Québec’s international (and domestic) arbitration rules are codified in the Code of Civil Procedure (the “CCP”) and were first enacted over thirty years ago as part of a major, progressive reform of arbitration law in the Province. This reform was inspired by the 1985 UNCITRAL Model Law on International Commercial Arbitration (the “Model Law”) and sought to promote arbitration as a means of private dispute resolution.
Today, each of the other Canadian provinces have separate legislation that governs international arbitration that is, like Québec, largely based on the Model Law.
Frequently in the context of commercial arbitrations, a party seeks the specific enforcement of the terms of a contract, or, for example, other types of protective or preservation orders. An important issue that has arisen under Québec law over the years is whether an arbitrator has the jurisdiction to render these types of orders, which are injunctive in nature.
Until 2011, there was serious debate in Québec as to whether an arbitrator had the power to render orders of specific performance, namely orders that force a party to an arbitration to do something, or not to do something. The debate stemmed from the fact that: (1) orders of specific performance can be akin to an injunction – which is defined in the CCP as “an order enjoining a person not to do or to cease doing something or, in applicable cases, to perform an act or operation under pain of all legal penalties” – and the CCP expressly provides that the Superior Court of Québec, Québec’s court of original jurisdiction and the highest trial court in the Province (the “SCQ”), has the exclusive jurisdiction to issue the extraordinary remedy of an injunction; and (2) a specific article in the CCP provided that a “judge or court” (as opposed to an arbitrator) could grant provisional measures before or during arbitral proceedings.
In 2011, the Court of Appeal of Québec (the “QCA”), Québec’s highest court, rendered a decision (Service Bérubé Ltée v. General Motors du Canada Ltée, 2011 QCCA 567) (“Bérubé”) that examined the question of whether an arbitrator could order the performance of a contract by a party to an arbitration. More specifically, in Bérubé, a key issue was whether the arbitrator could force General Motors to renew a franchise agreement with its franchisee. The QCA held that not all orders of specific performance were akin to an injunction and that arbitrators can enforce the performance of a contract that is at issue before them.
A year later, in 2012, in a highly anticipated decision (Nearctic Nickel Mines Inc. v. Canadian Royalties Inc., 2012 QCCA 385) (“Nearctic Nickel”), the QCA reaffirmed that arbitrators can order specific performance of contractual obligations that do not amount to injunctions. In Nearctic Nickel, consistent with the terms of a joint venture agreement between the parties, an arbitrator ordered a minority partner to transfer its interest in a mining property to the majority partner. The QCA held that this order did not constitute an injunction but rather, “was tantamount to an order to convey title and where the award itself is equivalent to the specific performance of the contractual obligations.” The QCA did not, however, expressly hold that an arbitrator could issue an injunction.
In rendering its decision in Nearctic Nickel, the QCA rejected the assertion that an arbitrator never possessed the power to grant orders of an injunctive nature because, without limitation: (1) in Québec, specific performance of an obligation (as opposed to pecuniary damages) is, in cases where this is possible, the rule and this can be obtained through an injunction or a simple court order; (2) this interpretation would be incompatible with the codified principle in the CCP that arbitrators “have all of the necessary powers for the exercise of their jurisdiction”; and (3) consistent with the Supreme Court of Canada’s (the “SCC”), Canada’s final court of appeal, modern interpretation of arbitration as a “complete system of alternate dispute resolution”, the powers granted to arbitrators should include the possibility for arbitrators to render awards to be executed by specific performance that do not require court intervention.
In deciding whether the order of an arbitrator is the equivalent of an injunction, the QCA noted as follows:
[63] In order to appreciate whether an arbitrator issued a particular order which would be tantamount to an injunction, one must look at the commercial agreement, determine the true intentions of the parties and decide whether, in light of all the circumstances, the pith and substance of the order truly constitutes an injunction with all of its known penal implications or whether it is more of a declaratory nature which serves the purpose of giving full effect to the Arbitrator’s determinations of the parties’ rights.
Of note in Nearctic Nickel, the QCA also indicated, in obiter, that an arbitral tribunal could grant provisional measures even where the parties’ agreement was silent on this issue. In support of this position, the QCA relied on the fact that the Model Law (article 17) expressly provides that arbitrators have the power to grant interim measures and this article was expressly incorporated in the CCP with respect to inter-provincial and international arbitration and that it would not make sense for domestic arbitration in Québec to follow different rules.
The SCC refused leave to appeal from the QCA’s decision in Nearctic Nickel (19 July 2012, No. 34801). As is always the case when the SCC dismisses an application for leave to appeal, it did not provide reasons for its decision.
In 2016, the CCP provisions dealing with arbitration were amended, including to take into account amendments to the Model Law. As part of these significant amendments, the legislator added article 638 CCP, which provides that “[t]he arbitrator may, on a party’s request, take any provisional measure or any measure to safeguard the parties’ rights […].” The legislator also added article 639 CCP, which provides that in urgent situations, even before a party requests provisional or safeguard measures, the arbitrator may issue “provisional orders” for a period not exceeding twenty days. In addition, in article 646 CCP, which deals with the grounds on which a court can refuse to homologate (recognize) an arbitral award, the legislator added the following underlined terms: “The court cannot refuse to homologate an arbitration award or a provisional or safeguard measure unless it is proved that […].”
Subsequent to the 2016 amendments to the CCP, the ratio of the QCA’s decisions in Bérubé and Nearctic Nickel was applied by the SCQ in a 2017 decision in Truong v. Syndicat des copropriétaires Appartements Miraflor, 2017 QCCS 3673 (“Truong”). In Truong, the Court reaffirmed that in Québec, an arbitrator can issue an order of specific performance that is not necessarily an injunction.
More recently, the question of an arbitrator’s powers and more specifically whether an arbitrator can issue a safeguard order that was akin to a Mareva injunction (i.e., a freezing order to prevent a party from dealing with its assets) was considered by the SCQ in the case of Hachette Distribution Services (Canada) Inc. c. 2295822 Canada Inc., 2018 QCCS 1213 (“Hachette”). In Hachette, the SCQ noted the legislator’s clear recognition, in enacting article 646 CCP, that an arbitral tribunal has the power to grant provisional measures or safeguard orders. The SCQ noted that an arbitrator’s ability to do so must be linked to the arbitrator’s mandate, which must be interpreted in a broad and liberal manner.
It should be noted that in Ontario, the Arbitration Act (Ontario) expressly provides that an arbitrator can render orders of specific performance and injunctions. The same is true under the relevant arbitration legislation in a number of other Canadian provinces.
The author of this post is David Stolow.