In Avalin Group FZE c. Lauzon – Planchers de bois exclusifs inc., 2026 QCCA 651, the Québec Court of Appeal overturned a judgment of the Québec Superior Court, which refused to refer the matter to arbitration because the arbitration agreement stipulated that the parties “may” initiate an arbitration if mandatory mediation is unsuccessful. The Superior Court had ruled that the word “may” meant that the arbitration agreement did not exclude the jurisdiction of domestic courts. The Court of Appeal overturned that decision. It applied the rules of interpretation of contracts and concluded that the parties intended to enter into a binding and exclusive arbitration agreement (clause compromissoire parfaite), despite the ambiguity created by the word “may”. It therefore granted the application for declinatory exception and referred the matter to arbitration. The Court of Appeal’s decision aligns with more recent jurisprudence as well as commentary regarding arbitration agreements from both Québec and international sources.
Background – The matter arises in the context of the parties’ framework agreement regarding the sale and distribution of wood flooring. Plaintiff, Lauzon – Planchers de bois exclusifs inc. (“Lauzon”), was a seller and distributor of wood flooring to customers in Québec. Respondent, Avalin Group FZE (“Avalin”), was an importer of wood flooring which was headquartered in United Arab Emirates.
The framework agreement contained a dispute resolution clause that called for mediation and then arbitration. It read as follows:
“15) Disputes: Parties shall endeavour to solve disputes through good faith negotiations; if necessary, they may resort to mediation at an accredited Commission of the following Commonwealth countries: Australia, Canada, New Zealand, Singapore, or United Kingdom. If Mediation is not successful, any party may request arbitration at the same Commission where one arbitrator shall, through the most simplified procedure available, issue a binding and final award based on the Convention for the International Sale of Goods. If a party declines to engage in a mediation process suggested by the other party, it shall be liable for any ensuing arbitration costs (cost of arbitrators, costs of arbitration institution and legal coasts) regardless of the award’s decision on the merits.”(Emphasis added.)
On October 21, 2024, Lauzon instituted an action in the Québec Superior Court seeking an award of $1.5 million in compensation for alleged damages related to wood flooring panels it claimed were defective.
On December 5, 2024, Avalin submitted a request for mediation at the London Court of International Arbitration, in conformity with the mediation-arbitration provision cited above. Lauzon declined to participate in the mediation, relying on the proceedings it had initiated in the Québec Superior Court. Avalin responded by filing an application for declinatory exception in the Superior Court, in which it sought an order referring the matter to arbitration in accordance with the arbitration agreement in the parties’ framework agreement.
Québec Superior Court decision – On January 22, 2025, the Court rejected Avalin’s application for declinatory exception and therefore accepted jurisdiction over the matter. (See 2025 QCCS 107.) The Court’s decision turned on the words “may request arbitration” in the second sentence of the arbitration agreement. It found that this clearly indicated that the parties had not agreed to exclude the jurisdiction of domestic courts. In coming to this decision, the Court referred to a 1991 decision, C.C.I.C. Consultech Interonal c Silverman, 1991 CanLII 2868 (QC CA), in which the Québec Court of Appeal similarly concluded that the words “may submit the disagreement to binding arbitration” meant that recourse to arbitration was not obligatory, and therefore that the arbitration agreement was not exclusive and binding.
Québec Court of Appeal decision on Appeal – The Court of Appeal granted leave to appeal, indicating that the Superior Court’s decision appeared to be inconsistent with recent jurisprudence concerning arbitration agreements that are ambiguous on whether they are binding and exclusive. (See 2025 QCCA 438)
On appeal, in a unanimous decision, this Court overturned the Superior Court’s decision and referred the matter to arbitration. The Court found that the first instance judge committed a palpable and overriding error in limiting its analysis to the use of the word “may” in the arbitration agreement in its interpretation of the arbitration clause. It found that two further elements should have alerted the judge to an ambiguity in the clause, notably the stipulations in the arbitration agreement that: (i) the award will be final and binding on the parties; and (ii) the party which refuses mediation is responsible for the costs of the arbitration. The Court of Appeal determined that these elements were consistent with a binding and exclusive arbitration agreement, and therefore inconsistent with the Superior Court’s interpretation that the agreement was optional and non-exclusive.
In the circumstances, the Court of Appeal stated that the ambiguities had to be resolved in keeping with principles of contractual interpretation, as follows [my translation]:
“[34] Consequently, the judge was required to resolve these ambiguities by proceeding to the second stage of contract interpretation—namely, ascertaining the common intention of the parties. In accordance with Article 1426 of the Civil Code of Quebec, he had to take into account the following three factors, as qualified by the principles of interpretation set out above: i) the nature of the contract—specifically, that it was an arbitration agreement; ii) the circumstances in which it was concluded—namely, an international sale of goods between parties domiciled in Quebec and the United Arab Emirates, respectively, with delivery at Chinese ports; and iii) the usages governing international arbitration agreements—specifically, the need to favor an interpretation that allows the parties to free themselves from the legal particularities of state courts.”
The Court of Appeal determined that a proper analysis in keeping with these factors should have led to the conclusion that the parties intended to create a binding arbitration agreement, to the exclusion of all courts. It reasoned that the clause would otherwise have no effect, because the stipulations regarding choice of arbitral institution and the binding nature of the final award would have no meaning if one party simply refused to participate in arbitration. Finally, echoing the commentary of Frédéric Bachand (now justice of the Québec Court of Appeal) and well-known commentator of international commercial arbitration, Gary B. Born, the Court of Appeal reasoned that the word “may” simply reflected the understanding that neither party was obligated to initiate an arbitration even if mediation was unsuccessful.
Commentary:
First, this decision is another step toward rational interpretation of arbitration agreements. It follows a line of decisions that includes 9369-1426 Québec inc. (Restaurant Baton Rouge) c. Allianz Global Risks US Insurance Company, 2021 QCCA 1594 (Summarized in Arbitration Matters Case note #515) and Clinique OVO inc. c. Elite IVF, 2023 QCCA 1097 (Summarized in Arbitration Matters Case note # 780), in which the Court of Appeal required courts to resolve ambiguities regarding the exclusive nature of arbitration agreements in accordance with general principles of contractual interpretation, rather than through drafting formalities from a bygone era. In this regard, the Court of Appeal summarized the principles relating to arbitration agreements that should guide the interpretive exercise under Québec law as follows (my translation, quotation is from Clinique Ovo, cited above):
“[18]…Thus, an arbitration agreement should not be viewed as departing from the ordinary rules of law; it is of its essence to exclude court intervention. It must therefore be given a broad and liberal interpretation. Where ambiguity remains in the interpretation of an arbitration agreement, it would be contrary to contemporary case law trends to adopt a judicial policy favoring recourse to state courts over arbitral tribunals. In other words, one must “allow freedom of contract to prevail over outdated drafting requirements”.”
Second, the Court of Appeal emphasizes the importance of having regard to the principles summarized above in the particular context of international commercial arbitration where, according to the Court, “the arbitration agreement serves to foster legal certainty and predictability, given that international arbitration is not anchored to any specific State and relies solely on the will of the parties” (para 20, my translation). Echoing the Supreme Court of Canada’s decision in Dell Computer Corp c Union des consommateurs, 2007 SCC 34, the Court of Appeal exhorts lower courts to be open to international commentary on international arbitration, which is “a formal source of Québec positive law”. True to its own analysis, the Court of Appeal cites a recognized commentator of international commercial arbitration, Gary B. Born, in support of its interpretation of the role that the word “may” played in the arbitration agreement that was at issue in this case. This is a welcome reminder for courts that are not always familiar with the growing field of international commercial arbitration. It is also consistent art. 649 of Québec Code of Civil Procedure, concerning arbitral procedure, which states that consideration can be given to the UN Model Law and related sources in proceedings in which there are foreign trade interests.
Third, other decisions from Québec courts have concluded that clauses which use the word “may” are nonetheless binding and exclusive arbitration agreements (clause compromissoire parfaite). These include Groupe Geyser inc. c. Coopérative de solidarité de Bel-Âge Pincourt, 2021 QCCA 1792, Fondations Trevi Canada c. Édyfic inc., 2023 QCCS 4466 (See Arbitration Matters case note #802), Transport Richard Meloche inc. c. Construction Innovo inc, 2021 QCCS 605 (See Arbitration Matters Case note # 473) and Bridgepoint International (Canada) Inc. c. Ericssons Canada Inc, 2001 CanLII 24728 (QC CS).