That's Not Cricket: Arbitration Run Amok

In Cricket Canada v. Bilal Syed (released May 2017), the Ontario Superior Court of Justice set aside part of the award of a single arbitrator who went beyond the terms of the arbitral submission and, therefore, exceeded his jurisdiction.

1. Facts

Mr. Syed (Syed), the respondent in the case, was a candidate for election to the board of directors of Cricket Canada, a not-for-profit corporation continued under the Canada Not-for-profit Corporations Act (CNCA). Syed was not elected to the board and he commenced arbitral proceedings alleging that the corporation's internal election process was tainted by fraud, discrimination, bias and a failure to follow its own by-laws.

Sport Canada makes it a condition of funding national sports organizations (NSOs) such as Cricket Canada that the NSO permit parties access to the dispute resolution services of the Sport Dispute Resolution Centre of Canada (SDRCC) for "sports-related disputes". SDRCC's Canadian Dispute Resolution Code (Code) defines a sports-related dispute as one affecting participation in a sport or sports program such as team selection or any dispute affecting participation of a person in a sports organization. The Code adopts as its governing law the law of Ontario and the Ontario Arbitration Act, 1991.

A single arbitrator was appointed and he made several orders, including that new board elections take place. Cricket Canada did not contest in court some of his arbitral awards. However, it did contest the following:

● Any person having a role in the selection of members of the Nominations Committee shall be prohibited from running in the election.

● Any person with voting rights by virtue of his position, who intends to run in an election, must resign from his position before the election is held.

● Any offer, suggestion or promise of a benefit by any candidate to a voter is prohibited.

● All necessary amendments to the corporation's by-laws are to be made to conform to the arbitral award.

2. Rulings

(a) Standard of Review

Justice Kristjanson first held that the question of whether a portion of an arbitral award should be set aside on the grounds that it is beyond the scope of the arbitration agreement and therefore not subject to arbitration is to be judged on the standard of correctness. This means that a court does not accord a degree of deference to the arbitrator's decision. Correctness is the same standard that the court uses in interpreting a statute or applying the common law. A private arbitrator has no jurisdiction to make any decisions except those granted to her under the arbitration agreement.

(b) Scope of the Agreement to Arbitrate and Arbitrator's Jurisdiction

Under the Code, the arbitration was to consider only matters in respect of a dispute "affecting the participation of a person in a sport program or a sport organization". At no point had the parties submitted to arbitration whether the general by-laws and policies of the corporation should be amended as the arbitrator ordered. The court found that the arbitrator erred in creating jurisdiction for himself to dictate future corporate policies and internal corporate governance issues which are to be set by the members.

Justice Kristjanson held that:

● the arbitrator had no jurisdiction to tell the corporation that that it needed to change its by-laws on director eligibility. There may be perfectly sound reasons why members want members of provincial sports organizations (PSOs) to seek election to the board of the NSO;

● the arbitrator had no basis to determine who may or may not determine how nominations for the board should be vetted. If the members wish to limit which directors may be involved in the nominations committee, then it is the members who ought to exercise such power;

● nothing in the by-laws or the CNCA limits the types of communications that can be made by candidates to electors; and

● generally, an arbitrator must show deference and should not interfere with a corporation's ability to govern itself in accordance with the decisions of the members and the choices that they make in their by-laws.

Eligibility to stand for election, how nominations for the board should be vetted, communications between candidates and members and making, amending and repealing by-laws are each core issues of internal governance, outside the scope of the arbitration agreement and beyond the jurisdiction of the arbitrator.

3. Key Observations

The important takeaway from Cricket Canada is not that arbitration was a poor or inappropriate choice of dispute resolution mechanism. An isolated case cannot impair arbitration as an institution or even its adoption by Sport Canada and NSOs in Canada.

What the case does illustrate is the importance of choosing an arbitrator who understands that his role is to resolve the dispute between the parties within the four corners of their agreement to arbitrate and not use the opportunity to expand his mandate. Also, parties should enter into a formal arbitration agreement to reinforce the scope of the arbitrator's mandate - something that the parties failed to do in this case.

The other important takeaway from this case is that, where an arbitrator does exceed his jurisdiction, the parties have resort to the courts to ensure that any orders that are in excess of jurisdiction are set aside or modified. Cricket Canada should serve as an important check on the use of arbitrators in the context of disputes involving non-for-profit organizations. Arbitrators must respect the limits of the agreement to arbitrate because, if they exceed their jurisdiction, the parties have recourse to the courts, which will apply the standard of correctness.