Québec – judicial protection of parties’ confidentiality promotes public interest in arbitration – #305

In homologating an award issuing from a consensual, administered arbitration, Madam Justice Marie-Anne Paquette in 79411 USA Inc. v. Mondofix Inc., 2020 QCCS 1104 ordered that the award be kept confidential because (i) doing so encourages the use of arbitration as a dispute resolution mechanism and (ii) the public interest favors confidentiality orders to promote arbitrations and protect the expectations of the parties to the arbitration.  Paquette J. also held that the burden rests on the party seeking the disclosure of otherwise confidential information to demonstrate that the good effects of disclosure outweigh the bad effects of infringing on the confidentiality expectations of parties to an arbitration.  Her approach emphasizes the public interest in arbitration and does not rely merely on the private interests peculiar to the parties.

79411 USA Inc. dba Fix Auto USA and FUSA Inc. (“Fix Auto”) and Mondofix Inc. (“Mondofix”) engaged in arbitration to resolve a dispute involving their Licence Agreement governed by Québec law including its Civil Code of Québec, CQLR c CCQ-1991 (“C.C.Q.”).  The Canadian Commercial Arbitration Centre (“CCAC”) administered the arbitration in accordance with its General Commercial Arbitration Rules (“CCAC Rules”).  The CCAC also has rules for administering International Arbitrations and Commercial Conciliation and Mediation as well as rules for specialized arbitration specific to the dispute/market activity.

The arbitration produced an award (“Award”) which neither party challenged and for which Fix Auto applied for homologation under article 646 of Québec’s Code of Civil Procedure, CQLR c C-25.01 (“C.C.P.”).  Mondofix agreed that the conditions of article 646 C.C.P. were met and that the award should be homologated. 

Mondofix objected to the Award to it being made public.  Mondofix requested that the Award be put under seal and that the exhibits filed in support of Fix Auto’s application for homologation, the Request for Arbitration and the Response to Arbitration be withdrawn from the court record.  Fix Auto resisted Mondofix’ request regarding the Award but consented to the withdrawal of the documents.

Paquette J. agreed with Mondofix regarding confidentiality of the Award.  She (i) homologated the Award, reproducing the dispositive orders in the Award, (ii) ordered the Award be filed under seal and (iii) ordered that the documents identified by Mondofix be withdrawn from the court record.

To issue her orders, Paquette J. began by noting that the CCAC made no specific mention of confidentiality but did introduce its CCAC Rules with the following preamble to which Paquette J. inserted the “[(arbitration)]” for clarity or emphasis:

Since commercial arbitration is conducted by specialists, takes place out of court, behind closed doors, and is wound up rapidly, this [(arbitration)] makes it possible to respect the confidentiality of the case and to obtain an economic and final decision that is immediately enforceable”.

Paquette J. added that the parties’ adoption of Québec law “unavoidably leads” to article 4 C.C.P.  which expressly provides for confidentiality of private dispute prevention and resolution process.

Article 4 C.C.P. Parties who opt for a private dispute prevention and resolution process and the third person assisting them undertake to preserve the confidentiality of anything said, written or done during the process, subject to any agreement between them on the matter or to any special provisions of the law”.

Article 4 C.C.P.’s use of the phrase “private dispute prevention and resolution process” is informed by article 1 C.C.P.’s identification of the “main” processes:

Article 1 C.C.P. To prevent a potential dispute or resolve an existing one, the parties concerned, by mutual agreement, may opt for a private dispute prevention and resolution process.

The main private dispute prevention and resolution processes are negotiation between the parties, and mediation and arbitration, in which the parties call on a third person to assist them. The parties may also resort to any other process that suits them and that they consider appropriate, whether or not it borrows from negotiation, mediation or arbitration.

Parties must consider private prevention and resolution processes before referring their dispute to the courts”.

Paquette J. referred to the later provisions in the C.C.P. at Book VII “Private Dispute Prevention and Resolution Processes” comprising Title I “Mediation” articles 605 C.C.P. et seq. and Title II “Arbitration” articles 620 C.C.P. et seq. and used “PDPR” to tag her subsequent references to those provisions.

She noted that encouraging litigants to use private dispute resolution processes was a goal of the 2014 refresh given to the C.C.P. “The confidentiality of such processes is often a major incentive when a party weighs the benefits of PDPR, against those of the traditional judicial streamline. Such confidentiality is often key to the success of a mediation or of a private arbitration, as it favours an open approach”.

Paquette J. dismissed as “untenable” Fix Auto’s suggestion that confidentiality applied only to the process and not the Award.

[9] In most if not all cases, arbitration awards thoroughly address what has been said, written and done during the arbitration.  The confidentiality protection expressed in article 4 above would be eviscerated from any effect or meaning if the application for the homologation of an arbitration award systematically turned the award (and all the information it includes on the evidence and the process itself) into publicly available information”.

She did acknowledge exceptions to a blanket application of confidentiality:

– the parties agree to waive confidentiality in whole or in part;

– if justice cannot be done with disclosure of the award

– if disclosure is necessary to avoid a denial of justice;

– if disclosure is reasonably necessary to establish or protect an arbitral party’s legitimate interests.

Having listed those exceptions, Paquette J. noted that disclosure would be necessary for enforcement of an award.  Referring to J. Brian Casey, Arbitration Law of Canada : Practice and Procedure, 3rd ed., New York, JurisNet LLC 2017, s. 6.10.3, Paquette J. reiterated/framed the question as follows: can justice be done without the necessity of ordering the production of documents that are otherwise confidential.

She readily acknowledged that, for enforcement of an award, “disclosure is unavoidable”.  That said, she then made two (2) vital observations.  First, she underlined that homologation of an award does not involve the merits and therefore the criteria for homologation under article 642 C.C.P. do not require “full disclosure of the award itself”. Second, she emphasized the purpose of homologating an award.

[17] Also, the purpose of an application to homologate an arbitration award is to ensure that the arbitration award can be enforced.  We shall remind here that only the conclusions of an award are to be enforced.  Not the reasons”.

Paquette J. held that Fix Auto bore a burden to justify that an exception to confidentiality principle should be made but did not meet its burden.  See paras 14, 18 and 24.  In apparent obiter, she further added that parties applying for homologation must not have a different purpose in mind.  There is nothing in her reasons to suggest that Paquette J.’s comments addressed Fix Auto.  Rather, her comments read more as cautions, anticipating future applications by other parties.

The application for the homologation shall not be used for the sole and distorted purpose of turning the Award and all the details it includes into publicly available information.  The Court shall not bring its participation to such use of the homologation process”.

Paquette J. considered that her reasoning ‘echoed’ the test in Sierra Club of Canada v. Canada (Minister of Finance), 2002 SCC 41 (CanLII), [2002] 2 SCR 522 para. 53 regarding the public interest in open and accessible court proceedings but specified that the general principle of public courts “does not automatically offset the confidentiality protection of PDPR processes”.

She expressly acknowledged that other courts had come to opposite conclusions and listed them to underscore being alert to them: Ontario Inc. v. Donato, 2017 ONSC 4975 para. 9; McHenry Software Inc. v. ARAS 360 Incorporated, 2014 BCSC 1485 para. 27 et seq.; Boeing Satellite Systems International Inc. v. Telesat Canada, 2007 CanLII 7991 (ON SC) para. 11 et seq.  Confidentiality is decided on a case-by-case basis she remarked and the “answer may largely rest on the actual necessity of the disclosure sought”.

In closing her reasons, Paquette J. emphasised that respect for confidentiality, if chosen, serves to encourage use of arbitration and thereby serves a legitimate public policy.

“[22] In the case of arbitration, particularly under Quebec Law, cases and specific legal provisions already aim at protecting the confidentiality of the arbitration process.  As highlighted in the above analysis, and as stipulated in Quebec Law, there is a legitimate public policy interest in encouraging private dispute resolution through arbitration by protecting the autonomy of arbitral process. The use of arbitration as a dispute resolution mechanism is encouraged and public interest favors confidentiality orders to promote arbitrations and protect the expectations of privacy and confidentiality of the parties to the arbitration”.

urbitral note – First, Paquette J. expressly faced the principles in Sierra Club of Canada v. Canada (Minister of Finance), 2002 SCC 41 (CanLII), [2002] 2 SCR 522 and the trends applicable in other cases/jurisdictions.  Doing so strengthened her intention to assert respect in court for confidentiality bargained for in arbitration.  Other cases will have to accept, as a starting point, that the result was made with full knowledge of those principles and other trends but that the result sought compliance with Québec’s public policy and lex arbitri.

Second, Paquette J. recognized a number of legitimate exceptions to confidentiality and agreed to include the terms of the dispositive to ensure coherence with the actual purpose of homologating an award so that it becomes an order of the court.  There is no purpose in issuing an order homologating an award if the dispositive portion is not somehow made an order of the court.  Having accepted that as a result, the decision also supports avoiding any unnecessary exposition of the contents of the award.

Third, the decision serves as a counterweight to the default approach applied in other courts.  For example only, see the recent Federal Court decisions in Canadian National Railway Company v. Gibraltar Mines Ltd., 2019 FC 225 and in Canadian National Railway Company v. Gibraltar Mines Ltd., 2019 FC 963.  Those cases considered awards issuing under ‘arbitration’ processes imposed by statute. The courts held that there is no general principle that confidentiality of arbitration proceedings carries over to court when a party appeals the arbitral award.  Even if confidentiality was imposed by statute for the purpose of the arbitration, absent specific wording in the statute, confidentiality does not automatically extend into the courts which are open and public. 

Those cases might be distinguished due to the courts’ role in judicial review and not appeals of consensual awards. See the Arbitration Matters note “Confidentiality of arbitration must be re-established independently on appeal to court”.  

In future cases, the courts might introduce some nuances for appeals of arbitral awards issuing from mandatory arbitration imposed by statute and subject to judicial review.  Those latter arbitrations, despite the name, are administrative proceedings and the courts might insist on maintaining the public nature of judicial review hearings. 

Confidentiality may be resolved by deciding whether an award issued by a process imposed by statute or by consensual arbitration and whether the award is therefore subject to judicial review principles under Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65 or commercial arbitration approaches applied by Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 (CanLII), [2014] 2 SCR 633 or Teal Cedar Products Ltd. v. British Columbia, 2017 SCC 32 (CanLII), [2017] 1 SCR 688.  See the Arbitration Note “Vavilov does not overrule Teal Cedar or Sattva Capital”.

Fourth, Paquette J. issued her reasons in regard to an application under article 642 C.C.P. which was not contested aside from confidentiality.  The parties did not require that she address disclosure, in whole or in part, of the contents of an award which may occur if and when a party seeks to set aside an award.

Fifth, Paquette J. identified the burden to justify an exception to the principle of confidentiality as resting on the party resisting confidentiality. Doing so has two (2) implications: (i) it effectively raises the parties’ bargain for confidentiality to the level of a starting point rather than merely accepting the court’s public process as the automatic or sole priority; (ii) the burden is now on the party coming to court with an award to justify why the court process should be any more public than necessary. 

Sixth, the result asserts that, if confidentiality is part of the parties’ bargain (by agreement, by rules of the administering institution, by lex arbitri), the court must strive to accommodate arbitration’s confidentiality with the court’s public hearings because doing so supports a public policy of encouraging alternative dispute resolution.  The approach emphasizes the public interest in arbitration to do so and does not rely merely on the private interests peculiar to the parties.

Seventh, with the current experiments with holding hearings, including trials, by means of videoconference and online tools, the nature of the technology in practice establishes a private group of those with the technology agreed to for that hearing and knowledge of the date and system entry point for access to the hearing. In such cases, the hearing is effectively though not intentionally private rather than public. Should virtual courtrooms function, will each courtroom be assigned a set/pre-determined position online as the equivalent of tv channels, radio stations or websites and thereby ensure open to access like regular courtrooms to those interested? Aside from prohibitions against recording audio and visuals and a legislated prohibition against use of any such recordings elsewhere upon penalty, the virtual courtrooms would recover their public nature despite being held virtually.

For those interested in just how Canadian courts organize procedural hearings and maintain public nature of those hearings in the new normal, read the brief endorsement issued April 1, 2020 by Mr. Justice David L. Corbett in Nation Rise v. Minister of the Environment, 2020 CanLII 25863 (ON SCDC).  The details involve a virtual hearing scheduled for April 17, 2020 using ZOOM technology organized through Arbitration Place.

[2] The hearing will be conducted as a video conference.  ZOOM technology will be used.  The hearing will be run through Arbitration Place.  The parties may expect to hear from Arbitration Place about the arrangements and for information about how the hearing will be conducted

[3] Neither counsel nor the court will gown for the hearing.  Instead, business attire is required for anyone with a speaking role in the hearing. All parties must ensure that they participate in the videoconference from appropriate surroundings and that they (and the Court) will not be interrupted or disturbed during the hearing.  …

[6] It is currently anticipated that the hearing will follow a webinar format and will accommodate up to 500 members of the public.  Particulars will be confirmed to the parties by Arbitration Place and in due course by the court”.