Québec – Arbitral award with declaratory relief no bar to homologation – #819

In Société des établissements de plein-air du Québec c. Station Mont-Ste-Anne inc., 2024 QCCS 2 (“SÉPAQ v. SMSA”), the Québec Superior Court granted homologation of an arbitral award and rejected its partial annulment, dismissing the argument that the award should not be homologated because it was merely declaratory. Also, the decision referred to parts of the award and arbitral record throughout its reasoning despite some concerns by one of the parties about maintaining the confidentiality of the arbitral record.

The dispute – The dispute involved the Société des établissements de plein-air du Québec (“SÉPAQ”) and Station Mont-Ste-Anne inc. (“SMSA”), which in 2008, entered into an agreement relating to the development of land near the Mont Sainte-Anne ski resort. SÉPAQ terminated its agreement with SMSA in April 2021, following which SMSA initiated arbitration proceedings pursuant to the agreement.

The arbitration – The dispute referred to arbitration involved two issues:

  • First, whether SMSA (“the Claimant”) was in breach of the agreement such that SÉPAQ (“the Respondent”) was entitled to initiate the process to terminate the agreement; and
  • Second, whether the arbitrator had jurisdiction to determine the legality and the consequences of the termination.

As to the first, the sole arbitrator declared that the Claimant was in breach of the agreement such that the Respondent could validly initiate the termination process under the agreement.

As to the second, he concluded that he did not have jurisdiction to rule on the legality of the termination of various agreements and related execution measures.

The Respondent then sought the homologation of the arbitral award in Superior Court. The Claimant opposed homologation and sought partial annulment of the award on the basis that the arbitral award was purely declaratory and that the arbitrator had exceeded his jurisdiction. 

The decision on homologation of the award – The Court homologated the award, rejecting the argument that declaratory arbitral awards cannot be homologated.

The Court first noted that the fact that an arbitral award is declaratory was not one of the grounds to refuse homologation listed at Article 646 of the Québec Code of Civil Procedure. The Court then referred to two precedents where it had homologated declaratory arbitral awards.

The Court also commented on the policy considerations behind homologating arbitral awards providing for declaratory relief, concluding that the legislative intent could not have been to deny them homologation. This was especially true considering the 2016 amendments to the Québec Code of Civil Procedure, which introduced new preliminary articles encouraging parties to use arbitration to adjudicate their disputes. The Court reasoned that the 2016 amendments would displace some of the many disputes seeking declaratory relief from the courts to arbitral tribunals, with the need for courts to then homologate such arbitral awards.

Confidentiality – The Claimant raised concerns about confidentiality of the arbitral record in the homologation proceedings. It did not, however, request that they be heard in camera. At a prior stage in the proceedings, on Claimant’s application to dismiss the homologation proceedings, the arbitral award had been placed on the Court record under seal, to protect confidentiality: Société des établissements de plein air du Québec c. Station Mont-Sainte-Anne inc. 2023 QCCS 1147.

The Court stated that homologation proceedings, as all judicial proceedings, are public, subject to exceptions or agreements by the parties to keep documents confidential. It noted that neither party had requested in camera proceedings in this case and that both parties had referred in their submissions to the contents of documents from the arbitral record, including the arbitral award. 

In the circumstances, the Court concluded that it could refer in its decision to the contents of documents from the arbitral record, including the arbitral award. Throughout the decision, the judge referred to parts of the arbitral award and record as needed in his analysis.

Partial annulment – The Claimant sought the partial annulment of one paragraph in the arbitral award on the basis that the arbitrator had allegedly exceeded his jurisdiction, based on certain reservations of rights that the Claimant had expressed in the agreement, but which were contested by the Respondent.

The Court rejected this argument, concluding that the first issue (whether the Claimant was in breach) was within the scope of the arbitration agreement, and that the arbitrator was careful to avoid ruling on the second issue (whether the termination was valid), such that he did not exceed his jurisdiction.

Contributor’s Notes:

First, on the homologation of a declaratory award, the Superior Court’s decision departs from older Québec case law holding that homologation was only possible when the award could be enforced, and thus not possible for purely declaratory awards: Coop services et recherches santé 3ième millénaire (S3M) inc. c. Confection médicale D.R. inc., 2005 CanLII 45380 (QC CS).

That precedent was distinguished as an interlocutory decision with a limited scope, and the Superior Court has homologated other declaratory awards since then.

The Superior Court’s emphasis on the preliminary articles of the Québec Code of Civil Procedure introduced in 2016 should be noted. Québec courts increasingly rely on such provisions to favor arbitration.

Second, on confidentiality, the decision differs slightly from 79411 USA Inc. c. Mondofix Inc., 2020 QCCS 1104 (CanLII) (“79411 USA v. Mondofix”), covered in Arbitration Matters Case Note #305 – Québec – judicial protection of parties’ confidentiality promotes public interest in arbitration, where, also at the homologation stage, the Superior Court ruled that the arbitral award should be filed under seal, holding that, “not only the process, but also the resulting arbitration award itself, are confidential, except for the conclusions of the Award. Fix Auto failed in showing that a broader disclosure and publicity of the Award, which is otherwise confidential, is reasonably necessary.

In 79411 USA v. Mondofix, only the dispositive orders of the arbitral award were reproduced in the court decision, whereas the remainder of the award was filed under seal.

Both the SEPAQ v. SMSA and 79411 USA v. Mondofix decisions were issued at the homologation stage. The slightly different results on confidentiality likely stems from the fact that, while the Court expressed some concerns relating to confidentiality, SSMA did not ask for the proceedings to be held in camera, and itself referred to parts of the arbitral record and the arbitral award in its submissions. Another difference lies in the fact that in 79411 USA v. Mondofix, both parties agreed that the award should be homologated, such that there was little need for the court to engage with the contents of the arbitral award. By contrast, in SEPAQ v. SMSA, the debate related in part to the jurisdiction of the arbitrator such that the Superior Court needed to refer to the award where necessary to rule on the questions before it.

The takeaway on confidentiality from SEPAQ v. SMSA is that the fact that arbitral record and award is confidential and under seal at the homologation stage does not prevent judges from referring to part of the award or arbitral record in their decision if they need to do so in their reasons.