Ontario Court Upholds High Bar for Public Policy Challenges to Foreign Arbitral Awards

In Feicheng Mining Group v. Liu, the Ontario Superior Court of Justice reaffirmed the high bar for resisting enforcement of foreign arbitral awards on public policy grounds, holding that the defence targets “repugnant laws and not repugnant facts.”

Proceedings in China

The applicant, a Chinese state-owned company, commenced an arbitration before the China International Economic and Trade Arbitration Commission (CIETAC) against the respondent pursuant to a repayment agreement (Repayment Agreement) in which the respondent assumed joint and several liability for the debts of a corporation in which he was a 50% shareholder and director.

The parties fully participated in the arbitration before the CIETAC, including by making submissions on the validity of the Repayment Agreement.

Before the CIETAC tribunal, the respondent argued the Repayment Agreement was signed under duress and was therefore invalid. He argued that he was threatened and coerced into signing the Repayment Agreement following an oppressive campaign against him and his family, accusations of contract fraud, and criminal proceedings against him in China, which were withdrawn fifteen days after the Repayment Agreement was signed.

The CIETAC tribunal ultimately dismissed the respondent’s argument on the basis that he presented insufficient evidence that he had been coerced into signing the Repayment Agreement. The respondent’s only evidence was that the charges were dropped after he signed the Repayment Agreement. The arbitration was ultimately determined in favour of the applicant.

Ontario Proceeding

The applicant subsequently sought to enforce the CIETAC award in Ontario. Before the Superior Court of Justice, the respondent raised two defences to enforcement pursuant to Article V of the New York Convention and Article 36 of the Model Law: first, that he was incapacitated due to mental health issues when the Repayment Agreement was signed, and second, that enforcement would be against public policy because the Repayment Agreement was coerced. The Court rejected both arguments, finding that the respondent had not pursued available remedies under Chinese law and was effectively attempting a collateral attack on the tribunal’s factual determination that there was no coercion. Notably, the respondent did not suggest any misconduct on the part of the CIETAC tribunal or any issues with its jurisdiction or the arbitral process.

The Court held that to resist enforcement on public policy grounds, a party must show that enforcement would “fundamentally offend the most basic and explicit principles of justice and fairness in Ontario” — a very high bar. Citing the Supreme Court of Canada’s decision in Beals v. Saldanha, the Court emphasized that the public policy defence addresses repugnant laws, not unfavourable factual findings. Since the respondent was challenging the tribunal’s factual determination instead of the laws of China, the defence was unavailable.

Key Takeaway

The decision reinforces that the public policy defence is narrow. Ontario courts will not refuse to enforce arbitral awards for public policy reasons merely because a party disagrees with the arbitral tribunal’s factual findings. The focus is on laws, not facts.

For more information, please contact the authors or any other member of our Arbitration group.