N.L. – court renews ex parte order in service of court’s deference to arbitration – #134

Mr. Justice Carl R. Thompson in Astaldi Canada Inc. v. Muskrat Falls Corporation, 2018 NLSC 229 demonstrated Newfoundland and Labrador’s Supreme Courts’ support of arbitration by renewing ex parte interim relief so that a Board of Arbitration constituted following a recent court decision could undertake and complete its own determination of its jurisdiction and, if accepted, issue its own interim relief sought in the Notice of Arbitration.  Thompson J. subjected the term of his own order to the occurrence of a later procedural step in the arbitration. His decision recognized that the courts can act quickly, repeatedly and in coordination to preserve to arbitral parties the value of the bargain they made to resolve their disputes, including urgent ones, by arbitration.

Thompson J.’s November 19, 2018 decision follows on the October 23, 2018 decision of Mr. Justice James P. Adams in Muskrat Falls Corporation v. Astaldi Canada Inc., 2018 NLSC 210 between the same parties regarding their same November 29, 2013 contract for the construction of a hydro electric project located in Labrador (“CW Contract”) and their more recent September 6, 2018 Incentive Funding Contract (“IFC”).

The CW Contract between Muskrat Falls Corporation (“MFC”) and Astaldi Canada Inc. (“Astaldi”) at article 31 provided for arbitration and attached, as Exhibit 16, a document entitled “Rules for Dispute Review Board and Arbitration” with a two (2) phase process, Part A and Part B, for resolving disputes.

Adams J. had dealt with two (2) competing applications:

(i) MFC sought a declaration that it was not obliged to appoint an arbitrator and that the arbitration process in CW Contract was not available to Astaldi; and,

(ii) Astaldi sought an order that MFC was required to appoint an arbitrator pursuant to the arbitration agreement and a stay of MFC’s application.

After analyzing the issues, Adams J. granted Astaldi’s application, in part, and referred the parties to arbitration so that the Board of Arbitration could first decide on its own jurisdiction, ordered MFC to appoint an arbitrator within 14 days and stayed MFC’s application pursuant to section 4 of Newfoundland and Labrador’s Arbitration Act, RSNL 1990, c A-14.

Adams J. held that MFC had failed to satisfy him that he should depart from the general rule that questions of jurisdiction should first be referred to arbitration and stayed MRC’s court litigation.

See the earlier ArbitrationMatters note on the case : “N.L. court endorses principle of separability of arbitration agreement despite omission in legislation”.

After Adams J. had ordered MFC and Astaldi to go before the Board of Arbitration and before the Board of Arbitration was scheduled to hear the parties on November 27, 2018, J. was asked to continue a November 14, 2018 ex parte order issued by the Supreme Court of Newfoundland and Labrador which prohibited/suspended MFC from calling two (2) letters of credit issued by the National Bank of Canada (“National Bank”).

After the October 23, 2018 decision by Adams J., MFC called upon the irrevocable letters of credit on November 6, 2018.

Thompson J. noted that:

(a) Adams J. had determined that the dispute resolution process at article 31 and Exhibit 16 of the parties’ CW Contract and IFC survived termination based on the principle of separability. See paras 17-20 of Adams J. decision; and,

(b) Astaldi’s September 27, 2018 Notice of Arbitration sought, among other things, interim relief against MFC from drawing upon the letters of credit.

Thompson J. held that, in light of Adams J.’s earlier decision, he did not have jurisdiction to deal with the rights on the parties to call on the letters of credit. Adams J. had determined that the dispute resolution process survived termination for default and that termination for default was an issue in dispute between the parties and which must be presented first for determination by the Board of Arbitration. The Board of Determination was scheduled to sit November 27, 2013, not long after the November 14 and 19, 2018 hearing before Thompson J. and his November 19, 2018 oral reasons.

[7] Consequently, it would appear that should the Arbitration Tribunal assume jurisdiction over this specific issue, it would have to determine inter alia whether the right to call the letters of credit is conditional upon a finding of proper “termination for default” under Article 16 as amended by section 31 of the IFC. The letters of credit issued by National Bank appear on their face to be without recourse.

Thompson J. renewed the ex parte order in service of the court’s deference to the Board of Arbitration’s jurisdiction:

[12] The call on the letters of credit took place after this determination of jurisdiction took place. The Arbitration Tribunal will not convene until November 27, 2018. The facts giving rise to this specific issue and the relief claimed by Astaldi crystallized after the decision of Justice Adams and before the convening of the Arbitration Tribunal.

[13] Until the issue is engaged by the Arbitration Tribunal, the parties should not be without recourse as to matters arising in this interim period. Accordingly, the ex parte Order should continue to preserve the integrity of the decision of Justice Adams and the process thereby engaged.

Thompson J. enjoined MFC from calling on the letters of credit and subjected the term of his own court order to the occurrence of a later procedural step in the arbitration.  He enjoined MFC “until such time as the Arbitration Tribunal either declines jurisdiction or issues an order with respect to Astaldi’s Notice of Application/Motion dated November 8, 2018, seeking emergency relief”.

It is worth noting that the National Banks, as a third party to MFC’s and Astaldi’s CW Contract and IFC, consented to the Supreme Court’s order which protected a dispute resolution process to which the National Bank was not a party.

The pair of decisions by Adams J. and Thompson J. demonstrates Newfoundland and Labrador’s ready support of arbitration. The decisions issued soon after Astaldi filed its Notice of Arbitration, deferred the determination of jurisdiction to the Board of Arbitration and provided sufficient and repeat interim relief in order to preserve to the Board of Arbitration the opportunity to exercise its jurisdiction and, if assumed, issue its own interim relief as sought by Astaldi in arbitration.