While many people think of the courtroom as the place where legal disputes are decided, alternative dispute resolution has become increasingly popular as clients look for faster, more flexible ways to settle a case. 

Over the years, the commercial arbitration process has become a popular option for commercial disputes in Ontario. This blog post will cover what commercial arbitration is, what the process looks like, and what parties can expect from the arbitration process. 

What is Arbitration?

Arbitration is an alternative to appearing in court to resolve a dispute. In an arbitration, the parties will present their case to the arbitrator, a neutral third party, who makes a binding decision based on the applicable laws. Arbitration is typically less formal and more flexible than appearing in court. Arbitrations are also private and confidential, including the award made by the arbitrator, which can be appealing in certain circumstances. 

The Arbitration Act guides the commercial tenancy arbitration process in Ontario. 

Commercial Tenancy Arbitrations 

Arbitration is common in commercial disputes but also may be required according to an agreement between the parties. “Arbitration clauses” are common in commercial contracts, particularly in commercial lease agreements. These clauses can vary in language, but the general goal is to require the parties to resolve disputes through arbitration as an alternative to court proceedings. 

In some cases, the arbitration clause will outline the process by which the parties will arbitrate any disputes. The requirement to proceed with arbitration where an arbitration clause is present is confirmed by s. 4(4) of the Arbitration Act.

Can I Start a Commercial Tenancy Court Action Before Arbitration? 

Under s. 7(1) of the Arbitration Act, if a party to an arbitration agreement starts a court proceeding before arbitration, the court will stay the proceeding. 

There are exceptions, however. For example, under s. 7(2), the court can allow the hearing to proceed in the following cases: 

• If one of the parties was under a legal incapacity when they entered into the agreement
• If the arbitration agreement is invalid,
• If the dispute is not capable of being arbitrated under Ontario law,
• If the motion to stay the proceeding was brought with undue delay, or
• If the dispute is appropriate for default or summary judgment.

What Types of Commercial Tenancy Disputes Can Arbitrators Hear? 

The commercial tenancy arbitration process in Ontario allows arbitrators to make a range of awards. Arbitrators can make awards based on the applicable laws. They may also make “equitable” awards, such as ordering specific performance or an injunction. 

To that end, arbitrators can make orders on a wide range of commercial tenancy disputes.  

How to Start the Commercial Tenancy Arbitration Process 

It is important to note that, depending on the terms of the arbitration clause or agreement, the steps for proceeding with a commercial tenancy arbitration can vary. Be aware that there are often specific time frames and notice periods stipulated in arbitration clauses and agreements.

Initiating a Commercial Tenancy Arbitration 

The arbitration process typically starts in one of three ways: 

• One of the parties serves a notice demanding arbitration on the other parties,
• One of the parties serves a notice to appoint an arbitrator on the other parties, or
• One of the parties serves notice to exercise the power to appoint an arbitrator on the other parties (where the arbitration clause or agreement gives a non-party the power to appoint an arbitrator).

Choosing an Arbitrator for a Commercial Tenancy Dispute 

The parties will have to agree on an arbitrator or, depending on the terms of the arbitration clause or agreement, one may be appointed for them by a third party. In certain circumstances, one of the parties may apply to the court to appoint an arbitrator for them under s. 10(1) of the Arbitration Act. This situation typically arises where the arbitration agreement does not offer a procedure for appointing an arbitrator or one of the parties fails to appoint an arbitrator within a stipulated time. 

The Arbitration Pre-Hearing Examination

After an arbitrator has been appointed, the parties and the arbitrator will meet at what is typically referred to as a pre-hearing examination. 

The purpose of a pre-hearing examination is for all parties to discuss the matter, clarify processes, and prepare for an arbitration hearing. At this meeting, the parties will normally discuss procedural topics such as: 

• The issues to be determined;
• The process for the arbitration (e.g., whether an oral hearing will be required);
• The timing and date of the arbitration hearing; and
• The documents and witnesses that the parties will put forward for the arbitration hearing. 

The Arbitration Hearing

An arbitration hearing typically functions much like a court hearing. Each party will have the opportunity to present their case, provide evidence, and examine witnesses. 

In some cases, the parties may proceed with written submissions rather than attending an arbitration hearing. 

The Arbitrator’s Decision

After hearing submissions, the arbitrator will make a final, binding decision. The arbitrator will provide a written copy of the decision to the parties, including an explanation of why the decision was made and any awards made by the arbitrator. 

Costs of an Arbitration

Depending on the arbitration clause or agreement, the parties may split the costs of arbitration, or the arbitrator will decide who pays the arbitration costs in their decision (typically, the “unsuccessful” party). 

Arbitration costs may involve, among other things, renting a space for the arbitration, the arbitrator’s fees, legal fees, and the costs of transcription for the arbitration. 

What Happens if I Disagree with the Arbitrator’s Award? 

If you disagree with an arbitrator’s award, you may be able to appeal the award to the court. Typically, the court will only allow an appeal if:

• The arbitration agreement allows a party to appeal the award to a court;
• The court is satisfied that an appeal is justified, given the importance of the matters at stake; and
• The court is satisfied that the issue’s determination significantly affects the parties’ rights.

A Final Note on Commercial Tenancy Arbitrations

The availability and process of arbitration are primarily dictated by the terms of an arbitration clause or agreement. Therefore, it is critical for landlords and tenants to carefully review the terms of an arbitration clause or agreement before signing to ensure they understand and are comfortable with the terms. If you have questions or concerns regarding an arbitration clause or agreement, consult an experienced commercial real estate lawyer for assistance. 

Oakville Commercial Real Estate Lawyers Representing Buyers, Sellers, and Professionals

At Campbells LLP, our trusted team of experienced commercial real estate lawyers assist business owners and entrepreneurs with real estate matters encountered in their ventures. Our lawyers are available to provide ongoing advice as your business grows or may be retained to address stand-alone issues where they arise. To speak with one of our lawyers regarding your questions about arbitration, contact us online or call us at 905-828-2247.