In its recent decision, IC2 Fund v. Wires, 2023 ONSC 3879, the Ontario Superior Court of Justice addressed the importance of properly identifying a party in an arbitration agreement, pleading and arbitral award.
The arbitration proceedings
The dispute arose from a Bespoke Funding Agreement (the "Bespoke Funding Agreement") between, among other parties, David E. Wires (then a litigation lawyer in Toronto) and an entity referred to as "Profile Investment".1 The purpose of the Bespoke Funding Agreement was to provide funding to Mr. Wires and another Canadian law firm on behalf of named claimants for the pursuit of a claim and recovery of damages, including against the People's Republic of China. The Bespoke Funding Agreement was expressly governed by certain General Terms and Conditions of Funding (the "General Terms").2
Pursuant to the Bespoke Funding Agreement, the party Profile Investment was identified as "incorporated...for and on behalf of an entity referred to as IC2 Fund, SICAV-FIS, a regulated company based in Luxembourg with a registration number of B205456."3 However, the General Terms included a separate definition of "Fund" to mean "IC2 Fund, SICAV-FIS, whose registered number is B148892 in the company register of Luxembourg."4
The General Terms included an arbitration clause (the "Arbitration Clause"), which provided that any dispute arising out of or in connection with the Bespoke Funding Agreement shall be finally settled by arbitration administered by the Arbitration Institute of the Stockholm Chamber of Commerce (the "AISCC").5
On June 1, 2020, pursuant to the Arbitration Clause, Mr. Wires commenced arbitration proceedings against the respondent, which he named as "IC2 Fund, SICAV-FIS Registration No. B205456 Luxembourg", seeking recovery of legal fees, lost fee revenue and lost opportunity as a result of alleged wrongful conduct of the funding party under the Bespoke Funding Agreement.6 The respondent to the arbitration identified itself as "IC2 Fund, SICAV-FIS" and filed an Answer and a Counterclaim.
The Counterclaim was ultimately settled, and Mr. Wires' claim was later heard by a sole arbitrator, who was appointed pursuant to the AISCC Expedited Rules of Arbitration.7
The arbitrator issued an award on April 7, 2021 (the "Award"),8 dismissing Mr. Wires' claims and providing that the costs of the arbitration shall be borne by Mr. Wires. In the Award, the respondent is identified by the name IC2 Fund, SICAV-FIS; however, a later paragraph in the Award described the respondent as "a company existing under the laws of Luxembourg, registered number B148892...".9
Importantly, the Luxembourg company with corporate registration number B205456, which entity Mr. Wires had identified as the respondent in his Request for Arbitration, is an active company registered since April 19, 2016 with a company name La Française IC 2, SICAV-FIS.10 However, the Luxembourg company with the corporate registration number B148898 (and that was identified in the later paragraph in the Award) had been placed into bankruptcy and was named La Française IC Fund, SICAV-FIS.11
IC2 Fund, SICAV-FIS brought an application in the Ontario Superior Court of Justice for:
- judgment recognizing the Award12, and
- later on in the Court proceedings, leave to amend the title of the proceedings to provide that the name of the applicant is "LA FRANÇAISE IC 2, SICAV-FIS also known as IC2 Fund, SICAV-FIS".13
Mr. Wire opposed the applications and sought an order dismissing the application to recognize the Award or, in the alternative, staying the application, on the grounds that the named applicant, IC2 Fund, SICAV-FIS, was not a legal entity and did not exist at law in Canada or Luxembourg, and the Award identified the recipient of the Award to be an entity with Luxembourg business registration number B148891, which had been placed into bankruptcy.14
Application to amend the title of the proceedings
The central issue before the Court was whether IC2 Fund, SICAV-FIS should be granted leave to amend the title of the Court proceedings and whether this was permissible under Luxembourg or Ontario law. Mr. Wires opposed the application to amend the title of the proceedings due to the inclusion of the words "also known as IC2 Fund, SICAV-FIS" being used to identify the applicant.
IC2 Fund, SICAV-FIS argued that "La Française IC 2, SICAV-FIS" was its full corporate name and that "IC2 Fund, SICAV-FIS" is just a shorter version of its full name, which it was legally permitted to use in the Bespoke Funding Agreement. Further, the identity of the applicant was clear and was known to all parties to the Bespoke Funding Agreement when it was made and when the arbitration was commenced.15
The Court found that there was no confusion on the part of Mr. Wires about the identity of the entity he named as the respondent in his Request for Arbitration and against which he made his claims pursuant to the Arbitration Clause in the Bespoke Funding Agreement.16 Although the Award included a paragraph stating that the respondent is registered in the company register of Luxembourg as B148892, the Court did not accept that this reference showed that the parties, or the arbitrator, were confused about the identity of the entity against which Mr. Wires had made his claims. Accordingly, the Court granted the motion to change the title of the proceedings and found that the applicant existed at law and was the Award recipient.17
Application for recognition of the Award
Mr. Wires relied on Article 36(1)(a)(iv) of the Model Law to oppose recognition and enforcement of the Award,18 which provides that:
the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties or, failing such agreement, was not in accordance with the law of the country where the arbitration took place...19
Mr. Wires argued that the terms for the appointment of the arbitrator included that the arbitrator have "no past, present or potential relationships with third party litigation funding companies or arbitration institutes in London..."20 and that Mr. Wires had discovered after the issuance of the Award that the arbitrator had direct involvement with IC2 Fund, SICAV-FIS's principal two years prior to the appointment, in which they jointly prepared for and participated in a panel at which they discussed security for costs in international arbitrations.21 Mr. Wires further argued that the Award should not be recognized because the appointment of the arbitrator was contrary to English law as the arbitrator was not impartial.22
The Court found that Mr. Wires had raised these same objections to the independence and impartiality of the arbitrator during the arbitration proceedings and his challenge was ultimately dismissed by the AISCC. The AISCC had found that the objection to the arbitrator based on his prior relationship with the principal of IC2 Fund, SICAV-FIS was available to Mr. Wires upon the arbitrator's appointment and the objection on these grounds was therefore dismissed as time barred under the AISCC rules.23 The AISCC further found that the circumstances upon which Mr. Wires relied upon would not lead to justifiable doubts as to the arbitrator's impartiality and independence.
Given this context, the Court found that Mr. Wires had not provided proof that the composition of the arbitral tribunal was not in accordance with the agreement of the parties.24 The Court also disagreed that it was open to challenge the independence or impartiality of the arbitrator in response to IC2 Fund, SICAV-FIS's application for recognition of the Award, particularly after Mr. Wires had unsuccessfully made such a challenge on the same grounds before the AISCC, the administrator of the arbitration proceedings. The Court found that it would be an abuse of process to allow Mr. Wires to relitigate his challenge in response to this application.25
Why this case matters?
The decision is an important reminder for parties and arbitrators to ensure that their arbitration agreements, pleadings, and awards properly identify the names of the parties, as poorly drafted arbitration agreements may be invalid or result to an unenforceable award. The decision also highlights the importance of carefully reviewing an arbitrator's relationships to the parties during appointment of the tribunal and bringing any challenge related to the lack of impartiality of the arbitrator as soon as possible in arbitration proceedings.
Footnotes
1. IC2 Fund v. Wires, 2023 ONSC 3879 [IC2 Fund] at para. 7
2. IC2 Fund at para. 8
3. IC2 Fund at para. 7
4. IC2 Fund at para. 10
5. IC2 Fund at para. 11
6. IC2 Fund at para. 12
7. IC2 Fund at para. 79
8. IC2 Fund at para. 1
9. IC2 Fund at para. 16
10. IC2 Fund at para. 18
11. IC2 Fund at para. 18
12. IC2 Fund at para. 1
13. IC2 Fund at para. 23
14. IC2 Fund at para. 2
15. IC2 Fund at para. 27
16. IC2 Fund at para. 47
17. IC2 Fund at para. 55
18. IC2 Fund at para. 77
19. IC2 Fund at para. 78
20. IC2 Fund at para. 80
21. IC2 Fund at para. 80
22. IC2 Fund at para. 86
23. IC2 Fund at para. 83
24. IC2 Fund at para. 78
25. IC2 Fund at para. 91
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