Rarotonga, 2010


Online Lawyer

Most Popular
Contracts / Torts / Evidence / Limitations / Tenant Plus / welfare (ontario works) / odsp / human rights / employment / consumer / COVID Litigation

home / about / Little Friends Lefkada (Greece) / testimonials / E-Colleagues / Conditions of Use

Civil and

Canadian Animal Law

Arbitration - Competence-Competence Principle

. Trade Finance Solutions Inc. v. Equinox Global Limited

In Trade Finance Solutions Inc. v. Equinox Global Limited (Ont CA, 2018) the Court of Appeal considered whether to upheld an arbitration contract:
[22] The Insurers argue that the existence of an arbitration clause in the contract demands that questions about the proper forum for dispute resolution, as well as the underlying dispute, ought to be determined by the arbitrator, pursuant to the “competence-competence” principle.

[23] Generally speaking, the approach in Ontario is that in cases where the "existence or validity of the arbitration agreement" is not clear (i.e. the agreement is arguably, but not clearly: (a) null and void; (b) inoperative; or (c) incapable of being performed) it is preferable for the arbitrator to decide the issue: Dalimpex Ltd. v. Janicki, (2003), 2003 CanLII 34234 (ON CA), 64 O.R. (3d) 737 (Ont. C.A.), at paras. 21-22. Thus, it would seem that an answer to issue two could be dispositive of this appeal.


[26] I note that Lauwers J.A., in the recent case of Haas v. Gunasekaram, 2016 ONCA 744, 62 B.L.R. (5th) 1 at para. 17, created an analytical framework[3] applicable to motions to stay proceedings under the Arbitration Act, 1991, S.O. 1991, c. 17, which may also be applicable to such motions under the ICAA. But I need not adopt this framework in this case. Its application was not argued, and this appeal effectively turns on a single issue: whether there was arguably an operative arbitration agreement in the contract.


[48] In sum, the arbitration provision was at least arguably operative in the circumstances. The motion judge failed to give effect to the mandatory language of the arbitration clause that provides that any dispute under the policy “shall be referred to and finally resolved by arbitration”. In finding that the Action Against Insurer clause allowed TFS to also commence court proceedings in Ontario, the motion judge erroneously nullified this mandatory language. He was in error in doing so.

[49] For these reasons, I would allow this ground of appeal.
. Haas v. Gunasekaram

In Haas v Gunasekaram (Ont CA, 2016) a shareholder investor sued the principles of a corporation for tort in negligent misrepresentation using Ontario's Superior Court. The principles moved under the Arbitration Act to declare that the matter should be resolved by the term of contractual arbitration, not in the public courts. The court explained the 'competence-competence principle', that in the event of a jurisdictional dispute between the court and the arbitration venue, that the arbitrator's ruling is paramount:
C. The Law’s approach to arbitration agreements

[9] Many cases have considered how the court should approach its task under s. 7(1) of the Arbitration Act, which provides:
7(1) If a party to an arbitration agreement commences a proceeding in respect of a matter to be submitted to arbitration under the agreement, the court in which the proceeding is commenced shall, on the motion of another party to the arbitration agreement, stay the proceeding. [Emphasis added.]
[10] The law favours giving effect to arbitration agreements. This is evident in both legislation and in jurisprudence. Section 7 of the Arbitration Act contains mandatory language, stating “the court in which the proceeding is commenced shall, on the motion of another party to the arbitration agreement, stay the proceeding” (emphasis added).

[11] The mandatory wording in s. 7 of the Arbitration Act is a change from s. 7 of the old Arbitrations Act, R.S.O. 1990, c. A.24, which gave the court discretion to stay the action:
[I]f satisfied that there is no sufficient reason why the matter should not be referred in accordance with the submission and that the applicant was at the time when the proceeding was commenced and still remains ready and willing to do all things necessary to the proper conduct of the arbitration, [the court] may make an order staying the proceeding. [Emphasis added.]
[12] As can be seen, the statutory language in s.7 of the current Arbitration Act is directory, not equivocal. It strongly favours giving effect to an arbitration agreement. This policy direction is reinforced by s. 17 of the Arbitration Act:
17(1) An arbitral tribunal may rule on its own jurisdiction to conduct the arbitration and may in that connection rule on objections with respect to the existence or validity of the arbitration agreement.

(2) If the arbitration agreement forms part of another agreement, it shall, for the purposes of a ruling on jurisdiction, be treated as an independent agreement that may survive even if the main agreement is found to be invalid.
[13] Subsection 17(1) did not exist in the 1980 or the 1990 Arbitrations Act. Subsection 17(2) codifies the common law, and establishes that an arbitration agreement can survive even where the contract in which it is found is determined to be invalid.[2]

[14] The same pro-arbitration orientation is found in the jurisprudence. In Dell Computer Corp. v. Union des consommateurs, 2007 SCC 34 (CanLII), [2007] 2 S.C.R. 801, Deschamps J., speaking for the majority of the Supreme Court, articulated a general rule, at para. 84: “I would lay down a general rule that in any case involving an arbitration clause, a challenge to the arbitrator’s jurisdiction must be resolved first by the arbitrator.” This has become known as the “competence-competence principle”. The exception is where a “challenge to the arbitrator’s jurisdiction is based solely on a question of law, or one of mixed fact and law that requires for its disposition ‘only superficial consideration of the documentary evidence in the record’” (Dell Computer, at para. 84). See also Seidel v. Telus Communications Inc., 2011 SCC 15 (CanLII), [2011] 1 S.C.R. 531, at para. 4.

[15] This court most recently discussed the “competence-competence” principle in Ciano Trading & Services C.T. & S.R.L. v. Skylink Aviation Inc., 2015 ONCA 89 (CanLII), stating “where it is unclear if the arbitrator has jurisdiction, it is preferable to leave the issue to the arbitrator pursuant to the competence-competence principle” (at para. 7). In Dancap Productions Inc. v. Key Brand Entertainment, Inc., 2009 ONCA 135 (CanLII), 246 O.A.C. 226, at paras. 32-33, Sharpe J.A. explained:
It is now well-established in Ontario that the court should grant a stay under art. 8(1) of the Model Law where it is “arguable” that the dispute falls within the terms of an arbitration agreement. In Dalimpex Ltd. v. Janicki (2003), 2003 CanLII 34234 (ON CA), 64 O.R. (3d) 737 (C.A.), at para. 21, Charron J.A. adopted the following passage by Hinkson J.A. in Gulf Canada Resources Ltd. v. Arochem International Ltd. (1992), 1992 CanLII 4033 (BC CA), 66 B.C.L.R. (2d) 113 (B.C.C.A.), at paras. 39-40, as “the proper approach” to art. 8(1):
it is not for the court on an application for a stay of proceedings to reach any final determination as to the scope of the arbitration agreement or whether a particular party to the legal proceedings is a party to the arbitration agreement because those are matters within the jurisdiction of the arbitral tribunal. Only where it is clear that the dispute is outside the terms of the arbitration agreement or that a party is not a party to the arbitration agreement or that the application is out of time should the court reach any final determination in respect of such matters on an application for a stay of proceedings.

Where it is arguable that the dispute falls within the terms of the arbitration agreement or where it is arguable that a party to the legal proceedings is a party to the arbitration agreement then, in my view, the stay should be granted and those matters left to be determined by the arbitral tribunal.
As Charron J.A. explained in Dalimpex, at para. 22, “a deferential approach” allowing the arbitrator to decide whether the dispute is arbitrable, absent a clear case to the contrary, “is consistent both with the wording of the legislation and the intention of the parties to review their disputes to arbitration.”


The author has waived all copyright and related or neighboring rights to this Isthatlegal.ca webpage.