Originally from Arbitration Law of Canada: Practice and Procedure, Fourth Edition

PREVIEW

In Canada, our Supreme Court has acknowledged that arbitration, as a private dispute resolution mechanism, is parallel to but not part of a province’s judicial system.  The court should treat the parties to arbitration as strangers to the judicial system who have opted for a different method of resolving their dispute. The court will become involved in the arbitral process only to the extent applicable legislation permits.

The decision of the arbitrator is only binding as between the parties and the arbitrator, unlike a judge, has no obligation to the State to further, expand, clarify or explain the law. As mentioned in Chapter 1, the purpose of modern commercial arbitration is to simplify, expedite and finally determine a commercial dispute. It is not a legal proceeding. It is a private dispute resolution method by which two parties have decided to allow a third party to settle the matter.

While the arbitrator is to do his or her best to apply the rules of law chosen by the parties, the decision is of no effect beyond the parties. It does not affect the law. In Hryniak v. Mauldin,  a case dealing with summary judgment, Madam Justice Karakatsanis, writing for the Court commented, in obiter about the rule of law and the “development of the common law” as being outside the scope of arbitration: 

In some circles, private arbitration is increasingly seen as an alternative to a slow judicial process. But private arbitration is not the solution since, without an accessible public forum for the adjudication of disputes, the rule of law is threatened and the development of the common law undermined.

While Madam Justice Karakatsanis was addressing the need for the courts to adopt procedures that would allow the justice system to be “accessible, proportionate, timely and affordable,” her point about arbitration is apt, but not necessarily in the way she intended. Arbitration does not exist to support the rule of law in any particular judicial system or to advance the common law. It is a contractual process to privately settle a commercial dispute. This reality must be kept in mind when considering to what extent the courts can or should review arbitral decisions.

Overall, court review of arbitral decisions starts with the premise that the court will only interfere where the tribunal has gone so wrong in its conduct of the arbitration that justice calls out for it to be corrected. As stated by Field J. in Latvian Shipping Company v The People’s Insurance Company: ”the courts strive to uphold arbitration awards. They do not approach them with a meticulous legal eye endeavouring to pick holes, inconsistencies and faults … Far from it. The approach is to read an arbitration award in a reasonable and commercial way,”   Court review of an arbitral award is not to be considered as just the next step in the dispute between the parties. It is the exception. If the parties had wanted multiple levels of court review, they would not have chosen arbitration.