In GlobeAir Holding GmbH c. Pratt & Whitney Canada Corp., 2024 QCCS 2451, the Court referred a claim to arbitration and, despite confirming its jurisdiction to do so, refused to issue interim measures. The Plaintiffs had argued that the claim, based in statute rather than contractual obligations, fell outside the scope of the arbitration clause, but the Court drew on the broad language of the clause to find otherwise. Then, after confirming that the Court had jurisdiction to issue interim measures even though the dispute was referred to arbitration seated in Ontario, it concluded that no prima facie case could be made to grant Plaintiffs’ request.
Background to the dispute – Plaintiffs, GlobeAir Holding and its subsidiary GlobeAir, operate a private charter-jet business in Europe. Their aircraft were equipped with turbofan engines designed, developed, and manufactured by Pratt & Whitney (P&W) . Pursuant to the Event Cost Program Agreement entered into in 2017 with GlobeAir (the “Agreement”), P&W was the exclusive provider of certain maintenance and services for the engines. The Agreement is in force until December 31, 2031.
Plaintiffs allege that, over time, they have discovered that the engines are affected by design and manufacturing defects, which they argued were latent defects, which are subject to a statutory warranty under the Civil Code of Quebec (C.C.Q.). These defects have required, according to Plaintiffs, that the engines be swapped out between flights – a costly and time-consuming exercise.
A demand letter was sent to P&W. In response, P&W denied any liability.
The dispute – Plaintiffs filed an Application to Institute Proceedings and for the Issuance of Interim Measures before the Superior Court of Quebec. On the merits of the Application, Plaintiffs sought compensatory damages from P&W. With respect to interim measures, Plaintiffs asked the Court to, among other things, provide suitable replacement engines under the conditions of the existing Agreement.
In response, P&W filed an Application for a declinatory exception, challenging the jurisdiction of the Court and seeking to have the Plaintiffs’ Application dismissed and referred to arbitration. The Agreement contained an arbitration clause, submitting “any dispute, questions or controversies arising out of, or in connection with the Agreement, or in respect of any legal relationship associated with it or derived from it” to arbitration pursuant to the Rules of Arbitration of the International Chamber of Commerce (the “ICC Rules”), seated in Toronto, Ontario.
The decision – The Superior Court was seized of two questions: first, whether the Interim Measures Application should be referred to arbitration; and second, whether the “interim measures” sought by plaintiffs should be granted regardless of the outcome of P&W’s Application for a declinatory exception to have the matter referred to arbitration.
On the first question, Plaintiffs argued that the claim was based on the statutory warranty provided for by Article 1730 C.C.Q. and was not grounded in contract. Accordingly, the claim did not fall within the scope of the arbitration clause. P&W responded that the claim advanced was intimately related to the Agreement and thus subject to the jurisdiction of an ICC arbitral tribunal.
On the second question, P&W argued that Plaintiffs could not seek interim measures, a provisional injunction, or any safeguard measure in Quebec because the seat of the ICC arbitration was Ontario.
Question 1: Scope of arbitration clause – After a review of basic arbitration principles, detailed extensively in the recent decision of Isolation Alerte inc. v. Entreprise de construction TEQ inc., 2023 QCCS 337, the Court noted that it was the arbitration clause that set out the boundaries of arbitral jurisdiction and that the language of the agreement was key. Starting from the assumption that parties to arbitration clauses intend to have their relationship subject to the jurisdiction of the arbitrator(s), the Court considered that the arbitration clause applied to “any legal relationship associated with or derived from the Agreement” and that the connection between the claims and the Agreement was evidenced by Plaintiffs’ own Application, which sought a conclusion declaring that the Agreement would apply to the interim measures, if granted. As a result, the Court granted P&W’s declinatory exception Application and referred the matter to arbitration.
Question 2: Whether interim measures should be granted – The Court’s decision turned on an analysis of Article 623 of the Code of Civil Procedure of Quebec (C.C.P.), Article 9 of the Model Law which inspired it, and Article 28 of the ICC Rules.
In Quebec, the Superior Court is the court of original jurisdiction and has jurisdiction to hear any application not formally and exclusively assigned by law to another court or adjudicative body. Article 623 C.C.P. states that the court, on an application, may grant provisional measures or safeguard orders before or during arbitration proceedings.
Because international trade interests were present in this case, the Court gave consideration to the Model Law (per Articles 649 and 650 C.C.P.), Article 9 of the Model Law, and the UNCITRAL explanatory note of that article, which refer respectively to “a court” or “any court” as competent to issue interim measures so long as so doing is not incompatible with the underlying arbitration agreement. In other words, the court/any court and the arbitrator have concurrent jurisdiction to order interim measures
The Court further noted that Article 28 of the ICC Rules also allow parties to apply to “any competent judicial authority” for interim measures, which does not constitute a waiver of arbitration.
Accordingly, the Court concluded that the ability of any competent court to grant interim or conservatory measures is explicit – even where there is an arbitration. In this case, since P&W was located in Quebec and since the “likely” enforcement proceedings would take place in Quebec, the Quebec Superior Court is a competent court for this end. Plaintiffs were not required to seek interim measures from an Ontario court.
That said, the Court refused to issue such measures. It found that the Plaintiffs had failed to demonstrate on a prima facie basis any of the required criteria for a mandatory injunction set out by the Supreme Court of Canada in R. v. CBC, 2018 SCC 5: the demonstration of a strong and clear chance of success; the absence of conceivable urgency; or that the balance of convenience must be resolved in its favour.
The Court remarked on the summary nature of the analysis to be carried out and considered that either an emergency arbitrator or a fully constituted ICC arbitral tribunal would be able to address the arguments advanced on the basis of a more complete factual record.
Contributor’s Notes:
First, the Court’s detailed analysis of each element of the arbitration clause is a reminder that broad formulations are to be favoured when trying to capture the entirety of legal relationships arising from any given agreement. Here, Plaintiffs attempted to avoid application of the arbitration clause by advancing their claim based in the obligations of the Civil Code of Quebec, but because of the drafting at the outset, they were unable to circumvent the jurisdiction of the ICC arbitral tribunal.
Second, the Court’s decision provides a clear confirmation of powers of courts to issue interim measures prior to, and sometimes during, arbitration. It also stands as a reminder such measures can be issued by any competent court. The parties are not required to seek interim measures in the jurisdiction of the seat of an international arbitration. While a Quebec court can rely on Article 3138 C.C.Q. and Article 623 C.C.P. alone to assume jurisdiction (on that topic see Forum selection clause does not eliminate courts’ jurisdiction to issue provisional measures in Arbitration Matters Case Note #338), the Court’s analysis of the ICC Rules and the Model law suggests that its reasoning in this decision could inspire courts of other jurisdictions. Indeed, as noted by the Court, eventual enforcement of the measures can be a key factor in deciding where to seek interim measures.
Third, while the Court here confirmed its jurisdiction to issue interim measures, the enthusiasm of a party to seek relief before a court may be tempered by the Court’s refusal in this case to grant the measures requested. Indeed, the Court’s decision illustrates the limits of what can be granted on the basis of a summary record at the provisional stage, noting that the arbitral tribunal or even, in this case, an emergency ICC arbitrator (Article 29 of the ICC Rules), would benefit from the complete record required to properly delve into the contractual relationship at the heart of the dispute.
Plaintiffs are seeking leave to appeal which, if granted, will have the Court of Appeal weigh in.