Foreign arbitral awards subject to provincial limitation periods, Supreme Court of Canada rules: Yugraneft Corp. v. Rexx Management Corp.

In its decision released this morning, the Supreme Court of Canada in Yugraneft Corp. v. Rexx Management Corp.,2010 SCC 19 (S.C.C.) has ruled that the two-year limitation period under s.3 of Alberta’s Limitations Act governs when a party seeks the recognition and enforcement in Alberta of a foreign arbitral award.

By way of background, a dispute between Yugraneft Corporation (Yugraneft), a Russian company, and Rexx Management Corporation (Rexx), an Alberta company based upon Yugraneft’s claim for money paid to Rexx for equipment which Rexx failed to deliver. Yugraneft then commenced foreign arbitral proceedings against Rexx. On September 6, 2002, the International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation made an award in favour of Yugraneft against Rexx in the amount of $952,614.43 USD.

Yugraneft then applied more than three years later pursuant to the International Commercial Arbitration Act (Alberta) for an order recognizing and enforcing the arbitral award in the province of Alberta. Rexx sought the dismissal of the application on the grounds that the limitation period had prescribed, or, alternatively, sought a stay pending resolution of a related RICO case pending in the U.S. which raised public policy defences that (1) Yugraneft had been fraudulently acquired by another company through corruption within the Russian judicial system; (2) forgery of shareholder meeting minutes, and (3) unlawful seizure of Yugraneft’s office by a “machine-gun toting private army”.

The application judge, Chrumka, J. rejected Yugraneft’s contention that there was no applicable limitation period for foreign arbitration awards based upon the definition of a “remedial order” in s.1(i)(i) of the Alberta Limitations Act, concluding that Yugraneft’s application was time-barred:Yugraneft Corporation v. Rexx Management Corporation, per Chrumka, J. at ¶¶’s 79-80.

Yugraneft appealed. On August 5, 2008, the Alberta Court of Appeal dismissed the appeal. Like the lower court judge, the Alberta Court of Appeal noted that since there are no comparable guidelines within the Model Law and the New York Convention, 1958 with respect to limitation periods, a foreign arbitral award, like a foreign judgment, was based upon a simple contract debt. As such, the action was statute-barred due to the expiry of the two-year limitation period set out in the Alberta Limitations Act.R.S.A. 2000, c. L-12, (as am): Yugraneft Corporation v. Rexx Management Corporation, 2008 ABCA 274 (CanLII).

Unlike most other Canadian provincial limitation statutes, the Alberta Limitations Act does not distinguish between substantive and procedural law and reads as follows:

Conflict of laws

12(1) The limitations law of Alberta applies to any proceeding commenced or sought to be commenced in Alberta in which a claimant seeks a remedial order.

(2) Notwithstanding subsection (1), where a proceeding referred to in subsection (1) would be determined in accordance with the law of another jurisdiction if it were to proceed, and the limitations law of that jurisdiction provides a shorter limitation period than the limitation period provided by the law of Alberta, the shorter limitation period applies.

Rothstein J. writing for the unanimous Court dismissed the appeal. The Court rejected the argument that foreign arbitral awards are not subject to a limitation period for enforcement purposes. The Yugraneft decision confirms previous Canadian jurisprudence that both foreign judgments and foreign arbitral awards are not automatically homologated and do not stand on equal footing with domestic judgments or domestic arbitral awards:

[49] Applying the limitation period set out in s. 3 is consistent with the overall scheme of Alberta limitations law. It also provides more generous treatment for foreign awards than for domestic awards and is therefore consistent with art. III of the Convention. The limitation period in s. 3 of the Limitations Act is subject to a discoverability rule, which is not the case for the time limit set out in s. 51 of the Arbitration Act governing domestic awards. This makes ample allowance for the practical difficulties faced by foreign arbitral creditors, who may require some time to discover that the arbitral debtor has assets in Alberta.

It is noteworthy that the two-year limitation period prescribed by section 3 of the Limitations Act (Alberta) incorporates a “discoverability” element, allowing for extension of the 2 year limitation period from the earlier of the dates on which the claimant either actually knew, or in the circumstances ought to have known, the necessary facts in relation to the putative claim. As Rothstein, J. explains:

[52] In order to determine whether a proceeding is time-barred, it is necessary to ascertain when the injury occurred. In the case of non-performance of an obligation, the question is when the non-performance occurred.

[53] In the context of a proceeding to recognize and enforce a foreign arbitral award, if non-performance is assumed to occur on the date the award was issued, Yugraneft would have commenced its proceeding in Alberta approximately 16 months after the two-year limitation period had expired. However, I do not think the date of the issuance of the award can normally be considered as the date of non-performance of the obligation to pay.

[54] The Model Law provides that a party to an arbitration has three months to apply to the local courts to have an award set aside, beginning on the day it receives the award (art. 34(3) — see Appendix A). At least until that deadline has passed, the arbitral award may not have the requisite degree of finality to form the basis of an application for recognition and enforcement under the Convention. If an award is open to being set aside, it may be considered “not binding” under art. V(1)(e) of the Convention (Blackaby and Partasides, at pp. 649-50). The same can be said when proceedings to set aside the award are under way. Thus, if an award originates in a Model Law jurisdiction, or one with analogous provisions concerning the setting aside of an arbitral award, an arbitral creditor would not know and would have no reason to think that recognition and enforcement proceedings are warranted on the very date the award is rendered. In those circumstances, the limitation period under s. 3 of the Limitations Act will not be triggered until the possibility that the award might be set aside by the local courts in the country where the award was rendered has been foreclosed.

[55] That would appear to be the case here. Russia is a Model Law jurisdiction, and there is no indication in the record before this Court that Russia modified art. 34 in its adoption of the Model Law (Award of the Russian ICAC (English translation), A.R., vol. 2, at p. 84). Thus, the courts of any State party to the Convention would be entitled to refuse to grant recognition and enforcement of the award at issue in this case until the three-month appeal period had expired; or, if an appeal was launched, until the appeal was concluded.

[56] Accordingly, it is my view that for the purposes of the Limitations Act, Rexx’s obligations under the award did not crystalize until three months after Yugraneft had received the award. The award was issued on September 6, 2002, and Yugraneft has provided no indication that it received the award at a later date. As a result, non-performance of its obligation to pay Yugraneft would not have occurred before December 6, 2002. This would suggest that Yugraneft had two years after December 6, 2002, to commence proceedings against Rexx in Alberta, meaning that its action, which was brought on January 27, 2006, was clearly time‑barred.

Two potential discoverability arguments that Yugraneft appears not to have raised are: (1) whether any potential prejudice arose from delays in enforcement efforts in Russia, or (2) the extent of Yugraneft’s knowledge of the location and exigibility of Rexx’s assets in Alberta. Justice Rothstein outlines the factors relevant to the discoverability inquiry as follows:

[60] Section 3(1)(a)(iii) provides that the limitation period will commence only once the plaintiff knew or ought to have known that the injury it received warrants bringing a proceeding. Thus s. 3(1)(a) ensures that the scheme created by the Limitations Act balances the interests of both plaintiffs and defendants. However, much like its counterpart in the B.C. Limitation Act at issue in Novak v. Bond, s. 3(1) measures the conduct of the plaintiff against an “objective” standard. Section 6(4) of the B.C. Act provides that the limitation period will not commence until the facts available to the plaintiff are such that a “reasonable person . . . would regard those facts as showing” that the plaintiff was a) able to bring a claim, and b) that the claim had a reasonable prospect of success. Section 3(1) of the Alberta Act does not refer to a “reasonable person” and its discoverability criteria are not identical with those in s. 6(4) of the B.C. Act. However, it does subject the knowledge elements of its discoverability rule to an objective test: the plaintiff must know or “ought to have known” the elements that trigger the running of the limitation period. Thus, constructive or imputed knowledge, in addition to actual knowledge, will trigger the limitation period.

[61] Section 3(1)(a)(iii) therefore allows the courts to consider aspects of an arbitral creditor’s circumstances that would lead a reasonable person to conclude that there was no reason for the arbitral creditor to know whether proceedings were warranted in Alberta. For example, it is not infrequent for the parties to an international arbitration to have assets in a number of different states or jurisdictions within a federal state. An arbitral creditor cannot be presumed to know the location of all of the arbitral debtor’s assets. If the arbitral creditor does not know, and would have no reason to know, that the arbitral debtor has assets in a particular jurisdiction, it cannot be expected to know that recognition and enforcement proceedings are warranted in that jurisdiction. Thus, in my view, recognition and enforcement proceedings would only be warranted in Alberta once an arbitral creditor had learned, exercising reasonable diligence, that the arbitral debtor possessed assets in that jurisdiction.

[62] Nevertheless, a delay on this account would not be open to Yugraneft in this case. The contract entered into by Yugraneft and Rexx on October 1, 1998, indicates that Rexx was identified as an Alberta corporation (Contract No. 157, A.R., vol. 2, at p. 41). An arbitral creditor might well not be expected to know every location in the world in which an arbitral debtor might have assets, but this cannot be said of the jurisdiction where the debtor is registered and where its head office is located. In such circumstances, Yugraneft has not claimed and could not claim that it did not know or ought not to have known that a proceeding was warranted in Alberta at the time of (or indeed earlier than) the expiry of the three-month appeal period following receipt of notice of the award.

[63] Thus, I have no difficulty concluding that even taking into account the discoverability rule in s. 3(1)(a) of the Limitations Act, Yugraneft’s proceedings are time-barred.

Implications of the Yugraneft Decision in Ontario

Under Ontario law, a foreign judgment is simply evidence of a contract debt and must be sued upon as an “action on the case”. The old limitation period for a “specialty” (i.e. a domestic judgment) was twenty (20) years, however, the Ontario Court of Appeal held that a “foreign judgment” was not equivalent to a domestic judgment unless there was reciprocal enforcement legislation from the originating jurisdiction which granted judgment. Therefore, the old limitation period in Ontario was six (6) years, but was only triggered when the judgment debtor returned to Ontario. Lax v. Lax (2004) 70 O.R. (3d) 520 (Ont. C.A.).This exception has limited application in circumstances where the debtor has no physical presence in Ontario, but simply has assets there. In any event, the new limitation period for most actions commenced after December 31, 2003 in Ontario is now two (2) years, a relatively short time to sue. By contrast, in the US, the Federal Arbitration Act lays down a time-limit of three years for the confirmation and enforcement of awards made under the New York Convention:Alan Redfern and Martin Hunter (with Nigel Blackaby and Constantine Partasides), Law And Practice Of International Commercial Arbitration, (4th Ed.-Student Version) (London: Sweet & Maxwell, 2004), Chap. 9, at §9-46, p.508.

This is further complicated by some drafting ambiguity in the Limitations Act, 2002 (the “Limitations Act, 2002”) which omits reference to the ICAA (incorporating the Model Law). Furthermore, the New York Convention is silent on limitation periods, which is a substantive issue to be determined by the either the lex arbitri or the lex fori (at least in Canada and the US). The following are relevant excerpts from the Limitations Act, 2002 and the Model Law (as incorporated by the domestic enabling legislation):

Limitations Act, 2002, S.O. 2002, c. 24, Sched. B

No Limitation Period

No limitation period

16. (1) There is no limitation period in respect of,

(a) a proceeding for a declaration if no consequential relief is sought;

(b) a proceeding to enforce an order of a court, or any other order that may be enforced in the same way as an order of a court;

(d) a proceeding to enforce an award in an arbitration to which the Arbitration Act, 1991 applies;

International Commercial Arbitration Act, R.S.O. 1990, c. I.9

10. For the purposes of articles 35 and 36 of the Model Law, an arbitral award includes a commercial arbitral award made outside Canada, even if the arbitration to which it relates is not international as defined in article 1 (3) of the Model Law. R.S.O. 1990, c. I.9, s. 10.


11. (1) An arbitral award recognized by the court is enforceable in the same manner as a judgment or order of the court. R.S.O. 1990, c. I.9, s. 11 (1).


(2) An arbitral award recognized by the court binds the persons as between whom it was made and may be relied on by any of those persons in any legal proceeding. R.S.O. 1990, c. I.9, s. 11 (2).

The Ontario Limitations Act, 2002 refers only to the domestic arbitration statute, namely, the Arbitration Act, 1991, S.O. 1991, c. 17 (as am.) but fails to refer to the international domestic statute, namely, the ICAA. The statutory interpretation argument that the interplay and combined effect of section 16(b) of the Limitations Act, 2002 and section 11(1) of the ICAA, means that, in Ontario, no limitation period applies to the enforcement of a foreign arbitral award will not likely succeed following Yugraneft.

Unless and until there is federal and/or inter-provincial legislative reform to harmonize or unify the law of limitations for both foreign judgments and foreign arbitral awards, a party seeking recognition and enforcement of a foreign arbitral award in an Ontario court is well advised to commence an application to enforce the final arbitral award within the new two (2) year limitation period, subject to any discoverability issues.

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