B.C. – No power to stay arbitration under Model Law – #731

In Johnston v Octaform Inc., 2023 BCSC 311, Justice Giaschi refused to stay an arbitration, finding he had no authority to do so under the International Commercial Arbitration Act, R.S.B.C. 1996, c. 233 [ICAA]. In so doing, he distinguished case law in which courts exercised inherent jurisdiction to stay domestic arbitration proceedings in various circumstances. 

Background – Justice Giaschi’s factual account was sparse. In summary, the underlying arbitration involved a claim for breach of an employment agreement. As of the time of the decision, the arbitration had been running for approximately six years. 

The petitioner employees commenced a petition before the Court alleging that the Arbitrator displayed bias, giving rise to justifiable doubt as to his or her (the Arbitrator’s gender is not mentioned) independence or impartiality. Among other things, the petitioner sought to remove the Arbitrator and invalidate all decisions the Arbitrator had made to date.

At the time of the decision, the petition to remove the Arbitrator was ongoing and would not be resolved for several months. However, the arbitration was proceeding in parallel. This prompted the petitioner to apply to stay the arbitration pending the petition’s outcome. 

Decision – Justice Giaschi found he was able to dispose of the application by answering one question: whether the Court had authority under the ICAA to stay an arbitration. He found it did not. 

After surveying the case law the parties advanced, he observed that none of those cases was directly on point. Some did not deal with staying arbitrations at all. Others addressed stays in the context of domestic arbitration. For Justice Giaschi, it was important that the domestic arbitration statutes at issue did not contain a provision akin to section 5 of the ICAA, which reads: 

In matters governed by this Act, 

(a) a court must not intervene unless so provided in this Act, and

(b) an arbitral proceeding of an arbitral tribunal or an order, ruling or arbitral award made by an arbitral tribunal must not be questioned, reviewed or restrained by a proceeding under the Judicial Review Procedure Act or otherwise except to the extent provided in this Act.”

Indeed, Justice Giaschi began his legal analysis by discussing this provision and its importance: 

[25] Section 5 of the ICAA is a key provision indicating that a significant purpose and object of the ICAA is to limit the role of the courts in relation to arbitral proceedings. Section 5(a) expressly directs that a court must not intervene in matters governed by the Act, except as provided for in the Act. If there was any doubt about the scope of this mandatory restriction, s. 5(b) further provides that an arbitral proceeding or an order or ruling of a tribunal “must not be questioned, reviewed, or restrained by a proceeding under the Judicial Review Procedure Act or otherwise”, except as provided for in the Act.

[26] In my view, s. 5 is a legislative direction in the clearest of terms that this court’s jurisdiction in relation to arbitral proceedings governed by the Act, including its inherent jurisdiction and its jurisdiction under s. 39 of the Law and Equity Act to grant injunctions or stays, is limited to only those matters where the court is expressly granted jurisdiction by the Act. A clear purpose and object of the ICAA is to limit the role of the courts in relation to arbitral proceedings.”

He then listed the circumstances in which the Court is permitted to intervene under the ICAA. Conspicuously absent from that list was the power to stay an arbitration where an arbitrator is challenged for bias. 

Justice Giaschi also observed that the ICAA’s challenge procedure applicable to allegations of bias contained in section 13 does not expressly grant the court power to stay the arbitration. 

In the result, Justice Giaschi dismissed the application. He reserved his costs decision pending the completion of the underlying petition on the bias allegation. 

Contributor’s Notes

First, section 5 of the ICAA is a slightly more detailed and “domesticated” version of article 5 of the UNCITRAL Model Law on International Commercial Arbitration, upon which the ICAA is based. Model Law article 5 reads: “In matters governed by this Law, no court shall intervene except where so provided in this Law”. Article 5’s purpose is to tell courts they ought not rely on their inherent jurisdiction to intervene in matters the Model Law governs except where expressly permitted. This furthers the Model Law’s goal of uniform application (see Model Law article 2A).

Second, Justice Giaschi correctly observed that the domestic arbitration statutes applicable to the B.C. cases canvassed did not contain a provision like section 5 of the ICAA. However, it bears noting that the Ontario case law he referenced does contain a similar provision. Section 6 of Ontario’s Arbitration Act, 1991, reads as follows: 

Court intervention limited

6 No court shall intervene in matters governed by this Act, except for the following purposes, in accordance with this Act:

1. To assist the conducting of arbitrations.

2. To ensure that arbitrations are conducted in accordance with arbitration agreements.

3. To prevent unequal or unfair treatment of parties to arbitration agreements.

4. To enforce awards.”

Although not identical to section 5 of the ICAA, section 6 of the Arbitration Act, 1991, enshrines a similar limit on the court’s ability to wade into arbitrations falling within that Act’s scope. It is unclear from the reasons whether section 6 was raised in argument. If so, it might have assuaged what appears to have been Justice Giaschi’s concern that the legislation before him was materially different from the legislation at issue in the cases the parties cited.

Third, one of the cases Justice Giaschi considered, Deluce Holdings Inc. v. Air Canada, 1992 CanLII 7654 (ON SC) [Deluce], bears further examination.

Deluce was a fairly unique and interesting case. It concerned a court proceeding in which the plaintiff, Mr. Deluce, sued the defendants, Air Canada et al., in court for oppression. Air Canada and Mr. Deluce’s corporation were shareholders in Air Ontario. Mr. Deluce’s corporation owned a minority interest and Air Canada owned the majority. Mr. Deluce alleged Air Canada had oppressively exercised its majority control to terminate him in order to trigger a buyout of his minority position. The buyout provision in the relevant shareholder agreement provided for arbitration if parties did not agree on the shares’ value. Upon finding Mr. Deluce made out a “strong prima facie case” of oppression, the Court opted to stay the arbitration until the oppression claim’s conclusion. It found granting the stay would not cause an injustice to Air Canada, and that allowing the arbitration to proceed would be unjust.

Justice Giaschi primarily distinguished Deluce on the basis that it involved a domestic arbitration rather than an international arbitration. However, Deluce’s unique facts present another reason for distinguishing the case. Specifically, the Court in Deluce concluded that the arbitration proceeding, the sole purpose of which was to value Mr. Deluce’s share’s for buyout, was itself an act in furtherance of Air Canada’s prima facie oppressive conduct. In other words, if Mr. Deluce’s termination was oppressive, a question properly before the courts, the arbitration simply did not arise.

Query whether Deluce remains good law following the Supreme Court of Canada’s decision in TELUS Communications Inc. v. Wellman, 2019 SCC 19 [TELUS]. TELUS dealt with a different issue—whether the court may refuse to partially stay court proceedings in favour of arbitration under subsection 7(5) of the Arbitration Act, 1991 when only some issues raised in court fall within an arbitration agreement. In TELUS the Supreme Court of Canada reversed previous jurisprudence that allowed courts to effectively defeat an arbitration agreement covering only some issues raised in a court proceeding. The Supreme Court concluded that courts have no discretion to refuse a stay in such cases; they must refer to arbitration the matters properly falling within the arbitration agreement. In reaching this conclusion, the Supreme Court expressly rejected an argument that having all matters addressed in court, rather than splitting off some issues for arbitration, would enhance efficiency and minimize risk of inconsistent judgments. For the Court, this was no answer to the arbitration legislation’s strong policy favouring enforcing arbitration agreements. One might argue TELUS’s reasoning could apply by analogy to the facts in Deluce. If a court cannot stay (or prohibit) arbitration in respect of issues falling within an arbitration agreement to achieve procedural efficiencies, then it stands to reason it cannot stay an arbitration that would become moot should related court proceedings obviate the need for arbitration in the first place. As of this case note, no court has considered whether Deluce remains good law in the shadow of TELUS. Given Deluce’s rather unique facts, we may never find out.