In Medicell Pharmaceutical (S) Pte Ltd v. Pharmascience Inc. 2025 QCCS 1325, the Court annulled an interim arbitral award issued ex parte, holding that the arbitrator had not been validly appointed under the parties’ agreement, which provided that the arbitration was to be administered by and conducted by one arbitrator in accordance with the rules of the Québec Code of Civil Procedure (“CCP”). In setting aside the award, the Court emphasized that arbitration is consent-based and that a party cannot unilaterally appoint an arbitrator, even in urgent circumstances and even when the parties’ arbitration agreement allows for provisional measures. Crucially, the Court held that Applicant, which sought the annulment of the interim award, had not waived compliance with the agreed appointment procedure – its silence and engagement, albeit limited, did not amount to tacit acceptance of the arbitrator’s appointment.
Background Facts
The underlying dispute in this case arose from a License, Supply & Distribution Agreement (the “Agreement”) between Medicell Pharmaceutical (S) Pte Ltd (‘Medicell”), a Singapore-based pharmaceutical distributor, and Pharmascience Inc. (“Pharmascience”), a Canadian pharmaceutical manufacturer. The Agreement entitled Medicell to distribute Pharmascience’s products in Singapore and required Pharmascience to obtain Marketing Authorizations (the “MAs”) in Singapore for each product. Though Pharmascience retained ownership of the MAs and intellectual property, the Medicell held the MAs.
The Agreement included an arbitration clause, which provided in material part:
“15.6.2 Dispute Resolution
(a) Any dispute, disagreement, controversy, or claim arising out of or relating to this Agreement, shall be exclusively submitted to and determined by arbitration to be administered by and conducted by one arbitrator in accordance with the rules of the Québec Code of Civil Procedure. The decision of the arbitrator shall be final and binding on the parties.
…
In 2021, Pharmascience gave notice terminating the Agreement, effective March 2022. Despite the termination, the parties continued their business relationship, attempting to negotiate a new agreement, until May 2023, when it broke down. Pharmascience demanded the return of the MAs, which Medicell refused.
In October 2024, Pharmascience commenced legal proceedings in Singapore against Medicell to compel the transfer of the MAs to it. Medicell successfully argued that the dispute should be referred to arbitration in Quebec, in accordance with the arbitration clause in the Agreement.
Arbitration Proceedings
On February 14, 2025, Pharmascience issued a Notice of Arbitration in Quebec (the “Notice”), which court had exclusive jurisdiction under the parties’ arbitration agreement to deal with provisional measures. Pharmascience alleged, among other things, that the MAs were set to expire in June 2025, and if Medicell did not return them before then, Pharmascience would “be fully excluded from doing business in Singapore.” Accordingly, Pharmascience sought a provisional order compelling the immediate return of the MA’s.
The Notice also identified a proposed sole arbitrator (the “Arbitrator”). Pharmascience’s Québec counsel contacted the Arbitrator directly, in the absence of Medicell’s counsel, and requested his services. Pharmascience served Medicell with the Notice through its Singapore counsel, who agreed to accept service on its behalf.
Pharmascience’s counsel contacted counsel for Medicell through its Singaporean counsel multiple times in February 2025, explaining that the arbitration was urgent and requested that it appoint Québec counsel, but did not receive a response. On March 5, 2025, Pharmascience’s Québec counsel wrote to the Arbitrator confirming a hearing date of March 7, 2025, copying both Medicell and its Singaporean counsel. The letter explained that Medicell had not advised Pharmascience that it had retained local counsel, but given the urgency, it wished to proceed with the hearing.
On March 6, 2025, Medicell notified Pharmascience that it had appointed Québec counsel. The same day, the Arbitrator wrote to local counsel for both parties, confirming that the hearing would proceed on March 12, 2025, possibly ex parte. Medicell’s counsel responded, noting the delay in confirming their mandate was due to time zone differences and explicitly reserved all Medicell’s rights, without waiver.
On March 11, 2025, Medicell’s Québec counsel again wrote to the Arbitrator and Québec counsel for Pharmascience, explaining that it had not confirmed its mandate, and therefore would not be appearing at the hearing scheduled for the next day.
The Arbitrator proceeded ex parte with the scheduled hearing and issued an interim award on March 13, 2025 (the “Award”). It ordered Medicell to transfer the MAs to Pharmascience, maintain them until transfer, and comply with other provisional measures. Pharmascience then sought to have the Award recognized and enforced in Singapore.
Application
Medicell applied to the Québec Superior Court to annul the Award, arguing that Pharmascience did not follow the agreed upon procedure for appointing the Arbitrator set out in ss. 624 – 625 of the C.C.P. It provides that parties to an arbitration shall appoint an arbitrator to decide their dispute by mutual agreement, failing which the Court may appoint an arbitrator on the application of a party.
In response, Pharmascience argued that Medicell’s silence and failure to object constituted tacit consent to the Arbitrator’s appointment, especially since it understood the urgency of the matter. It also invoked the competence-competence principle, arguing that the Arbitrator had jurisdiction to rule on his own appointment.
Analysis of the Court
The Court rejected Pharmascience’s arguments and annulled the Award.
Firstly, the Court held that Medicell’s silence and lack of participation did not amount to tacit acceptance of the Arbitrator’s appointment. While a party’s conduct may amount to tacit consent, there must be evidence for the Court to make this finding. Here, the Court found no conduct by Medicell that could be construed as tacit acceptance of the Arbitrator’s appointment. To the contrary, Medicell’s counsel had stated that he did not yet have a mandate to represent Medicell in the arbitration and confirmed that Medicell did not waive any of its rights.
Secondly, the Court emphasized that arbitration is consent-driven. The parties had adopted the procedure in the C.C.P. for appointing an arbitrator. Because the parties had not agreed on the Arbitrator’s appointment, Pharmascience’s remedy was to apply to and have the Court appoint an arbitrator.
Thirdly, the Court distinguished the present case from instances where a party’s lack of participation in an arbitration did not invalidate an award. Critically, in those cases, there was no question that the arbitrator had been validly appointed.
Fourth, the Court also found that the competence-competence principle did not apply to the case. While arbitrators are authorized to rule on their own jurisdiction, here the issue of the Arbitrator’s appointment was not before him, and he did not address the issue of his own jurisdiction in the Award.
Finally, the Court held that the urgency of an application cannot override the procedure agreed to by the parties. While the Court acknowledged the urgency of the proceedings, it noted that Pharmascience could have sought provisional relief from the Court under Article 623 C.C.P., something expressly permitted by the Agreement, writing that Pharmascience:
“was not without recourse because Art. 623 C.C.P. provides that the Court may grant provisional measures or safeguard orders before the commencement of arbitration proceedings and the parties themselves provided for this possibility in the Agreement….”
Contributor’s Notes:
This case serves as a cautionary tale for parties seeking to expedite arbitral proceedings without securing proper agreement or a court order appointing an arbitrator. Unlike superior courts in Canada, arbitrators do not enjoy inherent jurisdiction. Rather, as the Court held, an arbitrator’s authority flows exclusively from the consent and agreement of the parties to the dispute.
Silence, on its own, does not amount to consent to the appointment of an arbitrator, particularly where a party has expressly reserved its rights. Nor does urgency justify bypassing agreed upon procedure. Even in time-sensitive circumstances, parties must adhere to the arbitration agreement, including seeking judicial assistance where necessary. Waiver of a contractual right is not lightly inferred, and requires that a party show an unequivocal and conscience intention by the opposing party to abandon its rights under the subject agreement: Trial Lawyers Association of British Columbia v. Royal & Sun Alliance Insurance Company of Canada, 2021 SCC 47 at para. 75.
The UNCITRAL Model Law on International Commercial Arbitration (the “Model Law”) addresses the issue of waiver, though not specifically in the context of arbitrator appointments. The relevant provision is Article 4, titled Waiver of right to object. It provides:
“A party who knows that any provision of this Law from which the parties may derogate or any requirement under the arbitration agreement has not been complied with and yet proceeds with the arbitration without stating his objection to such non-compliance without undue delay or, if a time-limit is provided therefor, within such period of time, shall be deemed to have waived his right to object.”
This means that if a party is aware of a procedural irregularity – such as a deviation from the agreed method of appointing an arbitrator – but continues to participate in the arbitration without timely objection, they may be deemed to have waived their right to challenge that irregularity later.
However, the Model Law does not permit unilateral appointment of an arbitrator unless the parties have agreed to such a mechanism. Under Article 11, the parties are free to agree on a procedure for appointing arbitrators. If they fail to agree, a default mechanism involving court or institutional intervention applies. Therefore, any waiver of the right to participate in the appointment process would still require clear, informed, and timely conduct consistent with Article 4.
Accordingly, in the face of an unresponsive or dilatory counterparty to an arbitration, except in the clearest of cases where waiver is made out, the prudent course will always be to strictly comply with the procedures for appointing an arbitrator to ensure one has an enforceable award, or if authorized by the arbitration agreement, applying directly to the court for interim relief.
Regarding the Arbitrator’s decision to proceed ex parte in the circumstances, note the CIArb’s Guideline on Party Non-Participation comment that when one party appears unrepresented or fails to participate, arbitrators must proceed with heightened procedural caution to, among other things, minimize the risk that the award will be challenged. Arbitrators, therefore, are expected to ensure that the absent party has received proper notice, has had a fair opportunity to present its case, and is aware of the consequences of non-participation.
Finally, the case underscores the limits of the competence-competence principle. While arbitrators are empowered to rule on their own jurisdiction to hear a dispute, an arbitrator must explicitly address jurisdictional issues for the principle to apply. Silence on the matter does not confer jurisdiction.