[:en]In Japan Canada Oil Sands Limited v. Toyo Engineering Canada Ltd, 2018 ABQB 844, Madam Justice Barbara E.C. Romaine held that she had jurisdiction under section 8(1) of Alberta’s International Commercial Arbitration Act, RSA 2000, c I-5 to order the consolidation of an international commercial arbitration and a domestic arbitration involving the three parties even though one of the parties had not consented to consolidation. Romaine J. further held that, in light of the parties’ own contracts and in the circumstances, she ordered consolidation but left identifying the parties as Claimant(s) or Respondent(s) to the arbitrator to be appointed by ADR Institute of Canada Inc. (“ADRIC”). In her analysis, Romaine J. distinguished between consent to arbitrate and consolidation, characterizing the later as a procedural issue.
Japan Canada Oil Sands Limited (“JACOS”) and Toyo Engineering Canada Ltd (“Toyo Canada”) entered into a September 9, 2013 engineering, procurement and construction agreement (“EPC Agreement”) regarding the expansion and redevelopment of an oil sands project in Northern Alberta. On the same day, by guarantee and indemnity agreement (“Guarantee”), Toyo Canada’s parent company, Toyo Engineering Construction Ltd (“Toyo Japan”), undertook to pay the liabilities or perform the obligations of Toyo Canada under the EPC Agreement and to indemnify JACOS for any and all losses resulting from Toyo Canada’s breach of its obligations under the EPC Agreement.
Disputes arose between JACOS and Toyo Canada triggering a two-step negotiation/arbitration dispute resolution process under article 13 of the EPC Agreement (the “DRP”). During negotiations, JACOS, Toyo Canada and Toyo Japan entered into a standstill agreement, effective February 15, 2017 (“Standstill Agreement”).
While the Standstill Agreement was still in force, Toyo Canada served JACOS a July 13, 2017 Notice of Request to Arbitrate (“Request”) but stipulated that the Request would only take effect five (5) days following termination of the Standstill Agreement. Toyo Canada’s Request sought $60,359,291.00 plus GST from JACOS. Toyo Canada sent the Request to ADRIC the same day. Following receipt of the Request, ADRIC confirmed on July 21, 2017 that the commencement date for the arbitration initiated by Toyo Canada (the “Toyo Canada Arbitration”) was July 18, 2017. The arbitration qualified as a domestic arbitration.
JACOS sent a July 14, 2017 Notice of Dispute to Toyo Canada by which it asserted it engaged the first of the two steps in the DRP, namely negotiation. A few days later, on July 24, 2017, JACOS issued a Notice of Arbitration by which it commenced an arbitration against Toyo Canada and Toyo Japan (the “JACOS Arbitration”). Romaine J. at paragraph 22 states that the JACOS Arbitration was characterized as an international arbitration pursuant to the Model Law on International Commercial Arbitration, as adopted by the United Nations Commission on International Trade Law on June 21, 1985 and as amended in 2006 (the “UNCITRAL Law”) and subject to Alberta’s International Commercial Arbitration Act, RSA 2000, c I-5 (“ICAA”). In the JACOS Arbitration, JACOS claimed $300 million from Toyo Japan. (Note: in her reasons, at paragraph 22, Romaine J. lists the UNCITRAL Law but first gives it “UNCITRAL Rules” as a reference. Later, though, at paragraph 78(b), Romaine J. again lists the UNCITRAL Law but references it as the “Model Law”. Despite the mention of UNCITRAL Rules for the Model Law at paragraph 22, subsequent references to the UNCITRAL Rules, for example at paragraph 23 and 42, are correct).
JACOS required that (a) Toyo Canada respond within thirty (30) days as required by the UNCITRAL Arbitration Rules and (b) the Toyo Canada Arbitration be consolidated into the JACOS Arbitration.
JACOS relied on section 23.3.18 of the DRP which provided:
“Notwithstanding any provision within this section 23.3, if multiple disputes arise pursuant to this EPC Agreement, upon the request of either JACOS (sic), those disputes may be consolidated into a single arbitration so that all disputes can be resolved within the same forum or if any dispute arises pursuant to the EPC Agreement and relates to an agreement between JACOS and any third party with an agreement with JACOS in relation to the Project, upon the request of JACOS, [Toyo Canada] agree (sic) to the consolidation of those disputes into a single arbitration and the dispute between JACOS and [Toyo Canada] shall be resolved in accordance with such consolidated arbitration proceedings and such decision shall be final and binding upon JACOS and [Toyo Canada].” (reproduced as is from the reasons for decision)
Section 23.2 of the DRP provided:
“a) the arbitration shall be administered by ADRIC in accordance with ADRIC Rules;
b) a single arbitrator shall be agreed to by the parties, or failing such agreement, chosen by ADRIC;
c) the seat and place of the arbitration shall be Calgary, Alberta, unless otherwise agreed to by the parties, and the language of the arbitration shall be English; and
d) in no event shall the single arbitrator appointed pursuant to the arbitration procedure have the jurisdiction to amend or vary the terms of section 23.3 or of the ADRIC Rules.”
As a result, in July 2017, the three parties were involved in two arbitrations: one domestic, one international. Romaine J. was asked to decide which of the two arbitrations would continue and in either consolidated form or with the other arbitration stayed. To answer that question, Romaine J. identified the following issues, each of which is addressed further below:
1. whether Toyo Japan is required to be a party to JACOS’ Arbitration;
2. whether JACOS’ Arbitration has been validly commenced;
3. whether the Court has the jurisdiction to consolidate the domestic Toyo Canada Arbitration and the international JACOS Arbitration;
4. whether the parties had consented to arbitration, and if not, whether the Court had the jurisdiction to consolidate the two arbitrations without the consent of all three parties;
5. whether consolidation was appropriate in this case; and,
6. whether the Court should make directions about which party or parties should be Claimant in a consolidated arbitration.
#1. Romaine J. held that Toyo Japan can be joined to arbitral proceedings between JACOS and Toyo Canada because the concluding lines of section 20 of the Guarantee allows JACOS to add Toyo Japan as a direct party:
“This Guarantee shall be governed and construed in accordance with the laws of the Province of Alberta and the laws of Canada applicable therein. Disputes relating to this Guarantee shall be submitted to arbitration administered by the ADR Institute in accordance with its “National Arbitration Rules” as referenced by Article 23 pf the EPC Agreement. [Toyo Japan] hereby consents to the addition of any party JACOS deems necessary to such arbitration, and further agrees that it will, upon the request of JACOS, participate as a direct party in any other arbitrations relating to the EPC Agreement.” (reproduced as is from the reasons for decision)
#2. Romaine J. accepted that the JACOS Arbitration was validly commenced. First, Romaine J. acknowledged that Toyo Canada objected to JACOS’ reference to UNCITRAL Rules instead of one administer by ADRIC according to ADRIC’s own rules. Having acknowledged it, she did not discuss or dismiss it at this point, reserving it for her analysis later, for example at paragraphs 48, 81 and 92. Second, the Guarantee’s use of the words “relating to” was broad in scope and sought to convey some link between the Guarantee and the EPC Agreement. Relying on the broad interpretation given to “relating to” by the courts in three decisions, Canada (Information Commissioner) v. Canada (Commissioner of the Royal Canadian Mounted Police),  1 SCR 66, 2003 SCC 8 para. 25, Markevich v. Canada,  1 SCR 94, 2003 SCC 9 para. 26 and Ministry of Attorney General and Toronto Star, 2010 ONSC 991 para. 45, Romaine J. accepted that JACOS had met the requirement in section 20 that the claim against Toyo Japan was one “relating to” the EPC Agreement between JACOS and Toyo Canada. She held that the Guarantee and the EPC Agreement were “plainly linked” and that Toyo Japan’s liability under the Guarantee was “coextensive” with Toyo Canada’s liability under the EPC Agreement.
Romaine J. confirmed that, according to the wording of the parties’ contractual rights and obligations, JACOS did not have to exhaust its remedies against Toyo Canada before being entitled to rely on performance of Toyo Japan’s obligations under the Guarantee. Toyo Japan had waived any right to require JACOS to institute proceedings against Toyo Canada as a condition to recovery against Toyo Japan under the Guarantee.
The JACOS Arbitration named two parties and JACOS sought to consolidate the JACOS Arbitration with the Toyo Canada Arbitration. Romaine J. observed that the issue was not whether commencement of the JACOS Arbitration was itself a consolidation.
#3. Romaine J. held that under section 8(1)(a) of the ICAA, she had jurisdiction to consolidate the domestic and the international arbitrations.
Her analysis began by recording the parties’ agreement that she had no jurisdiction under the Arbitration Act, RSA 2000, c A-43 to consolidate a domestic arbitration and an international commercial arbitration because the Arbitration Act does not apply to an arbitration commenced under Part 2 of the ICAA.
Toyo Canada admitted that Toyo Japan had its place of business in Japan and therefore conceded that an arbitration involving Toyo Japan and JACOS would be an international commercial arbitration subject to the ICAA. (Toyo Canada’s argument on this point surfaced again at paragraph 88 of Romaine J.’s reasons). However, Toyo Canada argued that neither the Arbitration Act nor the ICAA would apply to both arbitrations as section 8(1) applies only to international arbitrations. Toyo Canada relied on its reading of ICAA’s article 2 definition of “arbitration”. It argued that because article 2 defines “arbitration” as “any arbitration whether or not administered by a permanent arbitral institution”, “arbitration proceedings” under section 8(1) can only mean international arbitration proceedings.. Romaine J. disagreed.
“ As noted by JACOS, if Toyo’s interpretation is accepted, it would lead to a legislative dead-end. At any rate, there is no reason to interpret the concept of “arbitration” under the ICAA in a narrow way restricting it to international arbitrations. The ICAA does not contain the type of carve-out language included in section 4(2) of the Arbitration Act, and the reference to international arbitrations elsewhere in the Act does not aid in the interpretation of “arbitration”.
 There is no need to create a legislative lacuna between the Arbitration Act and the ICAA by a deliberate narrowing of a defined term that does not include such a limitation on its face. I find that I have the jurisdiction to consolidate a domestic and an international arbitration pursuant to section 8(1) of the ICAA.”
#4. Romaine J. held that Toyo Canada had consented to consolidation by virtue of the wording of the EPC Agreement. As before, Romaine J. agreed with the broader interpretation given by JACOS to the parties’ EPC Agreement and disagreed with Toyo Canada’s narrower interpretation. She held that the wording of section 23.3.18 was adequate to the purpose of consolidation.
“The dispute between JACOS and Toyo Japan arises pursuant to the EPC Agreement because Toyo Japan has been joined to the dispute between JACOS and Toyo Canada pursuant to article 20 of the Guarantee. The JACOS arbitration is not brought pursuant to the Guarantee, but pursuant to the EPC Agreement. JACOS and Toyo Japan are parties to an agreement “in relation to the project”, as the Guarantee is certainly in relation to the project, being directly tied to Toyo Canada’s liability under the EPC Agreement.”
With regard to whether Toyo Japan had consented to consolidation, Romaine J. agreed with Toyo Japan that section 20 of the Guarantee was limited. Section 20 confirmed only that it had agreed to be added as a direct party to an arbitration but had not agreed to consolidation. Therefore, Romaine J. had to consider whether she had jurisdiction to consolidate the Toyo Canada Arbitration and the JACOS Arbitration without the consent of all the parties.
Romaine J. devoted paragraphs 74-109 to her analysis of the issues and, relying principally on the reasoning of Mr. Chief Justice Neil Wittmann in Pricaspian Development Corporation v. BG International Ltd, 2016 ABQB 611, concluded that she had jurisdiction to order consolidation under section 8 of the ICAA. Romaine J. reproduces Wittmann C.J.’s analysis in more detail at paragraph 77 of her reasons. Among several notes made by Wittmann C.J., he observed that:
– the ICAA did not mention the need for “consent”;
– the Alberta Rules of Court, Alta Reg 124/2010 contemplate an application being brought by one party to an action, and it is uncommon for a joint or consented to application to be made;
– section 8 of the ICAA provides the Court with some discretion, which would not be necessary if the consent of all parties to the consolidation was required; and,
– there would be no reason for section 8(3), dealing with the agreement of parties to consolidate, if both section 8(1) and 8(3) referred merely to an agreement between the parties.
She declined to follow the opposite result in two cases cited by Toyo Canada – Western Oil Sands Inc. v. Allianz Insurance Company of Canada, 2004 ABQB 79 and Liberty Reinsurance Canada v QBE Insurance and Reinsurance (2002), 42 CCLI (3d) 249 (Ont SC) – because, as Wittmann C.J. noted, the application of Alberta’s Interpretation Act, RSA 2000, c I-8 did not appear to have been argued in those cases. Wittman C.J. had relied on provisions of that legislation to assist him in the interpretation of section 8 of the ICAA.
Romaine J. then considered and dismissed Toyo Canada’s argument that that JACOS’ reference to UNCITRAL Rules made the JACOS Arbitration invalid. She noted that the parties had agreed to arbitration administered by ADRIC’s rules. The ADRIC rules in effect in 2008 when they entered into their contracts stipulated that he rules applicable to any disputes governed by the ADRIC Rules shall be any amended version in force as of the date the arbitration commenced. The current version of the ADRIC Rules came into force December 1, 2016 and, at article 1.3.2 allowed the parties to agree to UNCITRAL Rules.
“1.3.2 – If an arbitration to which the Rules apply is international under the law of the Seat of Arbitration, unless the parties agree otherwise the arbitration is governed by the UNCITRAL Arbitration Rules. To the extent that the UNCITRAL Arbitration Rules conflict with any provision of the Rules, the UNCITRAL Arbitration Rules apply.”
The seat of the arbitration was Calgary and the laws of Alberta applied. Applying article 1(3) of ICAA’s Schedule 2, and being satisfied that Toyo Japan’s place of business was outside of Canada, Romaine J. concluded that JACOS’ commencement of the JACOS Arbitration did not contravene the DRP. For a more detailed summary of each of the parties’ submissions on this point, see paragraphs 90-99 and, in particular, Romaine J.’s own comments at paragraph 97.
Romaine J. distinguished between consent to arbitrate and consolidation which she characterized as a procedural issue.
“ Toyo also submits that, since the hallmark of arbitration is consent, the court should not be able to impose a consolidation without that mutual consent, and that, just as a party cannot be compelled to participate in an arbitration, it should not be compelled by a court to consolidate existing arbitrations. Again, however there is a material difference between a decision to arbitrate and procedural issues that may arise once that mutual decision has been made.”
She exercised her jurisdiction to order consolidation under section 8(1) of the ICAA and, relying on her corresponding jurisdiction to consolidate “on terms it considers just” under section 8(2), determined that the parties’ arbitration would proceed before a single arbitrator appointed by ADRIC as the appointing authority by the parties and pursuant to article 6(1) of the UNCITRAL Rules.
“ The practical problems cited by Toyo with respect to consolidating arbitration without consent do not all arise in this case, and, as noted, those that exist can be addressed as conditions to the consolidation. Also, while the Court has jurisdiction to order a consolidation, consolidation may not be appropriate in all cases if the practical problems are so overwhelming that they out-balance the benefits of consolidation.”
As a result, though Toyo Japan had not consented to consolidation, Romaine J. determined that she had jurisdiction to decide the application for consolidation.
#5. Romaine J. then considered whether, having jurisdiction, she should exercise it and order consolidation. Romaine J. reviewed her earlier analysis, summing up that she had determined that Toyo Canada Arbitration and the JACOS Arbitration are related, involve related parties, arise out of the same transaction and involve similar questions of law and fact. She observed that it would be impractical to refer the consolidation application to an arbitration tribunal as none had been appointed. JACOS argued that it would be prejudiced, for specific procedural reasons listed in the reasons at paragraphs 116-118 but Toyo Canada replied that prejudice does not create jurisdiction.
Romaine J. acknowledged the issue of whether the Request sent while the Standstill Agreement was still in effect but decided that the relative stage of either arbitration did not play a determinative factor in her decision. Looking for a “just decision” as noted in Pricaspian Development Corporation v BG International Ltd, the ICAA and the Model Law, Romaine J. concluded and held that consolidation should occur.
#6. Romaine J. resisted JACOS’ request that she designate JACOS as the claimant in the consolidated arbitration. Describing the issue as a procedural one and indicating the restraint discouraging court intervention, she left this issue to the arbitrator. Article 19(2) of the Model Law left such issues, in the absence of agreement, to the arbitrator’s decisions on the conduct of the arbitration.
Romaine J. held that it was unnecessary to decide whether the Toyo Canada Arbitration should be stayed.
As a result, Romaine J. held that:
– the Toyo Canada Arbitration is consolidated into the JACOS Arbitration;
– the consolidated arbitration shall proceed as an international arbitration governed by the UNCITRAL Rules;
– the consolidated arbitration shall proceed in place of the JACOS Arbitration and the Toyo Canada Arbitration;
– there will be a single arbitrator;
– if the parties cannot agree as to the identity of that arbitrator within 15 days of the date of this decision, the arbitrator shall be appointed by ADRIC in accordance with the agreement of the parties; and,
– the issue of which party or parties shall be Claimant or Respondent will be reserved for determination by the arbitrator in the consolidated arbitration.[:]