BCICAC :: More On Appeals

In the last issue of "The Advocate" I talked about the right to appeal an arbitral award, focussing on Section 31 of the Commercial Arbitration Act, S.B.C. 1986. Section 31 deals with appeal on questions of law. The scope is limited.

In this column I want to comment briefly on Section 30 of the Act.

Section 30(1), allows a court to set aside an award where "an award has been improperly procured or an arbitrator has committed an arbitral error". In either case, the court may set aside the award or remit the award to the arbitrator for reconsideration.

Section 30(2) adds that "the court may refuse to set aide an award on the grounds of arbitral error if (a) the error consists of a defect in form or a technical irregularity and (b) the refusal would not constitute a substantial wrong or miscarriage of justice."

I have had some trouble nailing down what is meant by "improperly procured". It seems to me that it refers to improper behaviour on the part of the parties since the second part of the sentence refers to an error on the part of the arbitrator. Such improper behaviour could include fraud (fabricating a set of accounting records, for instance) or illegal activities (threats, blackmail or the like).

The Act clearly defines "arbitral error" as "an error that is made by an arbitrator in the course of an arbitration and that consists of one or more of the following:

It should be noted that an error of law or fact is not included in the definition. This is covered under Section 31, as previously discussed.

I would like to take a closer look at the four types of error:

Corrupt or fraudulent conduct

I cannot imagine that anything further need be said under this heading. It seems obvious that such behaviour, if proven, should and does allow for judicial intervention.

Bias

Bias on the part of an arbitrator is difficult to prove because it is usually a matter of perception.

When making an appointment, the Centre requires the arbitrator to sign a statement of "Independence and Impartiality" which includes, among others, the following statement: "I declare that I have no interest, directly or indirectly, in the outcome of the dispute between the parties. I am not aware of any circumstances which will give rise to justifiable doubts as to my independence or impartiality or which could raise a likelihood of perceived bias in this matter."

The Centre's Domestic Rules of Procedure (Rule 15) deal specifically with challenges of an arbitrator "where circumstances exist that give rise to a justifiable doubt as to his or her independence or impartiality". Indeed the Centre's panel members agree to adhere to the Code of Ethics of the British Columbia Arbitration and Mediation Institute, paragraph 6 of which reads "a member shall disclose any interest or relationship likely to affect impartiality or which might create an appearance of partiality or bias".

The Centre has seen challenges on the strength of alleged relationships between arbitrators and parties or their lawyers. They are difficult to deal with, particularly when the allegation is made by a party who is not represented by a lawyer and who is not familiar with what constitute normal interactions/relationships within the legal profession. The Centre's Governing Trustee, Rod Germaine, wrote a letter to the BC Arbitration and Mediation Institute's newsletter "Topics" in its March, 1999, issue which is pertinent. He emphasized that "importance of independence, impartiality and the appearance of both (by the arbitrator) is essential". He suggested that "the prudent and practical course is therefore (for the arbitrator) to make complete disclosure of even the most innocuous connections with a party". With regard to what constitutes a reasonable apprehension of bias he noted that "the courts have long applied an objective standard based on the perspective of an informed observer."

Exceeding the arbitrator?s powers

An arbitrator's jurisdiction is determined by the parties. The agreement to arbitrate, whether by way of a submission agreement or by an arbitration clause in a commercial contract, will define the scope of the matters subject to arbitration. Any issue in this respect is also within the arbitrator's jurisdiction. Rule 20 of the Centre's Domestic Rules of Procedure reads "The arbitration tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement". The ruling of the arbitrator as to his or her powers may be appealed to the courts.

An example of a challenge is provided in a relatively recent case (Student Association of the British Columbia Institute of Technology v. British Columbia Institute of Technology. SCBC Docket: A981946. Date: 1999/01/12. Vancouver Registry) in which an application was made to set aside an arbitral award due to arbitral error. The petitioner submitted that the arbitration tribunal exceeded its jurisdiction by founding its decision on a section of the document which did not form part of the matters before the tribunal. The court did not agree. It concluded that the tribunal had not "stepped outside the bounds of their jurisdiction".

Messrs. Alan Redfern, Martin Hunter and Murray Smith (of Campney & Murphy) in their book, "Law and Practice of International Commercial Arbitration" (second edition) summarize challenges to jurisdiction as follows: "A challenge to the jurisdiction of an arbitral tribunal may be partial or total. A partial challenge raises the question of whether certain (but not all) of the claims or counterclaims which have been submitted to the arbitral tribunal are within its jurisdiction. A challenge of this kind does not amount to a fundamental attack on the jurisdiction of the arbitral tribunal; a total challenge, by contrast, questions the whole basis upon which the arbitral tribunal is acting or purporting to act."

It is essential that arbitrators understand clearly the matters over which they have been asked to preside before the commencement of the arbitration. The safest practice is to ensure that jurisdictional matters have been "signed off" by the parties involved.

Failure to observe the rules of natural justice

This type of "arbitral error" carries with it a huge opportunity for challenges, particularly by an unsophisticated party who is not represented by counsel. The rules are not difficult to define but are often difficult to apply. Questions of "fairness" are often about whether evidence should or should not be admitted.

An interesting ruling can be found in the Supreme Court of Canada decision University du Quebec Trois-Rivires v. Larocque [1993] 1 S.C.R File No. 22146, in which the Court noted that:

An arbitrator must pay careful attention to ensure the process is fair and that it is perceived to be fair by the participants, even if they may not agree with the results. Rule 19 of the Domestic Rules of Procedure summarizes the concept of "natural justice" on the part of the arbitrator as follows:

19.(1)

Conclusion

One of the cornerstones of commercial arbitration is that there be a minimum of judicial intervention. The Commercial Arbitration Act severely limits the extent of judicial intervention in section 32 which states "Arbitral proceedings of an arbitrator and any order, ruling or arbitral award made by an arbitrator must not be questioned, reviewed or restrained by a proceeding under the Judicial Review Procedure Act or otherwise except to the extent provided in this Act." The only provisions for intervention are found in sections 30 and 31. Challenges under these sections are hard to prove, and only rarely successful.