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PAGE 4 NEWS may 31, 2010 • Law Times Yugraneft ruling turns heads Decision 'is a bit of an embarrassment,' lawyer says BY JULIUS MELNITZER For Law Times ada ruled that awards granted under commercial arbitration laws L are subject to shorter limitation periods than court orders. "For a country that holds it- self out as arbitration-friendly, the Supreme Court of Canada's decision in Yugraneft [Corp.] v. Rexx Management Corporation is a bit of an embarrassment — not as a matter of judicial poli- cy but as a matter of statutory drafting," says Joel Richler of Blake Cassels & Graydon LLP. Nevertheless, Richler is quick to opine that the Su- preme Court, which ruled that foreign arbitral awards aren't judgments or court orders and therefore are subject to shorter limitation periods, decided the case correctly and on the legal analysis. Nevertheless, the decision leaves many for- eign arbitration awards with a relatively short shelf life, which presents diffi culties when com- panies spread their assets over multiple jurisdictions to make themselves judgment-proof. Th e case arose after the In- ternational Commercial Arbi- tration Court at the Chamber of Commerce and Industry of the Russian Federation made a $950,000 award in Yugraneft's favour against Rexx. But it was only three years later that Yu- graneft, represented by Scott awyers took notice ear- lier this month after the Supreme Court of Can- Turner of Vancouver's Burns Fitzpatrick Rogers & Schwartz LLP, applied under Alberta's Arbitration Act for recognition and enforcement of the award. Rexx's counsel, David Haigh of Calgary's Burnet Duckworth & Palmer LLP, objected to the application on the basis that it was time-barred. Th e case garnered consider- able attention in the interna- tional arbitration community. Interveners and their counsel included Pierre Bienvenu of Ogilvy Renault LLP for the London Court of International Arbitration; Ivan Whitehall of Heenan Blaikie LLP for the Ca- nadian Arbitration Congress; Stefan Martin of Fraser Milner Casgrain LLP for the Institut de médiation et d'arbitrage du Québec; and Babak Barin of Montreal's BCF LLP for ADR Chambers. Th e high court's ruling turned on the interpretation of Alberta's Limitations Act. Th e legislation provides for a two- year limitation period for all proceedings brought in Alberta to obtain a general remedial order and a 10-year limitation period for a remedial order based on a "judgment or order for the payment of money." Haigh, for Rexx, argued the order enforcing the award was a general remedial order attract- ing the shorter limitation pe- riod. But Turner, representing Yugraneft, countered that the applicable limitation was the 10 years available for domestic and foreign court judgments. Alberta and all other Cana- dian provinces have adopted the Convention on the Rec- ognition and Enforcement of Foreign Arbitral Awards and the Model Law on Interna- tional Commercial Arbitra- tion, both of which deal with the enforcement of foreign arbitral awards. Although both are also si- lent on the applicability of limitation periods, the conven- tion provides for enforcement "in accordance with the rules of procedure" of the enforc- ing state. According to Justice Marshall Rothstein, who wrote the reasons for a unanimous court, this meant the conven- tion allowed for the application of local time limits. Here, the question was whether the order enforc- ing an arbitration award was a remedial order based on a "judgment or order for the payment of money" that in- voked the 10-year limitation or a general remedial order with a two-year prescription. Rothstein concluded that an international commercial arbi- tration award wasn't a judgment or court order because it wasn't so defi ned; it wasn't part of a state's judicial system; it arose from the will of the parties; and it wasn't directly enforceable without an appropriate court order. Ac- cordingly, the two-year period applied, meaning Yugraneft's ap- plication was out of time. Richler doesn't question the result on the particular facts of the case. Subscribe to Law Times Why pay extra for your legal news? Cutting-edge legal affairs, news and commentary for just 44¢ a day! Make the time for Law Times and keep up with all the developments in Ontario's legal scene. Subscribe today and receive: • Unlimited access to the Law Times digital editions and to our digital edition archives...FREE • Canadian Legal Newswire, a weekly e-newsletter from the editors of Law Times and Canadian Lawyer...FREE than they would otherwise." Th e diffi culty with Yu- graneft, Richler adds, is the perception that the decision is a "slap in the face" to the international arbitration bar and inconsistent with Ca- nadian attempts to promote the country as an arbitration venue. "But it's important to re- member that the case deals only with time limits and that our courts have gener- ally been very receptive to the enforcement of foreign arbitration awards," Richler notes. Barry Leon of Ottawa's 'There's no explanation that jumps off the pages of the judgment for the plaintiff's three-year delay,' says Joel Richler. "It would have been disin- genuous for the court to say that an arbitration award was akin to a judgment in the face of the clear language of the statute," he says. "It's interesting that both the Alberta Court of Ap- peal and the Supreme Court's judgments on this point were unanimous." He adds that sympathy for Yugraneft is misplaced. "Th ere's no explanation that jumps off the pages of the judg- ment for the plaintiff 's three- year delay," he says. As a matter of policy, howev- er, Richler argues there should be no diff erence between arbi- tration awards and judgments. "Th e theory behind the choice of arbitration in inter- national cases is that awards should be easier to enforce than judgments because they are consensual and governed by treaty and don't come with the baggage that can accom- pany the whole question of recognition of foreign judg- ments," he says. "Now, we'll have to tell our clients that if they obtain an award against a Canadian company, they'll have less time to enforce it reinforces Canada's Perley-Robertson Hill & McDougall LLP takes excep- tion to the view that the de- cision may impair Canada's reputation in the arbitration community. "To the contrary, Yugraneft reputation as arbitration-friendly because it continues the Supreme Court's record for providing pro-arbi- tration direction to lower courts in Canada and pro-arbitration guidance to courts globally," he says. "Th e reasons also make it clear that, consistent with the New York Convention, the en- forcing jurisdiction must pro- vide the foreign arbitral award with treatment as generous as that provided to domestic arbi- tration awards rendered in that jurisdiction." But like Richler, Leon be- lieves that legislative action is necessary. "Th e power to set a longer time limit should lead jurisdic- tions like Alberta to rethink their short time limits as it is an easy way to assist a prov- ince's own companies to do business internationally. Mak- ing it easier to enforce interna- tional arbitration awards in a province reduces the risk to the other party in the underlying business transaction, and this will result in a lower cost for Canadian companies business internationally." doing LT q Send me 1 year of Law Times for only $159.00 (Total with GST: $166.95) Name: __________________________________________________________________________ Company: _______________________________________________________________________ Address: ________________________________________________________________________ City: ____________________________ Prov: _______________ Postal Code: __________________ Tel: ( ) _______________________ Fax: ( ) ______________________ Email: ____________________________________________________________________________ q Payment enclosed q Charge my: q Visa q Mastercard q American Express Card #: __________________________________ Expiry Date: ___ / ___ (mm/yy) Signature (required): ________________________________________________ Date: ________________ 240 Edward St. Aurora, ON. 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