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lululemon v. ICP: Arbitral Award Stands; “Correctness is the Test”

In April of 2020, Boughton Law, working with our client, Industrial Color Productions Inc. (“ICP”) of New York secured an arbitration award of over $1 million for breach of contract by lululemon athletica canada inc. (“lululemon”). ICP, a professional media production company, provided media production services and photography for lululemon’s e-commerce platforms. In arbitration, the tribunal characterized the issue of the parties as “commercial consequences of termination” and damages were subsequently upheld.

lululemon sought to have the award set aside, under s. 34(2)(a)(iv) of the International Commercial Arbitration Act (the “ICAA”), which stipulates that the party may apply for setting aside an arbitral award if the arbitral award “deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration”.  First in BC Supreme Court and then in the Court of Appeal and in both cases, Boughton Law (George Cadman, Q.C. as counsel) successfully argued the legal and factual correctness of the arbitral award.

The key topic in question is the standard of review applied to s 34(2)(a)(iv) of the ICAA. While the B.C. Supreme Court dismissed lululemon’s application by applying the standard of “reasonableness”, in lululemon athletica canada inc v Industrial Color Productions Inc, 2021 BCCA 428, the Court of Appeal held that, under the ICAA, the standard of review on applications to set aside an arbitral award was in fact “correctness”. The BCCA stated, “in determining that the standard of review was reasonableness, the judge seemed influenced by general policy reasons and, it could be argued, did not focus on the specific statutory provision giving rise to the review”. Further concluding that “the arbitrator’s decision is that he simply decided the parties’ contractual dispute, which was squarely before him. […] it strikes me that [Appellant] may really be seeking to delve into the merits of the case, which is not the court’s role on review”. In coming to its decision, brought clarity to what had previously been an unsettled question of law in BC.