Canada: Ontario Decision Further Clarifies The Court's Role When Considering An Arbitral Panel's Ruling On Its Own Jurisdiction

Overview and Why This Case Matters

The Ontario Superior Court of Justice in Electek Power Services Inc. v. Greenfield Energy Centre Limited Partnership, 2022 ONSC 894 ("Electek") recently set aside a preliminary jurisdiction decision by an arbitral panel that it had jurisdiction over the matter before it. In setting aside the arbitral panel's decision, the Court considered recent jurisprudence under s. 17(8) of the Arbitration Act¹, and found that it was required to determine the issue on a de novo basis, and not as an appeal in which administrative law or appellate standards set out in Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65 ("Vavilov") would apply. 

Background and Initial Arbitral Decision

The underlying dispute between Greenfield and Electek relates to repairs performed by Electek on a power-plant operated by Greenfield. Their commercial relationship went back to 2009, at which time Greenfield provided purchase orders containing a "Purchase Order General Terms and Conditions" (the "POGTC"). Contained within the POGTC was an arbitration agreement.

In 2018, Greenfield asked Electek to provide emergency repair services on a transformer. A purchase order was issued that did not annex the POGTC. Electek performed the emergency repairs. Greenfield asserts that in doing so, Electek caused $10 million in damages to the power-plant. In 2020, Greenfield commenced arbitration proceedings against Electek. 

Electek disputed the submission to arbitration and asked the arbitrators to rule on their jurisdiction to hear the matter before it. In 2021, the panel unanimously held that it had jurisdiction to hear the dispute. The determination by the arbitral panel was not about whether the subject matter of the dispute fell within the confines of the arbitration agreement, but whether the arbitration agreement within the POGTC was binding on the parties.

After the arbitral panel rendered its decision, Electek brought an application before the court pursuant to s. 17(8) of the Arbitration Act seeking to set aside the jurisdiction decision of the arbitral panel. 

Hearing de novo or a Review of the Arbitral Panel's Decision?

The threshold determination that the Court was required to make was whether it was to determine the question of jurisdiction de novo, or whether it was to conduct an appellate review of the arbitral panel's decision.

Greenfield argued that the principles of Vavilov applied and that the Court was to consider the panel's decision akin to an administrative judicial review. Electek argued that Vavilov does not apply, and that the language of s. 17(8) of the Arbitration Act requires that the court is to "decide the matter", meaning that it is to hear the issue de novo.

The Court relied on the Divisional Court's decision in The Russian Federation v. Luxtona Limited, 2021 ONSC 4604 at para 22, stating:

The court is "to decide the matter". It is not "to review the tribunal's decision". "The matter" referenced in both art. 16(1) of the Model Law and s. 11(1) of the [International Commercial Arbitration Act, 2017] is the issue of the tribunal's jurisdiction. This is clear language conferring original jurisdiction on the court to adjudicate the question of the tribunal's jurisdiction. This language is not qualified by a privative clause or terms of reference for the application. The court's task is entirely described by the phase "decide the matter".

The Court therefore determined that it was to decide the matter de novo, and Vavilov did not apply. Ultimately, the court conducted a thorough review of the evidentiary record before it, finding that there was no arbitration agreement between the parties relating to the matters in issue. Accordingly, it set aside the arbitral panel's decision.

Concluding Thoughts

This decision provides further clarity as to how applications seeking to set aside arbitral panels' determinations on their own jurisdiction are to proceed. Electek applies the reasoning set out in The Russian Federation v. Luxtona Limited, making clear that applications made pursuant to s. 17(8) of the Arbitration Actand Article 16(3) of the International Commercial Arbitration Act, 2017² are hearings de novo, and not subject to the administrative law and standard of review principles enunciated by the Supreme Court in Vavilov. 

Footnotes

1 Arbitration Act, 1991, S.O. 1991, c. 17.

2 International Commercial Arbitration Act, 2017, S.O. 2017, c. 2, Sched. 5.

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