The Toronto Commercial Arbitration Society Program - CanArb Week Day 2

The Toronto Commercial Arbitration Society Program

Hannah Johnston*

 

On October 20, 2022, the Toronto Commercial Arbitration Society (TCAS) hosted a hybrid virtual and in-person program as part of the third annual CanArbWeek. The program was divided into two panels, as discussed below.

 

First Panel: Legislative Reform in Ontario and England

 

As generally stated, arbitration legislation in both Ontario and England is under review. The panel opened with a brief introduction from moderator Douglas Harrison, Chair of TCAS to discuss the history behind this type of legislation. Henoted that John Locke, no fan of lawyers, was the lead drafter of the first English Arbitration Act of 1698. The 1889 version of the English Arbitration Act was a major influence on Canadian legislation and is even still in force in Newfoundland and Labrador.

Then the panellists and their initiatives were introduced. The Chair of the TCAS Arbitration Act Reform Committee (AARC), independent arbitrator William G. Horton, was called to talk about the AARC’s proposal for a single Act for commercial arbitration in Ontario. Jackie van Haersolte-van Hof, Director General of the London Court of International Arbitration (LCIA) discussed the English Law Commission’s review of the Arbitration Act 1996, which recently yielded a set of recommendations. Both speakers focused on their respective regions and policies but drew some comparisons to the other’s jurisdiction.

van Haersolte-van Hof, an academic and arbitrator who, before joining the LICA, worked with Holocaust survivors resolving claims over dormant accounts, started with some general observations about the Law Commission’s report. The report yielded a consultation document over 200 pages long, and responses to the consultation submissions will be ready by mid-2023. It remains unclear if the LCIA’s users will agree with the direction in which the Law Commission was already heading. At this point, Jackie pointed out that England was once again appointing a new Prime Minister, as Liz Truss had resigned just as the panel started, noting that this could lead to further delays in the adoption of new legislation. 

The Law Commission made no recommendations for legislative amendments dealing with technology, such as for online hearings. van Haersolte-van Hof questioned whether this choice was a wise one; it is important for the English legislation to remain “best in class”, but it should not change too frequently or too drastically. Ultimately, she said, stability is good for LCIA users, and the framework of the legislation should be stable enough to adapt to developments.

Horton worked in litigation and as an individual arbitrator before becoming one of the founding members of TCAS. His opening comment was that the arbitration market is deeper and more varied in England than in Ontario, since so many international disputes, including those with no connection to the UK, are arbitrated or litigated in London. Ontario has a local market of users who generally seek arbitration to provide an alternative to the courts. Another important distinction made was that the AARC considered developments in other Model Law jurisdictions, as well as in the US, to canvass the ways in which international and domestic standards are reconciled in various jurisdictions. Elaborating on the committee’s decision-making process, Horton mentioned that their approach was to examine the existing legislation section-by-section comparing it to the Uniform Arbitration Act drafted by the Uniform law Conference of Canada and to the Model Law. One major question considered by the AARC was whether there should one Act for domestic and international arbitrations; ultimately, the committee recommended combining all commercial arbitrations under a single statute, based primarily on the Model Law. It will be interesting to see how this proposal proceeds, now that it has been discussed with a committee of Court of Appeal justices and formally presented to the Ontario Ministry of the Attorney General.

After these “opening statements”, the first question posed to the two panelists was on confidentiality. Van Haersolte-van Hof noted that the English Law Commission decided not to enact any codified confidentiality principle, a stance that Horton said he admired. Parties for whom confidentiality is important should conclude a confidentiality agreement in their contract, and this flexibility should be retained in the legislation.

The second question focused on arbitrator independence and disclosure. Horton noted that Ontario is not moving away from the Model Law standard, under which arbitrators must be independent and act impartially. He referred to the UK Supreme Court’s decision in Halliburton v Chubb,[i] where some interveners wanted to hold arbitrators to a higher standard, which was generally surprising. The arbitrator was not disqualified by failing to disclose his appointment in a related case, although the UK Supreme Court found the appointment should have been disclosed. Jackie agreed that the legislative standard did not need to be updated, and generally defended the decision on the basis of its context within the specialized community of insurance arbitrators, a context that was decisive to Court’s reasoning.

The panellists next discussed challenges to jurisdiction, in particular, whether court review of arbitrator decisions on jurisdiction should be de novo, including whether new arguments or new evidence should be permissible to raise in court which were not raised before the arbitrator. The Law Commission opted not to change these aspects of the English legislation, which was a surprising element of its report since the English law on jurisdictional challenges, while well-settled, continues to be debated.

On appeals from domestic arbitral awards, the AARC recommended that Ontario move to an express opt-in regime, with no other avenue for appeals from arbitration to the courts. (Appeals would continue to be unavailable from international arbitrations.) This would put the burden on lawyers to discuss with their clients the pros and cons of contracting for appeals, which would be more efficient in the end and put the responsibility where it should lie. van Haersolte-van Hof suggested that English law would likely continue its current position of appeals available on narrow grounds, but with parties able to opt out.

 

Second Panel: Challenges to Arbitrator Appointments – Both Literal and Figurative

 

This segment focused on the variety of challenges that arbitrators face when they take appointments, including conflicts of interest, accusations of bias, and doubts about capability.

The panel also considered the merits of these challenges, and attempts made to set aside awards after the fact. The speakers here included Rebecca Shoom (Lerners), Michael Schafler (Dentons), Alison FitzGerald (Norton Rose Fulbright), and Douglas Harrison, Arbitration Place.

Opening statements covered the situation in Ontario where, under the domestic Arbitration Act, it’s possible to challenge an arbitrator based on reasonable apprehension of bias.[ii] Under the Model Law, the standard is justifiable doubts as to impartiality or independence, or if the arbitrator lacks the agreed qualifications, unless this was known at the time of the appointment.[iii]

The procedure for challenging arbitrators was also discussed. An arbitrator’s mandate may be terminated on various grounds under the Model Law, article 13. Following a decision by the arbitrator whether to withdraw, a challenge can be made in court,[iv] and termination of the arbitrator’s mandate or court removal may follow. This may leave the arbitrator in an awkward position, as they may have to seek their own legal counsel and chase the parties for unpaid fees or for the costs of representation in the challenge action.

Each panelist was then invited to elaborate on various arbitrator challenge issues. Schafler mentioned a case in which he was involved, Jacob Securities Inc. v Typhoon,[v] which elaborated on the apprehension of bias standard and what can reasonably be expected of an arbitrator.

Shoom then discussed the difference between independence and impartiality under section 11 of the Ontario Arbitration Act, which closely follows the Model Law provision. To act impartially, she said, an arbitrator must pay attention to their attitude and state of mind, so challenges to an arbitrator based on partiality may not be raised until the proceedings are in progress. Lack of independence, by contrast, is often realized early in the proceedings.

Elaborating on this idea, Harrison added that conceptions of bias have evolved significantly. In the 1892 Bering Sea Arbitration between Canada and the US, the Canadian Prime Minister was one of the arbitrators! Current public policy measures have moved away from this relaxed approach, and few parties today would accept an arbitrator with such a direct stake in the outcome of a case.

Fitzgerald then raised the issue of disclosure, and the required level of transparency from the arbitrator. She mentioned that best practices are not static, and change based on developments in practice and in popular perceptions. For this reason, the IBA Guidelines on Conflicts of Interest[vi] are written to be broadly applicable, although the commentaries also offer specific guidance for some common situations.

Next, three scenarios were proposed, which were intended to show how fact-specific determinations of arbitrator independence and impartiality are.

The first scenario, taking place before commencement of arbitration, involved parties who approach a prospective arbitrator and want to interview them. The question for the audience was: would you attend such an interview? What if, at the interview, counsel disclose too much information about the case? What is required for the arbitrator to assess conflict? The general consensus was that a meeting is acceptable, even desirable, and is allowed under Article 1 of the IBA Guidelines[vii] as long as it doesn’t go against local law. However, the case should be described only in general terms, the meeting should be short (on the order of thirty minutes), and the prospective arbitrator should not receive any form of remuneration for the interview, not even a meal, although they should be reimbursed any travel expenses. Such a meeting should be restricted to the arbitrator’s expertise in the subject matter of the dispute, availability on certain dates, and approximate fees.[viii]

The second scenario was from the midst of an arbitral proceeding, where one party wants to add a new party that did not participate in the constitution of the tribunal, and someone in the added party (or their counsel) is from the same professional community as one of the arbitrators. Here, all the panelists agreed that it depends on the type of the community. For example, belonging to the same bar association would be acceptable. Generally, it was stated that a party joining an arbitration after constitution of the tribunal has to address the tribunal as-is, unless there is a serious conflict.

The last scenario involved a challenge made after the close of proceedings but while the award remains pending. One of the counsel in this first arbitration is appointed as an arbitrator in a second proceeding, along with one of the arbitrators from the first. All four panelists agreed that this situation is complicated, as it is common for a lawyer to act as both counsel and arbitrator as part of their practice. The sense of the panel was that this information would have to be disclosed to the participants in both arbitrations. Such disclosure may be prevented by confidentiality obligations, so the only truly safe course is for the counsel in the first arbitration not to accept the appointment as arbitrator in the second.

The second panel closed by revisiting Jacob Securities Inc. v Typhoon, an ad hoc international arbitration that illustrated many of these issues in the context of a set-aside application. In Typhoon, the arbitrator’s previous law firm was discovered to have acted for the underwriters of the transaction in dispute. The Ontario Court of Appeal held that the arbitrator was not expected to be able to investigate conflicts arising from the activities of his former firm. Since he was no longer an employee, the firm would have had to disclose confidential information to someone who was now an outsider. This case illustrates the complexity of arbitrator appointments, especially the interaction between confidentiality obligations and arbitrators’ duties of disclosure.