Arbitration can offer businesses speed, flexibility, and finality when resolving commercial disputes. However, that finality comes with an important trade-off: once an award is made, the opportunities to appeal are limited.
A recent Alberta Court of King’s Bench decision highlights two practical considerations for businesses using arbitration clauses. The wording of the arbitration agreement can determine which issues may be appealed, and procedural concerns are difficult to appeal, particularly when such concerns were not raised during the arbitration.
In Medicine Hat (City) v. Fieldcore Service Solutions Canada Company, the Alberta Court of King’s Bench (the “Court”) dismissed Medicine Hat’s (the “City”) appeal of an arbitration award relating to liability for a damaged gas turbine.[1] This decision reaffirms that courts: (i) will not interfere with an arbitrator’s procedural rulings absent “manifest unfairness”; and (ii) the scope of a party’s appeal rights is limited by the arbitration agreement.[2]
Overall, the decision provides another helpful reminder for commercial litigants and arbitration practitioners about the narrow scope of judicial review of arbitral awards.
Background: What happened in the Medicine Hat arbitration?
The City retained Fieldcore Service Solutions Canada Company (“Fieldcore”), to perform periodic inspections on certain gas turbines that provided power to the municipality. During a routine borescope inspection, Fieldcore detected significant damage to the inside of the gas turbine. The City took the damaged gas turbine out of service and sent it to a third party for repairs.[3]
The City’s theory was that a Fieldcore technician improperly reinstalled the borescope plug during a previous inspection, leaving an internal port exposed. The City alleged that, during subsequent operation of the gas turbine, a fragment entered through the exposed port and damaged turbine components.[4]
The City further alleged that Fieldcore failed to warn the City of the risks of continued operation after earlier inspections. Finally, the City claimed that Fieldcore was liable in bailment for returning the gas turbine in unserviceable condition.[5]
The Arbitrator dismissed the City’s claims, finding that:[6]
- Fieldcore did not breach the applicable standard of care;
- Fieldcore did not breach the duty to warn;
- the City failed to establish causation; and
- no bailment relationship existed between the parties.
The City appealed this arbitral award pursuant to sections 44 and 45 of Alberta’s Arbitration Act.[7]
Analysis: Can your arbitration clause limit your right to appeal?
Yes. The wording of an arbitration agreement will determine which types of issues the parties may appeal.
As a preliminary matter, the arbitration agreement between the parties stated that the arbitrator’s award was appealable on questions of “law or fact”.[8] The City argued that because the agreement permitted appeals of both law and fact, it was therefore permitted to appeal a question of mixed law and fact.
However, the Honourable Justice A.L. Froese rejected this argument on the basis that there is a well-established distinction between questions of law, fact, and mixed law and fact.[9] She held that arbitration agreements govern parties’ appeal rights, and in this case, the agreement does not include the right to appeal questions of mixed fact and law.[10]
For businesses, the lesson starts well before a dispute arises: appeal rights should be considered when the arbitration clause is negotiated, not after an unfavourable award has been issued.
Analysis: When will a court overturn an arbitration award for procedural unfairness?
Only in limited circumstances. The Court confirmed that an alleged procedural error must make the proceeding fundamentally or fatally flawed. Arbitration guarantees a fair hearing, not a perfect one.
The primary issue considered on appeal was whether the arbitration was procedurally unfair and should be overturned pursuant to section 45(1)(f) of the Arbitration Act.[11]
At the outset, Justice Froese confirmed that the Court’s discretion pursuant to section 45(1)(f) is narrow and should only be exercised when the alleged error renders the proceeding “fundamentally or fatally flawed”.[12] The Arbitration Act entitles parties to a fair hearing, not a perfect one.[13]
The City argued that the arbitration was procedurally unfair because:
- the Arbitrator wrongfully excluded a third-party report (the “TCT Report”) from evidence;
- the Arbitrator inappropriately favoured certain witness testimony;
- the City was unable to cross-examine Fieldcore’s initial corporate representative; and
- the Arbitrator failed to provide sufficient reasons for his award.
Justice Froese rejected the City’s arguments. The TCT Report was held to have been admitted into evidence and the Arbitrator to have appropriately exercised his discretion to determine what weight should be given to various sections of that report. The City was found to have been given an opportunity to address the admissibility and weight of the TCT Report but simply chose not to make submissions. To that end, Justice Froese noted that many of the difficulties arose from the City’s own strategic decisions regarding witness selection and evidence presentation, including the City’s decision to not submit the TCT Report’s authors as witnesses. The fact that the City disagreed with the Arbitrator’s assessment of the evidence was not a sufficient basis to find that the arbitration was procedurally unfair.[14]
In short, if you believe the arbitration process is unfair, raise the issue during the arbitration. Do not save the objection for an appeal.
Analysis: Procedural objections should be raised when they happen
The Court rejected the City’s argument relating to Fieldcore’s decision to replace its corporate representative. Justice Froese noted that a corporate representative gives evidence on behalf of the corporation, rather than as an independent witness. As such, the corporation retains the ability to appoint a replacement representative, and the City remained entitled to cross-examine the corporation through that replacement witness.[15]
Notably, the City never raised any meaningful objection to the substitution of Fieldcore’s corporate representative during the arbitration itself. Having elected not to challenge the procedure at the time, the City could not subsequently rely upon that issue as a basis to overturn the award.[16]
Overall, the Court found there was no basis to conclude that the arbitration process was fundamentally unfair.
Key takeaways for commercial arbitrations
Ultimately, Medicine Hat (City) v. Fieldcore Service Solutions Canada Company serves as another reminder that arbitration is intended to provide finality. Courts will generally respect an arbitrator’s procedural choices and factual findings unless a party can demonstrate a fundamentally unfair process.
The decision reinforces a practical point for parties involved in arbitration: procedural concerns should be identified, documented and raised promptly. A party that chooses not to challenge a procedural issue during the arbitration may have difficulty relying on that same issue later to overturn the award.
Practically, the decision provides several important reminders for businesses and counsel:
- A successful appeal regarding the procedural fairness of an arbitration requires more than disagreement with an arbitrator’s evidentiary rulings. The alleged defect must fundamentally undermine the fairness of the proceeding.
- Parties must raise procedural concerns during the arbitration itself. Courts are unlikely to entertain appeals regarding procedural fairness matters that could have been addressed before the arbitrator but were not pursued.
- Parties must appropriately present technical and expert evidence. Where a party seeks to rely on expert opinions, it must ensure that the appropriate witnesses are available for cross-examination and that the evidentiary foundation for those opinions can be properly tested by the opposing party.
- Businesses must take care to define appeal rights deliberately in an arbitration clause. Arbitration clauses are often treated as an afterthought;however, the details of an arbitration clause can have a significant impact if disputes arise, and those impacts should properly be considered as part of the risk analysis of any agreement. When negotiating an arbitration clause, the extent of appeal rights is one of a number of concerns.
For advice on drafting arbitration provisions, managing a commercial arbitration, or challenging an arbitral award, contact a lawyer in Miller Thomson’s Construction Litigation group.
[1] Medicine Hat (City) v Fieldcore Service Solutions Canada Company, 2026 ABKB 447 [Medicine Hat (City)].
[2] Ibid at para 44.
[3] Ibid at paras 5-10.
[4] Ibid at para 12.
[5] Ibid at paras 13-14.
[6] Ibid at paras 24-28.
[7] Arbitration Act, RSA 2000, c A-43 [Arbitration Act].
[11] Arbitration Act at s. 45(1)(f).
[12] Medicine Hat (City) at para 48.
[13] Ibid at para 49.
[14] Ibid at paras 73, 80, and 82.
[15] Ibid at para 105.
[16] Ibid at para 104.
