In the 2008 case of Smyth v. Perth and Smiths Falls District Hospital the Ontario Court of Appeal ruled that the standard of review test applied in administrative law cases is the same test to be applied in an application to set-aside an arbitration award.
Shortly before Smyth, the standard of review test was fundamentally altered by the Supreme Court of Canada (SCC) in Dunsmuir v New Brunswick. The SCC decided to simplify the test by applying only two standards upon which administrative decisions could be reviewed; correctness and reasonableness.
Bastarache and LeBel JJ noted that the correctness standard would be applied where the jurisdiction and scope of the tribunal’s authority were in question. That is, issues where a tribunal was alleged to be acting ultra vires its authority. The correctness standard allows for a total reexamination of the decision by the court.
However, where the merits of a tribunal’s decision are in issue, the reasonableness standard (i.e a higher degree of deference) is to be applied. Their Honours noted that the reasonable standard considers:
…whether the decision falls within a range of possible, acceptable outcomes which are defensible in respect of the facts and law.
In Smyth, because the issue was whether the arbitrator acted within the scope of his authority, the correctness standard was upheld by the Court of Appeal.
How Does This Affect Judicial Review of International Arbitration Awards?
The issue then is whether Ontario courts will apply Smyth in the context of the judicial review and enforcement of international commercial arbitration awards under the International Commercial Arbitration Act and the New York Convention’s Model Law.
While the grounds for setting-aside international awards are clearly laid out in the legislation, there is little jurisprudence on the issue of the applicable standard of review post-Dunsmuir.
In a pre-Dunsmuir judicial review of a NAFTA investor-state arbitration the Ontario Court of Appeal applied a high degree of deference (the reasonableness standard) and hinted that all international awards should attract a high degree of deference. The Court held:
Notions of international comity and the reality of the global marketplace suggest that courts should use their authority to interfere with international commercial arbitrationawards sparingly.
However, if Symth and Dunsmuir are applied to international awards, courts will have more room to wiggle on reviewing matters where a tribunal is alleged to have acted ultra vires.
While it is likely that Canadian courts will still apply a high degree of deference in reviewing international awards, the floor has opened, to some extent, to arguments as to why a higher degree of scrutiny should be applied to international arbitration awards.