ONTARIO – Arbitration – Application to enforce two UK arbitral awards pursuant to the International Commercial Arbitration Act, 2017 – The grounds for refusing to enforce an arbitral award on the basis of unfairness are narrowly construed. Where the UK High Court had dismissed an application to set aside the arbitral awards on the same grounds as raised before the Ontario court, the elements issue estoppel were met and the Respondent’s objection to recognition and enforcement was denied.

Prospector PTE Ltd. v. CGX Energy Inc.
2023 ONSC 4207 (CanLII)
Ontario Superior Court of Justice (Osborne J.)

This was an application before Justice Peter Osborne to enforce a Partial Final Award and a Final Award by an ICC-appointed arbitral tribunal in London, England on September 13, 2022 and November 30, 2022 respectively. The tribunal awarded USD$14,807,372.20 plus post-award interest to the Applicant and dismissed the Respondent’s Counterclaim. (paras. 10-12)

Following the arbitral awards, the Respondent moved before the UK High Court to set aside the awards. Those applications were dismissed. (paras. 13-16)

Background

The Applicant (“Prospector”) was a Singapore company that conducts and analyzes review of marine seismic surveys. The Respondent (“CGX”) was an Ontario oil and gas exploration company. (para. 4)

The parties were embroiled in a contract dispute. Each party claimed that the other had breached their agreement, which provided for disputes to be resolved by binding OCC arbitration. (paras. 5-9)

Issue on the Application

The only issue on the application was whether the arbitral awards should be enforced in Ontario. The Respondent asked the Court to exercise its discretion not to enforce the awards. (para. 17)

Under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”), and the UNCITRAL Model Law, both of which have the force of law under the International Commercial Arbitration Act, 2017 (“ICAA”), the Court must recognize and enforce a foreign arbitral award unless the responding party can demonstrate one of the limited grounds of exception set out in the Convention or Model Law to decline enforcement. (paras 18-19)

In this case, CGX asked the Court to exercise its discretion to refuse to enforce the awards on the grounds of procedural unfairness. CGX relied on Art. 34 (2)(a)(ii) of the Model Law, which permits the Court to refuse enforcement of an arbitral award where “the party against whom the award is invoked was unable to present his case”. (paras 20-21)

CGX alleged in its UK counterclaim that the material delivered by Prospector was late and of poor quality. As a result, CGX had to hire another service provider and lost an opportunity for favourable market conditions with a potential investor. The UK High Court dismissed CGX’s challenge to the arbitral awards on the same ground as it raised before Osborne J. (paras. 22-28)

Analysis

Relying on Consolidated Contractors Group S.A.L. (Offshore) v. Ambatovy Minerals S.A., 2017 ONCA 939, leave to appeal to S.C.C. refused, 2018 CanLII 99661, at para. 18, Justice Osborne noted that “the Model Law provides a standard process for the conduct of international commercial arbitrations.” Pursuant to Article 5, “In matters governed by this Law, no court shall intervene except where so provided in this Law.” (para. 29)

The Court also noted that the grounds for refusing to enforce an arbitral award must be construed narrowly: Yugraneft Corp. v. Rexx Management Corp., 2010 SCC 19, [2010] 1 S.C.R. 649, at para. 9; and Popack v. Lipszyc, 2018 ONCA 635, 141 O.R. (3d) 561, at para. 40. (para. 30)

After citing the relevant provisions of Art. 34 of the Model Law and provisions of UK Law, which held that there must be “such a mishandling of the arbitration as to likely amount to some substantial miscarriage of justice”, Justice Osborne held that CGX was unable to meet this hurdle. (paras. 31-36)

The Court held that CGX was a sophisticated commercial party that freely entered into the agreement, which was valid under English law. CGX participated in the arbitration fully and was represented by counsel and an addendum agreement between the parties was also included in the terms of reference of the arbitration. The enforcement of the awards would not offend public policy. (paras. 37-41)

The arbitration tribunal found that CGX had failed to prove its counterclaim. On the basis of that finding, Osborne J. held that “I cannot conclude that the counterclaim of CGX was dismissed without CGX having had an opportunity to address it. On the contrary, the arbitration tribunal found that it simply failed to succeed in meeting its evidentiary burden to prove the counterclaim.” (paras. 42-48)

The Court also held that the objection raised by CGX was identical to the basis upon which the UK High Court dismissed its application to set aside the arbitral awards. Accordingly, another reason to reject this objection was the application of the doctrine of issue estoppel. (paras. 49-56)

Disposition

The Court allowed the application with costs. The arbitral awards[1] were recognized in Ontario. (paras. 62-64)

[1] In para. 63 of Justice Osborne’s Reasons, only the September 2022 Award was recognized and enforced. However, counsel for the Applicant confirmed this was an oversight that was corrected in the order of the Court, which recognized and enforced both arbitral awards.