In Glen Eagle Resources Inc. v. Gem Yield Bahamas Ltd, 2023 QCCA 686, the Court of Appeal dismissed Appellant’s application for leave to appeal the Superior Court’s decision dismissing Appellant’s request to adduce evidence in support of its application for annulment of an arbitral award. The lower court dismissed Appellant’s request to have a witness testify in support of its argument that the contract containing the arbitration clause was void. Appellant argued that the nullity of the contract would lead to the conclusion that the arbitrator had no jurisdiction. Respondent, which applied for homologation of the award, argued that the lower court had no jurisdiction to hear evidence on the merits of the arbitration on an application to annul the award and that, in any event, the arbitration clause was a separate contract, not affected by the nullity of the contract in which it was included. Following the Superior Court’s decision, the hearing before it was suspended until the Court of Appeal’s decision on the matter.
First instance judgment – The Court of Appeal provides very little information on the history of this case. However, its decision originates in the Superior Court’s debate regarding the Appellant’s application for annulment and Respondent’s application for homologation of an arbitral award. The Appellant was denied permission to file a witness declaration in support of its annulment application. It agued that the award should be annulled because of the lack of jurisdiction of the arbitrator, who was acting on the authority of an arbitration clause included in a contract which the Appellant alleged to be void. The Appellant sought leave to appeal from this interlocutory ruling.
Appellant’s arguments – Before the Court of Appeal, the Appellant argued that it should be allowed to demonstrate the nullity of the contract in which the arbitration clause was included because an arbitrator does not have exclusive jurisdiction to rule on the contract’s validity. Appellant based its argument on the Supreme Court of Canada’s judgment in Uber Technologies Inc. v. Heller, 2020 CSC 16. Appellant argued that because the Court may assume jurisdiction to rule upon the arbitrator’s jurisdiction as it did in Uber, it also has jurisdiction to rule on the validity of the contract in which the arbitration clause is included. According to the Appellant, the fact that the arbitrator had already ruled on the validity of the contract was irrelevant because he wrongly treated this argument as a defence argument instead of as a preliminary question challenging his jurisdiction, in respect of which the court was permitted to “decide the matter”. If the Court of Appeal was to dismiss Appellant’s application for leave to appeal, the Court would cause irremediable injury to Appellant’s position – the position in which Mr. Heller found himself in the Uber case. Essentially, the Appellant was trying to apply the test for a preliminary challenge of the arbitrator’s jurisdiction, competence-competence, to an application for annulment for the reason of lack of jurisdiction of the arbitrator. In other words, the Appellant argued that the issue of jurisdiction could be decided either by the court or by the arbitrator, regardless of the stage of the arbitration process and regardless of the arbitrator’s ruling in the final award.
Respondent’s arguments – On the other side, Respondent supported the lower court’s application of the competence-competence principle. It argued that because the arbitrator had already ruled on the validity of the contract in its arbitral award the Superior Court should not be allowed to review the merits of this decision on an annulment application (645 C.C.P.). Respondent also argued that the arbitration clause contained in a contract is considered to be an agreement separate from the other clauses of the contract according to section 2642 C.C.Q. Therefore, the nullity of the contract would have no effect on the validity of the arbitration agreement.
Court of Appeal’s decision – The Court of Appeal dismissed Appellant’s application for leave to appeal. The irremediable injury that can be caused by an interlocutory ruling is not the only criterion that Appellant must meet. The Appellant also must demonstrate that the principle of proportionality and the interest of justice justify granting the leave to appeal (9 al. 3 and 17 and following C.C.P.). The present case did not meet these criteria. The Court of Appeal concluded that the Superior Court judgement application of the law was correct and that the appeal would have no chance of success. Concerning Uber’s application, the Court of appeal dismissed Appellant’s argument. The Court stated that Uber concerned a particular case in which the validity of the arbitration agreement would never be debated before the arbitrator because of the prohibitive costs of the proceeding, which was not the case in the present matter.
First, this judgement is interesting because the Court resisted to the temptation suggested by the Appellant to widen Uber’s application by giving an extended jurisdiction to the Court over the arbitrator’s jurisdiction. This judgement is faithful to the legislator’s intent to favour arbitration in Québec and to protect the arbitrator’s jurisdiction.
Second, and although the Court of Appeal did not address specifically this argument, Uber was not applicable to this case because the review of the validity of the arbitration agreement did not happen at the same stage of the proceedings. In Uber, the validity of the arbitration agreement was addressed prior to the arbitration process. In Glen Eagle Resources Inc. v. Gem Yield Bahamas Ltd, 2023 QCCA 686, the arbitrator jurisdiction was contested in an application for annulment of the final arbitral award, after the arbitrator had already ruled on the validity of the contract. The final arbitral award is protected from judicial review on the merits (645 C.C.P.). Uber cannot be used to overrule this fundamental principle of arbitration. The Court of Appeal confirmed the strict application of section 645 C.C.P. in Geci Espanola v. Government of The Dominican Republic, 2017 QCCA 1298 and this judgement has been regularly cited since then . See for examples prior Case Notes: Québec – court decision illustrates strength of arbitration in Québec – #001 and Québec – Annulment: no review of the merits, even if award wrong – #603.
For additional information about Uber Technologies Inc. v. Heller, 2020 CSC 16, see prior Case Note Supreme Court – courts should not refer jurisdiction challenge to arbitrator if real prospect that challenge might never be resolved – #344.