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Canadian Supreme Court Limits Collection of Arbitration Awards

The Supreme Court of Canada's May decision in Yugraneft v. Rexx Management Corporation leaves many foreign arbitration awards, including those obtained by U.S. companies against Canadian businesses, with a relatively short shelf life. The court affirmed Alberta's two-year limit for collecting arbitration awards, a time frame that could make it difficult to enforce awards against debtors who have spread their assets over multiple jurisdictions, making the assets difficult to find and mandating enforcement in a host of jurisdictions.

"For a country that holds itself out as arbitration friendly, the Supreme Court of Canada's decision in Yugraneft is a bit of an embarrassment--not as a matter of judicial policy but as a matter of statutory drafting," says Joel Richler, a litigation partner at Blake, Cassels & Graydon. "Still, the decision is a slap in the face to the international arbitration bar and inconsistent with Canadian attempts to promote the country as an arbitration venue."

Ultimately, the ruling turned on the interpretation of Alberta's Limitations Act. The legislation provides for a two-year limitation period from the date of the award on obtaining a "remedial order," including an enforcement order where the right arises from foreign law, for all proceedings brought in Alberta. But Alberta also allows 10 years to enforce domestic and foreign judgments or orders for the payment of money.

In Yugraneft, the question was whether any order enforcing the arbitration award would be based on a foreign "judgment or order for the payment of money" that invoked the 10-year limitation, or whether it was a general remedial order with a two-year prescription.

"The power to set a longer time limit should lead jurisdictions like Alberta to rethink their short time limits, as it is an easy way to help a province's companies do business internationally," he says. "Making it easier to enforce international arbitration awards in a province reduces the risks to the other party in the underlying business transaction, and this will result in lower costs for Canadian companies doing business internationally."

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Julius Melnitzer

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