In August 2014 the Supreme Court of Canada released its reasons in Sattva Capital Corp v. Creston Moly Corp (2014 SCC 53) [found here] ("Sattva"). This important decision addresses, among other things, the limited circumstances when courts can and should review arbitral decisions that involve contractual interpretation. The domestic arbitration legislation in British Columbia, Alberta and Saskatchewan each only provide for a statutory right of appeal on questions of law and only with leave of the court, except where the parties have agreed to other grounds of appeal in their arbitration agreement.
BLG's International Trade and Arbitration group has released a summary of Sattva [ found here], in which it concludes that in Sattva "the Supreme Court effectively instructed courts across the country to afford substantial deference to arbitral awards". The Supreme Court did this, in large part, by abandoning the historical approach of treating contractual interpretation as a question of law and by finding that, almost always, "contractual interpretation involves issues of mixed fact and law as it is an exercise in which the principles of contractual interpretation are applied to the words of the written contract, considered in light of the factual matrix." [Sattva, para 50]
In light of Sattva, it will be more difficult in the future for parties to a domestic arbitration agreement to obtain leave to appeal an arbitral decision in a contractual interpretation case based on a question of law. There are some differences in the legislation involved in Sattva (the British Columbia Arbitration Act) as compared to the Arbitration Act of Alberta and Saskatchewan, which might impact the question of whether leave should be granted even where a question of law exists. Further, the Supreme Court noted that in some cases it may be possible to identify an "extricable question of law", which could include "the application of an incorrect principle, the failure to consider a required element of a legal tests, or the failure to consider a relevant factor". [Sattva, para 53] The Court indicated that courts should be cautious in recognizing extricable questions of law in disputes over contractual interpretation, and that "the circumstances in which a question of law can be extricated from the interpretation process will be rare". [Sattva, para 55]
Whether Sattva is applied consistently by future courts remains to be seen, and we note that the Ontario Supreme Court of Justice, since Sattva, has already granted leave to appeal [found here] based on an extricable question of law in a contract interpretation case. Regardless of how strictly courts apply Sattva in the future, the overarching decision by the Supreme Court, namely that the interpretation of a contract is almost always a question of mixed fact and law, should apply in every Province and should usually result in leave to appeal being denied in contractual interpretation cases.
Sattva is particularly important in the Canadian energy industry, where domestic arbitrations often involve issues of contractual interpretation based on a complex factual context existing at the time of the agreement. Unless parties expressly provide in their arbitration agreement that a ground of appeal can include questions of mixed fact and law, which will likely be unusual given the desire for efficiency and finality in arbitrations, the requirement for leave to appeal will rarely be met in a contract interpretation case. For those energy industry participants who prefer the potential speed, privacy or other characteristics of domestic arbitration, Sattva is a positive step that should provide greater certainty that courts will be less likely to interfere with arbitral decisions.
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