Commercial Litigation and Dispute Resolution Blog

Earlier this year, we wrote about how questions about the applicable standard of review of arbitral awards had been re-opened by two decisions of the Supreme Court of Canada (“SCC”), Canada (Minister of Citizenship and Immigration) v. Vavilov^[1] (“Vavilov”) and Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District^[2] (“Wastech”).

On November 12, 2021, as we anticipated, the BC Court of Appeal (“BCCA”) took the opportunity to address the appropriate standard of review in lululemon athletica Canada inc. v. Industrial Color Productions Inc.^[3] (“lululemon BCCA”), a case involving an award under the International Commercial Arbitration Act^[4] (the “ICAA”). The BCCA has concluded that the standard of review is correctness and that the SCC’s decision in Vavilov is “not helpful.”^[5]

Although lululemon BCCA was heard in October 2021, after Wastech was released, the BCCA did not mention Wastech in its reasons or consider the SCC minority’s comments that the differences between arbitration and administrative law decisions do not affect the standard of review.

The result of lululemon BCCA does not increase the prospects of success on applications to set aside arbitral awards and does not mean that the courts will now afford little or less deference to awards. Like the Ontario Court of Appeal before it in Cargill, the BCCA again emphasized that the correctness standard “does not give courts broad scope for intervention in the decisions of international arbitral tribunals”^[6] and judicial intervention is restricted to matters specifically identified in the ICAA.^[7]

The lower court in lululemon (“lululemon BCSC”) had concluded that the reasonableness standard is the appropriate standard on applications to set aside awards under the ICAA, finding that this standard “aligned with the general framework” for the judicial review of a decision of a statutory tribunal set out in Vavilov and with the “general framework for domestic commercial arbitration” set out by the SCC in Sattva Capital Corp. v. Creston Moly Corp.^[8] (“Sattva”).

Although the BCCA dismissed lululemon’s appeal, it expressly rejected the lower court’s conclusion on the standard of review, finding that the Ontario Court of Appel’s 2011 decision in United Mexican States v. Cargill Inc.^[9] (“Cargill”) remains the leading case on the standard of review for applications to set aside awards under the ICAA and that the standard of review is correctness.^[10]

The lower court had distinguished Cargill on the basis that because the dispute in Cargill involved a damages claim against a country under NAFTA, it was “foundationally different” from the ICAA-governed dispute between two commercial parties before him.^[11] However, as the BCCA specifically noted, Cargill was conducted under the Ontario equivalent of the ICAA, which contained wording identical to s. 34(2)(a)(iv) of the ICAA (the provision governing applications to set aside awards).^[12] The BCCA reiterated that the ICAA significantly limits the scope for judicial intervention. Although the statutory provisions suggest a set aside application is a de novo hearing before the application judge, the BCCA found that nothing in the language of s. 34(2)(a) or s. 16 of the ICAA “suggests a reasonableness analysis or any sort of deference to the arbitrator’s own view of jurisdiction.”^[13]

The BCCA also criticized the lower court for overlooking the conclusion of Gary Born that “courts in Model Law jurisdictions have generally adopted a de novo [i.e., correctness] standard of judicial reconsiderations in proceedings under Articles 16(3) and 34(2)(a).”^[14]

The BCCA distinguished Sattva because it involved an appeal from a domestic commercial arbitration, as opposed to an application to set aside domestic or international arbitration awards on jurisdictional grounds, situations in which courts post-Sattva have applied the correctness standard.^[15] The BCCA rejected Vavilov, the leading case on the standard of review in administrative law, because it does not address the field of arbitration, citing earlier BCSC authority that administrative law standards should not be used to create a standard of review not provided for in the ICAA.^[16]

It is unfortunate that the BCCA did not consider the SCC minority’s comments in Wastech, at the very least if only to reiterate that an application to set aside an arbitral award under the ICAA is distinct from a statutory appeal from an arbitral award.

_{[1] Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65.}

_{[2] Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District, 2021 SCC 7.}

_{[3] lululemon athletica Canada inc. v. Industrial Color Productions Inc., 2021 BCCA 428.}

_{[4] International Commercial Arbitration Act, R.S.B.C. 1996, c. 233.}

_{[5] lululemon BCCA, para. 44.}

_{[6] lululemon BCCA, para. 39, citing United Mexican States v. Cargill Inc., 2011 ONCA 622, para. 44.}

_{[7] lululemon BCCA, para. 40.}

_{[8] lululemon athletica Canada inc. v. Industrial Color Productions Inc., 2021 BCSC 15, para. 22, citing Vavilov and Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, paras. 104–106.}

_{[9] United Mexican States v. Cargill Inc., 2011 ONCA 622, leave ref’d, [2011] S.C.C.A. No. 528 (SCC).}

_{[10] lululemon BCCA, para. 34.}

_{[11] lululemon BCSC, para. 25.}

_{[12] lululemon BCCA, para. 36.}

_{[13] lululemon BCCA, paras. 41 and 42.}

_{[14] lululemon BCCA, para. 43, citing Gary B. Born, International Commercial Arbitration, 3rd ed. (Alphen aan den Rijn, The Netherlands: Kluwer Law International B.C., 2020) at 1199.}

_{[15] lululemon BCCA, para. 45, citing DNM Systems Ltd. v. Lock-Block Canada Ltd., 2015 BCSC 2014, para. 86 (domestic) and Canada (Attorney General) v. Clayton, 2018 FC 436, paras. 73-82 (international).}

_{[16] lululemon BCCA, para. 46, citing The United Mexican States v. Metalclad Corporation, 2001 BCSC 664, para. 54.}