This case note reports on a trilogy of case management decisions that arose in the context of an application by the Claimant under art. 632 of the Code of Civil Procedure, RLRQ, c C-25.01 (“CCP”) challenging a tribunal’s jurisdiction to determine claims brought by the Respondent, which the Claimant alleged were new claims made after numerous rounds of written submissions – and thus outside the tribunal’s jurisdiction – in a commercial arbitration relating to a lease agreement (the “Arbitration”). The key issues decided were: (1) a court conducts a hearing de novo when deciding an objection to a tribunal’s ruling on its own jurisdiction (Hypertec Real Estate Inc c Equinix Canada Ltd, 2023 QCCS 2103); (2) Claimant’s application for an interim stay of arbitral proceedings during the pendency of its jurisdictional challenge was denied (Hypertec Real Estate Inc c Equinix Canada Ltd, 2023 QCCS 2098); and (3) the Court appointed a French amicus curiae with expertise in international law to assist it during the jurisdictional hearing, invoking the Court’s duty to abide by the uniformity principle in interpreting Québec legislation based on the Model Law (Hypertec Real Estate Inc c Equinix Canada Ltd, 2023 QCCS 3061).
Background – The trilogy of case management decisions relates to an ongoing Arbitration arising from a dispute over the terms of an option to purchase property in a lease, which has proceeded in several phases. Arbitration Matters has previously reported on the Court’s decision to deny the Claimant’s application to annul an award rendered in Phase I of the Arbitration. The issue was whether the property appraisal report prepared by the Respondent’s expert should be excluded because it was flawed. See “Québec – Property Appraisal Process not Contrary to Public Order”, case note #668. That case note sets out the background facts and the issues at play in Phase I of the Arbitration.
During Phase II, in which the tribunal was to determine the option price, the parties made additional submissions, which led to the tribunal taking jurisdiction over what it called Phase III of the Arbitration. This phase was to address post-closing disputes among the parties unrelated to the option price.
This process is described in the following passage of the jurisdictional order rendered by the tribunal, and in the Court’s decision (2023 QCCS 2103, para 18):
“21. […] The original notice of arbitration was about the process to determine the Purchase Option Price of the Property…
.[…]
23. In a subsequent contested amendment to its Reply in November 2021, Respondent alleged that the Purchase Option Price should be 50% of the sum of the two initial appraisals and introduced a Cross-Demand where it sought a declaration that the Carve-Out Option in favour of Claimant had expired and asked for an order for the measurement of the Property’s net leasable area. These two conclusions were not about the process to determine the Purchase Option Price but about the other disputes between the Parties that arose pending the arbitration proceeding.
[…]
25. Later on, in its Re-Modified Reply and Cross-Demand dated May 26, 2022 and repeated in its Re-Re-Modified Reply and Cross-Demand dated October 24, 2022, Respondent asked the Tribunal to remain seized of the Arbitration after rendering its Phase II Award until the Closing for the purchase of the Property to resolve issues arising at the Closing. Claimant strongly opposed that conclusion and the decision regarding that conclusion was in the Phase II Award […] suspended until the date of this Order.
26. The Application before us aims to add a Phase III to the arbitration proceeding to seek a declaration in connection with existing dispute(s) evidenced by the content of the December 21, 2022 letter from counsel of [Claimant]…” [emphasis removed]
The tribunal accepted jurisdiction over the disputes identified in Phase III of the Arbitration, based on reasons that are summed up in another passage of the arbitral tribunal’s award excerpted in the Court’s decision (2023 QCCS 2103, para 18):
“34. As stated in the previous Order, the Tribunal is of the view that its competence extends to any and all existing disputes between the parties that each of them wishes to submit to it before it becomes functus officio, Thus the Tribunal is competent to deal with the additional relief sought in the Fifth Amended Reply and Cross-Demand, the whole subject to the applicable rules on admissibility of the proposed amendment.” [emphasis removed]
Jurisdiction challenge before the Court – Claimant applied to the Court, challenging the arbitral tribunal’s decision that it had jurisdiction over the Phase III claims, which gave rise to the trilogy of case management decisions summarized herein.
(a) First case management decision: de novo hearing on jurisdiction challenge – In the first case management decision (2023 QCCS 2103), the Court ruled that the hearing conducted under art. 632 CCP to determine the arbitral tribunal’s jurisdiction over the issues raised in Phase III of the Arbitration would proceed de novo. This meant a complete re-hearing of the matter, in which the Court may disregard the arbitral tribunal’s decision entirely. In other words, the hearing would not proceed as an annulment proceeding, and the Court would not be limited to the record that was before the arbitral tribunal.
The Court identified the “primary source” for this decision as Art. 16 of the Model Law. which, the Court said, inspired the reform to Québec law on arbitration, including art. 632 CCP, which reads in relevant part:
“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.
For so long as the court has not made its ruling, the arbitrator may continue the arbitration proceedings and make an award.”
The Court also relied on the decision of the Court of Appeal for Ontario in Russian Federation v Luxtona Limited, 2023 ONCA 393, which concluded that the Court’s review of an arbitral tribunal’s jurisdiction ruling under Art. 16 of the Model Law should proceed de novo. This decision is summarized in a previous Arbitration Maters Case Note, “Ontario – Court must decide arbitral jurisdiction de novo” case note #748. In its case management decision, the Court excerpted an extensive portion of the Ontario Court of Appeal’s decision, noting\that its comments regarding the “uniformity principle” governing interpretation of the Model Law are equally applicable in Québec.
(b) Second case management decision: denial of a stay of arbitral proceedings – In separate reasons issued on the same day (2023 QCCS 2098), the Court denied the Claimant’s application for a stay of the arbitration pending the Court’s decision on the jurisdiction issue. The Court confirmed that it had discretion to order such a stay, referring among other things to the last paragraph of art. 632 CCP, which says the arbitrator “may” continue the arbitration proceedings and make an award so long as the court has not made its jurisdiction ruling. Article 16(3) of the Model Law is to the same effect.
As regards the criteria for the exercise of the Court’s discretion to order a stay of arbitral proceedings, the Court required proof of “exceptional circumstances”. The Court recognized that this test diverged from that sometimes adopted by courts -especially in the context of judicial review applications concerning proceedings before administrative bodies or statutory tribunals – which apply the criteria for issuance of an injunction to an application for a stay. However, the Court noted that consensual arbitration should not be “assimilated” with statutory tribunals or administrative bodies.
In applying the “exceptional circumstances” test, the Court reviewed legislation on commercial arbitration applicable in Québec and referred, among other things, to a “well-reasoned” 2017 decision of the High Court of Singapore (BLY v. BLZ & Another, [2017] SGHC 59 at para 11, 14 and other commentary interpreting Art. 16 of the Model Law.
(c) Third case management decision: appointment of amicus curiae – Following receipt of the parties’ submissions on the nature of the hearing to challenge the tribunal’s jurisdiction, the Court issued a third decision (2023 QCCS 3061), in which it appointed an amicus curiae to provide “independent and impartial legal submissions” in the context of the de novo competence hearing. The Court appointed a law firm located in Paris, France, citing its general expertise in international arbitration. Respondent objected, noting among other things that the Court was competent to interpret and apply art. 632 CCP upon which the Claimant’s jurisdictional challenge was based, without need for assistance from a French law firm. There appears to have been no dispute between the parties that the Arbitration was governed by the Laws applicable in the province of Québec, conducted according to the Civil Code of Québec, CQLR c CCQ-1991 and articles 620 ff of the CCP and that the place of arbitration was Québec.
The Court reasoned that the appointment would not only benefit the parties, but also the “development and growth of the law of arbitration” in Québec (2023 QCCS 3061, para 19). The Court referred to the Model Law’s influence on Québec law on arbitral procedure, including art. 632 CCP (excerpted above), and its duty to abide by the “uniformity principle” governing interpretation of the Model Law:
“[25] It is useful to recall again that in Quebec, interprovincial arbitrations are assimilated to international arbitrations and principles of international arbitration have been, justifiably, considered and applied to domestic arbitrations. It is also useful to recall again that the Model Law was adopted… with the policy view that the law of arbitral procedures and practice be, to the extent practicable, uniformized around the world.
[26] Both Canada and the province of Quebec have publicly agreed to adhere to and respect that policy. There is no doubt that the Model Law constitutes a sound and promising basis for the desired harmonization and improvement of national laws globally, and there is even less doubt that internationally, there is significant experience that may be of use for both Canada and Quebec to continue to actively respect its commitments.
[27] Turning back to the issue of expounding law impartially, it is useful not to underestimate the importance, in certain occasions, of obtaining neutral and comprehensive assistance, particularly when the legal issues are delicate, complex and of general application and where more significantly, the superior court does not have the much-needed basic resources – for example, comprehensive national and international research capabilities – to carry out its duties.“
Accordingly, the Court appointed the French law firm as amicus curiae.
Editor’s Notes:
First, the Court made numerous references to international sources, especially those interpreting the Model Law, and explicitly acknowledged that “principles of international arbitration have been, justifiably, considered and applied to domestic arbitration” (2023 QCCS 3061, para 25). This approach is consistent with the Court of Appeal’s decision in the seminal case of Coderre v Coderre, 2008 QCCA 888 (at para 48, 75-76), which confirms that the Model Law can be used as a source to guide the application of rules relating to the conduct of arbitration under articles 620 ff of the CCP, even in domestic cases. The Court’s reliance upon the Ontario Court of Appeal decision in Russian Federation v Luxtona Limited, 2023 ONCA 393, which applied the comparable Model Law provision, is another promising step towards a Canadian harmonized approach to this issue.
Second, based on a review of the Superior Court of Québec’s docket, it appears that this matter has now been settled between the parties, and that the Court will not have occasion to expand its views on the application of international principles in analysing the de novo hearing on competence in the domestic arbitration context.