Law Times

Page 12 December 2, 2013 Law Times • FOCUS Case highlights lack of uniformity in arbitration laws BY CHARLOTTE SANTRY Law Times A Supreme Court of Canada decision has considered the scope of arbitrators' powers in awarding compound interest. British Columbia (Forests) v. Teal Cedar Products Ltd. highlights the need for greater uniformity in arbitration law and may also increase Toronto's attractiveness as an arbitration centre, a lawyer is suggesting. Teal Cedar Products is a forestry company that held a licence to harvest a certain amount of timber in British Columbia. When the province reduced the allowable annual cut to create a park, Teal Cedar Products sued in a case claiming compensation for partial expropriation. An arbitrator awarded the company more than $6.3 million, including more than $2.2 million in interest compounded annually from the date the province reduced the allowable annual cut to that of the award. On appeal, the court upheld the award and denied the province a further application for leave to appeal the issue of compound interest. But on Oct. 4, 2013, the Supreme Court of Canada allowed the province's appeal. Justice Marshall Rothstein wrote: "There is no doubt that compound interest is a more accurate way of compensating parties for the time-value of money." But he concluded: "Arbitrators operating under s. 28 of the Commercial Arbitration Act cannot award compound interest because s. 1 of the Court Order Interest Act requires that a CANADIAN PATENT REPORTER EDITED BY MARCUS GALLIE, RIDOUT & MAYBEE LLP FOURTH SERIES (VOLUMES 1 TO 65): EDITED BY GLEN BLOOM, OSLER, HOSKIN & HARCOURT LLP FIRST, SECOND AND THIRD SERIES: EDITED BY GOWLING, STRATHY & HENDERSON FOUNDING EDITOR: GORDON F. HENDERSON, C.C., Q.C., LL.D. Let the experts help you to narrow your search and save you research time. Canadian Patent Reporter has been Canada's leading intellectual property law report since 1942. This renowned resource, available online and in print, includes precedent-setting intellectual property law judicial and board decisions from across Canada. This publication provides practitioners with the leading decisions on patent, industrial design, copyright and trade-mark law. Topical catchlines in bold print show the key issues involved in each decision. Expert case selection, editing and headnoting are a tradition with Canadian Patent Reporter. Weekly updates via email and in print, plus an annual cumulative index volume, ensure that this publication continues to be the prime reference source for intellectual property case law. INCLUDES eREPORTS (weekly electronic pdf version) Stay current as cases are issued with eReports emailed weekly to your desktop, with topically indexed case summaries linked to the full text judgments. pecuniary court judgment bear simple interest, and only simple interest." Nor can arbitrators include compound interest in the award itself, he stated. Otherwise, "there would be a double recovery since s. 28 of the Commercial Arbitration Act would then operate to add interest on top of an award that included interest," he wrote. While the decision was specific to British Columbia, there's a divergence of opinion on whether the court would have allowed compound interest under Ontario law. Joel Richler, a partner at Blake Cassels & Graydon LLP's Toronto office, says arbitrators can award compound interest under ss. 127-130 of Ontario's Courts of Justice Act. Paragraph 128(4)(b) says "interest  shall not be awarded under subsection (1) on interest accruing under this section." However, s. 130 provides for discretion over how the court calculates interest. Case law has long established this approach, says Richler, pointing to the 2009 case of Paragon Development Corp. v. Sonka Properties Inc. In Paragon, Justice Herman Wilton-Siegel concluded: "The court has the discretion to award interest at a rate in excess of the prejudgment rate of interest, and on a compound basis, by way of either expectation damages or restitution damages." The Supreme Court of Canada decision could make 'I think it would be hard to explain to a businessman or woman why his or her rights should be different in B.C. as opposed to Ontario,' says Joel Richler. Toronto a far more appealing arbitration location for parties hoping for a compound interest award, says lawyer Christopher Caruana in a post on the ontariolegal.com blog. He wrote: "Until the B.C. lawmakers decide to update their legislation, you may want to give some thought to whether you want any arbitration provision in your contracts to state that the arbitration should be held in B.C.  "Of course, if it is more likely that any arbitration might arise because of some failure on your part, you might want to arbitrate in B.C. so that any interest is limited to simple interest. "But if you were to be the party initiating the arbitration, you probably (for now at least) will want to avoid arbitrating in B.C." However, John Doherty, a partner at Gowling Lafleur Henderson LLP, argues that if the Teal Cedar arbitration had taken place in this province, it would have fallen under Ontario's Expropriations Act that only allows for simple interest. Richler and Doherty agree that the case highlights inconsistencies in arbitration laws across Canada. "There should be greater uniformity," says Richler. "I think it would be hard to explain to a businessman or woman why his or her rights should be different in B.C. as opposed to Ontario." Parties involved in commercial arbitration also have different appeal rights depending on the province, he points out. Many lawyers practising in the field share the desire for greater consistency in Canada's arbitration laws. A group of arbitrators presented a list of recommendations to the Uniform Law Conference of Canada's annual general meeting in August that called on governments to smooth out the differences between the provinces. The group specifically addressed international arbitration on the basis that uniformity would boost foreign exports and clarify the law. The Teal Cedar case is a reminder to carefully check the wording of provincial legislation regarding the jurisdiction of arbitrators, says Richler, as "the court will always look at the specific provisions in the statute of each province." 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