In May 2024, FTI Consulting released its first report on commercial arbitration in Canada entitled Canadian Arbitration Report 2024 (the “Report”). The findings are the result of a three-year survey conducted from January 2020 to December 2022, involving all stakeholders, such as arbitrators, professors, experts and legal counsel.
The Report’s conclusions are unequivocal: the use of arbitration, whether domestic or international, as a means of resolving disputes is increasingly prevalent in Canada. Co-authors Professor Janet Walker and the Honourable Barry Leon write that the future of arbitration in Canada is bright:
“[By] working cooperatively and energetically, and together with Canadian businesses, governments, and institutions, the practice of arbitration will see significant growth in the coming years.”
As the authors note, the rise of commercial arbitration in Canada will have a positive impact on the Canadian economy, by resolving disputes more efficiently and cost-effectively, making Canada more attractive for transacting and investing.
Diversity and Representation: Who Are Canada’s Arbitrators?
The Report examines the diversity of the representation of professionals serving as arbitrators. The following statistics are the most striking:
- 88% of arbitrators surveyed are from the legal community (p. 2);
- 66% are lawyers and 12% are former judges (p. 2);
- of the arbitrators surveyed, 70% of the arbitrators with whom they sat on an arbitral tribunal were men (p. 10).
Despite the increasing presence of women in the legal profession, they appear to be underrepresented in this area of law. In 2020-2021, the Québec Bar (Barreau du Québec) reported that women represent nearly 55% of all lawyers registered in Québec[1] yet 70% of co-arbitrators are men.
Lastly, along the same lines, only 5% to 7% of the arbitrators with whom the respondents served are from historically underrepresented groups (p. 11).
There is still a long way to go in terms of diversity in the arbitration profession.
Domestic and International Arbitration: What are the Key Trends?
The Report distinguishes between the two main types of commercial arbitration cases: international (IA) and domestic (DA). The most significant statistics are as follows:
- 9% of arbitrators surveyed have a practice focused on international arbitration, while 38% concentrate on domestic arbitration cases (p. 5);
- the vast majority of arbitrators surveyed practise in both spheres (p. 5);
- in international arbitration, the arbitrators surveyed reported having primarily served with North American (48%) or European (37%) arbitrators (p. 12);
- in domestic arbitration, 81% of the arbitrators with whom respondents sat were Canadian, followed by co-arbitrators from the United Kingdom (11%) and the United States (8%) (p. 12).
The Report reveals that domestic arbitration is by far the most active area in Canada. With respect to international arbitration:
- 89% of arbitrators and 85% of legal counsel said they had served in or been involved in arbitration cases five times or less during the three-year period surveyed (pp. 29-30);
- 52% of legal counsel either did not see an increase or saw a reduction in the number of international arbitrations in the same period (p. 31).
In contrast, with respect to domestic arbitration, 46% of arbitrators and 24% of legal counsel said they had served in or been involved in arbitration cases five times or less during the same period (pp. 29-30);
The Report also confirms the trend that international arbitration cases tend to involve larger amounts than those in domestic arbitration. Nearly half of international arbitration cases involved amounts in dispute valued at $20 million or more, whereas in 73% of domestic arbitration cases, the amounts were valued at $5 million or less (p. 33).
Lastly, the Report highlights the difference in the length of hearings between these two types of arbitration cases:
- International arbitration: 75% of arbitrators report that arbitration hearings last between 3 days and 2 weeks;
- Domestic arbitration: 69% of arbitrators report that arbitration hearings last 6 days or less (p. 45);
Lawyers Engaged in Arbitration-related Work
Most lawyers and arbitrators in Canada work in firms located in Canada’s largest cities, namely Montréal, Toronto, Calgary, Vancouver and Ottawa (p. 7). The distribution of Canada’s leading law firms is rather uniform across the country—none of the above cities has a significantly higher concentration of law firms than the others. Unlike other jurisdictions, the largest Canadian law firms generally have a pan-Canadian presence with offices in the country’s largest economic hubs.
Based on the survey, the work of arbitration practitioners can be broken down as follows:
- nearly 70% of respondents say their firms have between 21 and 100 lawyers involved in arbitration cases (p. 8), and the number of lawyers in that field increased by about 10 to 24% in their firms at the end of the 3-year period surveyed;
- their main task is advising litigants in arbitration matters, including the inclusion of arbitration clauses in contracts, the determination of the type of arbitration (institutional or ad hoc), the selection of the arbitrator(s) and the determination of the jurisdiction of the arbitration.
More than two-thirds of lawyers chose to have a recognized institution administer the arbitration in more than 50% of their cases (p. 27). Reasons for choosing ad hoc arbitration include not seeing the benefit of institutional arbitration (37%), the lower cost of ad hoc arbitration (29%) and the other party choosing it (18%) (p. 28).
Arbitration Clauses: Why Forgo Them?
According to the Report, the main reasons why lawyers did not include arbitration clauses, in either domestic or international arbitration cases, were as follows:
- desire for opportunity to appeal, 20% in international arbitration (IA) and 17% in domestic arbitration (DA);
- client adverse to arbitration, 17% in IA and 19% in DA;
- cost of arbitration, 15% in IA and 11% in DA (pp. 81 & 85).
There are still some reservations or concerns about arbitral institutions. Despite all the advantages attributed to the process, the finality of arbitral awards and a lack of knowledge about the process still hinder the continued growth of the practice in Canada.
Direct Correlation Between Arbitration Costs and the Number of Arbitrators
The choice of arbitral tribunal is another aspect on which Canadian lawyers advise their clients since it is directly related to the issue of costs.
According to the Report, the main reasons for choosing a sole arbitrator are the increased cost of having several arbitrators (41%), the size the case (29%) and time efficiency (24%) (p. 18). Given that nearly half of the arbitrators surveyed charge an hourly rate of $700 to $999 and that only 17% charge an hourly rate below $499, the cost of arbitration can quickly increase depending on the number of professionals involved (p. 19). However, while arbitrator compensation may have an impact on the composition of the panel in terms of the number of arbitrators, approximately 84% of counsel (in IA) surveyed said that this factor never or sometimes influenced their choice of the arbitrator they proposed (p. 19).
Choice of Venue
In international arbitration, counsel is often asked to recommend the jurisdiction in which the arbitration will take place. The following statistics in that regard are the most important:
- 84% of counsel recommended the seat of arbitration most of the time (p. 23);
- Toronto, Vancouver and Montréal are the three top Canadian cities recommended as the seat (p. 24);
- in international contracts, 27% of lawyers surveyed never recommended that the arbitration’s seat be outside Canada, whereas 12% recommended it in most cases.
- the main reasons for choosing a seat outside of Canada include the following: convenience due to there being multiple international parties (37%), the connection between the institution chosen and the seat (23%), the client’s preference in terms of location and travel thereto (17%) and it was the opposing party’s choice (17%).
Most Common Practice Areas
In arbitration, whether involving domestic or international matters, contractual interpretation is the primary reason for the dispute. In international arbitration, this is followed by construction and infrastructure disputes, while in domestic arbitration, the second largest source of disputes involves corporate law, shareholders and joint ventures (p. 41).
In Short: A Satisfactory and Cost-effective Process
As an alternative dispute resolution process, arbitration is appreciated because it benefits parties in situations where the courts no longer meet litigant needs. According to the Report, 82% of lawyers said they were satisfied or very satisfied with the international and domestic arbitrations in which they were involved during the period covered by the survey. The vast majority of lawyers attributed their satisfaction to the efficiency of the process in terms of time (36%) and cost (19%), and to the fairness and accuracy of the hearing, irrespective of the outcome (28%) (p. 56). In light of these findings, Fasken remains committed to promoting and enhancing the practice of commercial arbitration as a valuable option for effectively resolving disputes.
[1] Barreau du Québec, “Barreau-Mètre : la profession en chiffres” (2022), consulted in July 2024 <https://www.barreau.qc.ca/media/gadfrlil/barreau-metre-2022-faits-saillants.pdf>. (In French Only)
