Private Arbitration of Business Disputes

Arbitration is a form of dispute resolution in which the parties hire an arbitrator or arbitrators to hear and decide their case. Arbitration is sometimes called “private litigation” as the processes may resemble the public litigation process in court, but involves an adjudicator hired by the parties rather than a judge. In some cases, arbitration may be preferable to litigation.

When do Disputes go to Arbitration?

Arbitration often arises when a contract between two parties includes a clause allowing or requiring disputes be resolved by arbitration rather than traditional litigation. In addition, some statutes require disputes to be referred to arbitration rather than the courts. If a contract requires arbitration but one of the parties sues in court, the court may refuse to hear the case if another party objects and insists that the dispute be resolved by arbitration.

Parties may also agree to submit their dispute to arbitration even if it is not required by contract or statute. Whether arbitration is mandatory, or the parties agree to submit their dispute to arbitration, the process in Ontario is governed by the Arbitration Act, 1991, S.O. 1991, c. 17 for domestic arbitrations and the International Commercial Arbitration Act, 2017, S.O. 2017, c. 2, Sched. 5 for international arbitrations.

Benefits of Arbitration

Arbitration may offer several advantages when compared to litigation, including:

• a faster process;
• more flexibility and control over the process;
• confidentiality; and
• the availability of subject-matter expert arbitrators.

The parties to an arbitration process have greater control over the timing and process of their dispute resolution.  In litigation before the courts, in which the civil procedure rules, and the availability of court resources will largely determine the pace and steps of the process. If the parties wish to have a dispute determined in a streamlined fashion, arbitration may offer a faster and more flexible method for the determination of the dispute.

Arbitration is also an attractive option where qualified subject-area experts are available to act as arbitrators, and whose expertise allows them to hear and decide an issue in an expedited fashion compared to a judge who may not be as familiar with the issues in question.  For instance, where a dispute involves a great deal of expert opinion evidence about a technical issue, the parties should retain an arbitrator who is familiar with the types of issues and information that will be considered in the dispute. Experienced counsel may assist the parties with choosing an appropriate arbitrator and the most advantageous procedure to be followed in adjudicating a specific dispute.

If parties wish to avoid a protracted and public dispute in the courts, the confidentiality offered by arbitration will be an attractive alternative to litigation.

The Arbitration Process

A contract with an arbitration clause may provide details about the arbitration process, such as the number of arbitrators, the method for choosing the arbitrator, and where the arbitration will be held. If the arbitration clause does not include a procedure, a party to an arbitration agreement can ask the court to appoint an arbitrator.

In most cases, a party initiates arbitration by serving a notice to participate or a notice to appoint an arbitrator.

Some contracts adopt standard arbitration rules, such as the ADR Institute of Canada Arbitration Rules. Otherwise, it is up to the parties to agree on the arbitration process. If they cannot agree, the arbitrator can resolve any disagreements about the procedure to be followed.

Jurisdiction

An arbitrator may or may not have jurisdiction to decide a matter. Unlike a court of law, which typically has inherent jurisdiction when parties, events, and property are located within its jurisdiction, an arbitrator only has jurisdiction if the parties consented to arbitrate their dispute. The parties’ consent is usually found through an arbitration clause in an existing agreement or contract, or by the parties’ express agreement to refer a matter to arbitration when they prefer the arbitration process to litigation in a court of law.

Parties should ensure that arbitration clauses in agreements are as clear as possible. Arguments often arise about whether an arbitration clause is mandatory and whether it applies to the dispute at issue. If the arbitration clause is not clear, a party may not be able to insist on resolving the dispute through arbitration. Under the Ontario Arbitration Act, the arbitrator can determine whether he or she has jurisdiction.

Unless the arbitration agreement states otherwise, a party can only appeal an arbitrator’s decision if the party obtains leave from the court. Appeals are usually confined to issues of law. A court can also review and set aside an arbitrator’s decision on certain grounds specified in the Arbitration Act, such as if a party was not treated equally and fairly.

Evidence

As noted above, an arbitrator may decide the process that the parties will follow for the adjudication of a dispute. Provided the process obeys the rules of natural justice it will typically be upheld by a court. However, arbitrators may set processes for the exchange of evidence between the parties, and the hearing of evidence, that are quite different from the rules that apply in traditional litigation.

Arbitration Awards

The decision of an arbitrator is called an award. In Ontario, a domestic arbitrator can make a monetary award, and also award specific performance, injunctions, and other equitable remedies. The award s binding on the parties like the judgment of a court.

The parties can apply to the Ontario Superior Court of Justice for a judgment enforcing an arbitrator’s award, if necessary.

Arbitration may be attractive to you if you are seeking to resolve a dispute and are concerned about the delays, inflexibility, and public nature of the litigation process.