Court of Appeal Decision of the Week

The Jurisdiction of Canadian Courts in International Commercial Arbitration

Case: The Walt Disney Company v. American International Reinsurance Company, Ltd., 2018 ONCA 948

Keywords: International Commercial Arbitration; Insurance; UNCITRAL; the English Arbitration Act of 1996; International Commercial Arbitration Act, RSO 1990, c I.9

Synopsis:

An arbitration clause contained in an insurance agreement between the Appellant Walt Disney Company (“Disney”) and American International Reinsurance Company (the “Respondent”) provides that, in the event of arbitration, Disney gets to select the venue and procedural laws.

Toronto is on the list of options set out by that clause.

Disney prefers the Arbitration be administered by Judicial Arbitration and Mediation Services, Inc (“JAMS”) in Toronto and in accordance with UNCITRAL (“United Nations Commission on International Trade Law”) Rules, as set out in Ontario’s International Commercial Arbitration Act.

The Respondent argues that, while the insurance agreement provides for ad hoc arbitration in a variety of locations (Bermuda, London, Toronto or Vancouver), the arbitration is always to be conducted “…under the English Arbitration Act of 1996 (‘the Act’), which was incorporated by reference into the clause.” (See at para. 2).

The Application Judge dismisses Disney’s request for an Order declaring it properly commenced arbitration as against the Respondent by written “confidential” demand dated October 6, 2017 (i.e. initiating JAMS arbitration in Toronto) on the basis JAMS arbitration does not qualify as proper appointment of an arbitrator under the English Arbitration Act. The Court of Appeal dismisses Disney’s appeal from that decision.

Importance:

This is an interesting case with an interesting question about the jurisdiction of Canadian courts with respect to international commercial arbitrations. Here, Disney submits the procedural rules of the English Arbitration Act of 1996 do not apply to arbitrations held outside the United Kingdom. Further, it maintains that a “correct interpretation” of the agreement and its express terms would exclude the procedural sections of that Act in Toronto. Disney says UNCITRAL Rules, as set out in Ontario’s International Commercial Arbitration Act apply instead. (See para. 3).

The Court of Appeal disagreed, citing the “plain wording” of the agreement and “commercial sense”:

We disagree. In our view, the plain wording of the contract required that where Toronto was the seat chosen for arbitration, the arbitration was to be conducted in accordance with the procedural laws set out in the Act. The interpretation advanced by the appellant does not make commercial sense because it would mean that different procedural laws would apply depending on whether the arbitration took place in Toronto or Vancouver. Moreover, it makes no sense that the parties would agree to have an Ontario court apply specific provisions of the Act relating to the matters set out in s. 2(2), (3) of the Act. (See para. 4). [Emphasis in original].

Debateable of course – debatable both ways – whether that is a satisfactory response. For example, is it possible the parties agreed to just that (i.e. different procedural laws applying depending on the choice of venue)? Should leave to appeal to the Supreme Court of Canada be sought in this matter, Disney may have an opportunity to seek further clarification on this and other points raised by the decision. Doing so would give national guidance in this increasingly important area of “litigation”.

We note the Court of Appeal’s acknowledgment that the Application Judge’s decision “…may have been based on a misapprehension of the positions of the parties”. (See para. 5). Ultimately, however, the Court of Appeal was reticent to exercise jurisdiction to determine whether the arbitration commenced by Disney was appropriately commenced, and agreed with the Applications Judge in this case. (See para. 6).

The Court added this in its penultimate paragraph:

Assuming we have jurisdiction to determine whether the arbitration has been properly commenced, we decline to do so. Should it be necessary to determine whether the arbitration has been properly commenced, and if so when, that is a question reserved to the arbitrators. (See para. 6).

Counsel for the Appellant: Timothy Lowman and Trent Horne (Aird & Berlis LLP, Toronto)

Counsel for the Respondent: James Doris and Derek Ricci (Davies Ward Phillips & Vineberg LLP, Toronto)

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Posted: Wednesday, November 28, 2018