Federal Court determines criteria for Court to appoint arbitrator

In Export Development Canada v. Suncor Energy Inc.,^[1] the Federal Court of Canada set out for the first time the criteria to be used by the Court when asked by parties to appoint an arbitrator under federal arbitration legislation that incorporates the UNCITRAL Model Law.

Background

Export Development Canada (EDC) issued an insurance policy (the Policy) to Suncor Energy Canada Inc. (Suncor). In 2015, the parties were involved in an arbitration relating to an insurance claim under the Policy arising from political unrest in Libya, in which an arbitrator had awarded Suncor $347 million.

In 2022, EDC commenced a second arbitration against Suncor seeking to recover repayment of the $347 million, alleging that the Libyan assets that had been subject to the previous arbitration continue to have significant value.

The parties were not able to agree on the selection of the arbitrator for the second arbitration. Pursuant to the dispute resolution clause in the Policy, EDC applied to the Federal Court for an order, among other things, for the Court to appoint an arbitrator. While numerous issues were raised, this blog post focuses on the Court's appointment of an arbitrator.

The Court's decision

This was the first case in which the Federal Court acted as an appointing authority under the federal Commercial Arbitration Act. As a result, while the parties agreed that the Court had jurisdiction as an appointing authority, the Court also confirmed — as a preliminary matter — that it had jurisdiction to appoint an arbitrator for the parties.

With respect to selecting an appropriate arbitrator for the dispute, the parties disagreed on the criteria that ought to be used. In particular, Suncor proposed two "threshold criteria": independence and impartiality, and qualification in Ontario law. After considering the parties' positions, the Court set out the following approach:

My approach to selecting an arbitrator was first to consider the relative importance of the criteria in view of the circumstances of the case. I then assessed each candidate's qualifications and experience, weighing them with a view to the relative priority of the criteria to arrive at the candidate I believe to be most suitable for the Second Arbitration.^[2]

The Court considered the proposed "threshold criteria" in light of section 11(5) of the federal Commercial Arbitration Code (which is also section 11(5) in the Model Law), which reads as follows:

A decision on a matter entrusted … to the court or other authority specified in article 6 shall be subject to no appeal. The court or other authority, in appointing an arbitrator, shall have due regard to any qualifications required of the arbitrator by the agreement of the parties and to such considerations as are likely to secure the appointment of an independent and impartial arbitrator and, in the case of a sole or third arbitrator, shall take into account as well the advisability of appointing an arbitrator of a nationality other than those of the parties.

The Court determined that it had flexibility to determine the order of the criteria under section 11(5):

I do not agree that an independent and impartial arbitrator who is qualified to apply the laws of Ontario to the interpretation of the Policy are "threshold criteria", either by agreement of the parties or under the relevant legislation. Article 11(5) of the Code requires the Court to "have due regard" to any qualifications required of the arbitrator by the agreement of the parties and to such considerations as are likely to secure the appointment of an independent and impartial arbitrator. While qualifications agreed to by the parties and considerations of independence and impartiality are important, the language of article 11(5) provides flexibility. The failure to satisfy these criteria would not necessarily disqualify a proposed arbitrator or trump other considerations, and I do not consider them to be "threshold criteria". I agree with EDC that an appointing authority should conduct a holistic assessment in view of all of the circumstances of the case, including the nature of the dispute that the arbitrator will be called upon to decide.^[3]

In light of this flexibility, the Court then set out the criteria to be considered in this case. The Court assigned the highest priority to (i) qualifications and experience in Canadian law, particularly Ontario law; and (ii) independence and impartiality. The Court ranked these criteria in the highest importance because

1. both parties agreed that independence and impartiality were important criteria
2. the Court is required to have due regard to independence and impartiality
3. the arbitration clause required the arbitrator to apply the "Policy and the laws of the Province of Ontario in its interpretation"
4. the laws of Ontario and Canda were of central importance to the issues in dispute

The Court also considered that experience in arbitration or dispute resolution was of high importance, but that experience specifically with international arbitrations was of medium importance because the dispute is governed by Ontario law. Other factors of medium importance included experience as a sole arbitrator or tribunal president in complex international arbitrations; experience with international oil and gas disputes, commercial disputes and insurance disputes; and experience with political insurance disputes.

The Court assigned low priority to qualifications or experience in civil law generally; specific experience with disputes involving assets in North Africa or the Middle East; and familiarity with the political, legal, cultural and historical context in Libya.

The Court did not consider experience with UNCITRAL arbitrations to be a relevant factor because any candidate with experience in arbitration or dispute resolution would capably preside over arbitrations under the UNCITRAL Arbitration Rules. The Court also considered that experience with political risk insurance and experience in Libyan law were not relevant criteria, since none of the proposed candidates had that experience.

After applying these criteria to the list of candidates proposed by each party, the Court appointed John Judge, a candidate with extensive experience with Ontario law and with arbitration. The candidate's materials did not raise concerns about impartiality or independence, and the candidate had stronger qualifications for the medium- and low-priority factors.

Implications

The Court determined the applicable criteria for arbitrator selection in these circumstances under the Commercial Arbitration Act, which incorporates the UNCITRAL Model Law. As most provincial international arbitration legislation in Canada also incorporates the Model Law, the Court's approach and criteria could very likely be applied in other cases.

This case also serves as a useful reminder for parties that a robust arbitration clause with a detailed arbitrator selection process can potentially prevent the parties from having to make a court application for an arbitrator appointment, which would save time and money.

Further, if the parties do need to apply to the Court for an appointment, a detailed list of criteria in the arbitration clause can streamline this process. Indeed, the language in the arbitration clause played a significant role in the Court's determination of the most important criteria for arbitration selection in this case. Accordingly, parties should specifically list any criteria that should be considered when appointing an arbitrator, including qualifications, experience, independence and impartiality.