The Court of Appeal for Ontario's decision in La Française IC 2 v. Wires1 reflects the high bar that must be met to overturn an order recognizing and enforcing an arbitral award under Article 35 of the UNCITRAL Model Law on International Commercial Arbitration (the Model Law).2
The Court of Appeal agreed with the application judge that it would be an abuse of process to allow the appellant to relitigate issues relating to arbitrator impartiality and independence when those issues were dismissed by the arbitral institution and no appeal was made at the relevant time. In addition, the decision emphasizes that technicalities — such as an inconsistency with a corporation's legal name — will not easily prevent enforcement of an arbitral award.
Factual background
In April 2019, the respondent, David Wires, entered into a funding agreement with the applicant IC2 Fund, SICAV-FIS (the Fund) for the purpose of providing litigation funding to Mr. Wires for his prosecution of certain lawsuits. The funding agreement provided that any dispute arising out of or in connection with it was to be resolved by arbitration administered by the Arbitration Institute of the Stockholm Chamber of Commerce.
In June 2020, Mr. Wires commenced arbitration in London, England against the Fund to recover $95,000 in legal fees, lost fee revenue, and lost opportunity as a result of alleged wrongful conduct of the Fund under the funding agreement. The Fund submitted its answer and a counterclaim, the latter of which was settled in February 2021.
Circumstances surrounding the arbitral award
In April 2021, the sole arbitrator issued the arbitral award, pursuant to which Mr. Wires' claims were dismissed.
During the arbitration, Mr. Wires had submitted terms for appointment of the arbitrator to the effect that the arbitrator should not have any relationship with litigation funding companies. He then apparently discovered that the arbitrator had participated alongside the Fund's principal at a panel discussion, contributed to articles authored by the Fund's principal, was involved in conferences for which the Fund's main law firm provided sponsorship, and had relationships with the Fund's arbitration business. Mr. Wires raised these objections with the Stockholm Chamber of Commerce, which dismissed them in December 2020 on the basis that his challenge to the arbitrator's appointment was time-barred under the relevant rules and that, in any event, the alleged facts would not lead to justifiable doubts regarding the arbitrator's impartiality or independence. Mr. Wires did not challenge or appeal the arbitral institution's decision.
Although seemingly not an issue during the arbitration itself, a key aspect of the subsequent application to recognize and enforce the arbitral award was the correct name of the Fund. In Mr. Wires' request for arbitration, the Fund was named as "IC2 Fund, SICAV-FIS formally known as La Francaise IC2 Fund, SICAV FIS Registration No. B205456 Luxembourg" whereas the arbitrator identified the Fund as simply "IC2 Fund, SICAV-FIS" on the first page of the award (i.e., the short form of the Fund's name). To further complicate matters, the Fund was identified in the body of the award with a different registration number on one occasion, which number corresponded with an entity that had been liquidated and then went bankrupt.
The Superior Court's decision
In October 2021, the Fund commenced an application seeking judgment recognizing the arbitral award in Ontario. Justice Cavanagh was asked to determine three issues on the application. First, whether the Fund's motion to amend the title of proceedings should be granted; second, whether Mr. Wires's motion to dismiss or stay the application should be granted; and third, whether the Fund's application seeking recognition of the award should be granted.
The fund's correct name
In summary, the Fund contended that it was permitted to use its short form in the funding agreement and all the parties knew the identity of the Fund. By contrast, Mr. Wires submitted that the Fund — because it was named only with its short form in the first page of the award (and was then identified with a different registration number in the award corresponding with a bankrupt company) — does not exist under the laws of Luxembourg. The parties submitted expert evidence on whether Luxembourg law allows entities to use short forms when entering into agreements or when being sued. Cavanagh J. preferred the evidence of the Fund's expert and concluded that it was permitted to use its short form — IC2 Fund, SICAV-FIS.
In any event, Cavanagh J. found that Mr. Wires could not have been confused about the identity of the Fund (which he named with both its short and full corporate names in his request for arbitration). Moreover, Cavanagh J. held that the isolated reference to a different registration number in the award was clearly an error. Given that no non-compensable prejudice would result to Mr. Wires, Cavanagh J. allowed the amendment motion. For largely the same reasons, Mr. Wires' motion to stay or dismiss the application — on the basis that the Fund is not the same entity as the recipient of the arbitral award — was dismissed.
Recognition and enforcement of the award
The Court then considered the Fund's application to recognize and enforce the arbitral award pursuant to Article 35 of the Model Law. Mr. Wires' complaint grounded in Article 36 (which allows a court to refuse recognition and enforcement under Article 35 for certain reasons) was that the arbitration procedure was not in accordance with the parties' agreement or English law.
In light of the findings of the Stockholm Chamber of Commerce summarized above, Cavanagh J. held that Mr. Wires had failed to provide any proof for his complaint under Article 36.
With respect to the argument that the appointment of the arbitrator did not follow English law, Cavanagh J. noted that even putting aside Mr. Wires' failure to provide expert evidence of English law, it would constitute an abuse of process if he were allowed to relitigate his unsuccessful challenge to the arbitrator's impartiality and independence.
As a result, Cavanagh J. granted the Fund's amendment motion, dismissed Mr. Wires' motion to dismiss or stay the application, and granted the Fund's application recognizing the award.
The Court of Appeal's decision
On March 6, 2024, the Court of Appeal released its reasons for decision on Mr. Wires' appeal of the order made by Cavanagh J. The Court refused to set aside that order.
Abuse of process to relitigate challenge to arbitrator
The Court disagreed with Mr. Wires' contention that Cavanagh J. erred in concluding that he could not raise the issue of arbitrator impartiality and independence because he had not pursued an appeal of the decision of the Stockholm Chamber of Commerce. It affirmed Cavanagh J.'s holding that, given the circumstances, it would be an abuse of process to permit Mr. Wires to raise those issues again (and not merely because no appeal had been taken). The Court observed that Mr. Wires' objection to the arbitrator "seems to have arisen more from his dissatisfaction with the arbitrator's security for costs order than from a real concern about the arbitrator".
Recognition and enforcement of award not prevented by naming technicality
The Court also agreed with Cavanagh J. that the Fund was the party in whose favour the arbitral award was issued and the party which had brought the recognition and enforcement application. Crucial to this finding was the fact that Mr. Wires had named the Fund with both its short form (IC2 Fund, SICAV-FIS) and its full corporate name in his request for arbitration. In addition, the Court upheld Cavanagh J.'s conclusion that the one-off reference by the arbitrator to a different registration number for the Fund in the arbitral award was clearly an error.
As a result, the Court dismissed Mr. Wires' appeal and ordered the agreed-upon amount of $25,000 in costs to be paid in favour of the Fund.
Key takeaways
The Court of Appeal's decision demonstrates that resisting the recognition and enforcement of an arbitral award under the Model Law is an uphill battle.
When it comes to relying on Article 36 of the Model Law, La Francaise IC 2 emphasizes that allegations surrounding arbitrator impartiality and independence are not likely to be entertained by the Ontario courts if they have already been dismissed by an arbitral institution.
Moreover, attempting to prevent recognition and enforcement of an arbitral award on the basis of naming technicalities should only be done in very limited circumstances. Where the party seeking to contest an award knows the identity of the other side and cannot demonstrate any confusion or non-compensable prejudice, the courts will generally allow minor corrections.
Footnotes
1. 2024 ONCA 171.
2. In force in Ontario by virtue of section 5 of the International Commercial Arbitration Act, 2017, S.O. 2017, c. 2, Sched. 5.
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