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Arbitration - United Nations Foreign Arbitral Awards Convention Act (UNFAACA). Difederico v. Amazon.com, Inc.
In Difederico v. Amazon.com, Inc. (Fed CA, 2023) the Federal Court of Appeal considers (and dismisses) an appeal involving the application of an international arbitration forum selection clause, here in a context of Competition Act [s.45 and 46] allegations of price-fixing. The central issue is whether the transaction were consumer or commercial.
In these quotes the court cites relevant provisions of the federal United Nations Foreign Arbitral Awards Convention Act (UNFAACA), which implements the 'New York Convention' in Canada:[14] Turning to the United Nations Foreign Arbitral Awards Convention Act, R.S.C., 1985, c. 16 (2nd Supp.) (UNFAACA), the relevant portion of section 4, as well as the relevant portions of the UNFAACA Schedule, arelikewise reproduced as follows [SS: English-only extracted]:Convention Approved
Limited to commercial matters
4 (1) The Convention applies only to differences arising out of commercial legal relationships, whether contractual or not
....
SCHEDULE
Convention on the Recognition and Enforcement of Foreign Arbitral Awards [New York Convention]
Article I
1 This Convention shall apply to the recognition and enforcement of arbitral awards made in the territory of a State other than the State where the recognition and enforcement of such awards are sought, and arising out of differences between persons, whether physical or legal. It shall also apply to arbitral awards not considered as domestic awards in the State where their recognition and enforcement are sought
...
3 When signing, ratifying or acceding to this Convention, or notifying extension under article X hereof, any State may on the basis of reciprocity declare that it will apply the Convention to the recognition and enforcement of awards made only in the territory of another Contracting State. It may also declare that it will apply the Convention only to differences arising out of legal relationships, whether contractual or not, which are considered as commercial under the national law of the State making such declaration.
Article II
...
3 The court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed. ....
VII. Analysis
A. Preliminary Observations
[28] Before turning to the substance of the issues raised by this appeal, a few preliminary observations are worthwhile to briefly recall the history of the New York Convention and its application in Canada. A few words on the competence-competence principle and its significance for motions to stay in favour of arbitration are also in order.
(i) The New York Convention
[29] The New York Convention was adopted by the United Nations in 1958 and came into force in June 1959. It was developed for the purpose of advancing the protections provided to arbitral awards under the Geneva Protocol of 1927. The overall objective of the New York Convention is to promote uniformity in the treatment of arbitration agreements and awards internationally. Initially, the New York Convention was meant to be limited to the recognition and enforcement of foreign arbitral awards to the exclusion of arbitration agreements (United Nations, UNCITRAL Secretariat Guide on the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958), 2016 ed., at 39; Gary B. Born, International Commercial Arbitration, 3rd ed., (Kluwer Law International, 2023), at 351). But in the final weeks, prior to the adoption of the New York Convention, its drafters decided to include a provision regarding the recognition and enforcement of arbitration agreements. This explains why Article I of the New York Convention, delineating the scope of its application, only refers to arbitral awards and not to arbitration agreements (New York Convention, Article I). In reality, the Convention applies to both.
[30] Canada ratified the New York Convention nearly four decades ago, in 1986. There are currently 172 contracting state parties. By adhering to the New York Convention, these states have undertaken to give effect to arbitration agreements and to recognize and enforce awards made in other states, subject to certain limited exceptions. The New York Convention is described as setting a “ceiling” of control that contracting states may exert over international arbitral awards and arbitration agreements for purposes of ensuring their recognition and enforceability. It is credited for having created a uniform, simpler and therefore more effective regime for the resolution of international commercial disputes (Nigel Blackaby et al., Redfern and Hunter on International Arbitration, 7th ed., (Oxford University Press, 2022), at 26-27).
[31] When Canada adopted and assented to the New York Convention in 1986 through the UNFAACA, it did so simultaneously with the adoption of the United Nations Commission on International Trade Law (UNCITRAL) Model Law through the Commercial Arbitration Act, R.S.C., 1985, c. 17 (2nd Supp.) (CAA). The Model Law was developed by the international community to provide a more detailed legal regime for arbitral proceedings in the spirit of the New York Convention in 1985. Together, these instruments form the cornerstones of the international commercial arbitration regime.
[32] Given Canada’s dualist federal-provincial process for international treaty implementation, various jurisdictions have taken different approaches to incorporating the New York Convention and the Model Law into domestic legislation. A number of provinces adopted both instruments together, resulting in single statutes, for example Ontario’s International Commercial Arbitration Act, 2017, S.O. 2017, c. 2, Sch. 5 (ICAA). In contrast, the Federal Government chose to adopt the two instruments separately, specifically the New York Convention under the UNFAACA and the Model Law under the CAA. At the federal level, pursuant to subsection 5(2) of the CAA, the Model Law’s application is limited to circumstances “where at least one of the parties to the arbitration is Her Majesty in right of Canada, a departmental corporation or a Crown corporation or in relation to maritime or admiralty matters”, whether international or purely domestic. As such, given that the claims at issue in the present case do not involve one of these parties or areas of law, only the UNFAACA is relevant for this case.
....
(1) Did the Judge err in determining that the UNFAACA is applicable in the present case?
[37] The scope of application of the UNFAACA is limited to commercial matters as indicated at subsection 4(1). For ease of reference, the text of subsection 4(1) is reproduced again here:Limited to commercial matters
Restriction
4 (1) The Convention applies only to differences arising out of commercial legal relationships, whether contractual or not [Emphasis added].
4 (1) La Convention n’est applicable qu’aux différends découlant d’un rapport commercial de droit, contractuel ou non contractuel [mon soulignement]. [38] In the present matter, Ms. Difederico alleges that the Judge erred in ordering a stay of her proposed class action on the basis of the UNFAACA. Ms. Difederico submits that her proposed class action claims are beyond the scope of the UNFAACA. These claims, according to Ms. Difederico, are mere consumer claims, not commercial ones as contemplated by the UNFAACA. Ms. Difederico thus disagrees with the Judge’s interpretation and argues for a narrower interpretation of the word “commercial”, essentially maintaining that there can never be a “commercial relationship” when one party to the transaction is a consumer.
[39] This threshold issue begs the question: do Ms. Difederico’s claims arise out of a commercial legal relationship within the meaning of the UNFAACA?
[40] In order to address this question, it must be recalled from the outset that the New York Convention, as implemented by the UNFAACA, provides, in the broadest terms, that a contracting state may declare that “it will apply the Convention only to differences arising out of legal relationships, whether contractual or not, which are considered as commercial under the national law of the State making such declaration” (Article I(3)). Canada exercised this option by virtue of subsection 4(1) of the UNFAACA. Hence, what is the meaning of commercial in the context of the UNFAACA? This case offers our Court an opportunity to address the interpretation to be given to this term.
[41] The term “commercial legal relationships” is not defined by the UNFAACA. Be that as it may, the proper approach is what has been described as a unified, textual, contextual and purposive approach: Rizzo & Rizzo Shoes Ltd. (Re), 1998 CanLII 837 (SCC), [1998] 1 S.C.R. 27, 154 D.L.R. (4th) 193; Canada Trustco Mortgage Co. v. Canada, 2005 SCC 54, [2005] 2 S.C.R. 601. Consistent with this approach, the Judge in the present matter noted that “the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament” (Judge’s decision at para. 56; E.A. Driedger, Construction of Statutes, 2nd ed., (Butterworths, 1983), at 87).
[42] As a starting point, Black’s Law Dictionary provides a definition of commercial that includes “[o]f or relating to, or involving the buying and selling of goods” and “[r]esulting or accruing from commerce or exchange”. Black’s Law Dictionary also defines “e-commerce” as “[t]he practice of buying and selling goods and services through online consumer services and of conducting other business or activities using an electronic device and the Internet” (Brian A. Garner, ed., Black’s Law Dictionary, 11th ed., (Thomson Reuters, 2019)). These definitions, in and of themselves, are sufficiently broad as to include a consumer’s relationship with a merchant of goods and services.
[43] From a contextual perspective, it must be reiterated that the UNFAACA incorporates the New York Convention, and its terms must accordingly be interpreted in a manner that is consistent with the purpose and objective of the New York Convention. In this spirit, the Supreme Court of Canada observed in GreCon Dimter inc. v. J.R. Normand inc., 2005 SCC 46, [2005] 2 S.C.R. 401 (GreCon), that “the purpose of the New York Convention is to facilitate the enforcement of arbitration agreements by ensuring that effect is given to the parties’ express intention to seek arbitration” (see article II(3) of the New York Convention). The Supreme Court of Canada also emphasized that “[t]he interpreter must therefore encourage arbitration clauses, and facilitate their enforcement.” (GreCon at para. 43).
[44] Likewise, the author Gary. B. Born, one of the world’s preeminent authorities in the field of international commercial arbitration, explains that the term “commercial” captures consumer transactions:In terms of the content of the term under the Convention, a “commercial” relationship should have its ordinary meaning, being a relationship involving an economic exchange where one (or both) parties contemplate realizing a profit or other benefit. This definition is consistent with the weight of lower court authority under the Convention and the definition of the term in other contexts. It is a liberal, expansive definition that includes all manner of business, financial, consulting, investment, technical and other enterprise.
Among other things, the foregoing definition of “commercial” includes consumer transactions and (less clearly) employment contracts, thereby bringing agreements to arbitrate disputes arising from such matters within the Convention. [Emphasis added].
(Born, International Commercial Arbitration at 27). [45] It follows that, in order to interpret the UNFAACA in harmony with the purpose and objective of the New York Convention it incorporates, based on the statutory text, the context, and the broad and liberal interpretation it calls for, I am of the view that consumer relationships fall within the meaning of “commercial legal relationships” contemplated by the UNFAACA.
[46] In arguing the opposite, Ms. Difederico relies heavily on the recent decision of the Supreme Court of Canada in Uber. In that case, the plaintiff, an Uber driver based in Ontario, commenced a proposed class action on behalf of Ontario Uber drivers and argued that Uber drivers were employees of Uber. As such, he maintained that their relationship with Uber was governed by Ontario’s Employment Standards Act, 2000, S.O. 2000 c. 41 (ESA), and therefore the drivers were entitled to the benefit of the ESA. The plaintiff’s contention was that Uber had violated the ESA and he sought to advance this contention in his proposed class action. In so doing, he argued that the arbitration agreement included in the contract of adhesion between Uber and the drivers was void and unenforceable. In response, Uber brought a motion to stay the proposed class action in favour of arbitration.
[47] In Uber, the Supreme Court thus addressed Ontario’s arbitration framework, including the ICCA. Importantly, it noted that the ICAA incorporates both the New York Convention and the Model Law, but that only the Model Law was relevant for its analysis (Uber at para. 21). The definition of “commercial” articulated in Uber was accordingly not meant to be a comprehensive definition for the purposes of the New York Convention under the UNFAACA. Rather, the limited holding from Uber is that an employment dispute cannot be defined as “commercial” for the purpose of the ICAA because “[this] is not the type of dispute that the ICAA is intended to govern” (Uber at para. 26).
[48] It is also noteworthy that in Uber, the Supreme Court directed that in such circumstances, a court must focus on the nature of the dispute at issue and not the nature of the relationship between the parties to the arbitration agreement at paragraph 25:[A] court must determine whether the ICAA applies by examining the nature of the parties’ dispute not by making findings about their relationship. A court can more readily decide whether the ICAA applies (or an arbitrator can more readily decide whether the Model Law applies) by analysing pleadings than by making findings of fact as to the nature of the relationship. Characterising a dispute requires the decision-maker to examine only the pleadings; characterising a relationship requires the decision-maker to consider a variety of circumstances in order to make findings of fact. If an intensive fact-finding inquiry were needed to decide if the ICAA or the Model Law applies, it would slow the wheels of an arbitration, if not grind them to a halt. [Emphasis added]. [49] The above is consistent with the competence-competence principle and prior Supreme Court jurisprudence directing that complex factual inquiries should be avoided when a court is seized of a motion for a stay in favour of arbitration. In any event, the Judge in the present case observed that if she were to consider the nature of the dispute between the parties, as opposed to the relationship, she would conclude it is a commercial one because the claims alleged by Ms. Difederico have “a uniquely commercial character”. The Judge reasoned as follows at paragraphs 64 to 66:The thrust of Ms. Difederico’s claims is that Amazon conspired with third-party sellers to fix the prices for products that are sold to consumers on Amazon platforms in breach of the Competition Act. In my view, Amazon has properly characterized the pith and substance of the dispute as allegations of anti-competitive conduct related to Ms. Difederico’s purchases of products online, including Amazon.ca.
Ms. Difederico’s claims center around allegations that Amazon has entered into commercial agreements with third-party sellers on its sites regarding the pricing of goods. In my view, these purported agreements are commercial transactions between business entities akin to a “trade transaction for the supply or exchange of goods or services” or “distribution agreement” like the examples of commercial relationships listed in the footnote to the Model Law: Uber at para 23.
Although Ms. Difederico is a consumer, in my view the claims she has made have a commercial foundation. [50] I see no reason to depart from that reasoning which is in keeping with the competence-competence principle, the purposes of the New York Convention, and the reference to “differences arising out of commercial legal relationships” in the text of subsection 4(1) of the UNFAACA.
[51] In view of the dispute arising from Ms. Difederico’s claims pursuant to the Competition Act, I am thus of the view that the Judge did not err in finding that these claims are captured by the meaning of “commercial” in the context of the UNFAACA. Consequently, the UNFAACA applies, as does, more particularly, Article II(3) of the New York Convention:Article II
Article II
3 The court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed.
3 Le tribunal d’un État contractant, saisi d’un litige sur une question au sujet de laquelle les parties ont conclu une convention au sens du présent article, renverra les parties à l’arbitrage, à la demande de l’une d’elles, à moins qu’il ne constate que ladite convention est caduque, inopérante ou non susceptible d’être appliquée. [52] Incidentally, had paragraph 50(1)(b) of the Federal Courts Act been considered and applied instead of the UNFAACA, as argued for by Ms. Difederico, the result would nonetheless be the same. Indeed, the discretion afforded to the Federal Court (and the Federal Court of Appeal) to stay proceedings under paragraph 50(1)(b) where it is in the interest of justice to do so would not circumvent the competence-competence principle and the present matter would likewise also be stayed in favour of arbitration, absent any of the exceptions considered below (Murphy). Indeed, the competence-competence principle has long been understood to be in the interest of justice. Until Parliament legislates otherwise, and unless the limited exceptions established by Dell and Uber apply, stays in favour of arbitration are to be granted in relation to claims brought under the Competition Act.
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