CLOUT
  index.

Kanto, a manufacturer of industrial heat treatment furnaces having its principal place of business in Japan, and Can Eng, a corporation having its principal place of business in Ontario, executed a licence co- operation agreement in 1987 under which Can Eng was given the right to manufacture certain products in Ontario and Kanto would provide technical assistance. The agreement provided that all disputes were to be settled by arbitration in Tokyo in accordance with the rules of the Japan Commercial Arbitration Association. Alleging in 1990 that Can Eng had failed to pay royalties, Kanto initiated arbitration proceedings in which Can Eng did not participate. An award was rendered in Kanto's favour and Kanto sought to enforce it against Can Eng in Ontario. Can Eng resisted enforcement on two grounds. First, that there had been a fundamental breach of the licensing agreement which put the dispute outside the jurisdiction of the arbitrator, and, secondly, that to recognize the foreign arbitral award would be contrary to public policy in Ontario in that a foreign corporation without assets in Ontario would be entitled to enforce the Japanese award in Ontario, leaving the Ontario corporation with no recourse with respect to its substantial damages occasioned by Kanto's fundamental breach. Can Eng argued further that Kanto had not filed a duly certified copy of the award with the Court, as required by article 35(2) of the MAL.

The defendant's arguments were rejected. The arbitration agreement in this case fell within the class of arbitration agreements governed by the International Commercial Arbitration Act. The fact that the agreement was executed prior to the coming into force of the Act was irrelevant having regard to section 2(2) of the Act. Can Eng's argument that there had been a fundamental breach should have been raised in a timely manner before the arbitration tribunal, as it fell within the arbitrator's jurisdiction (article 16 MAL). The Court reviewed the meaning of "duly certified" used in article 35(2) and concluded that while the initial documents submitted by the applicant did not meet that standard, subsequently filed documents did comply with the requirements of article 35. The award was enforced.

Reproduced on this web site (www.interarb.com) with the kind permission of the United Nations, New York.
Database, typography, layout, etc. © interarb, 2003.