By Ruzbeh Hosseini
Parties seeking the enforcement of foreign arbitral awards in Ontario must understand how Ontario courts recognize and enforce awards issued abroad. Does the Ontario court re-try the case or does it simply enforce the award? The short answer is that Ontario courts enforce. The longer answer lies in the International Commercial Arbitration Act, 2017 (the “ICAA”),[1] which makes the New York Convention the law of Ontario and leaves an award debtor with a short, closed list of defences.
In short, Ontario courts generally recognize and enforce foreign arbitral awards without reconsidering the merits of the underlying dispute. Refusal is limited to the grounds set out in Article V of the New York Convention.
Why Canada Signed On
Canada ratified the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “Convention”) for two reasons that shape how Ontario courts approach New York Convention arbitration and recognition and enforcement. The first is to advance the “presumptive enforceability and overall predictability of arbitration agreements.”[2] The second is to give effect to what the parties bargained for when they agreed to arbitrate rather than litigate.[3] Ruzbeh Hosseini’s cross-border and international disputes practice also advises on award enforcement strategy.
Section 2 of the ICAA adopts the Convention, reproduced as a schedule to the Act, as Ontario law.[4] The Convention applies to any award made in another state that has also acceded to it. With more than 170 contracting states, that covers most of Canada’s trading partners.
What the New York Convention Requires
Articles III, IV and V are the most relevant.[5]
Article III obliges each contracting state to recognize awards as binding and to enforce them under its own rules of procedure. Critically, a state may not impose “substantially more onerous conditions or higher fees or charges” on a foreign award than it imposes on a domestic one. A foreign award is not a second-class instrument in Ontario. This is a central principle of foreign arbitral award enforcement.
Article IV sets out what the applicant must file. The list is short:
- the duly authenticated original award, or a duly certified copy;
- the original arbitration agreement, or a duly certified copy; and
- where either document is not in English or French, a translation certified by an official or sworn translator or by a diplomatic or consular agent.
That is the applicant’s entire case. Once those documents are before the court, the burden shifts.
Article V is where a dispute, if any, takes place. The court may refuse recognition and enforcement, but only on the grounds the Article lists. Five of the seven enumerated defences must be raised and proven by the party resisting recognition and enforcement:
- a party to the arbitration agreement was under some incapacity, or the agreement itself is invalid under its governing law;
- the resisting party was not given proper notice of the appointment of the arbitrator or of the proceedings, or was otherwise unable to present its case;
- the award decides matters outside the scope of the submission to arbitration (though the court can sever and enforce the portion that was properly within scope);
- the tribunal was composed, or the procedure was conducted, contrary to the parties’ agreement or, absent agreement, the law of the seat; or
- the award has not yet become binding, or has been set aside or suspended by a competent authority at the seat.
Two further grounds may be raised by the court on its own motion: the subject matter is not arbitrable under Ontario law, or enforcement would be contrary to Ontario public policy.
The Courts Have Closed the Door on Common Law Enforcement
The Supreme Court of Canada has confirmed that the Convention not only calls for recognition and enforcement of awards made in another state, but that enforcement may be refused only on the limited grounds in Article V.[6] The practical consequence is that the former common law rules for recognition and enforcement no longer apply. In Activ Financial Systems, Inc. v. Orbixa Management Services Inc., the Superior Court put it this way:
…it would be a source of unnecessary confusion and unnecessary expense to have two enforcement mechanisms. I conclude as a matter of statutory interpretation that it was the intention of the legislature to introduce a complete code about the enforcement of foreign arbitration awards under the [ICAA].[7]
The Court of Appeal has added that the Article V grounds are to be construed narrowly.[8] A judgment debtor cannot stretch “public policy” or “unable to present his case” into a disguised appeal on the merits. Therefore the prosecution of and defence to a proceeding for recognition and enforcement of a foreign award obtained from a contracting state occurs within the confines of the ICAA.
The Court Enforces the Obligation, Not the Underlying Dispute
In essence, the same principle that governs foreign judgments governs foreign awards. An enforcement proceeding is not an occasion to re-examine the claim that was originally pursued. Its purpose is to facilitate the fulfilment of an obligation that already exists.[9] Barring exceptional concerns, the court’s focus is not on the substantive or procedural law that produced the award, but on the obligation the award creates. Related debt collection matters may involve garnishment, examinations in aid of execution, and other post-judgment remedies.
The Process of Recognition and Enforcement of Arbitral Awards in Ontario
Under Ontario arbitration law, the ICAA does more than adopt the Convention. It also gives the force of law to the UNCITRAL Model Law, which is also produced as a schedule, and designates the Superior Court of Justice as the court that performs the functions the Model Law assigns to a court. Articles 35 and 36 of the Model Law track Articles IV and V of the Convention almost word for word, so the two instruments work together.[10] In practice, the steps look like this.
- Commence by application, not action. Because a statute authorizes the relief, the proceeding is brought by notice of application under rule 14.05(2) of the Rules of Civil Procedure, returnable before a judge. In Toronto, an application of this kind may be scheduled on the Commercial List.[11]
- Assemble the record. The applicant files an application record containing a supporting affidavit that exhibits the authenticated award (or certified copy), the arbitration agreement (or certified copy) and, where necessary, a certified translation. The affidavit should also establish the seat of the arbitration, that the seat is a contracting state, that the award has become binding, and what remains unpaid. It need not, and should not, re-argue the merits.
- Serve the respondent. The notice of application and record are served on the award debtor. Where the debtor is outside Ontario, service abroad is governed by rule 17.02, which may permit service without leave if certain factors are met. Otherwise, leave may be required for service abroad.
- The respondent answers. The award debtor may file a responding record and affidavit. This is the only point at which an Article V (or Article 36) ground can be raised, and the debtor bears the burden of proving it. Cross-examinations on the affidavits may follow, though they are confined to the enumerated grounds and will not be permitted to become a repeat of the arbitration.
- Adjournment where a set-aside application is pending. If the debtor has applied to set aside or suspend the award at the seat, the Ontario court may adjourn the enforcement application and, on the creditor’s request, may order the debtor to post security as the price of the adjournment.[12]
- Factums and hearing. Each side delivers a factum, and the application is argued before a single judge on the written record. The question for the court is narrow: are the Article IV documents in order, and has the debtor proven a listed ground for refusal? If the documents are in order and the debtor has not proven a listed ground for refusal, then the award is recognized.
- Judgment and execution. Once recognized, the award is enforceable in the same manner as a judgment of the court. An award expressed in a foreign currency is converted into Canadian dollars under section 121 of the Courts of Justice Act, and the usual enforcement tools under rule 60 are then available: a writ of seizure and sale, garnishment, and an examination in aid of execution.
Takeaways for Counsel
For an award creditor, the application should be lean. File the authenticated award, the arbitration agreement and, if needed, a certified translation, and resist the temptation to re-argue the merits in the supporting affidavit. The Convention places the burden on the other side. Note also that the ICAA sets a ten-year limitation period for commencing an enforcement application, running from the date of the award or the conclusion of any set-aside proceedings at the seat.[13] Ten years is generous, but it is not indefinite, and the interaction with the Limitations Act, 2002 should be checked on the facts.
For the award debtor, the analysis should begin and end with Article V. If the complaint does not fit within one of the enumerated grounds, it is likely not a recognized defence in Ontario. Where a set-aside application is available at the seat, it should be brought there, and promptly; an Ontario court will not sit as a court of appeal from the tribunal.
The message from both Ottawa and Ontario is consistent. Parties who agree to arbitrate get the benefit of their bargain, and the Ontario courts will hold them to it.