Where the terms of an arbitration prescribe the “seat” or “place” of the arbitration to be Jurisdiction A, but the parties choose to conduct the arbitration in Jurisdiction B, is judicial review of the arbitral award governed by the laws of Jurisdiction A or B? This question was recently considered at first instance by the Supreme Court of Prince Edward Island (“SCPEI”) in HZPC Americas Corp. v. Skye View Farms Ltd., 2025 PESC 25. According to the SCPEI, the answer is A.
Background to the SCPEI’s Decision
The proceedings before the SCPEI arose out of a dispute regarding the existence of a contract to purchase seed potatoes between the applicant, HZPC Americas Corp. (“HZPC”), and the respondent, Skye View Farms (“Skye View”). HZPC argued there was no contract, whereas Skye View claimed there was a binding contract that ought to be enforced by the Fruit & Vegetable Dispute Resolution Corporation (“DRC”), an organization in which both parties were members and which provides private commercial dispute resolution services to businesses engaged in the fresh produce trade.
As members of the DRC, the parties were bound by the DRC Mediation & Arbitration Rules (the “Rules”), which mandated arbitration. Article 69 of the Rules provided that “[u]nless the parties agree otherwise, the place (seat) of arbitration under this Formal Arbitration Procedure is the province of Ontario, Canada whose laws shall govern the agreement to arbitrate and the arbitral procedure”. Though the parties selected an Ontario-based arbitrator in accordance with Article 69, the parties chose to conduct the arbitration in PEI to reduce costs and ensure convenience for counsel and witnesses.
The arbitrator found in favour of Skye View. HZPC subsequently commenced an application in the SCPEI seeking judicial review of the arbitral award. HZPC claimed that PEI’s Arbitration Act applied or, alternatively, that the SCPEI had jurisdiction to grant substantive relief under Ontario’s Arbitration Act. Skye View maintained that Ontario’s Arbitration Act applied and HZPC was in the wrong court.
The “Seat” of an Arbitration Is a Choice of Law
The SCPEI accepted Skye View’s position, relying heavily on the fact that Article 69 of the Rules prescribed the seat of the arbitration to be Ontario. The SCPEI confirmed that the “seat” or “place” of an arbitration is a legal, rather than physical, concept. That is, the “seat” or “place” of an arbitration is not synonymous with the location where the arbitration takes place. Rather, it simply denotes the parties’ selection of a particular jurisdiction whose arbitration law governs proceedings, and under whose law the arbitral award is made. The parties may choose to physically conduct the arbitration at its seat, or they may choose to conduct the arbitration elsewhere for the sake of convenience.
The SCPEI concluded that, while the parties had agreed to the physical location of the arbitration being in PEI for reasons of cost and convenience, the parties had never agreed to change the presumptive seat of arbitration from Ontario to PEI. The SCPEI further noted that, consistent with the foregoing, the arbitrator had signed the award in Ontario. Accordingly, Ontario’s Arbitration Act applied and the SCPEI had no jurisdiction to award HZPC the relief sought.
Changes to PEI’s Arbitral Regime
In addition to affirming that the “seat” of an arbitration is a purely legal concept, the SCPEI’s decision cast a spotlight on recent changes to PEI’ arbitral regime. HZPC had brought its application for judicial review pursuant to section 12(2) of PEI’s former Arbitration Act, which provided a narrow basis for a court to set aside an arbitral award – namely, “[w]here an arbitrator or umpire has misconducted himself, or an arbitration or award has been improperly procured”.
The former Arbitration Act has been replaced by PEI’s new Arbitration Act, which came into force on March 1, 2024. The new Arbitration Act implemented appeal provisions similar to those in Ontario’s Arbitration Act. Notably, the new Arbitration Act expanded the grounds on which a court may set aside an arbitral award. The grounds consist largely of situations where procedural fairness was denied, such as where an award contains a decision on a matter beyond the scope of the arbitration agreement, where there is a justifiable doubt as to the impartiality of an arbitral tribunal, and where a party was not given a reasonable opportunity to present its case.
Notwithstanding these similarities between PEI’s new Arbitration Act and Ontario’s Arbitration Act, there are also important differences. Under the PEI regime, a party may appeal an arbitral award on a question of law only where an arbitration agreement so provides and where the PEI Court of Appeal has granted leave. Under the Ontario regime, even where an arbitration agreement is silent on appeals on questions of law, a party may appeal an arbitral award on a question of law with leave of the Ontario Superior Court of Justice. Further, whereas the PEI regime entirely precludes appeals on questions of fact, the Ontario regime permits appeals on questions of fact if the arbitration agreement so provides.
In summary, appeal rights under PEI’s new Arbitration Act – while expanded from those under the former Arbitration Act – remain relatively more limited than appeal rights under Ontario’s Arbitration Act. The intent of limited judicial recourse under the PEI regime is reinforced by section 61 of the new Arbitration Act, which precludes judicial review of arbitral awards except as expressly provided.
PEI’s new Arbitration Act is also noteworthy in that it is one of the few arbitration statutes in Canada that expressly provide for remote hearings (see sections 33 and 35(2)(k)). In this respect, PEI’s new Arbitration Act is analogous to the Arbitration Act of British Columbia (see sections 31(2) and 32(2)(xi)) and the Arbitration Act of the Northwest Territories (see sections 33(2) and 34(2)(k)). The growing acceptance and popularity of remote hearings provides parties with ever-greater options in selecting the “seat” of an arbitration and arguably diminishes the importance of aspects such as physical location, as previously explored in the context of forum non conveniens by Christina Doria and Brendan O’Grady in Has Forum Non Conveniens Gone the Way of the VCR Player? Canadian Court finds the Doctrine Obsolete in Age of Virtual Hearings.
For clarity, PEI’s new Arbitration Act does not apply to international arbitrations unless the parties to an international arbitration agree otherwise in writing. Instead, PEI’s International Commercial Arbitration Act (“ICAA”) applies. The ICAA was last amended in 2023 to align with the UNCITRAL Model Law, as amended in 2006. Notwithstanding that a separate PEI statute governs international arbitrations, the general principles in HZPC Americas on the seat of an arbitration are equally applicable. Section 2(3) of the ICAA is consistent with the understanding of the “seat” to be a choice of law.
Relatedly, the SCPEI’s decision is entirely consistent with the prevailing law in Canada on the seat of an arbitration, which the Ontario Superior Court of Justice recently canvassed in Tehama Group Inc v. Pythian Services Inc., 2024 ONSC 1819.
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