In Russian Federation v. Luxtona Limited, 2023 ONCA 393, the Court of Appeal for Ontario addressed an application under Article 16(3) of the United Nations Commission on International Trade Law’s (UNCITRAL) Model Law on International Commercial Arbitration (Model Law) in the context of examining whether to admit new or “fresh” evidence on appeals from jurisdiction decisions made in arbitration proceedings.
Article 16(3) of the Model Law, which is incorporated in Ontario under Schedule 2 of the International Commercial Arbitration Act, 2017, provides that “[i]f the arbitral tribunal rules as a preliminary question that it has jurisdiction [over a dispute], any party may request, within thirty days after having received notice of that ruling, the court specified in article 6 [the Ontario Superior Court of Justice] to decide the matter.” The Court of Appeal clarified that when a court “decides the matter” of the tribunal’s jurisdiction, it does not owe deference to the tribunal’s ruling. That court is deciding the issue de novo – with the result that on an application to a court under Article 16(3) of the Model Law the parties are entitled, as of right, to introduce new evidence relevant to the jurisdictional decision. The parties do not need to meet the test for fresh evidence that otherwise generally applies to appeals.
The dispute arose from a contested arbitral decision on jurisdiction in an international arbitration between Luxtona, a Cyprus-registered corporation, and the Russian Federation. The arbitration was seated in Toronto, and the tribunal issued a partial award finding that it had jurisdiction over the dispute. The Russian Federation sought to set aside the tribunal’s decision on jurisdiction under both Article 16(3) and Article 34(2)(a)(i) of the Model Law and in those proceedings sought to introduce new evidence that it had not tendered in the arbitration.
In first instance when the matter came before the Ontario Superior Court on the Commercial List, the court held on an interlocutory basis that Russia was entitled to introduce fresh evidence relevant to the jurisdictional issue. The issue then came before a different, new, judge to decide the application as the judge who issued the interlocutory decision had left the Commercial List. The new judge heard the set aside application, held he was not bound by the earlier interlocutory decision and held that new evidence could be introduced only if the Russian Federation could meet the stringent test for admission of fresh evidence in an appeal or bring itself within an “exception to the principle that review of an arbitral decision is based on the record before the tribunal.” The test for admitting fresh evidence in an appeal, established in Palmer v. The Queen,  1 S.C.R. 759, required that:
1) The evidence could not have been obtained using reasonable diligence;
2) The evidence would probably have an important influence on the case;
3) The evidence must be apparently credible; and
4) The evidence must be such that if believed it could reasonably, when taken with the other evidence adduced at the hearing, be expected to have affected the result.
The Russian Federation appealed this decision to the Ontario Divisional Court. The Divisional Court considered two issues on the appeal:
1) Did the application judge err in revisiting a previously decided issue (i.e. the interlocutory decision)?
2) If the answer is no, did the application judge err in finding that the Russian Federation is not entitled as of right to adduce evidence that was not before the tribunal?
On the first issue, the Divisional Court agreed with the applications judge – the interlocutory decision was not binding on the court. On the second issue, the Divisional Court disagreed with the applications judge, and held that the Model Law prescribes a de novo hearing in a court application “to decide the matter” of the tribunal’s jurisdiction.
The onus is on the challenging party to set aside a tribunal’s preliminary ruling on jurisdiction, but because the court is hearing the jurisdictional issue de novo the parties are entitled, as of right, to adduce evidence, including expert evidence, relevant to the jurisdictional issue even if the evidence was not tendered in the arbitration.
Decision of the Court of Appeal
The core issue before the Court of Appeal for Ontario was the admissibility of fresh evidence. However in deciding this issue the Court of Appeal had to consider the nature of an application under Article 16(3) to “decide the matter.”
The Court of Appeal held that the competence-competence principle requires that a tribunal should normally have the first opportunity to rule on its jurisdiction, but does not require that any special deference be paid to the tribunal’s ruling in that regard. Relying upon the “uniformity principle” set out in Article 2A(1) of the Model Law, the Court of Appeal recognized that the “very nature of international arbitration makes it highly desirable that Ontario’s regime should be coherent with those of other countries, especially (but not exclusively) those that have also adopted the Model Law.” The Court of Appeal then canvassed international authority, from primarily common law countries, finding this also showed that the competence-competence principle does not limit the fact-finding power of a court assessing an arbitral tribunal’s jurisdiction. The Court of Appeal ultimately held that a court assessing an arbitral tribunal’s jurisdiction under Article 16(3), to “decide the matter,” is not limited to the record that was before the tribunal.
The Court of Appeal also commented on the standard applicable to “applications to set-aside” under Article 34(2)(a)(i) of the Model Law. While not strictly before the Court (the issue on the appeal was whether the Divisional Court erred in deciding the matter of admission of fresh evidence on the basis of Article 16 alone and not also on Article 34), the Court nonetheless considered the interplay between Article 16 and Article 34 of the Model Law. On this, the Court of Appeal stated that the provisions should be interpreted harmoniously, as the nature of the court’s jurisdiction is not any different under Article 34 than it is under Article 16: “Nothing in the language of Article 34(2)(a)(i) or (iii) suggests the nature of the proceeding under those articles is any different.”
The language under Article 16(3) of the Model Law is incorporated in international commercial arbitration legislation across common law provinces and territories in Canada. While clarifying the nature of an application under Article 16(3) of the Model Law, the Court of Appeal for Ontario also confirmed the admissibility of new evidence when a party to an arbitration is looking to have a court decide the issue of jurisdiction. Where a decision on jurisdiction is rendered as a preliminary matter, and a court is asked to “decide the matter,” this can raise complexities for parties if the Tribunal nonetheless chooses – as it is entitled to do under that same Article 16(3) of the Model Law – to “continue the arbitral proceedings and make an award.” The upside, of course, being potential confirmation of jurisdiction by the court before the award is issued.
While fresh evidence may be adduced (regardless of whether the courts are being asked to decide jurisdiction resulting from a preliminary award or an award on the merits), introducing fresh evidence is also not without caution. As the Court of Appeal noted, citing the English case of Electrosteel Castings Ltd v. Scan-Trans Shipping and Chartering Sdn Bhd,  2 All E.R. (Comm) 1064, at para. 23 (Q.B.), and cited in the Singapore case AQZ v. ARA,  SGHC 49: “[N]othing said here should encourage parties to seek two evidential bites of the cherry in disputes as to the jurisdiction of arbitrators, not least because (1) evidence introduced late in the day may well attract a degree of skepticism and (2) the court has ample power to address such matters when dealing with questions of costs.”
It remains prudent to consider the evidence relevant to challenging an arbitrator’s decision when the issue first comes before the arbitrator. Even if new evidence can be tendered when the court decides the matter, the same weight may not be afforded to that evidence.