What is the international commercial arbitration act in Canada?

There are numerous modes of alternative dispute resolution (ADR), and when these are used or applied by a specific sector, it becomes a special field of ADR which is different from the other modes of ADR – one of these special fields is international commercial arbitration. 

What is international commercial arbitration in Canada? 

To understand international commercial arbitration in Canada, it must be broken down by knowing the different modes of ADR, the ways or process under such modes, and the venue or jurisdiction available for both. 

Alternative Dispute Resolution (ADR) 

Alternative Dispute Resolution (ADR) is a voluntary and consensual process of resolving disputes outside the judicial system. Here, parties voluntarily submit their dispute for resolution to a person/s chosen to adjudicate said dispute (also referred as voluntary submission) or have the ADR clause in their contract be enforced when such clause or contract exists. 

It’s “alternative” because it’s generally done “outside” the court, and the court has limited powers over the whole process of the ADR method – from the commencement of the proceedings until the pronouncement of award or the creation of amicable settlement. Depending on the laws of the country, the court may only assist the parties when problems arise before, during, and after the proceedings of the ADR. The court may also assist in enforcing the award or amicable settlement, but has limited powers in amending what has been agreed upon in the settlement or the award rendered. 

Here’s a video explaining a bit more: 

There are various types of mediators that can get involved in these types of disputes, but we recommend a lawyer in your area. You can start by taking a look at the best commercial arbitration lawyers in Ontario for assistance in that province. 

Modes of ADR 

There are two common modes of ADR – mediation and arbitration. In mediation, parties are guided by a mediator to come up with an amicable settlement or resolution which will govern both parties. However, in arbitration, an arbitrator or a panel of arbitrators will adjudicate on the dispute after due process and renders an arbitral award afterwards. The process of conducting either mode is (1) ad hoc or (2) institutional. 

(1) Ad Hoc 

Ad hoc mediation and arbitration mean that the parties initially agreed on the whole process or conduct of the arbitration. It may be included in their contract, or is in a separate document from their contract. Usually, parties may just copy in toto an existing process already found in laws or in international treaties and conventions on arbitration or mediation. 

(2) Institutional 

Institutional mediation and arbitration are where the parties mutually agree to submit any dispute to a domestic or international institution or organization which provides mediation and arbitration services. Said institution would have a list of arbitrators or mediators for the parties’ choosing, and institutional rules and process for arbitration or mediation which the parties submit themselves when they chose said institution. 

Venue of ADR Process 

The venue of these two modes may either be domestic or international. It is important to distinguish the two for the purpose of determining which law would apply in the resolution of the dispute, such as the process of the mediation or arbitration itself and resolution of disputes within this process itself. 

An arbitration or mediation is domestic when both parties to the dispute are located or operates in one country or state, and the cause of action (or the dispute) occurred in the same country or state. Here, the law of the country on arbitration or mediation shall govern, including the treaties and international conventions on arbitration or mediation that that country is a signatory of.  

International arbitration or mediation, on the other hand, is when there is an international component on the part of the dispute or of the parties which will be governed by the domestic laws and/or the arbitration or mediation contract which the parties have agreed upon. 

What are the key elements of international commercial arbitration? 

The key elements in international commercial arbitration are:  

1. that the arbitration should be consensual; 
2. that it has an international element in it; 
3. that it involves a commercial dispute. 

(1) Consensual 

As with mediation, international commercial arbitration must be explicitly consensual. This consent of the parties may be derived from the commercial contract signed by both parties which may contain the arbitration clause, or may be derived from the submission contract agreed upon by both parties after a commercial dispute arises and when there is no arbitration clause in their commercial contract. 

(2) International element 

An arbitration has an international element in either of the following: 

• When either party operates or are located in different countries or states, and the cause of action or the dispute occurred internationally or in either country where the party is located; or 
• When both parties are located in the same country or state, the cause of action or dispute occurred locally, but the parties agreed to submit their dispute to international institutional arbitration; or 
• When both parties are located in the same country or state, the cause of action or the dispute occurred internationally, and the parties agreed to submit it to international arbitration. 

(3) Commercial dispute 

A commercial dispute may involve matters arising out of a commercial contract or not, since commercial contracts may either be written contracts or oral agreements. According to the Model Law, the following may be considered as a “commercial transaction”: 

• any trade transaction for the supply or exchange of goods or services;  
• distribution agreement;  
• commercial representation or agency;  
• factoring;  
• leasing;  
• construction of works;  
• consulting;  
• engineering;  
• licensing;  
• investment;  
• financing;  
• banking;  
• insurance;  
• exploitation agreement or concession;  
• joint venture and other forms of industrial or business cooperation;  
• carriage of goods or passengers by air, sea, rail or road. 

What are the governing laws for international commercial arbitration in Canada? 

International commercial arbitration in Canada is governed both by the UNCITRAL Model Law on International Commercial Arbitration (or called “Model Law” for short) and by Canadian domestic laws on commercial arbitration (both federal and provincial). Although, these federal and provincial Canadian laws on arbitration are generally patterned from the Model Law. 

As such, the governing law would be either be the Commercial Arbitration Act which will only apply when one of the parties is a Crown corporation; or the Model Law for ad hoc arbitration and the parties agreed to adopt the Model Law; or provincial laws on international commercial arbitration when both parties are private parties or are not Crown (public) corporations. 

Are arbitration agreements enforceable in Canada?  

Arbitration agreements are generally enforceable in Canada, if the arbitration agreement has been freely and consensually agreed by the parties, and the arbitration process has been done according to law and without any undue influence, fraud, or grave abuse which will render the arbitration agreement, and consequently the arbitral award, void and unenforceable in Canada. 

Have any questions about the Model Law and other applicable Canadian laws on international commercial arbitration? Comment down below or ask from the best commercial arbitration lawyers in Canada to answer your inquiries.