PRE-ARBITRAL STEPS, JURISDICTION, PUBLIC POLICY and ARTICLE 34 DISCRETION
DUNCAN W GLAHOLT, GLAHOLT LLP
In 2008 to 2009 a 220 km gravity fed slurry pipeline was constructed from an open pit mine in the Madagascar highlands to a refinery and port facility in Toamasina. Obstacles were encountered. Environmental damage occurred. Costs mounted. Schedule slipped.
The owner was obliged to remediate environmental damage at its own expense and to compensate local communities for their losses. Disputes arose, including disputes over the contractor’s responsibility for environmental remediation and delay. Mediation was attempted and failed. Thus, the stage was set for what eventually became a unanimous ICC award in 2015 in favour of the owner, followed by an unsuccessful Article 34 Model Law challenge by the contractor heard by the Ontario Superior Court of Justice in 2016, and an unsuccessful appeal by the contractor to the Ontario Court of Appeal in 2017. 1 Leave to appeal to the Supreme Court of Canada was dismissed on 25 October 2018. The decision in Consolidated Contractors Group SAL (Offshore) v Ambatovy Minerals SA adds to the growing body of law concerning pre-arbitral steps, jurisdiction, public policy and, in the lower court at least, discretion under Article 34 Model Law.
At completion of its contract, the contractor claimed a 294-day extension of time for performance and compensation for its costs arising from delay and alleged additional work. The contractor duly submitted its claims to the project engineer for determination but was disappointed with the outcome. The contractor then set about taking its next contractual step and referring its claims to adjudication as a precursor to arbitration. By this time, however, the contract was substantially complete, and the owner suggested proceeding directly to arbitration, by-passing the adjudication step. The contractor agreed. The owner duly defended and counterclaimed, but in its counterclaim included a substantial claim for environmental remediation.
This presented the contractor with two possible procedural approaches: either arbitrate all issues, including all counterclaims, at once, or attempt to divert the “environmental counterclaims” into a prescribed but ultimately
1 Consolidated Contractors Group SAL (Offshore) v Ambatovy Minerals SA 2016 ONSC 7171; 2017 ONCA 939.
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