Arbitration Overhaul: BC Passes Legislation to Modernize its Domestic Arbitration System
By Lisa A. Peters, QC, Scott Lucyk, Catherine Whitehead – Lawson Lundell LLP
On September 1, 2020, the new Arbitration Act, S.B.C. 2020, c. 2, (the "New Act") came into force in B.C., which repealed and replaced the previous Arbitration Act, R.S.B.C. 1996, c. 55 (the “Previous Act”). The New Act will apply to arbitral proceedings commenced on or after the date it comes into force.
This is the first major overhaul since the Commercial Arbitration Act, S.B.C. 1986, c. 3 (the predecessor to the Previous Act) replaced the Arbitration Act, R.S.B.C. 1979, c. 18.
The New Act is modelled, with a few exceptions, on the Uniform Model Arbitration Act (2016) (the "Uniform Act") adopted by the Uniform Law Conference of Canada (ULCC) on December 1, 2016. The ULCC working group that recommended the Uniform Act to the Conference was made up of leading practitioners from multiple provinces. One of the stated objectives of the working group was to encourage uniformity of arbitration law throughout Canada. B.C.'s adoption of the New Act is an important step in pursuit of that objective.
The New Act also brings the province further in line with the modern, pro-arbitration approach that is increasingly common internationally. The New Act draws on many of the key provisions in the UNCITRAL Model Law, which is the template legislation drafted by the United Nations to assist in harmonizing arbitral practice globally. A similar approach was adopted in the updates to the International Commercial Arbitration Act, R.S.B.C., c. 233 in 2018.
The New Act is a statute of general application; it applies to all arbitrations not expressly excluded, not just to commercial arbitrations. It takes a liberal approach to arbitrability and the jurisdiction of arbitral tribunals to control proceedings before them and to fashion appropriate relief. The New Act limits judicial intervention in an arbitration proceeding (specifically stating that a court must not intervene unless so provided in the New Act), underscoring that arbitration is an alternative form of dispute resolution, not an adjunct or prelude to court proceedings.
We highlight below some of the changes from the Previous Act and enhancements in the New Act that practitioners and contracting parties who opt for arbitration clauses should be aware of.
Jurisdiction of arbitral panel to rule on its own jurisdiction
The case law has confirmed for some time that arbitrators have jurisdiction to rule on their own jurisdiction (the so-called competence-competence principle). However, there is jurisprudence in other jurisdictions where the courts have distinguished between an arbitrator having jurisdiction to rule on the scope of an arbitration clause and having jurisdiction to rule on its validity. This jurisdiction is codified in the New Act, which also contains a process for appealing a preliminary ruling on jurisdiction to the Supreme Court of British Columbia (“BC Supreme Court”). Notably, the New Act eliminates any further right of appeal from the BC Supreme Court decision.
Preliminary orders and interim measures
The New Act contains significant new provisions allowing an arbitral tribunal to grant interim measures without notice to the other party. "Interim measure" is broadly defined to cover orders requiring a party to preserve assets and evidence; maintain or preserve the status quo pending determination of the dispute; provide security for costs; and take action that would prevent, or refrain from taking action that is likely to cause, current or imminent harm or prejudice to the arbitral process.
Subject to limited exceptions, interim measures ordered by an arbitral tribunal must be recognized as binding and enforced on application to the BC Supreme Court.
Other features of this regime include:
- a rebuttable presumption that the party seeking the interim measures will provide security;
- liability of the requesting party for damages and costs caused by the interim measures if the arbitral tribunal later determines that, in the circumstances, the measure or order should not have been granted; and
- ongoing disclosure obligations in the event of material changes in the circumstances underlying the measures.
The New Act codifies an arbitral tribunal's power to appoint experts to report to the tribunal and the parties and includes the power to order a party to provide the expert with information and access to records, goods or other property for inspection. The duty of experts, whether retained by a party or appointed by the arbitral tribunal, to assist the tribunal and not be an advocate for either party, is explicitly set out.
Consolidation of arbitration proceedings
The New Act contains a consolidation regime consistent with that found in s. 27.01 of the International Commercial Arbitration Act. Consolidation of arbitration proceedings under this regime requires consent of all parties. This requirement should avoid disputes over whether the court has the power to order consolidation if only some parties consent (seen under the international arbitration and domestic arbitration legislation in other jurisdictions). If the parties have previously agreed to consolidate and a party reneges, the New Act allows the other party or parties to apply without notice to the BC Supreme Court for an order reflecting the prior agreement.
Application of Limitation Act
Some provinces expressly provide for the application of the Limitation Act to arbitration proceedings in their arbitration statutes or statutes. The Previous Act in B.C. is silent on this issue, and the wording of the Limitation Act is "court-centric", referring, for example, in the description of the basic limitation period in s. 6(1), to the time period within which a "court proceeding" must be brought.
As a result, there was uncertainty as to whether the Limitation Act applied to arbitral proceedings and, in particular, whether the commencement of an arbitral proceeding would toll the relevant limitation period set out in the Limitation Act. Subsection 11(1) of the New Act expressly provides that the law with respect to limitation periods for commencing court proceedings applies to commencing arbitral proceedings.
Subsection 11(2) of the New Act gives the arbitral tribunal the power and obligation to determine whether the arbitral proceeding was brought within the time limit specified in the arbitration agreement or the relevant limitation period.
The New Act contains significant changes to the appeal process. The Previous Act allows for the appeal of an arbitral award on a question of law to the BC Supreme Court. The New Act moves the jurisdiction over these appeals to the Court of Appeal, and parties will have the option of expressly agreeing not to allow an appeal of an arbitral award. These changes are designed to provide simpler and faster appeals.
The BC Supreme Court will maintain its jurisdiction to set aside awards on specific procedural points, such as where the arbitration agreement is void, the arbitral award deals with a dispute not falling within the terms of the arbitration agreement, or a party was not given a reasonable opportunity to present its case.
Designated authority under the New Act
The Previous Act provides that the domestic commercial arbitration rules of the British Columbia International Commercial Arbitration Centre (“BCICAC”) applies to domestic commercial arbitrations unless parties agreed otherwise. The New Act removes reference to these BCICAC rules, but requires that certain matters be dealt with by a “designated appointing authority”.
The New Act provides that the BCICAC will be re-branded as the Vancouver International Arbitration Centre (the “VIAC”), and it has been named the designated appointing authority pursuant to s. 67 of the New Act and s. 2 of the regulations.
As the designated appointing authority, the VIAC will be able to:
- appoint arbitrators where the parties fail to agree;
- summarily determine fees and expenses payable to an arbitrator if there is a dispute; and
- direct the tribunal to deliver an award on terms if there is a dispute regarding the arbitrator’s fees and expenses.
Use of the BCICAC Rules
Under the New Act, parties can still use the BCICAC’s rules and its administrative services for their arbitration, or opt to use another set of arbitral rules. The BCICAC previously announced that it will be revising its rules to harmonize them with the New Act.
Other key provisions
In addition to the above, the New Act also contains the following key provisions:
- procedures for how arbitrations can be started if the parties have not agreed otherwise;
- an express prohibition on parties disclosing confidential information;
- the option to record the settlement of a dispute as an arbitral award;
- issuing subpoenas to order a person who is not a party to give evidence or produce records; and
- courts may refer issues arising in a court proceeding to arbitration.
Structuring arbitration agreements in light of the New Act
Given the extensive changes that are being introduced, parties will need to ensure that arbitration agreements are drafted in a manner consistent with the New Act. This analysis will be particularly important where parties agree to use “boiler plate” arbitration clauses found in previous contracts or they have agreed to procedures that derogate from the provisions of the New Act.
In particular, parties will have to consider what provisions in the New Act are mandatory and which they can contract out of. Unlike s. 4 of the Uniform Act, the New Act does not list which provisions are mandatory. However, the New Act does expressly state that certain articles apply “unless the parties agree otherwise” or words to the same effect. Absent such language, specific advice may be required on whether a provision of the New Act is mandatory and the parties cannot opt out of it.