Enforcing Foreign Arbitral Awards and Judgments in Ontario

Obtaining an arbitration award or foreign judgment is not the same as getting paid. Assets are not always created equal. The imagination conjures an image of a plaintiff stoked at obtaining a lucrative arbitral award or foreign judgment, only to learn that the defendant which seemingly operated out of a commercial skyscraper, in fact operates out of a desolate vacant lot in the middle of nowhere (the “Headquarters”) and with little assets to satisfy the foreign judgment or arbitral award. It may be little more than a paper award against a shell company with no assets. The conundrum highlights the importance of doing asset tracing early on, and to identify key risks and tools that can be used as a hedge against dissipation of assets by a defendant (such as a Mareva Injunction).

It may sound counterintuitive, but a foreign arbitration award is easier to enforce in Ontario than a foreign court judgment. Foreign arbitral award enforcement is governed by the New York Convention of which Canada is a signatory, whereas foreign judgments are governed by the common law. In the former case, the arbitral award is presumed to be enforceable, and can only be set aside in very limited cases, such as on procedural fairness or public policy grounds. Enforcing a foreign judgment, on the other hand, requires a court action or application and the party seeking to enforce the award bears the burden of proof. Even on a civil law standard where the standard of proof is a balance of probabilities, this burden can be quite onerous indeed.

An assessment should be undertaken to determine whether the defendant’s assets are fixed or liquid, and whether there is an opportunity to pierce the corporate veil which Ontario courts are reluctant to do. Where assets are highly liquid and/or mobile, and there is areal risk of dissipation, this may be reason to seek a Mareva Injunction which will prevent a defendant from dissipating assets. In Ontario, a Mareva Injunction can be used where there is a strong case, a real risk of dissipation of assets, and the balance of convenience is in the moving party’s favour. Sometimes a ‘Norwich order’ can be used instead where one is unlikely to meet the test to obtain a Mareva Injunction. Even if one will not ultimately be successful in obtaining a Mareva Injunction, it can be useful to use tactically since one may be able to obtain an ‘undertaking’ from the defendant and get through consent what one cannot get through brute force (i.e. via the Mareva Injunction).

It is difficult to set aside an Order from the Ontario Superior Court recognizing and enforcing a foreign arbitration award on appeal, for example, under the International Commercial Arbitration Act, 2017, S.O. 2017, c. 2. It may be useful in seeking to appeal or set aside any such order enforcing a foreign arbitral award, to obtain advice from foreign counsel, who may give an opinion on whether there were irregularities, defects in service, etc., that may have occurred in the foreign jurisdiction. It may be useful to obtain your own translation if the foreign arbitral award is in a different language and relies on the translation of the party seeking to enforce the arbitral award.

For foreign judgments, it becomes a question of ‘where’ to enforce, where the assets are, etc. Supposing a businessman obtained $1M worth of maintenance work for his aircraft but did not feel like paying and instead left the aircraft in a hanger in Ontario. Unlike a car, one cannot simply sell an aircraft without the technical records, which by law, cannot be stored on the aircraft. Supposing the records are stored in London, England. In this case, one might obtain an Injunction in Ontario requesting delivery up of the records but have to enforce that Injunction in England in order to obtain the records. This can involve multi-jurisdictional questions of law, and, be expensive. Accordingly, some assets are easier to realize than others. Asset tracing therefore can be a very important and prudent thing to do at the outset to determine what will be needed to satisfy the foreign arbitral award or foreign judgment.

If you have a clause in your contract, for example, that any dispute will be brought to arbitration in a country outside of Canada, and you have obtained a foreign arbitral award and are seeking to enforce it in Ontario, please contact us. We also have appellate experience seeking to set aside foreign arbitral awards on grounds ranging from jurisdiction and procedural fairness to public policy.

This blog has summarized some aspects of enforcing foreign arbitral awards or judgments in Ontario, but does not constitute legal advice and is not intended to be a summary of the law relating enforcement. If you are seeking assistance with a foreign arbitral award or judgment, please do not hesitate to contact us for a consultation: info@cuttresslaw.com