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Arbitration - Competence-Competence (2). Lin v. Uber Canada Inc.
In Lin v. Uber Canada Inc. (Fed CA, 2025) the Federal Court of Appeal dismissed a class proceeding appeal, here brought against a successful motion for stay of the civil action in favour of a contractual arbitration clause.
The court considers when an action (here a class proceeding) should be stayed in favour of arbitration, here walking through the applicable Peace River test(s):I. The Process to be Followed in Determining whether a Claim Should be Stayed in Favour of Arbitration
[8] In Peace River Hydro Partners v. Petrowest Corp., 2022 SCC 41, the Supreme Court confirmed that there is a "“legislative and judicial preference for holding parties to arbitration agreements”": at para. 10. Moreover, as the Federal Court observed in this case, stays in favour of arbitration where the parties have agreed to mandatory arbitration are inherently in the interest of justice. As a result, Canadian courts will only consider challenges to the jurisdiction of an arbitrator or the enforceability of an arbitration agreement in exceptional circumstances.
[9] The Courts have further held that the "“competence-competence”" principle mandates that subject to limited exceptions, any challenge to an arbitrator’s jurisdiction should be decided by the arbitrator and not by the Courts: Peace River, above at paras. 39–41, Seidel v. TELUS Communications Inc., 2011 SCC 15 at paras. 2, 23, 42; Dell Computer Corp. v. Union des consommateurs, 2007 SCC 34 at paras. 84–86; Difederico v. Amazon.com, Inc., 2023 FCA 165 at para. 33, leave to appeal ref’d 2024 CanLII 43121.
[10] That is, where the invalidity or unenforceability of an arbitration agreement is not clear (but is merely arguable), the matter should be resolved in the first instance by the arbitrator unless certain exceptions apply: Peace River, above at paras. 88–89; Difederico, above at paras. 34–35, 52.
[11] Courts will only consider adjudicating challenges to arbitration agreements where such challenges raise pure questions of law, or questions of mixed fact and law that require only a superficial consideration of the record: Dell, above at paras. 84–86; Difederico, above at para. 35.
[12] In Uber Technologies Inc. v. Heller, 2020 SCC 16, the Supreme Court identified a third exception to the competence/competence principle, holding that a court should not refer a bona fide challenge to the validity of an arbitration agreement or an arbitrator’s jurisdiction to the arbitrator where doing so would make it impossible for one party to arbitrate or for the challenge to be resolved: at paras. 38–46.
[13] The Supreme Court identified a two-part test in Peace River, above at paras. 76–84, that should be used in determining whether an action should be stayed in favour of arbitration. Under the first part of the test, the party seeking to enforce the arbitration agreement must establish an arguable case that all four of the technical prerequisites have been satisfied. If the party seeking the stay satisfies this part of the test, the Court should, subject to the second part of the test, stay the action. The second component of the Peace River test requires the party resisting arbitration to establish on a balance of probabilities that there is a statutory exception that would prevent staying the judicial proceeding in favour of arbitration.
[14] The first of the four technical prerequisites is that an arbitration agreement must exist, and the second is that a court proceeding must have been commenced by a party to the arbitration agreement. Thirdly, the court proceeding must relate to a matter that the parties had agreed to submit to arbitration, and, finally, the party seeking the stay must apply for the stay prior to taking any step in the court proceeding: Peace River, above paras. 81–86.
[15] While Mr. Lin took issue in the Federal Court with these prerequisites insofar as Uber Canada Inc. was concerned, there is now agreement that Uber has established an arguable case that all four of the technical prerequisites to the granting of a stay have been satisfied here. At issue in this appeal is whether Mr. Lin has demonstrated, on a balance of probabilities, the existence of a statutory exception preventing the Court from referring his action to an arbitrator.
[16] As the Federal Court observed in this case, statutory exceptions address more substantive reasons to object to or to invalidate an arbitration agreement. These include matters such as the agreement being "“null, void, inoperative, or incapable of performance”", other legislative interventions, or situations where the subject of the dispute is incapable of being the subject of arbitration: Federal Court decision at para. 46, citing Peace River, above at paras. 86–87.
[17] If the party resisting arbitration cannot establish the existence of a statutory exception on a balance of probabilities, the Court must grant a stay of the judicial proceeding and cede jurisdiction to the arbitrator: Peace River, above at para. 79. The competence-competence principle further requires that where the invalidity or unenforceability of an arbitration agreement is not clear, but is merely arguable, the question should be resolved by the arbitrator: Peace River, at paras. 88–89.
[18] In other words, to deny a stay of proceedings, it must be clear from the record before the Court that deferring a matter to arbitration would create a real prospect that there would be a denial of access to justice. The mere possibility of this occurring is not enough to overcome the competence-competence principle. As arbitration clauses are presumptively valid, a clear case must be established to reverse the presumption of validity: Peace River, above at para. 89. . BizTech v. Accreditation Canada
In BizTech v. Accreditation Canada (Div Ct, 2025) the Divisional Court considered what are essentially two JRs, these opposing decisions by Accreditation Canada and the Superintendent of Career Colleges [under the Ontario Career Colleges Act, 2005], these resulting in the revocation of a college's educational program which "triggered a statutory right by BizTech students in the DMS Program to a full refund of their fees."
Here the court briefly sets out the 'competence-competence' doctrine of arbitration:[94] Before analyzing this two-step test on the facts here, the competence-competence principle must be addressed. Competence-competence is a principle that gives precedence to the arbitration process subject to the exceptions where the challenge to jurisdiction involves pure questions of law, or questions of mixed fact and law requiring only superficial consideration of the evidentiary record. If the two exceptions do not apply, the arbitrator should be allowed to exercise their power to rule first on their own jurisdiction: Peace River, at paras. 41 to 42; Uber Technologies Inc. v. Heller, 2020 SCC 16, 447 D.L.R. (4th) 179, at para. 32. If the exceptions apply, the court may resolve a challenge to the arbitrator’s jurisdiction. . J.P. Thomson Architects Ltd. v. Greater Essex County District School Board
In J.P. Thomson Architects Ltd. v. Greater Essex County District School Board (Ont CA, 2025) the Ontario Court of Appeal applies the competence-competence arbitration doctrine to favour the arbitration tribunal regarding a jurisdiction issue:[27] The application judge correctly recognized that, where it is arguable that a dispute falls within the terms of an arbitration agreement, any final determination as to the scope of the dispute to be arbitrated is better left to the arbitration tribunal, “since the question of jurisdiction is itself within the jurisdiction of that tribunal”: Patel v. Kanbay International Inc., 2008 ONCA 867, 93 O.R. (3d) 588, at para. 18; see also Dalimpex Ltd. v. Janicki (2003), 2003 CanLII 34234 (ON CA), 64 O.R. (3d) 737 (C.A.), at para. 21.
[28] Due in part to her misreading of GC18, however, the application judge failed to apply this principle. She did not limit her consideration of the record to whether the parties had a dispute that “arguably” triggered a right to arbitration under GC18 but instead made numerous findings of fact about the entire history of interactions between the parties over the preceding 15 months. She erred in doing so.
[29] GC18 gives an arbitrator jurisdiction over any dispute between the parties “arising out of or relevant to” their agreement. It is up to the arbitrator to determine the scope of the dispute being arbitrated and of their jurisdiction. . Joseph Lebovic Charitable Foundation v. Jewish Foundation of Greater Toronto
In Joseph Lebovic Charitable Foundation v. Jewish Foundation of Greater Toronto (Ont CA, 2024) the Ontario Court of Appeal quashed a motion for leave to appeal, here "on the basis that this court does not have jurisdiction" to hear an appeal against the Superior Court's ruling respecting the arbitrator's jurisdiction [AA s.17(9)]:[7] The responding parties have commenced a motion for leave to appeal from the application judge’s order to this court. The moving parties move to quash the motion for leave to appeal on the basis that this court does not have jurisdiction to hear an appeal from the application judge’s order.
[8] We agree with the moving parties. It is plain from s. 17(9) of the Arbitration Act 1991, S.O. 1991, c. 17, that there is no appeal from the application judge’s decision. Section 17(8) provides 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.” Section 17(9) states: “There is no appeal from the court’s decision” (emphasis added).
[9] We do not accept the responding parties’ argument that the arbitrator’s jurisdiction decision was not a ruling “on an objection as a preliminary question” and therefore that it was not made under s. 17(8) of the Arbitration Act, 1991. It is evident that the issue of jurisdiction was argued as a preliminary question before the arbitrator; he did not wait to deal with this issue in the award, but instead issued a separate, preliminary ruling: see s. 17(7) of the Arbitration Act, 1991. While he may have delivered his ruling after the parties had already commenced the hearing of the arbitration on the merits, this does not alter the fact that the issue was raised and decided as a preliminary question: Iris Technologies Inc. v. Rogers Communications Canada Inc., 2022 ONCA 634, at paras. 7-8.
[10] Moreover, the responding parties treated the jurisdiction decision as a ruling on a preliminary question by bringing a stand-alone application to review the arbitrator’s jurisdiction decision, and a separate application in respect of the arbitrator’s July 27, 2023 award. In the circumstances, we have no doubt that the application to review the arbitrator’s jurisdiction decision was brought under s. 17 (8) of the Arbitration Act 1991, and that any appeal from the application judge’s order is precluded by s. 17(9). . Lochan v. Binance Holdings Limited
In Lochan v. Binance Holdings Limited (Ont CA, 2024) the Ontario Court of Appeal dismissed a defendant cryptocurrency operation's appeal, here from an order "dismissing its motion for a stay of proceedings in favour of arbitration, pursuant to s. 9 of the International Commercial Arbitration Act 2017".
Under the accepted competence-competence arbitration principle, a dispute over the arbitrator's contractual jurisdiction would be resolved by the arbitrator, with exceptions - here the exceptions of public policy and unconscionability:[15] First, the appellant argues that the motion judge erred in holding that an arbitration clause being contrary to public policy is an independent ground for an Ontario court to take jurisdiction and refuse a stay in favour of arbitration. In making this argument the appellant placed emphasis on the recent British Columbia Court of Appeal decision in Spark Event Rentals v. Google LLC, 2024 BCCA 148. The appellant argues that the motion judge went straight to considering whether the arbitration clause was void as contrary to public policy without first considering whether an exception to the competence-competence principle applied that would justify an Ontario court deciding whether the arbitration clause was void for public policy reasons, rather than allowing the arbitral tribunal to first consider the validity of the arbitration clause.
[16] Spark does not add anything to the analysis from Dell Computer Corp. v. Union des consommateurs, 2007 SCC 34, [2007] 2 S.C.R. 801, and Uber Technologies Inc. v. Heller, 2020 SCC 16, [2020] 2 S.C.R. 118. In Dell and Uber, the Supreme Court of Canada held that, in general, challenges to an arbitral tribunal’s jurisdiction should first be decided by the arbitral tribunal – what is known as the “competence-competence” principle. Before a domestic court can entertain arguments that an arbitration clause is void for reasons such as unconscionability or being contrary to public policy, it must first be satisfied that the circumstances fall within an exception to the application of the competence-competence principle to justify the domestic court deciding whether the arbitration clause is void, rather than allowing the arbitral tribunal to first decide the issue: Dell, at para. 84.
[17] Dell considered the exception to the competence-competence principle for cases where the jurisdictional issue depends on a question of law alone or where questions of mixed fact and law require only a superficial consideration of the documentary record: Dell, at paras. 84-85. Uber discussed the Dell framework and also considered the exception to the competence-competence principle for cases where impediments exist that functionally prevent a party from bringing a matter to arbitration such that, if the issue of validity of the arbitration clause is left to the arbitral tribunal, there is a real prospect that it will never be resolved by the arbitral tribunal. In Uber, the issue was high fees and inability, due to cost, to reach the place of arbitration. The concern underlying the Uber exception to the competence-competence principle is to address cases where an arbitration clause is effectively insulated from meaningful challenge. This is referred to in some of the jurisprudence as the “brick wall” framework: Uber, at paras. 32-40, 44-46.
[18] In Spark, the party resisting a referral to arbitration argued that where a party challenges the validity of an arbitration agreement on the basis that it is contrary to public policy, the party is not required to first meet the threshold of showing circumstances justifying an exception to the competence-competence principle: at para. 42. The British Columbia Court of Appeal rejected this argument. Consistent with Dell and Uber, the court held that before a domestic court can consider whether an arbitration clause is void, such that a matter should not be referred for arbitration, it must first consider the threshold question of whether an exception to the competence-competence principle applies which would justify the domestic court deciding the validity of the arbitration clause, rather than the arbitral tribunal: Spark, at paras. 43-48. The respondents do not dispute this proposition.
[19] The motion judge’s approach was consistent with Spark, Dell, and Uber. The appellant’s first argument fails because the motion judge did not go straight into the public policy analysis. Rather, as the jurisprudence provides, he first considered whether an exception to the competence-competence principle applied to justify an Ontario court deciding whether the arbitration clause was void as contrary to public policy or on the basis of unconscionability. . 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 class action 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 considered the arbitral competence-competence principle:(ii) The Competence-Competence Principle
[33] Historically, courts in Canada were reluctant to give way to arbitration and more specifically to the competence-competence principle, which, as noted earlier, mandates that any challenge to an arbitrator’s jurisdiction be decided by the arbitrator, not the courts. In essence, courts traditionally viewed the application of the competence-competence principle as favouring the autonomy of arbitration and thereby restricting their jurisdiction to judicially intervene in arbitration processes.
[34] The adoption of the New York Convention through the UNFAACA and of the UNCITRAL Model Law through the CAA paved the path for Canada to curb the historical reluctance to recognize arbitration in favour of becoming an “arbitration friendly” country. Indeed, several provinces followed suit and the Supreme Court of Canada, through a series of seminal decisions, enshrined the acceptance and implementation of international law on arbitration and the competence-competence principle in particular throughout the country: Desputeaux v. Éditions Chouette (1987) inc., 2003 SCC 17, [2003] 1 S.C.R. 178 (Desputeaux); Seidel v. TELUS Communications Inc., 2011 SCC 15, [2011] 1 S.C.R. 531 (Seidel); Dell Computer Corp. v. Union des consommateurs, 2007 SCC 34, [2007] 2 S.C.R. 801 (Dell); TELUS Communications Inc. v. Wellman, 2019 SCC 19, [2019] 2 S.C.R. 144; Uber Technologies Inc. v. Heller, 2020 SCC 16, [2020] 2 S.C.R. 118 (Uber).
[35] It is now well-established that Canadian courts will only consider challenges to the jurisdiction of an arbitrator or the enforceability of an arbitration agreement where such challenges raise a pure question of law or a question of fact or mixed fact and law that only requires a superficial consideration of the record (Dell at paras. 84-86). These questions may go to whether the arbitration agreement is null and void, inoperative, or incapable of being performed, as stated in Article II(3) of the New York Convention, or, since Uber, invalid for being unconscionable. As such, cases involving an arbitration agreement will be systematically referred to arbitration, subject to one of these limited exceptions.
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