In June 2017, the Supreme Court of Canada released a decision in Teal Cedar Products Ltd. v. British Columbia, 2017 SCC 32, which acted to further strengthen the principle of finality to be applied with respect to commercial arbitration awards. Teal Cedar follows the Supreme Court’s 2014 decision in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, which concluded that the court should not interfere with a commercial arbitration award unless the arbitrator’s decision was unreasonable.

In Teal Cedar, the Supreme Court of Canada reiterated the distinction between the standard to be applied to a review of a civil litigation judgment and an arbitral award. The Court found that they are to provide greater deference to the review of commercial arbitration awards regardless of the nature of the question under review. As the Court concluded that the arbitrator’s decision was reasonable on review, they reinstated the initial arbitration award.

Under Ontario’s arbitration legislation, the court has the authority to review arbitral awards on questions of law, fact, and mixed law and fact, so long as this is agreed to by the parties in their arbitration agreement. As such, it is important to take special care in drafting arbitration agreements so as to consider the instances in which the parties would be open to judicial intervention in the award made by an arbitrator.

Despite the court’s ability to review the decisions reached at arbitration pursuant to terms of the parties’ arbitration agreement, Ontario courts have begun to follow the decisions in Sattva and Teal Cedar, by limiting their interference with commercial arbitration awards to intervene only when an arbitrator’s decision is found to be unreasonable, rather than applying that higher standard of correctness to the arbitral award.

In August 2017, Cavanagh J. of the Superior Court of Ontario considered a review of an arbitral award in 2249492 Ontario Inc. v. Donato, 2017 ONSC 4974. In that case, the corporation argued that the reasonableness standard should not be applied in reviewing issues regarding the arbitral award, as the arbitration agreement between the parties conferred broad appeal rights to the court on questions of fact, law, and mixed law and fact. In rejecting the corporation’s argument, Cavanagh J. drew focus to the parties’ agreement to resolve their dispute by private arbitration, and therefore, they had accepted a limited role for judicial oversight. As such, Cavanagh J. held that the appropriate standard for review was one of reasonableness. Cavanagh J. found that the arbitrator’s decision was reasonable, and ultimately upheld the initial arbitration award.

The Supreme Court’s decisions in Sattva and Teal Cedar, and the more recent decision by Cavanagh J. of the Superior Court of Ontario in 2449492 Ontario Inc. v. Donato, have acted to strengthen the key policy objectives underlying the use of commercial arbitration in resolving disputes. These decisions emphasize the importance in allowing greater deference to arbitrator’s decisions, ultimately creating a greater sense of finality with respect to arbitral awards.

In drafting your next commercial agreement, you should carefully consider the inclusion of a dispute resolution clause, such as arbitration. Please contact us if you have any questions regarding the drafting of a commercial agreement or with respect to the challenge of an arbitral award.