Arbitration and the Right to Appeal

We have previously addressed the differences between traditional litigation through the Court system, versus the benefits and disadvantages of alternative methods of dispute resolution such as mediation and arbitration.  However, there is one particular aspect of Arbitration, in particular, that we address in this blog – that of diminished right to appeal an Arbitration Award.

In general, parties to traditional litigation have the option to broadly appeal any decision made by the Court.  There are certain restrictions that arise in specific circumstances, depending on the issue that has been decided by the Court, where the litigants require permission to appeal the decision, but in general, most final orders of the Court, in Family Law, are appealable without the requirement of seeking permission from the higher Court.  As to the grounds for appealing, under matters that have been decided by a Court, appeals may be brought in respect of:

• errors that the Court made in law;
• errors that the Court made in respect of the facts; and
• errors that consist of mixed law and fact.

While the differences between an error in mixed law and fact, and the other two types of errors can often be a matter of degrees, the fact is that the ability to raise appellant grounds in any of the three above listed areas provides litigants with the security of having any decision reviewed on broad grounds of possible errors.

In arbitration, however, the right to appeal an Arbitrator’s award is governed by the provisions of the Arbitration Act.  Under the Arbitration Act, parties have the right to specify in any agreement to arbitrate as to the grounds that may be advanced on any appeal of an arbitration award; however, if the agreement to arbitrate is silent as to the permissible grounds of appeal, then the parties to the arbitration are limited to appeals solely on errors of law, and then only if granted permission from the Court to bring such an appeal. In the latter, the Court is limited to granting permission, only if it is satisfied that the importance to the parties of the matters at stake in the arbitration justifies an appeal, and that the determination of the question of law at issue will significantly affect the rights of the parties.

This can create many difficulties to parties who are not aware of the default restriction on appealing arbitration awards, when entering into an agreement to arbitrate.  Failing to ensure that the agreement does not reflect the full range of appealable errors can limit a party’s right to seek review in the event of an error of fact or mixed fact and law made by the Arbitrator.  This is particularly relevant when the arbitration award seeks to determine or resolve a dispute that requires the arbitrator to engage in interpretation of a contract or agreement.  In the case of Sattva Capital Corp v Creston Moly Corp, 2014 SCC 53  the Supreme Court of Canada definitively stated that interpretation of contracts involves questions of mixed fact and law, and not questions of law alone.  As a result, any decision made by an arbitrator that involves the interpretation of contract or agreement, or the provisions therein, cannot be appealed unless the parties specifically agree otherwise when entering into the agreement to arbitrate.

This has special significance for Family Law matters as divorcing parties often enter into Divorce and Property Agreements, and more and more parties are entering into prenuptial agreements.  In any case where the parties engage in a dispute as to the meaning or intention of the agreement or its provisions therein, they are, by virtue of the case of Sattva, engaging in a question of mixed law and fact.  It is critical for litigants and their lawyers to be aware of the risk of losing a right to appeal an arbitration award should they not specifically require the agreement to arbitrate to include a full right of appeal.

However, notwithstanding the right of the parties to require an agreement to arbitrate to include a full right of appeal, the appeal rights of the parties will still remain limited by the Arbitration Act, as regardless of whether or not the parties agree to the full suite of appeal rights, or are limited to appeals on questions of law, the Act does not permit a party to appeal an award to the court on a question of law that the parties expressly referred to the arbitral tribunal for decision.   As a result, if the paramount question that forms the dispute between the parties is referred to an arbitrator for a decision, the Act precludes the parties from appealing any decision on that question itself, regardless of whether there might be an error in law.

In summary, and as stated above, before entering into any arbitration the parties and their counsel need to ensure that they not only clearly identify the right of appeal set out in the agreement to arbitrate and ensure that it reflect the requirements of the parties, but also ensure that they clearly and cogently form the question that will be presented to the arbitrator to ensure that all parties are aware of exactly what will be answered and to what extent it will be limited by the restriction on referring identical questions of law to the Court on appeal.

If you are considering arbitration as a means of dispute resolution, or have concluded an arbitration and are questioning whether or not you have a right to appeal, Mincher Koeman LLP has the knowledge and experience to assist you.  Give us a call at (403) 910-3000, or email us at reception@mincherkoeman.com