In 55104 Newfoundland and Labrador Inc. v. Wärtsilä Canada Incorporated, 2026 NLSC 29, the Court granted a stay and referred a warranty dispute to arbitration before the ICC in Paris. The Court held that the province’s International Commercial Arbitration Act, RSNL 1990, c. I15 (“ICAA”), not the domestic Arbitration Act, RSNL 1990, c. A14 (the “AA”), governed the dispute, even though all the parties and the subject of the contract were in Newfoundland. That mattered, as under the ICAA, a stay was mandatory unless a narrow exception applied (which it didn’t). Under the AA, the Court would have had discretion to refuse a stay, as the Plaintiffs urged. The decision highlights Newfoundland’s outlier status among common law provinces. While its domestic statute still permits discretionary stays, other common law provincial statutes provide for mandatory stays.
Background Facts – The dispute arose from a July 2020 contract (the “Contract”) under which Defendant Wärtsilä Canada Incorporated (“Wärtsilä”) agreed to overhaul the main engine of the fishing vessel Aqviq. Plaintiff 55104 Newfoundland and Labrador Inc. owned the vessel, and Plaintiff Ocean Choice International (“OCI”) operated it. Wärtsilä warranted the work for six months and completed it in September 2020. Engine problems emerged in January 2021. Wärtsilä denied warranty coverage in March 2021, claiming that OCI had operated the engine in overload operation.
The Plaintiff owner and operator commenced the action in October 2021. They sought damages for breach of warranty and alleged that defective parts supplied by Wärtsilä and negligent workmanship caused the engine failure. Wärtsilä applied in May 2022 for a stay of the action in favour of arbitration, relying on the Contract’s arbitration clause, which provided:
“Any controversy, claim or dispute between the parties hereto arising out of or related to this Contract shall be submitted to the International Court of Arbitration of the International Chamber of Commerce for final and binding arbitration in accordance with the Rules of Arbitration of the International Chamber of Commerce by three (3) arbitrators appointed in accordance with the said Rules. The arbitration process shall be in the English language and shall take place in Paris, France.”
The significance of the arbitration clause was that the parties operated in Newfoundland and Labrador and had entered into a contract which required performance in Newfoundland and Labrador; however, they chose to refer disputes to arbitration before the International Court of Arbitration of the International Chamber of Commerce in Paris, France.
Legislative framework – The sole question before the Court was whether it should stay the action and refer the dispute to arbitration. The choice of statute was dispositive. If the ICAA applied, Article 8(1) of the Model Law required the Court to refer the matter to arbitration unless the agreement was null and void, inoperative, or incapable of being performed. If the domestic AA applied, section 4(2) gave the Court discretion to decide whether to grant a stay.
The parties’ positions – Wärtsilä argued that the dispute was international and commercial, and thus the ICAA governed. On that basis, the Court was required to grant the stay unless the Plaintiffs established one of the Model Law’s three narrow exceptions. They had not pleaded any of them. The Plaintiffs argued that the AA applied and gave the Court discretion to refuse a stay. They also argued that the Court should exercise that discretion under the “proportionality principle,” found in the Newfoundland and Labrador Rules of Court, which requires that the Rules be interpreted to ensure that actions are determined efficiently and expeditiously, including by considering the cost and inconvenience of an ICC arbitration in Paris. To buttress this argument, the plaintiffs invoked the Supreme Court’s decision in Uber Technologies Inc. v. Heller, 2020 SCC 16(“Uber”), which held that a stay of an action in favour of arbitration should not be granted as the high cost of arbitration would have been a barrier to access to justice. In the alternative, if the ICAA applied, the Plaintiffs relied on and urged the Court to apply the “strong cause” test articulated by the Court in Oppenheim v. Midnight Marine Limited, 2010 NLCA 64(“Midnight Marine”). That test would allow the Court to decline to enforce a binding contract where it would be unjust or unreasonable to do so.
The Court’s analysis – The Court held that the ICAA governed. It interpreted the arbitration clause and found that Paris was the seat of arbitration, as opposed to the location where hearings were to take place. The contract was plainly commercial and international. Article 1(3)(b)(i) of the Model Law provides that an arbitration is international if the parties designate a place of arbitration outside their place of business. Once the ICAA and Model Law apply, Article 8(1) is mandatory; a court “shall” refer the parties to arbitration unless the agreement is null and void, inoperative, or incapable of being performed.
The Court rejected the Plaintiffs’ argument that the AA applied. It identified a divergence between the ICAA, which provides for a mandatory stay, and the discretionary stay under the AA and resolved it through ordinary principles of legislative interpretation. The ICAA is special legislation, which applies where there is a right of international commercial arbitration. The AA is general legislation for domestic arbitration. Where statutes conflict, the specific prevails over the general.
The Court also rejected the Plaintiffs’ reliance on the “strong cause” test. Midnight Marine arose under section 97 of the Judicature Act, which says a court “may” stay proceedings and therefore presupposes discretion. By contrast, Article 8(1) of the Model Law gives no discretion, apart from the three narrow exceptions not advanced here. Although the Court in Midnight Marine referred to the ICAA in obiter, it neither applied nor interpreted the statute in a way that reconciled the Judicature Act’s discretionary language with the Model Law’s imperative language.
Finally, the Court distinguished Uber. First, Uber involved an employment dispute, not a commercial one, so Ontario’s domestic Arbitration Act, 1991, SO 1991, c 17, Part -1 applied. Second, the Supreme Court found the clause unconscionable, which rendered the arbitration clause invalid. The plaintiffs did not invoke unconscionability in this case.
Commentary:
First, this case is a straightforward application of settled Model Law principles on stay applications, although the facts may be unusual. It seems surprising that Newfoundland and Labrador parties would choose ICC arbitration in Paris, but an explanation may be that one of the parents was Finnish. Perhaps its standard ICC arbitration clause made its way into the parties’ contract without giving a lot of thought to its effect?
Once the Court found that the arbitration agreement was “international,” the ICAA required a stay and a referral to arbitration unless one of the enumerated exceptions applied. In that sense, the result is unremarkable.
Second, the more interesting feature of the case lies not in application of the Model Law, but in the contrast it highlights between the ICAA with Newfoundland’s domestic AA, which still preserves the Court’s discretion to grant stays. Under section 4 of the AA,
“(2) The court may make an order staying the proceedings under subsection (1), upon being satisfied,
(a) that there is no sufficient reason why the matter should not be referred to arbitration in accordance with the submission; and
(b) that the applicant was, at the time the proceedings started, and still is ready and willing to do all things necessary for the proper conduct of the arbitration.”
For example, in AECOM Consultants Inc. v. Tata Steel Minerals Canada Ltd., 2017 CanLII 20090 (NLSC) (“AECOM”)at para. 18, the Court explained that a court may decline to grant a stay “if the questions to be determined are ones of law, or relating to the construction of the agreement, or of a complexity of mixed law and fact.”
That approach contrasts with the prevailing Canadian common law approach, set out by the Supreme Court of Canada in Peace River Hydro Partners v. Petrowest Corp., 2022 SCC 41(“Peace River”). Peace River provides a two‑stage test for stay applications under domestic arbitration statutes. First, the party seeking a stay must establish an “arguable case” that the technical prerequisites for a stay are met. Second, the burden shifts to the party resisting arbitration. That party must show, on a higher balance of probabilities standard, that one of the limited statutory exceptions applies and justifies refusing the stay. As the Supreme Court noted in Peace River at paras. 88 – 89, mandatory stays and strict limits on exceptions rest on “the presumptive validity of arbitration clauses and the principle of party autonomy.” Against that backdrop, the discretionary stay in Newfoundland’s domestic statute sits uneasily with contemporary arbitration practice and law, which emphasize party autonomy and freedom of contract. An agreement to arbitrate is a binding bargain that sets out how the parties will resolve disputes. Allowing courts to refuse a stay on open‑ended discretionary grounds undermines that bargain. Indeed, contra AECOM, the fact that a dispute involves questions of law should never be a reason to decline to give effect to a party’s arbitration agreement. Similarly, proportionality concerns, including cost or inconvenience, arguments that the Plaintiffs advanced in this case, run against the presumption that parties weighed the burdens and benefits of the chosen forum when they contracted. In short, the AA is ripe for reform to bring it into line with the modern Canadian statutes that give full effect to arbitration agreements and confine judicial intervention to narrow, defined exceptions.