SCC Grants Leave in Important International Arbitration Case

The Supreme Court of Canada announced this morning that it has granted leave to appeal the decision of the Alberta Court of Appeal in Yugraneft v. Rexx Management. This decision has been the subject of considerable discussion among arbitration practitioners: as was discussed several months ago on Slaw, the case raises a number of difficult questions about how international arbitration and Canada’s treaty obligations in that respect interact with local procedural law – specifically limitation of actions – when seeking to enforce the award, and more generally whether foreign judgments and arbitral awards should continue to be treated, for limitations purposes, as mere contract debts.

A brief description of the issues in the case is available from the news release on Lexum.

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  1. Antonin I. Pribetic

    According to the SCC website, the appeal hearing is tentatively scheduled to be heard on November 17, 2009:

  2. The Yugraneft appeal will be heard tomorrow, December 9th. The factums are here. A number of private arbitrators intervened on behalf of the London Court of International Arbitration and the ADR Chambers.

    Anyone want to live-blog or Twitter the argument – assuming that the SCC allows such things or is able to detect them?

  3. The SCC site states that there will be webcast.

  4. The central issue in the Yugraneft SCC appeal heard on December 9, 2009, is establishing how an international arbitral award should be characterized – as being equivalent to a foreign judgment or as something else? – in order to determine the applicable limitation period.

    Based on the factums submitted to the SCC, the appellant (Yugraneft) is arguing that international arbitral awards should be considered, at least for enforcement purposes, equivalent to foreign judgments, and, as such, should benefit from the 10-year limitation period under s. 11 of the Alberta Limitations Act. On the other hand, the respondent (Rexx Management) denies the applicability of Section 11 of the Alberta Limitations Act on the basis of a statutory interpretation argument that the Alberta legislature did not intend to include international arbitral awards in the definition of “judgment or order for the payment of money” found in Section 11, and, as a result, such awards cannot be considered and treated as judgments or orders, including in terms of the applicable limitation periods.

    The issues before the SCC in this case highlight the existence of problematic gaps in Canadian legislation with regard to the procedural status of international arbitral awards. In the absence of clear statutory limitation periods applicable specifically in the enforcement of international arbitral awards, or even, alternatively, of clear guidelines on how to characterize such awards for the purpose of applying existing limitation periods (Are international arbitral awards to be treated as mere debts – simple bases for a domestic cause of action? Are they equivalent with foreign judgments?), any court, including the SCC, will be hard-pressed to clearly interpret how different laws, such as the Alberta Limitations Act, in this case, apply to international arbitral awards.

    While the procedural treatment of domestic arbitral awards is addressed in Canadian law, that of international arbitral awards remains unclear, forming the source of potential conflicts with Canada’s international arbitration treaty obligations. For example, Ontario’s Limitations Act waives any limitation period vis-a-vis the enforcement of domestic arbitral awards, but makes no such express exception for international arbitral awards. The logical conclusion follows that, in the absence of an express waiver of all limitation periods for international arbitral awards, such awards are subject to more procedural conditions than domestic awards, to which no limitations period applies. In light of the New York Convention Article III prohibition on applying more onerous procedure to the enforcement of international arbitration awards than to that of domestic awards, this discrepancy is problematic. In Yugraneft, there is no such issue, as domestic arbitral awards are subject to a mandatory two-year limitation period under the Alberta Arbitration Act, and the Alberta Court of Appeal has ruled that international arbitral awards are also subject to a two-year limitation period. However, the fact remains that this “equal treatment” is a result of judicial interpretation of the procedural status of international arbitral awards, not of a clear legislative decision in this sense.

    Statutory provisions such as the Alberta Reciprocal Enforcement of Judgment Act only go part-way towards alleviating the lack of procedural certainty respecting the enforcement of international arbitral awards, by establishing clear limitation periods applicable in the enforcement of international arbitral awards issued by designated reciprocating jurisdictions. The issue in Yugraneft arose partly because Russia is not a designated “reciprocating jurisdiction” under Section 8 of the Alberta Reciprocal Enforcement of Judgments Act, and thus any judgments originating in Russia would not benefit from the registration for enforcement mechanism and the 6-year limitation period set out in that Act. The key issue here is that the Act expressly includes in its definition of “judgment” an arbitration award made and enforceable in a designated reciprocating jurisdiction. However, even where statutory enforcement regimes like Alberta’s Reciprocal Enforcement of Judgments Act ensure procedural certainty for a certain delineated sub-set of international arbitral awards, the unclear procedural status of international arbitral awards, in general, continues to affect international arbitral awards not covered by the respective enforcement regime.

    Extending the certainty offered under regimes such as the Alberta Reciprocal Enforcement of Judgments Act to all international arbitral awards is not only beneficial because it ensures regulatory consistency, but would also be commercially desirable, helping to avoid costly litigation such as the case at issue here. The SCC decision in the Yugraneft case could be interesting as a policy signal in this regard and will hopefully serve as motivation for legislative action clarifying the procedural status of all international arbitral awards.

  5. In an interesting twist, I recently ended up assisting in drafting the submissions for one of the interveners before the SCC. Let this serve as an object lesson to those of us who post repeatedly on Slaw about a particular topic.

    John, just by way of clarification, the SCC website unfortunately links only to the factums of the appellant and the respondent. The SCC has not yet seen fit to include the appellant’s reply factum, the factums of the four interveners, or the respondent’s reply to the interveners’ factums.

    Alex

  6. Alex, is the object lesson that if one posts frequently to Slaw, one may be retained for a fee to develop one’s arguments further – or that one will be asked to contribute for the same amount that one receives from Slaw?

    The oral argument is here (going down the column to the appropriate date – 2009-12-09).