The Impact of Vavilov on Commercial Arbitration
By Gordon L. Tarnowsky Q.C. and Rachel Howie
The standard of review for appeals from commercial arbitration awards – where permitted in Canada – has been settled for some time, including by judgments of the Supreme Court of Canada. With its judgment in Canada (Minister of Citizenship and Immigration) v Vavilov (“Vavilov”) dealing with “statutory appeals”, the Court, whether intentionally or unintentionally, may have unsettled the law governing appeals of commercial arbitration awards.
One of the distinguishing features between international and domestic commercial arbitration in Canada is the ability of parties to appeal a domestic award to varying degrees depending on the applicable legislation and arbitral agreement. In domestic arbitrations an appeal right could be exercised by either party, particularly if they believe the Tribunal made reviewable errors. As a result, the standard for review applied by a court in hearing any such appeal is important to parties that agree to arbitrate and can impact procedural and strategic considerations in an arbitration.
Before Vavilov, the Supreme Court of Canada had established and confirmed the law regarding appellate review of commercial arbitration awards. The commercial arbitral standard of review on appealable questions of law was “almost always” reasonableness; only questions of a constitutional nature or questions of central importance to the legal system and outside of the tribunal’s expertise would attract the correctness standard. The Court considered arbitral appeals to be distinct from judicial reviews of decisions by administrative or statutory tribunals.
In Vavilov the Supreme Court set about resolving, and redefining, what had become a complex approach to judicial review of decisions made by administrative tribunals. The majority held that a reasonableness standard of review applies presumptively, even for questions of law, unless there is a recognized exception. The potentially relevant exception in the arbitration context is where there is a legislated appeal right signalling the applicable standard. Here, in a departure from previous case law, the majority held that the applicable standard of review would then be determined based upon the type of question at issue: questions of law are to be assessed on the standard of correctness; questions of fact and questions of mixed fact and law, where the question of law is not readily extricable, are to be assessed on the standard of palpable and overriding error.
There is no express mention in Vavilov of commercial arbitration or appellate review of commercial arbitration awards. The majority in Vavilov charts “a new course forward for determining the standard of review that applies when a court reviews the merits of an administrative decision” so it is not surprising that there is no mention of the key standard of review cases for commercial arbitration. One might say it is surprising that the majority made no mention of the commercial arbitration context when the Court received intervener submissions (from the British Columbia International Commercial Arbitration Centre Foundation) on the need to maintain a distinction between the two types of appeals. The “revised framework for determining the standard of review a court should apply when the merits of an administrative decision are challenged”, while undoubtedly broad and intending to revise the existing administrative law framework, appears limited in application to that context.
However, in charting this “new course” the majority also “provides additional guidance for reviewing courts to follow when conducting reasonableness” reviews. Departing from the Court’s previous stance on statutory rights of appeal, the majority notes that “appeal” in an administrative law statute might not be different from a commercial law context. Whether this aims to cast (or signals the potential for) a wider scope of application for the decision (i.e. potentially impacting the interpretation of statutory appeal rights in domestic arbitration legislation), or is more properly considered obiter and tempered by the specific administrative law context of the decision, has caused some division amongst lower courts. For example:
- In Buffalo Point First Nation et al. v Cottage Owners Association, which involved a commercial arbitration under the Manitoba Arbitration Act, the Court found the direction in Vavilov to be applicable, holding “that the presumption of reasonableness as the standard of review can be rebutted ‘where the legislature has provided a statutory appeal mechanism from an administrative decision to a court, thereby signalling the legislature’s intent that appellate standards apply when a court reviews the decision’.” Because the Manitoba Arbitration Act provides a statutory appeal right, the Court held that the standard of review ought to be the appellate standard of correctness and not reasonableness.
- Two weeks later, the Alberta Court of Queen’s Bench released its decision in Cove Contracting Ltd. v Condominium Corporation No 012 5598 (Ravine Park). The Court rejected arguments that Vavilov ought to apply to an appeal under the Alberta Arbitration Act, finding Vavilov was not applicable in a commercial arbitration context. Further, the Court held that the Supreme Court’s decision in Vavilov not to reference Teal Cedar or Sattva meant the Court had no intention to overrule this previous jurisprudence.
- At the end of March, 2020 the Ontario Superior Court of Justice in First Nations (2008) Limited Partnership v Ontario Lottery And Gaming Corporation, also found the principles from Vavilov did not apply to commercial arbitration. “The standard of review for commercial arbitrations is guided by commercial considerations about respect for the decision-makers chosen by the parties… deference is justified by the parties’ contractual intent. It is for this reason that Rothstein J. identified the key differences between administrative decisions and arbitral awards in Sattva and concluded that the judicial review framework for administrative decisions is not applicable in the commercial arbitration context.”
- In Allstate Insurance Company v Her Majesty the Queen the Court dealt with an appeal of an arbitral decision issued under the Ontario Insurance Act that was resolved by arbitration under the Ontario Arbitration Act. The Court distinguished between statutorily prescribed arbitration (in this case as mandated by the Insurance Act) and commercial arbitration, and applied Vavilov to determine the standard of review because this was an arbitration mandated by legislation.
Knowing the law around potential appeals from a domestic arbitral award – from whether a right exists to what standard of review might apply – is important from the outset of any dispute, if not from the beginning of any commercial arrangement. Time will tell whether Vavilov impacts appeals from domestic commercial arbitral awards, though the limited judicial consideration to date suggests Vavilov is not likely to result in a change to the existing standard of review.
Gordon L. Tarnowsky Q.C. is a partner with Dentons and the Canada Dispute Resolution Practice Group Lead.
Rachel Howie is a partner with Dentons and the co-lead of the Dentons Canada ADR and Arbitration group.
The authors acknowledge, with thanks, the assistance of Emily Shilletto, Associate at Dentons. Any opinions expressed herein are those of the authors for the purposes of this article and do not reflect the views of Dentons.
 2019 SCC 65. [Vavilov]
 Sattva Capital Corporation v Creston Moly Corporation, 2014 SCC 52, [Sattva] and Teal Cedar Products Ltd. v British Columbia, 2017 SCC 32. [Teal Cedar]
 For a more detailed discussion of the decision in the administrative law context, see Dentons’ Insight on the case: Greg Kane et al, “Supreme Court of Canada redefines approach to review of administrative decisions”, Case Comment on Canada (Minister of Citizenship and Immigration) v Vavilov (30 December 2019), online: Dentons Canada LLP <www.dentons.com/en/insights/alerts/2019/december/30/supreme-court-of-canada-redefines-approach-to-review-of-administrative-decisions>
 Vavilov at para 2.
 Vavilov at para 16.
 Vavilov at para 2.
 Vavilov at para 40.
 Vavilov at para 44.
 2020 MBQB 20. [Buffalo Point]
 CCSM c A120
 Buffalo Point at para 46, citing Vavilov at para 17.
 Buffalo para 47-48.
 2020 ABQB 106. [Cove]
 RSA 2000, c A-43.
 Cove at para 12.
 2020 ONSC 1516. [OLG]
 OLG at para 72.
 2020 ONSC 830. [Allstate]
 RSO 1990, c I.8
 1991, SO 1991, c 17
 Allstate, at footnote 6 and accompanying text.