Bringing the dispute in time

By Alexander Gay April 16, 201816 April 2018

Bringing the dispute in time
Photo by rawpixel.com on Unsplash

 

When to commence arbitration is no small matter for a business to consider, particularly when there is a time bar clause in its commercial agreement.  And yet time bar clauses, which can shorten the limitation period found in a provincial limitations law, are rarely used and often misunderstood by counsel.

A contractual time bar clause in an arbitration agreement will typically require a party to commence arbitration within a given period of time, failing which it will not be able to assert the claim either in an arbitration forum or before the courts (though this must be stated clearly).

This type of clauses offers the promise of bringing certainty into a commercial relationship; or parties will use it in circumstances where the evidence supporting a claim is susceptible to immediate loss.

The parties must strictly adhere to the requirements of a time bar clause.  Filing a claim before the courts instead of the commencement of an arbitration may not be enough to satisfy the time bar requirements of these clauses, even if a party had a clear intention of pursing the claim within the prescribed time period.    

Unlike the Arbitration Act in the United Kingdom, which allows the courts to extend the time for the commencement of arbitration, there is no equivalent provision in Ontario or elsewhere in Canada.

Court discretion in Canada is generally limited to extending the time for the issuance of an award by an arbitral tribunal. This discretion is included in the legislation to attenuate the rigidities of the common law, whereby an arbitral tribunal’s mandate has expired after the time period provided for the issuance of an award in an arbitration agreement.

The absence of a provision allowing for an extension of time to commence an arbitral proceeding may, of course, give rise to unfairness, especially in cases where there may be a power imbalance between the parties. On the other hand, this concern may be misplaced where two commercial parties have willingly agreed to these commercial terms. 

There are some considerations to bear in mind. There is case law to suggest that an arbitral tribunal ceases to have jurisdiction after the expiry of a contractual limitation period. A party that is faced with a demand for arbitration may bring an application before the court for a declaration and a possible injunction to prevent the continuation of the arbitration (see the 2015 Alberta ruling, Lafarge Canada Inc. v. Edmonton (City)), However, the competing and better view is that an arbitral tribunal may rule on its own jurisdiction and on whether an arbitration has been commenced within the prescribed time period. If it is without jurisdiction, it may say so, as is the case with all other jurisdictional challenges that are put before it. 

Contractual time bar clauses in arbitration agreements offer opportunities for commercial parties, but they must be crafted to meet the needs of the parties.  And to the surprise of most counsel, the clauses may be asymmetrical, requiring only one of the parties to commence arbitration within those time constraints. The possibilities are endless and they need to be explored with clients.

Alexander Gay is General Counsel at the Department of Justice. He maintains a broad civil litigation practice, with an emphasis on commercial and trade disputes. He is also a part-time professor at the University of Ottawa (Faculty of Law) and the author of the Annotated Arbitration Act of Ontario, 1991. The author's views are his own.

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