Canada – ‘Only Logical to Modernize’ New York Convention ‘Agreement in Writing’ to Include Text/E-Mail Exchange

This article first appeared in Urbas Arbitral, here.

In Parrish & Heimbecker Ltd. v. TSM Winny AG Ltd., 2020 SKQB 348, Mr. Justice Richard W. Elson held that the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958) mention of an “agreement in writing” in the definition of an agreement to arbitration was “inclusive” and imposed no formal requirement that an “agreement in writing” needed to be signed. “Given the absence of text and email messages in 1958, when the New York Convention was created, I think it only logical for the Court to modernize these words and find that the reference to “telegrams” should include other similar forms of electronic communication, such as facsimile, text and email messages”.  Though applicant’s submissions referred to but produced no certified copies of the agreement to arbitrate or award, Elson J. adjourned the application for recognition and enforcement to allow applicant to file the certified copies. When recognizing and enforcing the appellate arbitral tribunal’s award issuing from an administered arbitration, Elson J. further recognized there was “little doubt” that the appeal panel “premised its analysis on a basis that was not part of either the notice of appeal or the respective arguments it received” but concluded that doing so did not justify a dismissal of the application. “I accept that it was unfortunate for the Appeals Committee to have addressed the question in the manner it did, without giving the parties an opportunity to address the point” but that the appeal panel “clearly believed it was entitled to act as it did”.

Parrish & Heimbecker Ltd. (“P&H”) applied for recognition and enforcement of an arbitration award (“Appeal Award”) issued against TSM Winny Ag Ltd. (“TSM”) by the arbitration appeal tribunal (“Appeals Committee”) of the National Grain and Feed Association (“NGFA”) under rules 7 of the NGFA Arbitration Rules.  (See Overview of NGFA Arbitration for more).  The dispute involved the application of the NGFA Trade Rules to the parties’ dispute and the extent to which the NGFA Trade Rules could or did have precedence over the terms of the parties’ contract. 

First Award and Appeal Award – A panel of three (3) arbitrators issued an award “in first instance” on June 7, 2019 (“First Award”). Further to an appeal filed June 21, 2019 by P&H under the NGFA Arbitration Rules, an Appeals Committee issued a January 10, 2020 award (“Appeal Award”) allowing P&H’s appeal.  

Both the First Award and Appeal Award contained two (2) parts.  In the first part, both panels agreed that the parties had entered into a binding contract for the purchase and sale of grain.  That determination rested on the application of NGFA Trade Rule 3 regarding the confirmation of contracts.  The panels differed on the second part regarding the role of NGFA Trade Rule 28 and the consequences of TSM’s non-delivery.  The panel in the First Award concluded that P&H was not entitled to damages.  The panel in the Appeal Award disagreed, that Rule 28 applied at all.

In its Appeal Award, the panel awarded P&H $75,901.14 comprised of $55,481.14 as damages and $20,420.00 as administration fees.

Arbitration framework – P&H submitted that that the Appeal Award issued within an arbitration framework recognized and adopted by the provincial legislature in The Enforcement of Foreign Arbitral Awards Act, SS 1986, c E-9.11 (“EFAA”) and The International Commercial Arbitration Act, SS 1988-89, c I-10.2 (“ICAA”).

TSM resisted on three (3) grounds. First, the parties had no “agreement in writing” to submit disputes between them to arbitration.  Second, P&H failed to meet the procedural requirements by not filing a certified or original copy of the arbitration agreement.  Third, the Appeals Committee exceeded the scope of the parties’ submission to arbitration, thereby depriving TSM of its opportunity to present its case.

Framework and sources – As preface to engaging in the case before him, Elson J. at paras 5-18 set out “a discussion of the framework for the recognition and enforcement of foreign commercial arbitration”.  As preamble to his discussion, Elson J. identified his sources.

The text resource is J. Kenneth McEwan, Q.C. and Ludmila B. Herbst, Commercial Arbitration in Canada:  A Guide to Domestic and International Arbitrations, loose-leaf (2008) (Aurora: Canada Law Book, 2004). The two judicial decisions are BWV Investments Ltd. v Saskferco Products Inc. 1994 CanLII 4557 (SK CA), [1995] 2 WWR 1 (Sask CA) [BWV]; and Yugraneft Corp. v Rexx Management Corp., 2010 SCC 19, [2010] 1 SCR 649 [Yugraneft]”.

As part of his discussion, at para. 14, Elson J. listed a sampling of judicial considerations and comments from Saskatchewan courts.  In addition to BWV Investments Ltd. Saskferco Products Inc. he noted Schiff Food Products Inc. v. Naber Seed & Grain Co. Ltd. 1996 CanLII 7144 (SK QB), [1997] 1 WWR 124 (WL) (Sask QB)West Plains Co. v. Northwest Organic Community Mills Co-operative Ltd., 2009 SKQB 162 and Parrish & Heimbecker Ltd. v. Bukurak, 2017 SKQB 322, 18 CPC (8th) 194.

For an earlier Arbitration Matters note on the latter decision, see “Saskatchewan – court delivers no-fuss recognition of default foreign arbitral award – #048”. In Parrish & Heimbecker Ltd. v Bukurak, 2017 SKQB 322 Saskatchewan’s Court of Queen’s Bench provided a proof-of-concept application of Saskatchewan’s embrace of international commercial arbitration in its straightforward review and grant of an application to recognize and enforce a foreign arbitral award. 

In his discussion, in addition to comments on Saskatchewan’s EFAA and ICAA, Elson J. noted the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958) (the “New York Convention”) and the UNCITRAL Model Law on International Commercial Arbitration (1985), with amendments as adopted in 2006 (“Model Law”).  Elson J. noted that the parties’ dispute before him focused on the New York Convention’s articles II and V and the Model Law’s articles 7, 35 and 36(1)(a)(iii).

Limited role of trade association – Elson J. commented on the limited role played by the NGFA in the recognition and enforcement of a foreign arbitration award.

[18] Finally, it should be noted that the role of the NGFA in this framework is confined to providing an arbitration scheme for the resolution of disputes coming within the scope of its trade and arbitration rules. It has no direct role in the recognition and enforcement of a foreign arbitration award. As such, neither the parties or the Court should expect the NGFA arbitration panel or Appeals Committee to construe or apply provisions of either the New York Convention or the Model Law when considering the matters before them. It also follows that their consideration of the NGFA trade and arbitration rules cannot inform or assist the Court in its construction of the New York Convention and the Model Law. In this respect, their respective processes, while related, are substantially distinct”.  

Agreement in writing – Elson J. dismissed TSM’s argument regarding the absence of a signed contract.  He noted that para. 2 of the New York Convention’s article II definition of “agreement in writing” was “inclusive” and imposed no formal requirement that an agreement in writing needed to be signed.

Given the absence of text and email messages in 1958, when the New York Convention was created, I think it only logical for the Court to modernize these words and find that the reference to “telegrams” should include other similar forms of electronic communication, such as facsimile, text and email messages”.

In addition to the exchange of electronic messages, Elson J. held that “both the evidence and the findings on arbitration” demonstrated that TSM had received the contract and knew or ought to have know that P&H intended to contract with TSM on the terms in the contract including the agreement to arbitrate.  He added a reference to Saint John Tug Boat Co. Ltd. v. Irving Refining Ltd., 1964 CanLII 88 (SCC), [1964] SCR 614 pp. 621-22 regarding conduct that affirms a contract.

Certified original copy of arbitration agreement – Elson J. disagreed with P&H that certified copies had been filed of the agreement to arbitrate. Despite the mention of the awards and the contract in the file, Elson J. recorded no actual certified copy presented to him.

[47] Respectfully, I do not accept that either of the documents, as filed, are “certified” in a manner that this Court could accept for the purposes of this application. Although the phrase “certified” is not formally defined in either the New York Convention or the Model Law, there is consensus in the authorities on an applicable definition. That consensus suggests that a copy of a document or record is certified where the officer, to whose custody the original document or record is entrusted, signs and certifies a document as a true copy of the original. See R v Tatomir, 1989 ABCA 233, [1990] 1 WWR 470 at paras 10-12 and Kanto Yakin Kogyo Kabushiki-Kaisha v Can-Eng Manufacturing Ltd. (1992), 1992 CanLII 7628 (ON SC), 7 OR (3d) 779 (WL) (Ont Ct J) [Can-Eng Manufacturing] at paras 38-40. In the case of the Appeals Committee award, certification from an appropriate officer with the NGFA would have sufficed. With respect to the contract document, I am satisfied that it could be certified by the appropriate officer of P&H. In this respect, it would not have been necessary to certify anything more than the two page document containing the purchase confirmation and the terms, where Clause 12 is contained”.

Despite the omission, Elson J. determined that it would not be “appropriate” to “simply dismiss the application”.  Rather, he did not see the omission as “a case of creating documents that do not exist” and noted that TSM questioned only the binding nature of the contract and not its existence.  He elected to adjourn the application and granted P&H time to file the necessary documents.

Award beyond scope of submission to arbitration – Elson J. noted that both parties argued the application of Rule 28 but neither addressed the question of whether the terms of the contract superseded Rule 28, a question which “informed the Appeals Committee analysis”.

Elson J. noted that TSM’s arguments did engage a key provision in the Model Law but reasoned that the “general purpose” of both the New York Convention, the Model Law and the legislation “that incorporates them” urged to “favour resolution” in the arbitration proceedings and that recognition and enforcement “should not be lightly refused”.

[50] TSM’s argument presents the Court with two questions. The first question pertains to whether, as worded in Article 36(1)(a)(iii) of the Model Law, the Appeals Committee dealt with the dispute not contemplated by the submission to arbitration, or not falling within it. The second question, which arises only after an affirmative answer to the first question, is whether the Court should exercise its discretion not to refuse recognition and enforcement despite the Appeals Committee having exceeded its jurisdiction.

[51] Turning to the first question, I am satisfied that it must be answered in the affirmative. Based on the material before the Court, there is little doubt that the Appeals Committee premised its analysis on a basis that was not part of either the notice of appeal or the respective arguments it received. Although one could reasonably argue that the dispute between the parties was confined to determining whether P&H was entitled to damages for TSM’s failure to perform, I am satisfied that the dispute was more nuanced than that. It is clear that the core features of each side’s argument focused on Rule 28 – not the terms of the contract.

[52] I now turn to the second question. Despite the affirmative answer to the first question, I am satisfied that the Appeals Committee’s excess does not justify a dismissal of this application. I accept that it was unfortunate for the Appeals Committee to have addressed the question in the manner it did, without giving the parties an opportunity to address the point. That said, the Appeals Committee clearly believed it was entitled to act as it did. More directly, there is no evidence of any action taken by TSM to pursue a judicial challenge of the award in the United States, or whether such a challenge was available to it. 

[53]  Secondly, there is no evidence before the Court, either by affidavit or through counsel’s submissions, of a reasonably persuasive argument TSM could have advanced if it were aware of the reasoning the Appeals Committee eventually applied. In my view, unless TSM could demonstrate that such an argument was available to challenge the Appeals Committee’s analysis, it could not assert any palpable prejudice”.

Elson J. therefore “narrowly construed” article 36(1)(a)(iii). “Unless a responding party can demonstrate palpable and overriding prejudice, akin to a denial of natural justice, recognition and enforcement of an award should not be refused”.

urbitral notes – First, the facts involve a two (2) step arbitration process which stipulates an internal appeal process.

Second, the reasons do not address whether the approach to “favour resolution in arbitration” ought also to have applied to the internal two (2) step arbitration process or only to the courts’ involvement once the arbitration, including appeals, concluded.  

author

Daniel Urbas

Daniel Urbas is an experienced litigator, arbitrator and mediator with over 25 years of dispute resolution experience. He has earned a variety of repeat, annual peer recognitions including “Leading Lawyer” in “Commercial Arbitration” in the 2019 edition of the Lexpert ® / American Lawyer Guide to the Leading 500 Lawyers…

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