ONTARIO – Arbitration – Recognition and Enforcement of Arbitral Judgment – Under the Model Law, the grounds for a court to refuse recognition and enforcement of a foreign arbitral award are construed narrowly and are the same as the grounds to set aside an award. To justify setting aside an arbitral award under the Model Law for reasons of fairness or natural justice, the conduct of the arbitral tribunal must be sufficiently serious to offend our most basic notions of morality and justice.  Judicial intervention for alleged violations of the due process requirements of the Model Law will be warranted only when the tribunal’s conduct is so serious that it cannot be condoned under Ontario law. A party is not entitled to reargue the merits of the case in an application to enforce the Award.

ONTARIO – Application – Adjournment – Where the party requesting the adjournment has not acted with diligence and provided no explanation for its lack of diligence, the administration of justice is undermined. Whether the adjournment will cause a significant delay is an important consideration and outweighs allowing a party to continue to search for evidence to support its opposition to enforcement of a foreign arbitral award. Where there is no evidence that an adjournment will result in finding such evidence and the proposed grounds to resist enforcement of the Award “do not appear to have any air of reality”, the adjournment was denied.

Xiamen International Trade Group Co., Ltd. v. LinkGlobal Food Inc., 2023 ONSC 6491 (CanLII)
2023 ONSC 6491  (November 16, 2023)
Ontario Superior Court of Justice (Vermette J.)

The Applicant sought recognition and enforcement of an arbitration judgment of the Xiamen Arbitration Commission (“Commission”) under the UNCITRAL Model Law on International Commercial Arbitration (“Model Law”). At the hearing, the Respondent sought an adjournment, which was contested.

Background

The parties carried on business in different countries. The contract between the parties provided that any disputes that could not be resolved through negotiation could be brought  before the Commission. (paras. 5-6)

The Respondent participated in the arbitration. The Commission delivered its unanimous decision on September 1, 2021, which required the Respondent to make payments to the Applicant. None of payments were made. The Respondent did not apply to have the Award varied or set aside. (paras. 8-12)

The Application was commenced on October 26, 2022. The Respondent was served with the requisition to schedule the Application, which included a timetable, and the Application Record. The Respondent did not serve any responding materials. (paras. 13-15)

General Principles Applicable to Recognition and Enforcement

Foreign arbitral awards are enforceable in Ontario through the International Commercial Arbitration Act, 2017, S.O. 2017, c. 2, Sched. 5 (“ICAA”), which gives the Model Law force of law in Ontario. The court found that the Model Law applied to the arbitration because the parties’ places of business were in different countries (China and Canada – Ontario). (para. 24)

There are limited grounds under the Model Law for an Ontario court to refuse recognition or enforcement of a foreign arbitral award. Those grounds are to be narrowly construed. They are substantially the same as the grounds for an Ontario court to set aside a foreign arbitral award under the Model Law. “Courts have held that to justify setting aside an arbitral award under the Model Law for reasons of fairness or natural justice, the conduct of the arbitral tribunal must be sufficiently serious to offend our most basic notions of morality and justice.  Judicial intervention for alleged violations of the due process requirements of the Model Law will be warranted only when the tribunal’s conduct is so serious that it cannot be condoned under Ontario law.” (paras. 26-28)

Justice Vermette cited the holding in Nelson v. The Government of the United Mexican States, 2022 ONSC 1193 (“Nelson”) at para. 34 that “a party may be said to have been ‘unable to present their case’ when:

1. the award is based on a theory of liability that either or both of the parties were not given an opportunity to address, or based on a theory of the case not argued for by either of the parties;
2. a party was not given an opportunity to respond to arguments made by an opposing party; or
3. the tribunal ignored or failed to take the evidence or submissions of the parties into account.” (para. 29)

Justice Vermette held that a party is not permitted to review the award on its merits by alleging breaches of Article 34(2)(a)(ii) of the Model Law. “Where a party merely disagrees with the outcome, the court should not permit re-argument of the merits in the guise of a claim for breach of procedural fairness.  See Nelson at para. 35.” (para. 30)

Adjournment Request

The court denied the Respondent’s request for an adjournment after weighing the factors listed by Justice Perrell in Ariston Realty Corp. v. Elcarim Inc., 2007 CanLII 13360 at para. 34 (Ont. S.C.J.), which are relevant to the exercise of a judge’s discretion to grant or refuse an adjournment. (paras. 34-35)

In this case, Justice Vermette held that the circumstances of the adjournment request and the reasons and justification for the request were very important factors. In particular, the court noted that:

1. Despite knowing about the Application for a year, the Respondent did not have any evidentiary support for any valid ground to oppose enforcement of the Award. It only started to investigate whether it could find such support nine months after the Application was scheduled, which left little and insufficient time for reply evidence, cross-examinations and exchanged of factums. The Respondent did not provide any explanation for its lack of diligence. This undermined the needs of the administration of justice to the orderly process of civil proceedings and to effectively enforce orders, including scheduling orders (para. 36)
2. The evidence filed in support of the adjournment request was based on hearsay and direct evidence could have been provided. The court drew an adverse inference from the absence of any evidence from the Respondent. (para. 37)
3. The proposed grounds to resist enforcement of the Award “do not appear to have any air of reality.” Most of the grounds submitted referred to substantive issues before the Commission, upon which the Commission ruled. The Respondent is not entitled to reargue the merits of the case in an application to enforce the Award. (para. 38)
4. There is no evidence that the parties were not treated the same with respect to access to the hearing or that the exclusion of parties was contrary to the Commission’s rules and procedures. (para. 39)
5. While the Respondent had requested a document prior to the arbitration that it did not receive until after the arbitration, there was no indication that it asked the Commission to order production of the document. The Commission also considered and ruled on the issue to which the document pertained. The Respondent did not show reasonable diligence and that it raised the issue before the Commission to object to the issue in this Application. (paras. 40-42)
6. The Respondent argued that no witnesses may have been heard by the Commission. However, the court held that this did not mean that the Respondent was unable to present its case. “There is no suggestion in the Award and no evidence in the record that: (a) the Respondent objected to the procedure adopted by the Commission; or (b) the Commission did not follow its regular rules and procedures. By agreeing in the Contract that any dispute under the Contract would be resolved by way of arbitration before the Commission, the parties agreed to any rules that the Commission may have adopted.” (para. 43)
7. The test under the Model Law to show that a party was unable to present its case is “very stringent” and the Respondent’s “theory of the case” and “proposed arguments do not appear to have a chance of success”, which is an important consideration in balancing the factors for an adjournment request. “If an adjournment were to be granted, there is a real possibility that, more than one year from now, the Respondent would not have been able to obtain the evidence for which it seeks an adjournment, thereby creating a long delay for naught.” (para. 46)
8. Another important factor is the significant delay that an adjournment would cause, which must be considered in light of the length of time it took for the Application to obtain a hearing date. The court found that the Respondent had an interest in delaying the Application. “The Respondent’s request for an adjournment, the limited and last-minute evidence filed in support of the request, and the fact that more than two years after the Award was delivered and almost one year after the Application was scheduled the Respondent does not appear to know what its defence is going to be, suggest a party who is grasping at straws to avoid its payment obligations under the Award.” (para. 47-49)

Recognition and Enforcement of the Award

Justice Vermette held that the Award be recognized and enforced in Ontario in accordance with Articles 35 and 36 of the Model Law. None of the grounds under Article 36 for refusing recognition or enforcement were present. The Respondent did not provide proof of any of the grounds under Article 36(1)(a), nor did the court see indication in the record that such grounds could be established. None of the grounds in Article 36(1)(b) were present either. (paras. 51-55)