Court File and Parties

COURT FILE NOS.: CV-23-00700629-0000CL CV-22-00678750-0000CL DATE: 20240415

ONTARIO SUPERIOR COURT OF JUSTICE

B E T W E E N:

MEDIVOLVE INC. Applicant/Respondent

• and - JSC CHUKOTKA MINING AND GEOLOGICAL COMPANY Respondent/Applicant

Counsel: A. Hassan and T. Milosevic, for the Applicant/Respondent (Medivolve Inc.) S. Desjardins and M. Folinas, for the Respondent/Applicant (JSC Chukotka Mining and Geological Company)

HEARD: January 23, 2024

WILTON-SIEGEL J.

Reasons for Decision

[1] In these companion proceedings, JSC Chukotka Mining and Geological Company (“Chukotka”) seeks an order recognizing and enforcing an arbitral award (the “Arbitral Award”) pursuant to Article 35 of the UNCITRAL Model Law on International Commercial Arbitration (the “Model Law”), which is a schedule to the International Commercial Arbitration Act, 2017, S.O. 2017, c. 2, Sched. 5 (the “ICAA”). This application is opposed by Medivolve Inc. (“Medivolve”) which also seeks an order setting aside the Arbitral Award pursuant to Article 34 of the Model Law.

[2] The Arbitral Award was issued on December 23, 2021 by the International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation (the “ICAC”). The Arbitral Award found that Medivolve had breached a Supply Agreement (defined below) between the parties and ordered Medivolve to pay Chukotka $2,405,950.78 USD.

Factual Background

[3] The applicant, Medivolve Inc. (“Medivolve”), is a publicly traded corporation incorporated under the laws of Canada.

[4] Chukotka is a mining company incorporated, operating and headquartered in Russia.

[5] On September 21, 2020, Medivolve and Chukotka entered into an agreement under which Medivolve agreed to supply Chukotka real-time COVID-19 pcr testing machines, real-time covid -19 pcr test kits and covid -19 antibody test kits (collectively, the “Equipment”) for a purchase price of approximately $2.07 million USD (the “Supply Agreement”).

[6] Medivolve completed deliveries of the Equipment on or about December 29, 2020. Chukotka paid the purchase price in two instalments on October 2, 2020, and on December 18, 2020.

[7] Under section 9 of the Supply Agreement, Chukotka could reject the Equipment for defects or non-conformance by providing notice to Medivolve within 90 days of the transfer of the Equipment to Chukotka at a named port. Chukotka did not provide any such notice within the stipulated period. However, in early 2021, Chukotka complained to Medivolve that the Equipment was not functioning properly. Medivolve asserts that this was due to Chukotka’s failure to store the Equipment properly which was not Medivolve’s responsibility.

[8] After unsuccessful negotiations pursuant to section 16.2 of the Supply Agreement, Chukotka sent Medivolve by email a Notice of Rejection of Goods on April 29, 2021, demanding a refund of the purchase price paid by Chukotka for the Equipment pursuant to section 9.1 of the Supply Agreement. Medivolve does not deny receipt of this letter. Medivolve did not, however, respond to the letter.

[9] The letter was sent to Medivolve’s head office at Suite 815, 65 Queen Street West, Toronto, Ontario M5H 2M5 (the “Head Office”) in accordance with section 23 of the Supply Agreement. At the time of the events giving rise to this proceeding, Medivolve’s registered office as shown on its corporate profile in the Register maintained by the Director under the Canada Business Corporations Act, R.S.C. 1985, c.C-44, as amended (the “CBCA Corporate Registry”) was Suite 900, 65 Queen Street West, Toronto, Ontario, M5H 2M5 (the “Registered Office”).

[10] On May 11, 2021, Chukotka sent Medivolve by email a pre-arbitration claim in accordance with sections 9.2 and 16.3 of the Supply Agreement. The pre-arbitration claim stated that Chukotka would submit the dispute to arbitration in accordance with section 16.4 of the Supply Agreement if Medivolve failed to fulfil the claim of Chukotka within 15 business days of receipt. Medivolve does not deny receipt of this letter. Medivolve also did not respond to this letter.

[11] On July 1, 2021, Chukotka commenced arbitration proceedings against Medivolve in the ICAC in accordance with Article 16.4 of the Supply Agreement. Section 16.4 of the Supply Agreement provided that all disputes or controversies that could not be settled were subject to arbitration by the ICAC and under the ICAC Rules (as defined below).

[12] On July 9, 2021, the ICAC sent Medivolve a copy of the Statement of Claim in the arbitration in accordance with Article 10.3 of the ICAC Rules. All communications to Medivolve from the ICAC were sent by the Secretariat of the ICAC. The correspondence was sent by registered mail to Medivolve’s Head Office address and to Medivolve’s Registered Office address. The correspondence invited Medivolve to appoint its side arbitrator within 15 days and to provide a Statement of Defence within 30 days. Medivolve did not receive this correspondence. The courier reported that it was unable to deliver the correspondence because “the consignee has not been found at the given address”.

[13] This is apparently because Medivolve had moved its Head Office to 198 Davenport Road, Toronto, Ontario, M5R 1J2 in June 2021. Medivolve did not advise Chukotka or the ICAC of this change of address, nor did it update its Registered Office address in the CBCA Corporate Registry until October 12, 2021. Medivolve says, however, that its personnel would routinely return to the Head Office location to collect any mail or packages. Medivolve did update its head office address with the SEDAR securities document filing system for public corporations by a material change report dated July 16, 2021.

[14] On July 13, 2021, Chukotka sent Medivolve a letter advising that Chukotka had filed a statement of claim in respect of its dispute (the “Statement of Claim”) with the ICAC on July 1, 2021 and providing a link to the Statement of Claim and 38 Exhibits. The email further stated that a hard copy of the Statement of Claim, along with the Exhibits, had also been couriered to Medivolve at its address as indicated in the Supply Agreement and to its registered address. The Chukotka letter also included a Notice of Arbitration Proceedings which described Chukotka’s claim and the heads of damage claimed and stated that Chukotka had nominated its side arbitrator in accordance with Article 16 of the ICAC Rules. The Notice concluded with the following statement: “Please be reminded that you should get an official service of process notice from the ICAC in accordance with [Article 10 of the ICAC Rules] and follow further procedures which will be described in that notice”. The “official service of process notice” referred to in the Notice is understood to be the correspondence sent by the ICAC on July 9, 2021 to Medivolve’s Head Office and Registered Office addresses which Medivolve did not receive for the reason described above.

[15] The Chukotka letter was sent by courier to Medivolve’s Head Office address and its Registered Office address, and the process server sent a copy of the correspondence by regular mail to Medivolve’s Registered Office address. The letter was also sent by email on July 15, 2021. Medivolve received the letter and attached materials by email on July 15, 2021.

[16] However, Medivolve also did not receive any of the correspondence sent by courier or mail by Chukotka on July 13, 2021 to its Head Office address or to its Registered Office address.

[17] On August 9, 2021, the ICAC sent a letter to Chukotka notifying it that the claim materials sent to Medivolve had been returned to the ICAC. The ICAC invited Chukotka “to take appropriate measures to establish the existence of [Medivolve], including his status, legal address (or location address) in accordance with the registration data of [Medivolve] as a legal entity, for which purpose it proposed to send an inquiry to the registration authorities at the location of the Defendant”. The letter also states that “[t]he ICAC … also asked whether [Chukotka] believed that the claim materials had been received by [Medivolve] as having been sent to the party’s last known place of business”. On August 20, 2021, Chukotka obtained another copy of Medivolve’s file in the CBCA Corporate Register which continued to reflect that Medivolve remained an active corporate body, that its Registered Office address remained the same and that there was no indication that it was in liquidation or in the process of liquidation. Chukotka reported this information to the ICAC on August 23, 2021.

[18] On August 23, 2021, Chukotka requested that the ICAC send notices to it via email. The ICAC apparently complied with this request. It did not, however, request that notices from the ICAC be sent to Medivolve by email.

[19] On September 1, 2021, the ICAC sent a copy of the ICAC’s notice of appointment of an arbitrator to the ICAC panel due to Medivolve’s failure to appoint an arbitrator. This notice was sent to Medivolve at its Head Office address and its Registered Office address. The courier was unable to deliver this document.

[20] On September 14, 2021, the ICAC sent a notice of the arbitral hearing to be held on October 15, 2021. This notice was sent by courier to Medivolve’s Head Office address and Registered Office address. The courier was also unable to deliver this document.

[21] The arbitration hearing began on October 15, 2021. No representative appeared on behalf of Medivolve.

[22] On October 18, 2021, on motion of Chukotka, the ICAC panel hearing the arbitration (the “Tribunal”) entered an order pursuant to Article 30(8) of the ICAC Rules that permitted Chukotka to file a claim for reimbursement of its arbitration expenses by October 29, 2021. The Tribunal order allowed Medivolve to provide comments regarding Chukotka’s claim for expenses by November 12, 2021. In referring to the parties at the hearing held on October 15, 2021, the Tribunal stated that “The Defendant that has been duly notified of the time and venue of the hearing was not present at the proceeding.”

[23] The ICAC sent Medivolve notice of this ruling by courier at its Head Office address and its Registered Office address. The courier was unable to deliver this document. However, the document was also sent by email on October 18, 2021 to the address included in the legal address of Medivolve in section 23 of the Supply Agreement, as well as to four other individuals who Chukotka says were “representatives of Medivolve with which Chukotka had corresponded in the past”. Medivolve received this ICAC correspondence by email on the date of its transmission.

[24] On October 29, 2021, Chukotka submitted its application for reimbursement of its costs totalling $120,630.02 USD. On November 22, 2021, the ICAC sent Medivolve notice of Chukotka’s application for costs by courier to Medivolve’s Head Office address and to its Registered Office address. The courier was unable to deliver this document.

[25] Medivolve did not submit a response or objection to Chutkotka’s application for reimbursement of its costs. However, after receiving the ICAC email on or about October 18, 2021, Medivolve proceeded to retain legal counsel. It contacted a Moscow-based lawyer, Alexey Yevgenievich Gubkin (“Gubkin”) in October 2021 and formally retained him in November 2021. Apparently, in November 2021, Gubkin contacted the ICAC which notified him that Medivolve could not participate in the arbitration through Russian counsel until it provided a power of attorney documenting that Russian counsel was authorized to represent Medivolve.

[26] Medivolve provided a power of attorney to Gubkin dated November 15, 2021. Gubkin provided it to the Tribunal on December 17, 2021, along with a request to obtain and review the materials filed by Chukotka in the arbitration. Medivolve says the request was made with a view to “prepare to participate” in the arbitration. The following is a translation of the body of the letter provided by Gubkin to the Tribunal on December 17, 2021:

Petition

to receive documentation

The Panel of Arbitrators of the International Commercial Arbitration Court at The Chamber of Commerce and Industry of The Russian Federation delivered a judgement on October 18, 2021, regarding the completion of the oral hearing concerning [this] case.

Since the respondent has not received written documentation, based on which the complainant substantiates his/her demands in this case, I ask, following the rules of the International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation, to send to my address written documentation pertaining to this case.

[These] documents may be sent to an email address: Agub_kin@mail.ru.

[27] On December 20, 2021, Medivolve’s request to review the Chukotka materials was denied on the basis that the power of attorney submitted by Medivolve was deficient by reason of both substantive omissions in the content of the power of attorney and formal defects including a lack of authentication by the Canadian and Russian governments. The following is a translation of the relevant portion of the letter of the ICAC to Gunkin:

The Power of Attorney submitted by [you] does not meet the requirements expected from this type of documents as far as the justification of powers of the person who is acting on the Grantor’s behalf is concerned:

• The name of the person signing the Power of Attorney is not stated;

• The Power of Attorney does not show the reason to act for the person signing the Power of Attorney;

• The Power of Attorney does not address the general powers of the authorized person during the course of representing the grantor during arbitration proceedings in Arbitration Courts; the only mentioned authority is to submit the case to the Arbitration Court;

• The Power of Attorney is not furnished with an Apostille;

• The extract furnished with an Apostille from the Canadian Commerce Registry regarding the Grantor’s company is missing.

[28] On December 23, 2021, the Tribunal issued the Arbitral Award. In the Arbitral Award, the Tribunal found that Medivolve had breached the Supply Agreement and ordered it to pay $2,405,950.78 USD to Chukotka. The Tribunal found that notice was properly given in accordance with Article 10 of the ICAC Rules. As such, the notices were considered duly delivered, and were deemed received in accordance with Article 10.5 of the ICAC Rules (set out below) and Article 3(1) of the Law on International Commercial Arbitration (N3338-1), 7 July 1993, a law of the Russian Federation, (the “Russian Arbitration Law”) which deems written communications received on the date of delivery if delivered to the addressee personally or delivered at its place of business, permanent residence or mailing address, or, if none of these can be found after making reasonable inquiry, if it is sent by registered mail to the party’s last known place of business, permanent residence or mailing address. I note that this provision has a counterpart in Article 3(1) of the Model Law.

[29] On December 27, 2021, the ICAC sent a copy of the Arbitral Award to Medivolve by registered mail, addressed to Medivolve in accordance with Rule 10.3 of the ICAC Rules, but it was not received. Chukotka says that, in reply to a query on behalf of Chukotka, the ICAC advised Chukotka on February 28, 2022 that this correspondence had not been received by Medivolve.

[30] Accordingly, on March 1, 2022, Chukotka advised Medivolve by letter of the Arbitral Award and attached a copy. This correspondence was sent by to Medivolve at its address at 198 Davenport Road Toronto, Ontario and by email. By this time, Chukotka had obtained a copy of the file of Medivolve in the CBCA Corporate Registry which reflected the change of Medivolve’s registered office address. The email was also sent to the same email addresses as the Tribunal used in sending its email of October 18, 2021. The correspondence was received by Medivolve on March 3, 2022.

[31] Unaware of the Arbitral Award, Medivolve submitted the power of attorney to Global Affairs Canada for authentication on February 1, 2022, and obtained the authenticated document on April 20, 2022. On May 5, 2022, Medivolve received an appointment to submit the power of attorney to the Russian Consulate in Ottawa. The authenticated power of attorney was received from the Russian Consulate on May 30, 2022.

[32] In the meantime, on May 27, 2022, Medivolve filed an application to set aside the Arbitral Award before the Arbitration Court of the City of Moscow (the “ACCM”) on the basis that it did not receive proper notice. On September 19, 2022, the ACCM denied Medivolve’s application.

[33] Medivolve then filed a cassation appeal before the Arbitration Court of the Moscow District (the “ACMD”) to annul the Arbitral Award. In a decision dated December 15, 2022, the appeal was rejected.

The Supply Agreement

[34] The following provisions of the Supply Agreement are relevant for these applications:

16.2 All disputes and controversies which may arise from or in connection with this Contract will be settled, if possible, by way of mutual negotiations.

16.3 Presentation of a claim to the counterparty before instituting an action in the court is a mandatory procedure for the Parties. Claims shall be forwarded to the legal address indicated in [the] respective clause hereof by electronic mail indicated in clause 7.3 or by express mail. Response to a claim shall be forwarded within 15 business days from the date of its delivery to a Party.

16.4 If disputes or controversies fail to be settled, they are subject to arbitration by the International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation in accordance with its Rules.

[35] In addition, section 2.3 of the Supply Agreement identified the legal address of Medivolve as Suite 815, 65 Queen Street West, Toronto, Ontario, M5H 2M5. There is, however, no provision in the Supply Agreement that expressly states the manner of giving notice to either party under the agreement.

The ICAC Rules

[36] The following rules of the ICAC, which are found in the Rules of Arbitration of International Commercial Disputes, Appendix No. 2 to Order No. 6 of the ICAC, dated 11.01.2017 (the “ICAC Rules”), are relevant:

Mailing and Delivery of Documents

1. The Secretariat shall mail the documents in a case to either of the parties at the addresses given by the party to which the documents are being mailed or by the other party. The parties shall immediately notify the Secretariat and the other party of any changes in the addresses given previously.

2. All documents submitted by either of the parties to the Secretariat shall be transmitted by it to the other party, unless these documents have been transmitted by such party to the other party during the arbitral proceedings. Any reports prepared by experts or other documents classified as evidence on which an arbitral award may be based shall be transmitted to the parties as well.

3. The statements of claim, statements of defense, notices of the hearing, arbitral awards, and orders shall be sent by the Secretariat by registered mail with return receipt requested, or otherwise, provided that a record is made of the attempt to deliver the mail.

4. Other documents may be sent by registered mail, ordinary mail, or electronically or otherwise, provided that a record is made of the communication sent.

5. A communication shall be deemed received on the day when it is received by a party or when it should have been received if sent as specified in the preceding subparagraphs of the present paragraph even if a party fails to appear to receive the communication, waives the receipt, or if it is not located or is not resident at the corresponding address.

Analysis and Conclusions

[37] There are two applications before the Court which I will address in turn.

The Medivolve Application

[38] In its application, Medivolve seeks an order setting aside the Arbitral Award, pursuant to the provisions of s. 34 of the Model Law and s. 5(1) of the ICAA.

[39] The provisions of Article 34 of the Model Law that are relevant for this application are as follows:

(1) Recourse to a court against an arbitral award may be made only by an application for setting aside in accordance with paragraphs (2) and (3) of this article.

(2) An arbitral award may be set aside by the court specified in article 6 only if:

(a) the party making the application furnishes proof that: …

(ii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or …

(iv) … the arbitral procedure was not in accordance with the agreement of the parties, …

[40] Chukotka argues that the Court lacks jurisdiction to hear this application by virtue of the provisions of Article 1(2) of the Model Law, as supplemented by s. 6(1) of the ICAA. The effect of these provisions is that Article 34 of the Model Law applies only if “the place of arbitration is in the territory of this State” which for this purpose is Ontario. As the place of arbitration in this case was in Russia, Article 34 of the Model Law does not apply to the Arbitral Award.

[41] Medivolve does not dispute Chukotka’s analysis that Article 34 of the Model Law does not apply in the present circumstances. Medivolve says however that, if Article 34(2) of the Model Law does not apply, it is entitled to rely upon common law principles to set aside the Arbitral Award. It relies for this proposition upon the fact that s. 6(1) of the ICAA merely addresses the application of the relevant words and expressions for the purposes of particular sections of the Model Law. Although that section provides that Article 34 of the Model Law is excluded because the seat of an arbitration is outside Ontario, it does not expressly provide that a party cannot proceed outside the Model Law to set aside an arbitration award. In other words, Medivolve argues that Article 34 does not set out the exclusive basis on which an international arbitration award can be set aside.

[42] I do not agree. While s. 6(1) of the ICAA is silent on this issue, s. 5(3) of that statute provides that “[t]he Model Law applies to international commercial arbitration agreements and awards made in international commercial arbitrations…”. At a minimum, s. 5(3) thereby excludes recourse to the Arbitration Act, 1991, S.O. 1991, c.17, as amended, which in any event is specifically excluded under that statute pursuant to s. 2(1)(b) of the latter statute. Collectively, however, I think these two statutes indicate an intention to occupy the field, that is, that any application to set aside an arbitration award must proceed under one or other of these statutes absent perhaps special circumstances that are not present in this case.

[43] In any event, Medivolve does not suggest that, in seeking to set aside the Arbitral Award, it would seek to apply any principle of common law that is not already reflected in the principles in Article 36 of the Model Law, upon which it relies in its defence to Chukotka’s application to recognize and enforce the Arbitral Award. Accordingly, while I incline to the view that the Court lacks jurisdiction to hear the Medivolve application, the Medivolve application is effectively denied in reaching the determination below on Chukotka’s application.

[44] In addition, I note that, as the grounds for refusing to recognize and enforce a foreign arbitral award under Article 36 of the Model Law are substantially similar to the grounds for setting aside an arbitral award under Article 34 of the Model Law, I have had regard to the materials in the Medivolve application record to the extent that they are not also reproduced in the Medivolve reply and responding application record filed in respect of Chukotka’s application for recognition and enforcement of the Arbitral Award.

The Chukotka Application

[45] As mentioned, Chukotka seeks an order recognizing and enforcing the Arbitral Award pursuant to Article 35 of the Model Law. Chukotka has satisfied the requirements of that provision.

[46] Article 36 of the Model Law sets out the grounds on which a court may refuse to recognize or enforce an arbitral award. The relevant provisions of Article 36 for present purposes are the following:

(1) Recognition or enforcement of an arbitral award, irrespective of the country in which it was made, may be refused only:

(a) at the request of the party against whom it is invoked, if that party furnishes to the competent court where recognition or enforcement is sought proof that: …

(ii) the party against whom the award is invoked was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or …

(iv) … the arbitral procedure was not in accordance with the agreement of the parties …

[47] Medivolve raises three grounds for denying such recognition and enforcement. It bears the onus of establishing such grounds. I will address each of Medivolve’s three arguments, which are:

(1) that Medivolve did not receive proper notice of the arbitration;

(2) that Medivolve was unable to present its case in the arbitration; and

(3) that the Tribunal did not treat the parties equally.

[48] The following observations inform the Court’s approach to these three arguments of Medivolve and the determinations herein.

[49] First, the Court of Appeal has repeatedly held that reviewing courts should accord a high degree of deference to the awards of international arbitral tribunals governed by the Model Law: see Consolidated Contractors Group S.A.L. (Offshore) v. Ambatovy Minerals S.A., 2017 ONCA 939, at para. 24; United Mexican States v. Cargill Inc., 2011 ONCA 622, 107 O.R. (3d) 528, at para. 33; and United Mexican States v. Karpa (2005), 74 O.R. (3d) 180 (C.A.), at paras. 34-37. The following statement of Vermette J. in Costco Wholesale Corporation v. TicketOps Corporation, 2023 ONSC 573, at para. 46, articulates the principle that is of particular relevance for the present case:

… Courts have held that to justify setting aside an arbitral award under the Model Law for reasons of fairness or natural justice, the conduct of the arbitral tribunal must be sufficiently serious to offend our most basic notions of morality and justice. Judicial intervention for alleged violations of the due process requirements of the Model Law will be warranted only when the tribunal’s conduct is so serious that it cannot be condoned under Ontario law. [Italics added]

[50] Second, both parties refer to the decision of Kimmel J. in Tianjin v. Du, 2023 ONSC 1808, although they have put forward differing interpretations of that decision. I note that, in that case and in the present case, the moving party did not deny that deemed service had occurred but submitted that such deemed service did not constitute proper notice under Article 36(1)(a)(ii) of the Model Law. Accordingly, in that sense, the point of departure is similar in Tianjin v. Du and this case. However, the issue of proper notice was very different.

[51] In Tianjin v. Du, the application judge found that the applicants had not received actual notice. She noted however that proper notice does not require actual notice. The issue in that decision was therefore whether the service that had occurred could constitute proper notice, notwithstanding the lack of actual notice. She held that, because strict compliance with the contractual provisions had not occurred and the deemed delivery that had occurred was not “reasonably calculated to inform [the applicants] personally of the Arbitration Proceeding”, proper notice had not been given. Accordingly, the finding in Tianjin v. Du was that the actual service that was effected did not constitute proper notice in the absence of any actual notice.

[52] In the present case, the issue for the Court is whether the actual notice that did occur was sufficient to constitute proper notice. The distinctive feature of the present case is that Medivolve was made aware of the arbitration on two occasions prior to the issue of the Arbitral Award on December 23, 2021. As described above, on July 15, 2021, Medivolve received an email from Chukotka advising Medivolve that it had commenced an arbitration, providing a description of its claim, having also previously advised Medivolve of its claim on several occasions, and providing a copy of a link to its Statement of Claim. In addition, on or about October 18, 2021, Medivolve received an email from the ICAC advising of the status of the arbitration as well as the process regarding Chukotka’s costs application, which email was received more than two months prior to the issue of the Arbitral Award. The issue is therefore whether such actual notice was sufficient to constitute proper notice, despite the absence of service by the ICAC of the Statement of Claim and notice of the time and place of the hearing of the arbitration.

[53] Third, as set out above, Article 36(1)(a)(ii) of the Model Law provides that a court may refuse recognition and enforcement of a foreign arbitral award if “the party against whom the award is invoked was not given proper notice … of the arbitral proceedings or was otherwise unable to present his case.” It is certainly arguable that this provision contemplates a single issue in the sense that the concept of a “proper notice” includes the ability to present one’s case. However, in their respective submissions, the parties have treated Medivolve’s allegations of a denial of proper notice and a denial of the right to present its case as separate and distinct issues. I have therefore attempted similarly to consider these issues separately. I note however that, insofar as a sufficient opportunity to respond is an element of “proper notice”, I consider this requirement has also been satisfied for the reasons set out in the section of these Reasons for Decision that addresses Medivolve’s allegation that it was denied an opportunity to present its case.

[54] In the following analysis, I will address in turn each of Medivolve’s three grounds for denying such recognition and enforcement after first considering a preliminary argument of Chukotka that Medivolve’s claims of the absence of proper notice are subject to the application of the doctrine of issue estoppel.

Is the Medivolve Claim of Lack of Proper Notice Subject to Issue Estoppel?

[55] Chukotka argues that the question of whether Medivolve was given proper notice is subject to issue estoppel because it has already been decided by the ICAC in the Arbitral Award, and subsequently confirmed by the ACCM and the ACDM at the seat of arbitration.

[56] There are three requirements to establish an issue estoppel: (1) that the same question or issue has been decided; (2) that the decision was judicial and final; and (3) that the parties to the judicial decision were the same parties to the proceedings in which the estoppel is raised: Angle v. M.N.R., [1975] 2 S.C.R. 248, at p. 254. In the present case, as Medivolve was not present in the arbitration hearing before the Tribunal, the proceedings at issue are the proceedings before the ACCM and the ACDM. It is not disputed that, in respect of these proceedings, the conditions in (2) and (3) are satisfied.

[57] Accordingly, the issue for the Court in respect of Chukotka’s assertion of issue estoppel is whether the same question of proper notice was decided by either the ACCM or the ACMD. In my view, while each of these decisions refers to the absence of proper notice as a ground for setting aside an arbitration decision, each decision treats the issue of proper notice solely as a question of whether delivery of the ICAC notifications to Medivolve complied with the ICAC Rules for deemed delivery. Neither court addressed the question of whether "proper notice" had occurred that satisfied the standard of “notice that is reasonably calculated to inform the party of the arbitral proceedings and give them an opportunity to respond” which, as discussed below, is the standard applicable for the purposes of Article 36(1)(a)(ii) of the Model Law.

[58] The extract of the translated decision of the ACMD set out below illustrates this limitation of the legal analysis and conclusions of both the ACCM and the ACMD:

The arguments about the improper notification of the company were found to be unsubstantiated, since the materials of the mediation case contain evidence of the notification of the election of an arbitrator dated Jul 09, 2021 and of the court hearing scheduled for Oct 15, 2021 at the addresses of the interested person: 65 Queen Street West, Suite 900, Toronto ON M5H 2M5, Canada and 65 Queen Street West, Suite 815, Toronto ON M5H 2M5, Canada, including those specified in the contract.

As established by the court, in accordance with the response of the courier service, notifications were not received by the interested person due to the absence of the addressee at the specified addresses. At the same time, the applicant did not dispute that the statement of claim had been filed with the mediation tribunal on Jul 01, 2021, the mediation tribunal had sent a notice of the election of an arbitrator to the applicant’s addresses as indicated above on Jul 13, 2021, and the notice of the date of the court hearing had been sent by the mediation tribunal on Sep 16, 2021. However, on Oct 12, 2021, after the acceptance of the petition by the mediation tribunal and the sending of relevant notifications to the applicant, Medivolve Inc. changed the registration address, which the interested person, as a party to the contract, was not notified about. Thus, acting reasonably and prudently, Medivolve Inc. had to exercise due diligence and independently take measures to obtain information about the mediation tribunal’s consideration of the dispute. Medivolve Inc. took no actions to protect its interests, to properly receive correspondence at the place of its registration, and therefore, taking into account the explanations of the court contained in paragraph two of item one of the resolution of the Plenum of the Supreme Arbitration Court of the Russian Federation No. 61 dated Jul 30, 2013, the applicant is deemed duly notified of the consideration of the case by the mediation tribunal.

The court of cassation instance finds that the assessment of the stated arguments is based on the correct application by the court of the norms of substantive law, and the conclusions made by the court correspond to the actual circumstances of the case and the evidence available in the case.

[59] In summary, the ACCM saw no basis for setting aside the Tribunal finding of due delivery of the notifications based on deemed delivery of the notifications for the purposes of the ICAC Rules. Insofar as the ACCM addressed the issue of notice, it concluded that, to the extent that Medivolve did not receive the ICAC notifications, Medivolve was responsible for failing to ensure that it received such notifications at its Registered Office address. The ACMD confirmed these conclusions in its decision. In my view, neither of these conclusions addresses the issue of whether Medivolve was given notice that was reasonably calculated to inform it of the arbitration and to give it an opportunity to respond.

[60] For this reason, I am of the view that the issue of proper notice that is before this Court – whether in the circumstances proper notice for the purposes of Article 36(1)(a)(ii) of the Model Law required the ICAC to send the ICAC notifications by email – was not addressed in the decisions of either the ACCM or the ACMD. I therefore conclude that the question of whether Medivolve was given proper notice is not subject to issue estoppel before this Court.

Was Medivolve Denied Proper Notice?

[61] As mentioned, Medivolve does not dispute that the ICAC complied with the relevant ICAC rules regarding delivery of the documentation described above. Medivolve’s position is that it did not receive “proper notice” of the arbitration proceedings. For this purpose, both parties accept the formulation of the test for “proper notice” articulated by Kimmel J. in Tianjin v. Du, at para. 57, being “notice that is reasonably calculated to inform the party of the arbitral proceedings and give them an opportunity to respond”: see also Tianjin v. Xu, 2019 ONSC 628, at paras. 31 and 43, citing Tianjin Port Free Trade Zone International Trade Service Co. Ltd. v. Tiancheng International Inc., 2018 WL 4502497 (C.D. Cal. 2018), at paras. 4 and 5.

[62] Clearly, as a matter of best practices, the ICAC should have considered sending its notifications to Medivolve by email after each delivery in July and September was returned by the courier as undelivered. However, actual notice can constitute proper notice even in the absence of formal service in appropriate circumstances.

[63] In this case, as mentioned, on July 15, 2021, Medivolve received actual notice of the commencement of the arbitration by Chukotka, of the arbitration court in which the arbitration had been commenced and of the nature of Chukotka’s claim, together with the link to access the Statement of Claim and related exhibits. In addition, Medivolve received a notification from the ICAC of the status of the arbitration on or about October 18, 2021.

[64] Given this knowledge, I am of the view that Medivolve had “proper notice” of the arbitral proceedings in that it had notice of the arbitral proceedings as of July 15, 2021 and notice of the status of the proceedings on or about October 18, 2021, well in advance of the Arbitral Award.

[65] Medivolve argues that, collectively, the following three circumstances should inform proper notice in the present context, specifically that proper notice required email transmission by the ICAC of its notifications to Medivolve:

1. prior to commencement of the arbitration, Chukotka communicated by email in respect of the dispute;

2. the arbitration took place during the COVID-19 pandemic when business was increasingly issuing forms of electronic communication, including Chukotka which requested email communications with the ICAC; and

3. the Supply Agreement expressly provided for email communications under certain circumstances, specifically notice of termination under section 15.1 and notice of a claim under s. 16.3.

[66] I do not accept that these circumstances, individually or collectively, required email transmission for proper notice to have been given for the following reasons.

[67] The fact that Chukotka sent communications respecting the dispute by email prior to commencement of the arbitration or that the Supply Agreement expressly contemplated email communications in certain circumstances cannot be relevant considerations in the present circumstances given that, unlike the situation in Tianjin v. Du, the ICAC Rules do not incorporate the agreement between the parties regarding the method of service or delivery in the Supply Agreement.

[68] Nor do I think the pandemic is an appropriate consideration in this case. The failure of Medivolve to receive the ICAC documentation was not due to the closure of Medivolve’s office due to the pandemic. It was due to a change of the location of Medivolve’s head office, which was not reflected in the CBCA Corporate Registry or notified to Chukotka and which was made without any accommodation for deliveries of registered mail at Medivolve’s former head office location. Effectively, Medivolve argues that the ICAC should have amended its Rules as a result of the pandemic in which event Medivolve would have received the ICAC notifications. There is however no evidence of a generalized need for such amendments to the ICAC Rules.

[69] Medivolve also argues that it had a reasonable expectation that the ICAC would use email to communicate with it regarding the Tribunal based on the fact that Chukotka sent its communications relating to the dispute under the Supply Agreement to Medivolve by email and also sent the Statement of Claim to it by email on July 15, 2021. However, there is nothing in the correspondence of July 15, 2021 that would indicate that any correspondence from the ICAC regarding the arbitration proceedings would be sent by email. In the absence of any mention of email communications of the ICAC notifications, I do not think that such expectation was reasonable. I would also add that there is no evidence of this alleged expectation; it is simply a bald allegation.

[70] Medivolve also relies on the language of Article 3(1) of the Russian Arbitration Law cited above and its counterpart in the ICAA. Medivolve argues on the basis of this provision that the ICAC effectively had an obligation to make a reasonable inquiry regarding an alternative means of delivery of its notifications to registered courier after its deliveries in July and September were returned by the courier as undeliverable. It says that the inquiry conducted by the ICAC in the form of its request for information made to Chukotka in its letter of August 9, 2021 failed to satisfy this obligation.

[71] However, Article 3(1) of the Russian Arbitration Law and Article 3(1) of the Model Law address the issue of the requirements for deemed delivery of notifications. In the present case, as mentioned, the issue is not whether deemed delivery has occurred but whether proper notice has been given. I do not think that this provision is relevant for the issue of whether proper notice has occurred.

[72] Medivolve also refers to the decision of L’Heureux-Dube J. in Supermarchés Jean Labrecque Inc. v. Québec, [1987] 2 S.C.R. 219, arguing that the rationale of that decision is that a failure to give parties or their counsel of record prior notice of the specific date and place of a hearing in a proceeding is a fundamental breach of the rule of audi alteram partem that vitiates a proceeding. Medivolve argues that proper notice required that it receive notification from the ICAC of the specific time and date of the hearing of October 15, 2021.

[73] I do not read the decision of L’Heureux-Dube J. as articulating an absolute rule of the nature proposed by Medivolve, but rather as addressing the operation of the principle of audi alteram partem in the specific circumstances of that decision. The circumstances in the present case are very different from the situation in Supermarchés Jean Labrecque, where neither party was advised or had any way of knowing of a hearing convened by the Chief Judge of the court in an ongoing criminal proceeding in respect of which another judge in another judicial district had carriage. In the present case, Medivolve alone failed to appear. It had notice of the commencement of the arbitration and the specific claim against it. It took no steps to ensure that it received the documents sent to it by both Chukotka and the ICAC, of which it was made aware by Chukotka in its email of July 15, 2021. It did not engage counsel when it was made aware of the arbitration, nor did it contact the ICAC to inquire about its process.

[74] More importantly, a criminal proceeding as in Supermarchés Jean Labrecque and an application for enforcement of a foreign arbitration award are very different in two respects. In this case, the Court must have regard to the principle set out above that judicial intervention for alleged violations of the due process requirements of the Model Law, including the provisions asserted by Medivolve, will be warranted only when a tribunal’s conduct is so serious that it cannot be condoned under Ontario law. In this case, the assessment of the Tribunal’s conduct must be tempered by the fact that Medivolve had agreed to the submission of disputes under the Supply Agreement to the ICAC and to the application of the ICAC Rules to the arbitration. In addition, the Court must consider Medivolve’s knowledge of the commencement of the arbitration as early as July 15, 2021 and Medivolve’s own actions that contributed to the delay in its receipt of notification of the status of the hearing from the ICAC until October 18, 2021.

[75] Lastly, under Article 36(1)(a)(ii) of the Model Law, recognition and enforcement may not be refused unless a party did not receive “proper notice … of the arbitral proceedings.” The Article does not specifically mandate notice of the time and place of a hearing in the arbitral proceedings. For the reasons set out in this section, I am of the view that Medivolve had notice of the arbitral proceeding. Insofar as a failure to receive notice of the time and place of a hearing is relevant under Article 36(1)(a)(ii), it is more appropriately considered in the assessment of whether a party was unable to present its case in the arbitration.

[76] In summary, Medivolve’s position is that the ICAC should have attempted to communicate by email once it became aware that none of the documentation sent by courier had been delivered. However, while best practices might have suggested such a course of action, in my view that is not the test for proper notice for the purposes of Article 36(1)(a)(ii) of the Model Law. In my view, by virtue of receipt Chukotka’s correspondence on July 15, 2021 and the ICAC notification on October 18, 2021. Medivolve had notice that was reasonably calculated to inform it of the arbitral proceedings and therefore had proper notice of the arbitration.

Was Medivolve Unable to Present its Case?

[77] As was noted in Tianjin v. Du, at para. 112, “a party is unable to present its case at arbitration if it lacks the ‘opportunity to be heard at a meaningful time and in a meaningful manner’.” Medivolve also argues that it was unable to present its case in the arbitration.

[78] In its Factum, Medivolve states its position on this issue in the following manner:

… Medivolve did not receive the materials beyond the initial statement of claim, was denied access to [Chukotka’s] submissions and evidence, was not permitted to file any submissions of its own, did not actually know of the October 15 hearing until after it was held and did not know of the Arbitral Award until well after it was issued.

[79] The circumstances in this case are very different from the cases upon which Medivolve relies in which a party failed to receive any notice of an arbitration proceeding prior to receipt of an arbitral award. In this case, to repeat, Medivolve had actual notice of the commencement of the arbitration and of the arbitration court from the July 15, 2021 email of Chukotka. It also had notice of the specifics of Chukotka’s claim from several sources – the communications from Chukotka under the Supply Agreement on April 29, 2021 and May 11, 2021, from the “Claimant’s Notification of Arbitration Proceedings” attached to the Chukotka email of July 15, 2021 and from the link to the Statement of Claim and related exhibits set out in that email, which it does not suggest that it accessed. Medivolve also received a direct notification by email from the ICAC of its order respecting the procedure to be followed in respect of Chukotka’s cost reimbursement application. This email of October 18, 2021 effectively advised Medivolve of the status of the arbitration proceedings slightly more than two months prior to the issue of the Arbitral Award.

[80] In my view, Medivolve’s statement of its position oversimplifies the factual circumstances in several respects.

[81] First, from and after July 15, 2021, Medivolve had full access to Chukotka’s submissions and evidence through the link provided by Chukotka in its email of that date. There is also no evidence that Medivolve was unable to file submissions of its own. Admittedly, Medivolve was required to engage counsel and grant such counsel a power of attorney. However, there is no evidence that it was prevented from doing so or was otherwise unable to do so in July 2021 or thereafter. Instead, Medivolve made the decision not to engage a Russian Lawyer to represent it in the arbitration or to contact the ICAC for information regarding the procedure before the ICAC.

[82] Second, while Medivolve did not have knowledge of the hearing on the merits of Chukotka’s case until after the hearing of October 15, 2021, it did learn of the status of the arbitration on October 18, 2021. This was more than two months prior to the issue of the Arbitral Award.

[83] The evidence in the record does not provide a reasonable explanation for Medivolve’s failure to present a claim for relief that would have enabled it to present its case prior to the issuance of the Arbitral Award. There is no evidence, expert or otherwise, that it was physically impossible to satisfy the ICAC requirements and assert such a claim prior to the issuance of the Arbitral Award. There is also no evidence that any such claim would have been rejected if it had been made even after the hearing of October 15, 2021. Given this silence in the record, in my view, the evidence does not support Medivolve’s claim that it was unable to present its case before the Tribunal.

[84] In addition, while Medivolve says that it was denied the ability to file any such claim even after it engaged counsel, the evidence in the record is not that definitive.

[85] The evidence in the record does not provide a reasonable explanation for Medivolve’s failure to instruct counsel promptly after it received the ICAC notification on October 18, 2021 and to initiate contact with the Tribunal in an expeditious manner. While Medivolve says it contacted Gubkin in October and formally retained him in November, it does not give precise dates and offers no explanation for the delay in the formal retention of counsel. Further, while Gubkin was advised of the need to obtain a power of attorney in November, again on an unspecified date, a power of attorney dated November 15, 2021 was not provided to the ICAC until December 17, 2021. In addition to the fact that the documentation submitted to the ICAC at that time was defective, Medivolve’s request at this time was limited to obtaining and reviewing the materials filed by Chukotka.

[86] This latter fact is significant. There is no evidence that Medivolve ever requested an opportunity to present its case in the period after it was advised of the status of the arbitration on October 18, 2021, or that it ever advised the Tribunal that it did not participate in the hearing of October 15, 2021 because it was not aware of the time and place of the hearing.

[87] Further, while Medivolve now says that, had it been aware of the hearing, it would have participated, there is no evidence that supports this bald assertion. Looking at the evidence from July 15, 2021 onward in its totality, the evidence reveals, at best, a lack of urgency and, quite possibly, a careful attempt to avoid acceding to the jurisdiction of the ICAC. As mentioned, after it received Chukotka’s email of July 15, 2021, Medivolve did not engage counsel with a view to being able to participate. When it learned of the arbitration status on October 18, 2021, it proceeded to engage and instruct counsel in a dilatory manner. While Medivolve suggests that it was unable to provide the power of attorney for such purpose because of “events beyond its control”, those events occurred well after the issue of the Arbitral Award and are not relevant. As mentioned, Medivolve never requested an opportunity to present its case.

[88] Medivolve argues that the standard in this case should be informed by a comment of Brown J. (as he then was) in Elekta Ltd. v. Rodkin, 2012 ONSC 2062, [2012] O.J. No. 1439 (S.C.J.), at para.10, to the effect that service of a default judgment motion record on the responding party is desirable in order that a court will know that a non-attending responding party elected not to defend or respond. While desirable in many circumstances, this is not a requirement of the Rules of Civil Procedure. More significantly, in my opinion, the present circumstances are more appropriately analogized to a party seeking relief based on inaction. In such circumstances, Canadian courts consider, among other things, the extent to which a party responds after learning of a proceeding of which the party previously had no notice, including, in particular, bringing to the attention of the court not merely its actions in response to learning of the proceeding, but also a reasonable explanation for its earlier failure to respond. In this case, the record indicates that Medivolve failed to act promptly in this regard and does not furnish a reasonable explanation for its inaction from July 15, 2021 onward.

[89] Lastly, for the sake of completeness, while Medivolve did not know of the Arbitral Award until March 3, 2022, when it was advised of the Award by Chukotka, Medivolve did not suffer any prejudice as a result of these circumstances. It was permitted to pursue its appeals before the ACCM and the ACMD notwithstanding the timing of the receipt of the Arbitral Award.

[90] In summary, for the reasons set out above, I conclude that Medivolve has failed to demonstrate that it was denied “an opportunity to be heard at a meaningful time and in a meaningful manner.”

Did the Tribunal Fail to Treat the Parties Equally?

[91] Finally, Medivolve submits that the Tribunal failed to treat the parties equally in the manner in which it communicated with them in the notification of the arbitral process. As mentioned, the Tribunal granted Chukotka’s request to communicate with it via email. However, in communicating with Medivolve, the Tribunal sent notifications by registered courier. Medivolve argues that, in these circumstances, particularly given the COVID-19 pandemic when many forms of communication were being switched away from physical delivery to electronic methods, the Tribunal’s actions created “a significant, and ultimately determinative, lack of equality between the parties in terms of their ability to communicate with the Tribunal.”

[92] Article 36(I)(a)(iv) of the Model Law provides that a court may refuse to recognize and enforce a foreign arbitral award if “the arbitral procedure was not in accordance with the agreement of the parties”. In this case, section 16.4 of the Supply Agreement provides that the arbitral procedure would be conducted in accordance with Russian law before the ICAC which engages both the ICAC Rules and the Russian Arbitration Law.

[93] Medivolve argues that the practice of the Tribunal contravened section 20 of the ICAC Rules which required that “[t]he arbitral proceedings shall be conducted on the basis of the principles of discretionary and adversarial proceedings and the principle of equal treatment of the parties.” It also says that the Tribunal’s failure to communicate with it by email was inconsistent Article 18 of the Russian Arbitration Law, which states that “[t]he parties shall be treated with equality and each party shall be given a full opportunity of presenting his case.” In addition, Medivolve says that the practice of the Tribunal contravened the provisions of Article 18 of the Model Law, which provides that “[t]he parties shall be treated with equality and each party shall be given a full opportunity of presenting his case.”

[94] I do not agree that the Tribunal treated the parties unequally such that the Arbitral Award should not be recognized and enforced for the following reasons.

[95] First, in the absence of a request from Medivolve for email communication, the Tribunal did not take any action that resulted in unequal treatment of the parties.

[96] Second, the unfair treatment that Medivolve says that it suffered was not the result of any deliberative action on the part of the Tribunal that can be characterized as unfair treatment. The ICAC communications adhered strictly to the ICAC Rules in the manner of communication of its various orders and notifications. The unfair treatment that Medivolve alleges is the absence of any email notification from the ICAC prior to October 18, 2021. These circumstances are properly addressed as a question of whether of Medivolve received proper notice of the arbitration proceedings above, not as a question of whether Medivolve received unequal treatment from the ICAC.

Exercise of the Court’s Discretion

[97] I note that Chukotka also submits that, even if the Court were to find that Medivolve has discharged its onus to demonstrate grounds for a refusal to recognize and enforce the Arbitral Award, the Court retains discretion to recognize and enforce the Award. It urges the Court to exercise such discretion based on a balancing of relative prejudice. Given the determinations above, however, it is not necessary to address this issue and accordingly I decline to do so.

Disposition of the Applications

[98] Based on the foregoing, the Chukotka application for recognition and enforcement of the Arbitral Award is granted. In addition, to the extent that the Court has jurisdiction in respect of the Medivolve application to set aside the Arbitral Award, the Medivolve application is denied.

[99] Costs in the agreed amount of $70,000 are awarded in favour of Chukotka.

Wilton-Siegel J. Released: April 15, 2024