Supreme Court of Canada Limits Appeals of Arbitral Awards

Alternate Dispute Resolution | Sattva Capital Corp. v. Creston Moly Corp.

In a recent case, Sattva Capital Corp. v. Creston Moly Corp., the Supreme Court of Canada (SCC) has restricted appeals to the courts from domestic commercial arbitral awards. The case stemmed from a straightforward commercial transaction over which the parties disagreed.

Mr. Hai Van Le, the principal of the plaintiff, Sattva Capital Corp., introduced Creston Moly Corp. to a molybdenum mining prospect in Mexico. In 2007, Sattva and Creston entered into an agreement that obliged Creston to pay Sattva a finder’s fee if the former acquired the Mexican property.

The purchase did go ahead but, although both parties agreed that a finder’s fee was payable, they disagreed on the amount. A formula with a minimum payment of $1.5 million had been set out in the agreement between the two parties. Sattva, however, claimed that Creston owed it more than $4 million. This amount was based on when the finder’s fee was to be calculated and on the price of Creston shares at that time.

The parties took their dispute to an arbitration hearing, pursuant to British Columbia’s Commercial Arbitration Act (now the Arbitration Act). The Arbitrator found in favour of Sattva, awarding the company $4,140,000 plus costs. Creston made a payment of $1.5 million following the award and sought leave to appeal the award.

B.C.’s legislation limits appeals from arbitral awards under the Commercial Arbitration Act to questions of law alone. There is no automatic right of appeal. Leave to appeal must be sought from, and requires a litigant to apply to, a court to review the arbitrator’s decision and determine if it is appealable.

It is interesting to note that the case spent approximately five years in the courts, whereas the arbitration process took about one year. Over this lengthy period before reaching the Supreme Court of Canada, the case had twice been before the B.C. Supreme Court and twice before the Court of Appeal.

In the end, the SCC decision restored the arbitration award of over $4 million. The Court found that construing contracts, as this matter did, required an interpretation of mixed fact and law—as such, it was not a question of law alone. In the past, B.C.’s courts have reversed arbitral awards by interpreting contracts. In future, though, this SCC decision means that leave to appeal an arbitral award will only be granted on a question of law alone.

Many commercial contracts contain an “arbitration clause” that mandates any dispute be settled by arbitration rather than going to court. This has not prevented appeals to courts but, following this decision, there should be fewer of them. Furthermore, as this case’s costly time-consuming process showed, appealing arbitral decisions can well be more expensive and less efficient than going to court, rather than arbitration, in the first instance.

Sattva Capital Corp. v. Creston Moly Corp. emphasizes the importance of considering arbitration to settle a dispute in a commercial contract. Arbitration usually has the advantage of speed and cost—but not always. It is important to consult thoughtful and competent counsel before electing to use arbitration to settle any dispute.

For more information on this case and on arbitration matters in general, please contact Winton.