May 21, 2010

Canada’s Supreme Court Applies Alberta’s General Two-Year Limitations Period for Civil Actions to Proceedings to Enforce Foreign Arbitral Award

Yesterday the Supreme Court of Canada held unanimously that Alberta’s two-year Statute of Limitations applicable to actions seeking “remedial orders” applies to an action for recognition and enforcement of certain foreign arbitral awards.  The consequence was to affirm judgments of the Alberta trial and appellate courts that had dismissed as time-barred the application of a Russian oil services company to enforce an award of nearly $1 million against an Alberta supplier made in Russia by an international arbitral tribunal.

 

Unlike the Federal Arbitration Act in the United States, Alberta’s International Commercial Arbitration Act incorporates both the New York Convention and the UNCITRAL Model Law on International Commercial Arbitration, but contains no limitations period for the commencement of an action to obtain recognition and enforcement of a foreign arbitral award.   The New York Convention expressly reserves matters of judicial procedure relating to the enforcement of Convention awards to the jurisdiction in which recognition and enforcement are sought, and so there is little question as a matter of international law of the right of an enforcing jurisdiction to decide what shall be the limitations period governing such proceedings.

 

But Alberta incorporated the Convention and the Model Law into its international arbitration legislation in 1986, and in the intervening 24 years had not seen fit to ordain, within that statute, a limitations period specifically applicable to enforcement of awards.  So the curious question in this case – Yuganreft Corp. v. Rexx Management Corp., 2010 SCC 19 (May 20, 2010)) – at least to this avid reader and self-proclaimed Canadian sympathizer – was why should the courts find that any limitations period not  expressly applicable to foreign arbitral awards such as the one at issue in the case should be construed to apply?  Alberta’s (domestic) Arbitration Act contains an express two-year limitations period for enforcement of domestic awards, and expressly excludes foreign awards from that  prescription without establishing a different period.  Alberta’s Reciprocal Enforcement of Judgments Act (REJA) fixes a six-year period for enforcement of foreign arbitral awards made in jurisdictions that reciprocally recognize and enforce Canadian judgments. The REJA was silent as to a limitation period for incoming awards from non-reciprocating States such as Russia. (Note: Russia as a member State of the New  York Convention presumably does reciprocally enforce arbitral awards made in Canada — a fact not noted by the Court.) Given the presumably not inadvertent silence of two Alberta statutes dealing specifically with limitations periods for enforcement of arbitration awards, was there not good reason for the Supreme Court of Canada to conclude that Alberta had decided not to impose a limitations period on foreign awards issued by States that do not reciprocally enforce Canadian court judgments but do reciprocally enforce Canadian arbitration awards?    

 

The Court relies mainly on legislative history of the Limitations Act, which supports the position that Alberta intended to establish comprehensive and uniform application of the two-year limitations period to nearly all claims seeking a “remedial order” (that term being defined as an order “requiring a defendant to comply with a duty or to pay damages for violation of a right).”  But the Court was unable to cite any legislative history indicating that Alberta intended to treat applications to enforce foreign arbitral awards  as requests for a “remedial order” akin to a civil actions seeking to vindicate the underlying contract rights . One can readily agree with the Court that the Limitations Act was “intended to be pervasive.“   But pervasive in what domain?  Enforcement of foreign arbitral awards entails a distinctive public policy considerations that are not implicated in the regulation of limitations periods for ordinary civil actions.  Perhaps it was to vindicate that view that the organized Canadian international arbitration community (including ADR Chambers and the Canadian Arbitration Congress), joined by the London Court of International Arbitration, were intervenor participants in support of the Russian appellant in this case. But their position was not embraced.  

 

It is a hazardous matter for a U.S. practitioner to comment critically on the application of principles of statutory construction by a foreign court to the legislation of one of its federal states. But it does appear that given Alberta’s substantial commitment to promoting international arbitration through its adoption of the Convention and the Model Law, the Court was perhaps too willing to draw inferences about Alberta’s intent to apply its general limitations rules to foreign award enforcement from such equivocal  indicia of legislative intent as the mere fact that Alberta revised its Limitations Act several years after it had adopted of the Convention and the Model Law.  The international comunity has reason to be disappointed in the Canadian Supreme Court’s approach in this case.

 

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