Alberta Court of Appeal Decides Key Issues Regarding Tribunal Jurisdiction
By Carsten Jensen KC, FCIArb
In Dow Chemical v. Nova Chemicals, the Alberta Court of Appeal considered when a party has participated in an arbitration such that it is foreclosed from having the Court decide a jurisdictional issue, as well as the role of the Courts in determining an arbitrator’s jurisdiction. The Court of Appeal gave valuable guidance on these issues. Competence-competence is alive and well in Alberta, and the role of the Courts in arbitration matters is limited.
The latest instalment of the legal saga between Dow and Nova regarding their shared ownership of a petrochemical complex is the decision by the Alberta Court of Appeal in Dow Chemical v. Nova Chemicals, 2023 ABCA 343 (the “CA Decision”). Parallel litigation resulted in a judgment exceeding $1.4 billion against NOVA, partially reversed on appeal.[1]
The CA Decision arises from a budget dispute. NOVA was responsible for the budget, with disputes referred to arbitration, which happened here.
Dow participated, but eventually challenged the arbitrability of the dispute in Court. Dow’s position was that the budget should not include production forecasts, and whether such forecasts were properly included raised a jurisdictional issue to be decided by the Court. Dow’s position was grounded in the parallel litigation finding that NOVA was required to try to run the facility at full capacity. Dow said that the arbitration was a collateral attack on that finding.
The Court of King’s Bench determined that Dow had participated in the arbitration to such an extent that it was foreclosed from bringing a Court challenge,[2] and in any event the competence-competence principle required Dow’s jurisdiction challenge to be decided by the arbitrators.[3] Permission to Appeal was granted.[4]
The Appeal involved s. 7 (1) and s. 47 of the Alberta Arbitration Act.
Section 7 provides that a Court shall, subject to limited exceptions, stay a court proceeding where there is an arbitration agreement. Section 47 provides limited jurisdiction to the Court to declare an already commenced arbitration to be invalid, and to enjoin that arbitration if (for example) the arbitration agreement does not apply to the subject matter of the dispute – and if the applicant has “not participated” in the arbitration.
The Issues Raised in the Appeal
Dow argued that its participation in the arbitration did not disentitle it from seeking relief under s. 47, because it had not engaged with the substantive or jurisdictional issues. Further, Dow argued that the competence-competence principle does not apply to determinations under s. 47, so the Court should determine the jurisdiction question. Dow argued that the competence-competence is applicable only under s. 7 determinations (where a Court action has been commenced notwithstanding an arbitration agreement).
What Does “Participated in the Arbitration” mean?
The KB Decision had adopted a framework for analyzing whether a party had participated in an arbitration, after reviewing Canadian and English authorities:[5]
[102] … the assessment… should be approached objectively and practically, in light of the circumstances of a particular case… :
1. Was a notice of arbitration served on the objecting party?
2. Did the notice of arbitration clearly indicate the nature of the dispute, so that the jurisdictional issue was apparent on its face?
3. Did the objecting party raise any issue with respect to jurisdiction?
4. What steps did the objecting party take to progress the arbitration, if any? Did any of those steps relate to the substantive issue in dispute? Did any of these steps engage with the arbitrator’s jurisdiction?
5. How much time elapsed… ?
This framework was not described as being a “fixed list of criteria”, and focused on “substance”.
The CA Decision adopted this framework, with two important comments. First, participation in the substantive or jurisdictional issues in the arbitration “might well be determinative”, but other participation short of that “can nevertheless be sufficient”. That was the case for Dow. Participation in the appointment of the tribunal, case management and scheduling, and the delay in raising jurisdiction, were important.
Second, at para. 11, the CA Decision noted that an express reservation of position would be an important consideration in determining whether an applicant had participated in the arbitration in a way sufficient to preclude an application under s. 47.[6] Dow had not reserved its rights, even though the jurisdiction issue would have been apparent from the outset.[7] In those circumstances, Dow was foreclosed from seeking relief under s. 47.
The Competence-Competence Principle
While the second issue was moot, the Court of Appeal nevertheless considered the competence-competence principle and its application to s. 47 of the Arbitration Act.
The Court of Appeal confirmed[8] that a premise of the Arbitration Act is that judicial intervention in the arbitration process should be limited, except to assist,[9] and a manifestation of this is that challenges to jurisdiction should presumptively first be resolved by the arbitrator.[10] There are exceptions where it is clear from the contract that the dispute in question is not subject to arbitration.[11]
The CA Decision rejected Dow’s argument that competence-competence does not apply to s. 47. The Court noted that s. 7 and s. 47 largely mirror each other and there is no principled basis for any distinction between the two.[12] It would indeed be strange if the competence-competence principle somehow had lesser application where an arbitration had commenced, especially where an arbitral tribunal has been appointed, than it had in respect of a still-to-be commenced arbitration.
The CA Decision also made an important point on party autonomy: competence-competence does not force a party to participate in arbitration – “The parties must arbitrate because they have voluntarily agreed to arbitrate some issues, which the law regards as a prima facie agreement to have the arbitrators determine the scope of the arbitration.”[13]
On collateral attack, the CA Decision said that the arbitrators are well placed to decide this issue. The law assumes that the parties have selected arbitrators who have the necessary skill-sets.[14]
Conclusion
The CA Decision provided guidance on what it means to participate in an arbitration, which has implications on the ability to raise court challenges to jurisdiction, and on competence-competence. Party autonomy matters, as do arbitration agreements, and there is a presumption that arbitrators should in most cases determine jurisdiction.
Parties who wish to have recourse to the Courts should move quickly, clearly state the jurisdictional objection as soon as possible, and reserve rights in the meantime. Competence-competence is alive and well in Alberta, and the role of the Courts in arbitration matters is limited.
[1] Dow Chemical Canada ULC v. NOVA Chemicals Corporation, 2020 ABCA 320, varying Dow Chemical Canada ULC v. NOVA Chemicals Corporation, 2018 ABQB 482.
[2] Dow Chemical Canada ULC v NOVA Chemicals Corporation, 2023 ABKB 215, para. 115 (the “KB Decision”)
[3] KB Decision, para. 129.
[4] Dow Chemical Canada ULC v. NOVA Chemicals Corporation, 2023 ABCA 217. Permission to appeal was required pursuant to s. 48 of the Arbitration Act.
[5] KB Decision, para 102.
[6] Relying on Eyelet Investment Corp. v. Song, 2018 ONSC 3980 at para. 9.
[7] CA Decision, para 15.
[8] CA Decision, para. 19.
[9] TELUS Communications Inc. v. Wellman, 2019 SCC 19.
[10] Dell Computer Corp. v. Union des consommateurs, 2007 SCC 34 and Peace River Hydro Partners v. Petrowest Corp., 2022 SCC 41.
[11] Uber Technologies Inc. v. Heller, 2020 SCC 16, see para. 20 of the CA Decision.
[12] Citing J. Brian Casey, Arbitration Law of Canada (4th ed) 2022.
[13] CA Decision, para. 26.
[14] CA Decision, para. 22, citing Enmax Energy Corp. v. TransAlta Generation Partnership, 2015 ABCA 383.
Carsten Jensen KC, FCIArb practices dispute resolution with JSS Barristers in Calgary, as counsel and as arbitrator. He is a former bencher and Past-President of the Law Society of Alberta, currently serves as the Federation of Law Society’s Chair of the Standing Committee on the Model Code, and Chairs the Professional Conduct Committee of the Chartered Institute of Arbitrators.