Limits to arbitration
Although the policy of the Arbitration Act is to favour arbitrations and generally to trust the arbitral process, the law does not blindly assume that private decisions are as good as decisions of the public court system. It imposes a number of limits and safeguards on the process that can prevent a dispute from being arbitrated or an award from being enforced. These constraints are legal, procedural and substantive.
(i) legal limits
The main legal limit is that the arbitration must be voluntary. Private dispute resolution occurs only because the parties have agreed to it. The arbitrator gets his or her powers from the parties, with the statute playing a supplementary - and sometimes protective - role. An arbitrator has no power to order the parties to do something that the parties could not have agreed to do on their own. Likewise the arbitrator cannot order the parties to do something illegal under Canadian law (since the parties cannot lawfully agree to break the law). So, for example, the arbitrator could not allow the parties to engage in conduct prohibited by the Criminal Code, or any other statute.
The arbitration agreement is a contract between the parties, and it is enforceable at law to no greater extent than any other contract. This is clear from the grounds on which a court can refuse to stay litigation, or can set an award aside: that a party entered into the agreement while under a legal incapacity (such as being under age,or subject to duress, or mentally incompetent), or that the agreement is invalid for another reason of law.25
For this reason, an arbitration agreement cannot bind children; they are not capable of contracting, i.e. agreeing to arbitrate. It may bind parents in matters concerning their children, but as noted below, the courts will always maintain their right to ensure the best interests of the child, whatever the parents have agreed to directly or through an arbitration.
Likewise, an arbitrator can decide only the questions that the parties have agreed to refer to arbitration. The contract fixes the scope of the arbitrator's power. A court may refuse to let an arbitration proceed if the arbitrator purports to deal with matters that the parties have not agreed to arbitrate, and the court may set aside an award made in excess of the agreement.26
Another legal limit, one that makes an arbitration agreement less enforceable than other contracts, is that the subject matter of the agreement must be "capable of being the subject of arbitration under Ontario law". Most civil (i.e. between private parties) disputes may be arbitrated. However, criminal offences are not disputes between parties but matters between the state (the Crown) and the offender. They cannot be arbitrated. Likewise matters that involve a public recognition of civil status cannot be altered by a private arrangement. The parties can decide through an arbitrator only their own private affairs. For example, the registration of a patent, the recognition of parenthood (affiliation), or the status of marriage cannot be arbitrated. Therefore, arbitrators cannot grant a civil divorce. Only a public body, a court, can make an order affecting this public status. This does not affect the authority to grant a religious divorce. This power may be exercised as religious authorities determine. Civil divorce occurs only under the Divorce Act (Canada) and is not arbitrable. An award purporting to have such an effect can be set aside, or simply ignored.
