TORONTO—An agreement to submit a commercial dispute to final and binding arbitration prevents one of the parties from appealing the decision except in the narrowest of circumstances, Ontario’s top court ruled recently.
As a result, the court found, a judge was wrong to set aside an arbitrator’s award on the basis that it might have been unreasonable or even wrong.
Having decided that the arbitrator was acting within the scope of the arbitration agreement, his task “was at an end,” the Appeal Court said.
“It was for the arbitrator, not the court, to interpret and apply the substantive provisions of the (arbitration agreement) and it is of no moment whether the arbitrator did so reasonably or unreasonably, correctly or incorrectly,” the Appeal Court ruled. “The decision was the arbitrator’s to make.”
The dispute arose in September 2016 when Alectra Utilities Corp. cancelled a financing agreement with Solar Power Network for the construction of solar-power projects in Ontario. Under a contract in which they had agreed to binding arbitration, Solar Power asked an arbitrator to award them $19.5 million in damages.
Court records show the arbitrator concluded after a seven-day hearing that Alectra had in fact terminated the deal illegally, and awarded Solar Power $12.3 million for lost profits.
“The arbitrator’s award was supposed to be final,” the Appeal Court noted in its ruling. “The parties chose not to establish a right of appeal on any basis from the arbitrator’s award.”
Nevertheless, Alectra asked the courts to intercede under Ontario’s Arbitration Act of 1991 that allows for judicial review only if an arbitrator goes beyond what the parties had agreed to.
Essentially, Alectra argued the arbitrator had gone beyond his authority in awarding damages to Solar.
In August 2018, Superior Court Justice Herman Wilton-Siegel accepted Alectra’s argument and set aside the award.
Wilton-Siegel found the arbitrator had not exceeded his jurisdiction but had been unreasonable in deciding he had the power to award damages.
Solar Power appealed. The company maintained the courts were wrong to interfere, saying the judge was confused about the difference between a narrow look at whether the arbitrator had acted outside the arbitration agreement and a broader review of the merits of the dispute.
In siding with Solar Power, the Court of Appeal cited the Arbitration Act as essentially barring appeals from private arbitration unless parties explicitly agree otherwise.
In other words, the court said, arbitrators have to stick to the terms the parties agreed to.
“In this case the parties — sophisticated commercial parties represented by counsel — chose not only to resolve their contractual dispute by arbitration rather than litigation, but also to preclude appeals to the court,” the Appeal Court said.
“There is no ambiguity here: There is no appeal to the court, period. The arbitrator’s determination is final and binding.”
The Appeal Court said the arbitrator “did exactly what he was authorized to do” under the arbitration agreement: He resolved the parties’ dispute concerning the alleged breach of their agreement and awarded damages.
© 2019 The Canadian Press