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Arbitration - Competence-Competence Principle
MORE CASES
Part 2
. Russian Federation v. Luxtona Limited
In Russian Federation v. Luxtona Limited (Ont CA, 2023) the Court of Appeal considered the arbitration competence-competence principle, which allows either the arbitrator or the court to decide it's jurisdiction (ie. wherever the issue arises). Here the issue was - when a court hears the jurisdiction matter - are the parties restricted to the record below (as in a conventional non-arbitral appeal) or can they adduce entirely new evidence. The court here decided the latter, because it's a hearing de novo:(1) The competence – competence issue
[28] Luxtona argues that the Divisional Court erred in not referring to the competence-competence principle. It says that this principle, which allows an arbitral tribunal to rule on its own jurisdiction, requires that parties be given strong incentives to put as much of the record before the tribunal as possible. Otherwise, in Luxtona’s submission, the tribunal will not truly be able to rule on its own jurisdiction.
[29] I do not accept this submission.
[30] Article 16(1) of the Model Law provides that an arbitral tribunal may rule on its own jurisdiction. This principle, referred to variously as competence-competence, compétence de la compétence, or Kompetenz-Kompetenz, is fundamental to international commercial arbitration.
[31] Competence-competence serves two primary functions. First, it resolves a legal loophole whereby an arbitral tribunal that finds itself lacking jurisdiction would, ipso facto, lose its ability to make a ruling to that effect: see Nigel Blackaby, K.C., Constantine Partasides, K.C., & Alan Redfern, Redfern and Hunter on International Arbitration, 7th ed. (Oxford: Oxford University Press, 2023). And second, it promotes efficiency by limiting a party’s ability to delay arbitration through court challenges to the tribunal’s jurisdiction: see Uber Technologies Inc. v. Heller, 2020 SCC 16, at para. 122 (per Brown J., concurring).
[32] Thus, in Dell Computers v. Union des consommateurs, 2007 SCC 34, at para. 84, the Supreme Court of Canada set out a “general rule that … a challenge to the arbitrator’s jurisdiction must be resolved first by the arbitrator.”
[33] That is precisely what happened in this case: the tribunal was provided with the first opportunity to resolve Russia’s challenge to its jurisdiction.
[34] That is as far as the competence-competence principle goes. It does not require any special deference be paid to an arbitral tribunal’s determination of its own jurisdiction. Competence-competence is best understood as “a rule of chronological priority” rather than as “empowering the arbitrators to be the sole judge of their jurisdiction”: see Emmanuel Gaillard & John Savage, eds., Fouchard, Gaillard, Goldman on International Commercial Arbitration (The Hague: Kluwer Law International, 1999), at paras. 659-60.
[35] As the Divisional Court correctly noted, the “uniformity principle” set out in Article 2A(1) of the Model Law makes international decisions strongly persuasive in Ontario. The very nature of international arbitration makes it highly desirable that Ontario’s regime should be coherent with those of other countries, especially (but not exclusively) those that have also adopted the Model Law. The weight of international authority shows that the competence-competence principle does not limit the fact-finding power of a court assessing an arbitral tribunal’s jurisdiction.
[36] In Dallah Real Estate and Tourism Holding Company v. The Ministry of Religious Affairs, Government of Pakistan, [2010] UKSC 46, a unanimous decision of the United Kingdom Supreme Court, Lord Collins wrote, at para. 84, that competence-competence “is no doubt a general principle of law.” However, he wrote, “it does not follow that the tribunal has the exclusive power to determine its own jurisdiction … Nor does it follow that the question of jurisdiction may not be reexamined by the supervisory court of the seat in a challenge to the tribunal’s ruling on jurisdiction.”
[37] The U.K. court in Dallah referred to the decision of the French Cour de cassation in the Pyramids case (République Arabe d’Egypte c. Southern Pacific Properties Ltd, Cour de cassation Civ. 1re, 6 January 1987, No. 84-17.274). There, the French court held that the court’s role in assessing the tribunal’s jurisdiction is [translation] “to examine as a matter of law and as a matter of fact all circumstances relevant to the alleged defects” [Emphasis added.]
[38] Because the court retains the final say over questions of jurisdiction, it necessarily follows that the court must be, as a Singapore court put it, “unfettered by any principle limiting its fact-finding ability”: AQZ v. ARA, [2015] SGHC 49, at para. 57.
[39] There are sound policy reasons why this should be the case. As set out in another Singapore decision (Insigma Technology Co. Ltd. v. Alstom Technology Ltd., [2008] SGHC 134, at para. 22, aff’d [2009] SGCA 24):First, if the court was limited to a process of review, it might be reviewing the decision of a tribunal that itself had no jurisdiction to make such a finding. Second, the procedure to determine jurisdiction is available to a party that took no part in the arbitral proceedings; if the court was confined to a review of the tribunal’s decision this would greatly undermine the ability of the challenging party to make its case. Third, if there is to be a challenge on an issue of fact, the court should not be in a worse position to make an assessment than the tribunal, and should therefore be able to examine witnesses in the usual way. [40] For these reasons, as the Singapore court held in AQZ, a court assessing an arbitral tribunal’s jurisdiction is not limited to the record that was before the tribunal. Put another way, an application to set aside an arbitral award for lack of jurisdiction is a proceeding de novo, not a review of or appeal from the tribunal’s decision.
[41] However, that comes with a significant caveat. I agree with the following proposition, set out in the English case of Electrosteel Castings Ltd v. Scan-Trans Shipping and Chartering Sdn Bhd, [2003] 2 All E.R. (Comm) 1064, at para. 23 (Q.B.), and cited in AQZ:[N]othing said here should encourage parties to seek two evidential bites of the cherry in disputes as to the jurisdiction of arbitrators, not least because (1) evidence introduced late in the day may well attract a degree of scepticism and (2) the court has ample power to address such matters when dealing with questions of costs. [42] Accordingly, while there is no need to strictly apply the Palmer test, where a party has participated fully in the arbitration, its failure to raise a piece of evidence before the tribunal may be relevant as to the weight the court should assign that evidence. . Peace River Hydro Partners v. Petrowest Corp.
In Peace River Hydro Partners v. Petrowest Corp. (SCC, 2022) the Supreme Court of Canada considers the arbitration competence-competence principle, the principle that an arbitrator has authority to decide it's own jurisdiction (usually against that of the court):[39] Competence‑competence is a principle that gives precedence to the arbitration process. It holds that, generally speaking, “arbitrators should be allowed to exercise their power to rule first on their own jurisdiction” (Dell Computer Corp. v. Union des consommateurs, 2007 SCC 34, [2007] 2 S.C.R. 801, at para. 70). This preference for arbitration is a departure from the traditional approach in Canada, which favoured an interventionist judicial role (Dell, at para. 69). Historically, judges took a dim view of arbitration, “treating it as a ‘second‑class method of dispute resolution’” (TELUS Communications Inc. v. Wellman, 2019 SCC 19, [2019] 2 S.C.R. 144, at para. 48; Seidel v. TELUS Communications Inc., 2011 SCC 15, [2011] 1 S.C.R. 531, at para. 96).
[40] However, in 1986, Canada acceded to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, Can. T.S. 1986 No. 43 (“New York Convention”), which established a single, uniform set of rules for international commercial arbitration that applied worldwide. Canada also adopted the UNCITRAL Model Law on International Commercial Arbitration, U.N. Doc. A/40/17, Ann. I, June 21, 1985 (“Model Law”), prepared by the United Nations Commission on International Trade Law. The Model Law was intended to guide legislative development in jurisdictions seeking to establish a modern legal framework in order to encourage commercial arbitration (J. K. McEwan and L. B. Herbst, Commercial Arbitration in Canada: A Guide to Domestic and International Arbitrations (loose‑leaf), at § 1:4). Article 16 of the Model Law articulates the competence‑competence principle. British Columbia adopted the principle, as set out in the Model Law, through s. 22 of the Arbitration Act (Seidel, at para. 28).
[41] In light of the foregoing, it is well established in Canada that a challenge to an arbitrator’s jurisdiction should generally be decided at first instance by the arbitrator (see Uber, at paras. 31‑34; Seidel; Dell; Rogers Wireless Inc. v. Muroff, 2007 SCC 35, [2007] 2 S.C.R. 921). This reflects the presumption that arbitrators have fact‑finding expertise comparable to that of courts, and that the parties intended an arbitrator to determine the validity and scope of their agreement (McEwan and Herbst, at § 5:10).
(2) Exceptions to the Competence‑Competence Principle
[42] The competence‑competence principle is not absolute, however. A court may resolve a challenge to an arbitrator’s jurisdiction if the challenge involves pure questions of law, or questions of mixed fact and law requiring only superficial consideration of the evidentiary record (Uber, at para. 32; Dell, at paras. 84‑85). This exception is justified by the particular expertise that courts have in deciding such questions. Further, it allows a legal argument relating to the arbitrator’s jurisdiction “to be resolved once and for all, and also allows the parties to avoid duplication of a strictly legal debate” (Dell, at para. 84). . Optiva Inc. v. Tbaytel
In Optiva Inc. v. Tbaytel (Ont CA, 2022) the Court of Appeal considered several arbitration issues dealing with the arbitrator's jurisdiction. In this quote the court addresses Arbitration Act s.17, which involves whether the arbitrator can decide it's own jurisdiction, as opposed to the court doing it:[4] Optiva moved in Superior Court for an order setting aside the arbitrator’s award pursuant to ss. 17 and 46 of the Arbitration Act, 1991, S.O. 1991, c. 17 (the “Act”). Optiva also sought leave to appeal on questions of law pursuant to s. 45 of the Act. In reasons released on April 20, 2021, the application judge refused to set aside the arbitrator’s order and dismissed Optiva’s application for leave to appeal.
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A. Did the application judge err in holding that optiva was required to challenge the arbitrator’s ruling that tbaytel could proceed by summary judgment motion within 30 days of receiving notice of that ruling?
[17] Section 17(1) of the Act provides:An arbitral tribunal may rule on its own jurisdiction to conduct the arbitration ... [18] Section 17(8) requires that:If the arbitral tribunal rules on an objection as a preliminary question, a party may, within thirty days after receiving notice of the ruling, make an application to the court to decide the matter. [19] On the application before the Superior Court, Tbaytel submitted that Optiva was required to bring an application in the Superior Court challenging the arbitrator’s preliminary ruling that he could proceed by summary judgment procedure within 30 days of the arbitrator giving notice of that decision. Optiva did not do so, but instead proceeded with the arbitration and challenged the ruling only after the arbitrator had decided the merits against Optiva.
[20] The application judge agreed that s. 17(8) required Optiva to challenge the decision to proceed by summary judgment motion within 30 days of receiving notice of that decision. He went on, however, to conclude that even if Optiva’s challenge had been brought in a timely fashion, he would have dismissed the application. In his view, the arbitrator had jurisdiction to hear the summary judgment motion: Optiva Inc. v. Tbaytel, 2021 ONSC 2929, at paras. 42-46.
[21] On appeal, Optiva submits that s. 17 of the Act has no application to procedural orders like the order made by the arbitrator permitting Tbaytel to proceed with a summary judgment motion. Optiva places heavy reliance on Inforica Inc. v. CGI Information Systems and Management Consultants Inc., 2009 ONCA 642, 97 O.R. (3d) 161.
[22] In response, Tbaytel submits that Optiva repeatedly characterized its challenge to the arbitrator’s ability to proceed by summary judgment motion as a jurisdictional challenge. Optiva argued the arbitrator had no authority to conduct a proceeding by way of summary judgment motion. Tbaytel argues that Optiva cannot resile from that position to avoid its failure to comply with the time limit imposed by s. 17(8).
[23] I cannot accept that Optiva’s characterization of the argument as jurisdictional is determinative. Inforica Inc. is the controlling authority. In Inforica Inc., the responding party in the arbitration asked the arbitrator to make an order for security for costs against the claimant. The arbitrator made that order. The claimant successfully moved in Superior Court to set aside that decision on the ground that the arbitrator had no jurisdiction to make an order for security for costs.
[24] This court reversed the application judge. In doing so, it described the scope and nature of s. 17 of the Act. Specifically, the court held that the arbitrator’s decision ordering security for costs was not a ruling on the arbitrator’s “own jurisdiction” under s. 17(1). Consequently, the ruling did not fall under s. 17(1), and the other parts of s. 17, including the time limit in s. 17(8), had no application.
[25] Sharpe J.A. wrote for the court. He said, at para. 16:Section 17(1) defines the parameters of s. 17, allowing an arbitrator to rule on his “own jurisdiction to conduct the arbitration”. In my opinion, on a fair reading of that language in light of the modern approach that respects the autonomy of the arbitral process and discourages judicial intervention, s. 17(1) is concerned with only the arbitrator’s jurisdiction to entertain the subject matter of the dispute. Asking an arbitrator to decide whether he has jurisdiction to order security for costs does not amount to asking him whether he has jurisdiction to conduct the arbitration. The words “jurisdiction to conduct the arbitration” in s. 17(1) connote jurisdiction over the entire substance or subject matter of the case, not jurisdiction to make interlocutory or procedural orders that do not determine the merits of the dispute and that are made along the way to final resolution of the issues. [Emphasis added.] [26] Sharpe J.A., at para. 23, made it clear that the application of s. 17 did not depend on whether a particular order was classified as procedural or something other than procedural:The issue is not whether the order is, strictly speaking, procedural in nature – the issue is whether the order amounted to a ruling on the arbitrator’s “own jurisdiction to conduct the arbitration”. In my view, it did not and s. 17(8) did not apply to confer a jurisdiction on the application judge, even if the order for security for costs was not, strictly speaking, procedural in nature. [27] The subject matter of the dispute between Tbaytel and Optiva arose out of the contract and the problems that ensued. The ruling on the availability of a summary judgment motion was a ruling on the procedure to be followed in the arbitration. It was no more a ruling on the merits of the subject matter of the arbitration, than was the ruling in Inforica Inc. on the availability of an order for security for costs. Both matters, whether described as procedural or something else, were incidental to the determination of the merits of the subject matter of the dispute.
[28] Applying Inforica Inc., the arbitrator’s decision to proceed by summary judgment was not a decision under s. 17(1) of the Act. Section 17(8) did not apply to any challenge brought to the arbitrator’s decision to proceed by summary judgment. The application was not out of time. Optiva’s application to set aside the arbitrator’s award was properly brought under s. 46 of the Act.
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[41] Apart from the language in para. 8 of the agreement, there is a further reason for rejecting Optiva’s submission that the arbitrator could not proceed by way of a summary judgment motion. Optiva and Tbaytel agreed in para. 8.1.13 that the arbitrator had the power to interpret agreements, including the arbitration agreement. The parties agreed that the arbitrator would decide what the terms of the arbitration agreement, including the terms in para. 8, actually meant. In deciding that Tbaytel could proceed by way of a summary judgment motion, the arbitrator exercised the interpretative powers given to him by Optiva and Tbaytel: Alectra Utilities Corp. v. Solar Power Network Inc., 2019 ONCA 254, 145 O.R. (3d) 481, at para. 40, leave to appeal refused, [2019] S.C.C.A. No. 202. In the circumstances of this case, and in light of the arbitrator’s acknowledged power to interpret the arbitration agreement, the court could set aside the arbitration award based on the arbitrator’s interpretation of the agreement only if satisfied that Optiva was not treated “equally and fairly”, or that the procedure followed “did not comply” with the Act: Arbitration Act, ss. 46(1)6-7. . Irwin v. Protiviti
In Irwin v. Protiviti (Ont CA, 2022) the Court of Appeal upheld a motion judge's stay of court proceedings under the reasoning that the court's jurisdiction over employment issues (ostensibly governed by an arbitration agreement) be decided by arbitration itself (competence-competence):[5] With respect to procedural fairness, the appellant argues that she was unaware that the motion judge was contemplating referring the question of the arbitration clause’s validity to arbitration, and therefore was unable to make meaningful submissions on this issue. We reject this argument. The respondents took the position in their factum on the motion that the court should defer to the arbitrator on the issue of the arbitrator’s jurisdiction. The appellant was on notice that jurisdiction was in issue.
[6] The respondents argued that this court lacks jurisdiction to hear the appeal on two bases: (1) the order appealed from is interlocutory, and accordingly the proper appeal route would be to the Divisional Court; and (2) the appeal is statute-barred pursuant to s. 7(6) of the Arbitration Act.
[7] In coming to the decision to grant the stay motion, the motion judge followed s. 7(1) of the Arbitration Act, which provides that a court shall stay proceedings if a party to an arbitration agreement commences proceedings in respect of a matter that the arbitration agreement requires to be submitted to arbitration. She noted, following Lauwers J.A.’s observation in Haas v. Gunasekaram, 2016 ONCA 744, 62 B.L.R. (5th) 1, at para. 12, that the statutory language is directive, and that the priority granted to arbitration by the legislative scheme is reinforced by s. 17(1), which provides that “[a]n 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.”
[8] The motion judge also noted the exception in s. 7(2)(2) of the Arbitration Act that grants the court the discretion nevertheless to refuse to stay a proceeding where “[t]he arbitration agreement is invalid.” The motion judge did not refuse to stay the proceeding, holding that “the statute and the jurisprudence establish that the determination of the validity of the arbitration clause is within the jurisdiction of the arbitral tribunal.”
[9] The appellant argues that the motion judge erred by leaving the question of the validity of the arbitration clause to be determined in arbitration. The motion judge was required, the appellant argues, to decide whether the arbitration clause was invalid due to unconscionability or inconsistency with the ESA or HRC, as the appellant had argued before her.
[10] We do not agree. As explained below, the motion judge was permitted to leave the issue with the arbitrator as contemplated by s. 17(1) and the common law rule it codified, and was not obligated to provide reasons justifying this decision. This is in keeping with the general rule in Dell Computer Corp. v. Union des consommateurs, 2007 SCC 34, [2007] 2 S.C.R. 801, at para. 84, that “in any case involving an arbitration clause, a challenge to the arbitrator’s jurisdiction must be resolved first by the arbitrator.” Uber Technologies Inc. v. Heller, 2020 SCC 16, 447 D.L.R. (4th) 179, at para. 32, further specified that a court should refer all challenges to an arbitrator’s jurisdiction to arbitration, except in two situations: (1) the challenge raises pure questions of law; or (2) the challenge raises questions of mixed fact and law (i) requiring only superficial consideration of the evidence and (ii) where the court is convinced the challenge is not a delaying tactic or will not prejudice recourse to the arbitration.
[11] The rule, then, is that questions of jurisdiction are to be arbitrated. A court has the discretion to decide otherwise, but only where the jurisdictional question is based on a pure question of law, or of mixed fact and law requiring not more than a superficial consideration of evidence.
[12] The appellant’s argument from unconscionability is that it is unconscionable for an arbitration clause to exclude potential awards of punitive damages or costs. The determination of unconscionability is a “probing factual inquiry”: Rogers Wireless Inc. v. Muroff, 2007 SCC 35, [2007] 2 S.C.R. 921, at para. 15. The record assembled on this motion is voluminous, and the interpretation of the arbitration agreement would depend on factual findings, including findings of credibility. It would be necessary to assess the sophistication of the parties, their bargaining power, and other aspects of the factual matrix related to the drafting of the agreement. Whether the arbitration clause ought to be found void for unconscionability could therefore not be determined by a superficial consideration of the evidence. Answering that question would risk turning the motion into a mini-trial: Heller, at para. 45.
[13] The question of the arbitration clause’s consistency with the ESA and the HRC are also questions of mixed fact and law, in that they cannot be decided in the abstract, but require an interpretation of the employment agreement. The motion judge was, inferentially, of the view that these questions could not be decided by undertaking a superficial consideration of the evidence. In any event, given that the unconscionability question needed to be resolved by arbitration, it would make little sense to bifurcate the proceedings and have the remaining questions resolved by the motion judge.
[14] It is worth noting that none of the access to justice concerns that animated Heller are present in this case. The plaintiffs in Heller clicked on a standard form services agreement, were unlikely to have received legal advice, had no opportunity to negotiate the agreement, were made subject to the law of the Netherlands with arbitration to take place in the Netherlands, and required to pay a fee of $14,500 USD just to begin the arbitration. In contrast, the appellant was a professional earning a base salary of $350,000, claiming over $1.5 million, and facing arbitration in Ontario under Ontario law. She had the assistance of legal counsel during the negotiation of the employment agreement. Notwithstanding that the unavailability of a costs award under the arbitration clause makes arbitration potentially less remunerative than it would otherwise be, there is no suggestion that the costs of arbitration are disproportionate to the potential reward, or that barriers to arbitration would effectively leave the appellant without remedy.
[15] In summary, the appellant was not denied procedural fairness, and the motion judge was not required to determine the validity of the arbitration clause as a threshold matter. By the operation of s. 7(6), no appeal from the motion judge’s decision is available. This court is without jurisdiction and the appeal must be quashed. Accordingly, it is unnecessary for us to address the further issue of whether the order appealed from is final or interlocutory. . 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 uphold 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.
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[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.
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[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.”
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