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This article originally appeared in the October 28, 2016 issue of The Lawyers Weekly. Click here to view the full article.
Enforcement power can come from tribunals or from original agreement
In Canadian domestic commercial arbitration, there are two typical aspects to the application of injunction remedies. The first relates to carving injunction remedies out of an arbitration agreement and reserving them for court proceedings. The second relates to the power of an arbitral tribunal to make an award for injunctive relief.
It is common in some types of arbitration agreements to exclude interlocutory injunction remedies and leave them to the jurisdiction of the court. Sometimes, the exclusion is discretionary at the election of one or both of the parties to the agreement.
This is typically done in franchise agreements that contain an arbitration clause. Different variations of this sort of a carveout, some with the discretionary option and others without, are also used in some intellectual property agreements, telecom joint venture agreements and many other types of domestic commercial arbitration agreements.
In Bell Mobility Inc. v. MTS Allstream Inc. 2008 MBQB 144, the court analyzed a party’s election under an arbitration agreement to seek an injunctive remedy in court and the consequences of that election.
Bell Mobility and MTS Allstream entered into a mobility alliance agreement. The agreement contained an arbitration clause, with an exception for interim and interlocutory injunctions. MTS brought a court proceeding for injunctive and related relief to restrain Bell Mobility from suspending shipments of products.
While the court injunction proceedings were under way, MTS also issued a notice to commence arbitration proceedings for the adjudication of the substance of the dispute.
Bell Mobility took the position that by first going to court, MTS elected to adjudicate the entire dispute in court. The Manitoba Court of Queen’s Bench held that MTS’s court proceedings for injunctive relief did not override the requirement in the arbitration agreement to resolve the dispute through arbitration. Similarly, the court held that the commencement of the court proceeding was not a “duplicative” or “simultaneous” proceeding. As has been consistently held by Canadian courts in the enforcement of arbitration agreements, the court’s overriding principle was the intention of the parties, which was to create a presumption in favour of arbitration.
By virtue of well-established provincial judicature statutes and under common law, injunctive relief falls within the inherent jurisdiction of Canadian superior trial courts. Most provincial domestic arbitration statutes in Canada contain provisions granting to an arbitrator the jurisdiction to award injunctive relief.
In Ontario, with virtually identical provisions in most other provinces’ arbitration statutes, s. 8(1) the Arbitration Act, 1991, provides an arbitral tribunal with the same powers as the court in respect of preservation of property, interim injunctions and appointment of receivers. Section 31 makes it mandatory for an arbitral tribunal to decide a dispute in accordance with law, with which is expressly stated to include specific performance, injunctions and other equitable remedies.
Two exceptions are noteworthy: Newfoundland and Labrador provides such a power to an arbitrator indirectly, by stating that its Arbitration Act is to be read together with its Judicature Act. The latter contains typical equitable and injunction powers granted to the court.
In British Columbia, s. 10 of the Arbitration Act uses the term “specific performance” and only in respect of the sale of goods.
The British Columbia statute also contains an indirect purported general power to grant injunction and related relief. Section 22 of the act incorporates by reference the rules of the British Columbia International Commercial Arbitration Centre for the conduct of domestic commercial arbitrations, unless “those rules are, among other things, inconsistent with, or contrary to the statute.” Subsection 29(k) of those rules provides the power to make broad injunctive and other equitable relief.
While private arbitration rules of various arbitration institutions in Canada (and internationally) routinely grant such powers to their arbitral tribunals, it is unclear to me whether this scheme can properly work to effect a statutory scheme. The statute incorporates the rules by reference, making them technically inferior to the statute. The rules themselves are stated as rules of procedure, rather than substantive powers or rights. This scheme becomes circular.
Further, s. 23 of the B.C. Arbitration Act requires an arbitrator to decide an arbitration “by reference to law,” unless the parties agree that the matter may be decided on equitable grounds. This agreement of the parties is made under s. 35 of the act, and thus can only be made after the arbitration has commenced.
The B.C. Court of Appeal has provided conflicting decisions on the jurisdiction of an arbitrator to award equitable relief in the absence of an agreement by the parties (see Randhawa v. Pepsi Bottling Group (Canada) Co. 2006 BCCA 273, and Hayes Forest Services Limited v. Teal Cedar Products Ltd. 2008 BCCA 283). Recently, the Supreme Court of Canada, in British Columbia (Forests) v. Teal Cedar Products Ltd. 2013 SCC 51, stated in a unanimous decision (by Justice Marshall Rothstein) that the B.C. Arbitration Act does not grant to an arbitrator jurisdiction to award equitable relief, unless the parties agree to it under s. 23 of the act.Tags : Arbitration, Franchise Agreement, Injunction
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