Administrative law – Decisions of administrative tribunals – International Commercial Arbitration Court – Arbitration and award – Judicial review – Compliance with legislation – Limitations
Yugraneft Corp. v. Rexx Management Corp.,  S.C.J. No. 19, 2010 SCC 19, Supreme Court of Canada, May 20, 2010, McLachlin C.J. and Binnie, LeBel, Deschamps, Fish, Abella, Charron, Rothstein and Cromwell JJ.
The appellant, Yugraneft Corp. (“Yugraneft,”) is a Russian corporation. The respondent, Rexx Management Corp. (“Rexx”) is an Alberta corporation that at one time supplied materials to Yugraneft for its oil field operations. Yugraneft and Rexx had a contractual dispute and Yugraneft commenced arbitration proceedings before the International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation (the “Russian ICAC”). In September 2002, the Russian ICAC awarded damages to Yugraneft.
In January 2006, Yugraneft applied to the Alberta Court of Queen’s Bench to enforce the arbitration award. Rexx argued the application was time-barred under the Alberta Limitations Act. Rexx also argued the enforcement proceedings should be stayed pending an outcome in an ongoing criminal case involving the parties in the United States.
The judge, at the Alberta Court of Queen’s Bench, ruled the application was time-barred under the Limitations Act. Yugraneft argued the applicable provision of the Limitation Act was Section 11, which applied to the enforcement of a “judgment or order for the repayment of money”. The judge disagreed and held that Section 3 was the applicable section of the Limitation Act. That section related to “remedial orders” and had a two-year limitation period.
The Alberta Court of Appeal unanimously upheld the judge’s finding noted above. A foreign arbitral award could not be considered a “judgment” pursuant to Section 11 of the Limitations Act because that term only encompassed domestic judgments. The appeal was dismissed.
In the within application, Yugraneft argued a foreign arbitral award should be treated as a domestic judgment under Section 11 of the Limitations Act because arbitration is an adjudication of a legal dispute and posses all the characteristics of a judgment. Yugraneft also argued foreign arbitral awards should be treated as at least equivalent to a foreign judgment, and that foreign judgments fall within the meaning of “judgment” under Section 11 of the Limitations Act. Finally, Yugraneft argued the Limitations Act is ambiguous and the ambiguity should be resolved in its favour.
The recognition and enforcement of foreign arbitral awards is governed by the ICAA, which incorporates both the convention on the recognition and enforcement of foreign arbitral awards (the “New York Convention”) and the UNCITRAL model law on international commercial arbitration (the “Model Law”), into Alberta law. The New York Convention requires each contracting state to recognize and enforce arbitral awards made in the territory of another state and that recognition and enforcement can only be refused on limited grounds. The Convention has been ratified by over 140 countries, including Canada.
The Model Law is not an international agreement like the New York Convention is. The Model Law is a codification of international “best practices” intended to serve as an example for domestic legislation. The Model Law has been adapted, for the most part, by every jurisdiction in Canada. Having adopted both the Convention and the Model Law, there is no doubt Alberta is required to recognize and enforce eligible foreign arbitral awards. The question is what limitation period, if any, applies to the recognition and enforcement of foreign arbitral awards in Alberta.
The Court decided whether the Convention allowed local limitation periods to apply. This was a relevant question since neither the Convention nor the Model Law expressly impose a limitation period on recognition and enforcement of arbitral awards. The Court concluded the Convention permits contracting states to provide a time period for the recognition and enforcement of foreign arbitral awards. The Court relied on the nature of the Convention in interpreting its provisions.
The Court then turned to decide whether Alberta law subjected the recognition and enforcement of foreign arbitral awards to a limitation period. The Limitations Act is the only piece of legislation applicable in this case. That act was intended to create a comprehensive and simplified limitations regime to replace the previous Limitation of Actions Act. Thus, the purpose of the Act was to streamline the law of limitations by limiting the number of exceptions and providing a uniform limitation period for most actions.
The Court concluded the overall scheme of the Act was intended to be pervasive. The Act was intended to apply to all claims for a remedial order not expressly excluded by statute. Foreign arbitral awards are not listed as specific exceptions to the definition of “remedial order” and therefore, by implication, foreign arbitral awards should be deemed to fall within the meaning of “remedial order”.
The Court next turned to consider how best to characterize, under the Limitations Act, an application for recognition and enforcement of a foreign arbitral award. Yugraneft concedes that what it seeks constitutes a “remedial order”. However, it argued an arbitral award is akin to a judgment and an application for recognition and enforcement of that award is therefore a “claim based on a judgment or order for the repayment of money” under Section 11 of the Act (subject to a ten-year limitation period). The Court rejected this argument as an arbitral award is not a judgment or a court order. When compared to a local judgment, an arbitral award is not directly enforceable. In Alberta for instance, it must first be recognized by the Court of Queen’s Bench and this recognition can be resisted by the arbitral debtor on certain grounds outlined in the Convention.
Yugraneft argued, in the alternative, the Limitations Act is ambiguous. The Court held the Act was not ambiguous in this case. The legislature made it clear in other instances that when in intends the word “judgment” to include a foreign arbitral award, it provides express words to that effect. There are other legislative examples in Alberta, which the Court pointed to in support of this holding. In addition, if the ten-year limitation period was applied to the recognition and enforcement of foreign arbitral awards, this would result in an incoherent limitations regime.
In conclusion, the Court held the applicable section of the Limitations Act was Section 3. The application for recognition and enforcement was filed on January 27, 2006. Yugraneft’s application was held to be time-barred. The Court reviewed the application of the discoverability rule but that rule did not assist Yugraneft and Yugraneft’s application was held to be time-barred.
This case was digested by Scott J. Marcinkow of Harper Grey LLP. If you would like to discuss this case further, please feel free to contact him directly at email@example.com or review his biography at http://www.harpergrey.com.
To stay current with the new case law and emerging legal issues in this area, subscribe here.