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Arbitration - Competence-Competence (2). 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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