In the dynamic and fast-paced world of commerce, disputes are an inevitable part of conducting business. Whether it is a contract disagreement, intellectual property conflict, or international trade dispute, finding a swift and effective resolution is crucial to maintaining healthy business relationships and ensuring the smooth functioning of the Canadian economy. Traditionally, litigation has been the go-to method for resolving commercial disputes, but in recent years, arbitration has emerged as a highly advantageous alternative. It is now common for many agreements to include a dispute resolution clause whereby any disputes are submitted to arbitration before litigation.

Despite their popularity, there are nuances to their use that business owners should understand, particularly regarding their appeal. Recent case law has emerged that has considered what language must be used when precluding an appeal of an award under an arbitration agreement.

What are Arbitration Agreements?

An arbitration agreement is a contractual provision that establishes arbitration as the preferred method for resolving disputes between parties. It is typically included as part of a larger contract, and it could consist of explicit language on the procedure of the parties and any associated timelines with submissions to an arbitrator. The arbitrator’s role is to hear the evidence and arguments presented by both sides and render a binding decision, known as an arbitration award.

If a party is unhappy with the arbitration award, it may appeal the decision per section 45(1) of Ontario’s Arbitration Act. This section allows for an appeal on a question of law, but only where the arbitration agreement is silent as to the availability of the appeal. In this case, the disputing party may only appeal with leave of the court, which shall be granted if:

“(a) the importance to the parties of the matters at stake in the arbitration justifies an appeal; and (b) determination of the question of law at issue will significantly affect the rights of the parties.”

In other words, there is a method to appeal an arbitration award, but the specific wording of the arbitration agreement is crucial in determining the availability of an appeal.

Parties Trigger Arbitration as a Result of Contract Termination

The operation of section 45 of the Arbitration Act was recently considered at the Ontario Court of Appeal in the case of Baffinland Iron Mines LP v. Tower-EBC G.P./S.E.N.C. The matter involved several Baffinland Iron Mines entities, mining corporations, as well as Tower-EBC, an earthworks company. In 2017, the two companies entered into two similar contracts to construct a railway to transport ore. The contracts were standard form and included provisions for an arbitration agreement.

The contracts included multiple dispute resolution methods, but the relevant process allowed the parties to refer the dispute to a Dispute Adjudication Board (which was not deemed arbitration), where the Board’s decisions could be “final and binding.” If the Board could not find an amicable solution, the dispute could be “finally settled” by arbitration.

In 2018, due to delays, Baffinland Iron Mines attempted to terminate the contracts. Tower-EBC filed a statement of claim challenging the right to cancel the contracts, which was the subject of the arbitration. Not long after, in 2020, the majority in the three-member arbitration panel awarded Tower-EBC an award exceeding $100 million. Baffinland sought leave to appeal the decision to the Superior Court under s.45(1) of the Arbitration Act.

Application Judge Dismisses Leave to Appeal

In the application, Baffinland argued that the inconsistent phrasing of “final and binding” and “finally settled” concerning two different steps in the dispute resolution mechanism entitled it to leave to appeal the arbitration award. It argued that since the “final and binding” language applied to the Board decision “that has been recognized to preclude appeals but used a different phrase – ‘finally settled’ − in relation to arbitration, the parties must have intended a different meaning for the latter.” The application judge considered these phrases to have the same meaning, which precluded an appeal. The application for leave to appeal was dismissed.

Baffinland then sought an appeal of the application judge’s denial of leave. In hearing this appeal, the Court of Appeal also weighed in on the substance of the wording.

The Operative Term is “Final”

As described by the Court, Baffinland argued that the application judge’s decision is subject to appellate review on the standard of correctness and is based on principles of contractual interpretation, one of which being the principle of consistent expression.

Consistent expression is the principle whereby it is presumed that language in a contract is used consistently. In light of the different wording, it was submitted that since “final and binding” was commonly used to preclude appeals, the term “finally settled” had a different meaning. The Court disagreed and noted a common word in both phrases – “final.” In this case, the presumption “pulls toward giving the word “final” or “finally” the same meaning.” Whether the word was used in combination with “binding” or “settled” was not material, as the word conveys the meaning of “admitting of no further disputation.” The Court found that in the context of the principle of consistent expression, the phrases had the same meaning of precluding an appeal.

The Court concluded that the application judge made no reversible error. As a result, leave to appeal was not available to Baffinland under the Arbitration Act.

This decision highlights the importance of carefully reviewing or drafting language for arbitration clauses. If a party wishes to be able to make an arbitration decision, the arbitration agreement must exclude any language that could preclude an appeal.

Contact Bader Law for Effective Advice and Representation in Business Disputes

The experienced corporate lawyers at Bader Law help businesses navigate the complexities of corporate law in Ontario. Our lawyers help clients mitigate risk and future disputes by conceptualizing and drafting dispute resolution mechanisms that accurately match the business’s needs. Our knowledgeable corporate team works to create unique legal solutions to help clients obtain their desired outcomes in matters such as corporate financing and information technology law. Located in Mississauga, our firm proudly serves clients throughout the Greater Toronto area. To schedule a confidential consultation, contact us at 289-652-9092 or reach out to us online.