral Tribunals
By Linda Jensen
In Ong v Fedoruk[1], the court considered an arbitral tribunal’s ruling as to its own jurisdiction. The judgment addresses legislative language used in many provinces and territories related to the applicable standard of review and an arbitrator’s ability to retain jurisdiction. Although making no attempt to resolve the uncertainty over the impact of the Vavilov[2] decision on the standard of review applicable to arbitral decisions, the judgment does provide useful guidance on issues specific to the question of jurisdiction.
The decision in Ong v Fedoruk arose from commercial arbitration involving an agreement for the sale of shares of a business. The main substantive issues in dispute were the valuation of the shares and the purchasers’ decision to terminate the seller’s employment with the company. The arbitrator issued an award settling those issues, but reserved jurisdiction on the unresolved issues of the amount of salary owed to the seller, interest payable on amounts awarded, and costs (“Reserved Matters”).
Subsequently, a dispute arose about the arbitrator’s jurisdiction to adjudicate on the Reserved Matters. The arbitrator held that he had jurisdiction, and set a procedure to hear the Reserved Matters. Following the arbitrator’s award on those matters, the seller brought an application challenging the arbitrator’s determination of jurisdiction, and his ability to make the award of costs.
Standard of Review of Arbitrator’s Decision as to Jurisdiction
Section 17(9) of Alberta’s Arbitration Act confirms that rulings by an arbitral tribunal with respect to its own jurisdiction are subject to an application to the court to “decide the matter”.
In Ong, the Court agreed with Alberta and Ontario case law interpreting that language as requiring courts to review on a standard of correctness, rather than a standard of reasonableness. While the Court accepted that a reasonableness standard normally applies to an appeal of an arbitral decision[3], it noted that the authorities nonetheless indicate that a correctness standard should apply to “questions of law that are of central importance to the legal system as a whole and outside the arbitrator’s expertise”[4].
The Court skirted the issue of whether the Vavilov decision may have changed the framework applicable to appeals of arbitral decisions, concluding simply that the arbitrator’s jurisdiction fell into this category of questions of law, and therefore a correctness standard applied.
Similarly, the language of s. 17(9) authorizing a court to “decide the matter” was central to the conclusion that a hearing under that section should be de novo, rather than a hearing on the record. The Court expressly declined to follow the limited Alberta case law on point which favoured a hearing on the record, and instead preferred the contrary approach taken by Ontario and UK courts, which it considered to be consistent with “international consensus on the issue in the context of international commercial arbitration”. The Court saw “no principled reason” why Alberta courts deciding the matter of an arbitrator’s jurisdiction should proceed any differently from courts in other jurisdictions interpreting similar language.[5]
Power of Arbitrator to Retain Jurisdiction
Applying the correctness standard, the Court examined the seller’s challenge to the arbitrator’s ability to retain jurisdiction over costs. The Court provided commentary on the scope of section 20 of the Act, which authorizes an arbitrator to determine the procedure to be followed in the arbitration.
The Court observed that not only had the arbitrator expressly reserved jurisdiction over the Reserved Matters (including costs), but he had good reason to do so, since the information necessary to resolve those matters – which clearly fell within the matters the parties had agreed to submit to the arbitrator – was not in evidence at the time of the initial award. Applying a broad and liberal interpretation of section 20, the decision to retain jurisdiction was an appropriate exercise of the arbitrator’s discretion, promoting the objectives of efficiency, timeliness, and specialized expertise that underlie the arbitration process.
However, that would not have been the case if any of the circumstances giving rise to termination of the arbitration under section 42 of the Act had occurred. The Court noted that “section 20 is not limitless and does not include the power to extend statutory time limits”[6]. The arbitrator’s jurisdiction over costs therefore continued to exist only as long as he also retained jurisdiction over the Reserved Matters.
Dealing specifically with the costs awarded against the seller, the Court found no error by the arbitrator in making that award several months after the initial decision on the merits, notwithstanding language at section 53(4) of the Act requiring a party seeking an award of costs to request it within 30 days. The Court held that language at section 53(4) requiring the arbitrator to “deal with costs” was not equivalent to a requirement to “award costs” or “make a decision about costs”. Consequently, the language of the initial award reserving the matter of costs was sufficient to prevent a loss of jurisdiction.
Conclusion
Ultimately, the Court in Ong concluded that the arbitrator did not err in determining his own jurisdiction or in exercising his authority to set procedure and retain jurisdiction over unresolved issues, including costs. The decision offers useful treatment of the principles governing those issues, and will certainly be a helpful decision for practitioners seeking guidance on matters of jurisdiction under the Alberta Act, or similar legislation in other provinces and territories.
[3] Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53.
[4] Ong at paras 28-30, citing Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District, 2021 SCC 7 and Sattva, ibid.
[5] Ong at para 37, declining to follow Kitt v. Voco Developments Inc, 2005 ABQB 743.
Linda Jensen is the principal and lead lawyer at Bottom Line Research and Communications, a company providing legal research and writing services to law firms, corporations, and other agencies throughout common law Canada since 1993.
