Québec – Final Award on arbitrator’s own jurisdiction: what recourse(s)? – #797

In ADREQ (CSD) Estrie c. Centre intégré universitaire de santé et des services sociaux de l’Estrie – CHUS, 2023 QCCA 1315, the Court of Appeal granted leave  to appeal  a Superior Court decision dismissing an application for annulment of an arbitration award. The first instance Judge ruled that despite the fact that the arbitrator heard the whole case on the merits and decided in the final award that he had no jurisdiction, the award could not be contested under the annulment provisions of the Code of Civil Procedure (sec. 648), but rather must be challenged under the provisions concerning an arbitrator’s ruling on their own jurisdiction (sec. 632). Because of the potential overlap between these provisions and because of the limited jurisprudence on their application, the Court of Appeal deemed that it was a subject of interest for the Court and granted the leave. 

The Arbitration – The dispute arose from a contract with a limited arbitration agreement. The agreement provided jurisdiction for an arbitrator to rule only on disputes concerning modification, termination or non-renewal of the contract. The Respondent to the arbitration contested the arbitrator’s jurisdiction over Claimant’s claims. Instead of ruling on his jurisdiction in a preliminary decision, the arbitrator took the challenge to his jurisdiction under reserve and proceeded with the hearing on the merits. Following a five-day hearing, the arbitrator rendered a final award deciding he had no jurisdiction to arbitrate the parties’ dispute.

The Court proceedings – Sixty days after the arbitration award was rendered, the Applicant/Respondent to the arbitration filed an application for annulment of the final award pursuant to section 648 CCP. This section reads as follows:

“648. An arbitration award may only be challenged by way of an application for its annulment. Such an application is subject to the same rules as those governing an application for the homologation of an arbitration award, with the necessary modifications.

Whether it constitutes an originating application or is presented to contest an application for homologation, the application for annulment must be presented within three months after receipt of the arbitration award…. This is a strict time limit…”

The reason for annulment on which the Applicant/Respondent in the arbitration relied is section 646 (5) CCP, which sets out the grounds upon which the Court may refuse homologation:

“…(5) the award pertains to a dispute not referred to in or covered by the arbitration agreement, or contains a conclusion on matters beyond the scope of the agreement, in which case if the irregular provision is not homologated if it can be dissociated from the rest.”

The first instance Judge dismissed the application for annulment. He ruled that the appropriate application was an application for a de novo hearing on arbitrator’s jurisdiction pursuant to section 632 CCP which reads as follows:

“632. […]

If an arbitrator rules on the arbitrator’s own jurisdiction, a party, within 30 days after being advised of the decision, may ask the court to rule on the matter. A decision of the court recognizing the jurisdiction of the arbitrator cannot be appealed…”

According to section 632 CCP, the application to have the court rule on the mater of jurisdiction was out of time and therefore, the Court dismissed it.

The leave to appeal – The Applicant/Respondent to the arbitration sought leave to appeal the first instance Judge’s dismissal of its application for annulment. The Court of Appeal granted leave because this situation showed a potential overlap between the available recourses and because there is very limited jurisprudence about these provisions. Also, the application relied on some authors’ views concerning the application of these two provisions which favours an application for annulment when an arbitrator rules on his own jurisdiction within a final award instead of within a preliminary ruling.

The Court of Appeal deemed it appropriate to clarify this ambiguous situation – A case to follow!

Contributor’s Notes: 

This case is interesting because it shows a potential overlap between sections 632 and 648 CCP. It also highlights the ambiguity resulting from the absence of a clear definition of “award” in the applicable law – award being subject to annulment or set aside.

First, section 632 CCP refers specifically to the arbitrator’s “ruling” on his own jurisdiction. Typically, specific provisions supersede more general ones. Section 632 CCP also gives the Court a wider jurisdiction to overlook the arbitrator’s jurisdiction ruling because it is a de novo hearing before the Court. Though a party must act within 30 days from the arbitrator’s ruling on his own jurisdiction to benefit from this provision.

Second, section 648 CCP prevents the Court from reviewing the merits of the decision and does not permit annulment although the award contains errors of facts and/or law. Rather, it focuses on the conformity of the arbitration process more than on the decision itself. Québec’s provisions are greatly inspired from the Model Law. It gives the applicant three months to submit its application for annulment.

Notwithstanding the above, at the international level, jurisprudence seems to recognise that a ruling on the arbitrator’s own jurisdiction may constitutes an award subject to annulment because it has a final effect on the dispute. Paris Court of Appeal described an award (subject to annulment) as follows [Not published: C.A. Paris, 1re Ch. March 25, 1994 (Société Sardisud c. Société Technip)]:

 “The award is the act by which the arbitrators finally decide, in whole or in part, of the dispute submitted to them. The decision may be on the merits of the case, on the arbitrator’s own jurisdiction or on a procedural application that leads to the end of the arbitration proceedings.” [author’s translation]

In light of the above, the Court of Appeal’s ruling on the matter will provide clarification not only on the application of sections 632 and 648 CCP but also on the very definition of an award subject to annulment.
As an aside, Courts in other Canadian provinces have also struggled with the provisions which are comparable to section 632 of the CCP. See Russian Federation v Luxtona, 2023 ONCA 393, discussed by Arbitration Matters in “Courts must decide arbitral jurisdiction de novo #748.