Will We Ever See Collective Arbitrations in Canada?
Will We Ever See Collective Arbitrations in Canada?
The United States and Canada have taken very different approaches to collective arbitrations. US courts have upheld and strengthened the rights of companies to mandate arbitration, including collective arbitrations. It is common to see US contracts including class action waivers and providing for all disputes to be resolved by way of arbitration. In contrast, in Canada, collective arbitrations have not been adopted and are unlikely to be adopted under the current statutory and policy framework.
Consumer protection class proceedings have continued to increase in
North America over the last decade. Conversely, an increasing number of corporations are seeking to resolve their disputes through arbitration proceedings by way of binding arbitration clauses within their commercial agreements, requiring that disputes are adjudicated outside of the traditional court system. The convergence of these two trends has created ‘collective arbitrations.’
What are Collective Arbitrations?
A group arbitration is a process which allows a group of claimants subject to sufficiently similar arbitration clauses to pursue identical or related claims collectively. The claimants will have each separately brought claims against the same defendant(s) for similar harm, which become consolidated.
A class arbitration is a hybrid between a class proceeding through the traditional judicial system and a private arbitration. A class arbitration embraces the characteristics of a private arbitration, such as choice of decision-maker, confidentiality and tailored rules of procedure. A class arbitration is brought by a representative plaintiff on behalf of the prospective members of the class, who will be determined at a later time in the dispute.
Collective Arbitrations in the United States
The US is still the only jurisdiction that provides for collective arbitrations. Agreements that waive class action rights are valid, irrevocable, and enforceable, except for any grounds that exist at law or in equity for the revocation of any contract.
The US Supreme Court has explained that, due to the flexibility and contractual nature of arbitration agreements, parties can specify with whom they choose to arbitrate their disputes, and courts and arbitrators must give effect to the contractual rights and expectations of the parties. As such, if parties explicitly allow for collective arbitrations in their arbitration agreements, those provisions are valid and must be enforced.
However, the US Supreme Court has held that collective claims can not be compelled into arbitration when the parties had only agreed to arbitrate their individual claims. In cases where an arbitration agreement is silent on class actions, an arbitrator cannot institute a class action because it would change the nature of arbitration to such a degree that it cannot be presumed that the parties consented to it by simply agreeing to submit their disputes to an arbitrator. For the same reason, an ambiguous arbitration agreement cannot provide the necessary contractual basis for compelling class arbitration.
Collective arbitrations may sound appealing to corporations; however, they can end up costing defendants significantly more money than litigation. For example, an arbitration involving DoorDash resulted in more than 5000 drivers filing claims and the arbitration clause required DoorDash to pay all of the individual filing fees. If mass-arbitration claims continue to rise in the US, companies may consider removing arbitration clauses from their contracts.
Roadblocks to Collective Arbitrations in Canada
There are key differences between the US and Canada which make the adoption of collective arbitrations unlikely in Canada.
First, in Canada, class proceedings are a creature of statutes enacted by the federal, provincial, and territorial governments.
Second, provincial consumer protection legislation has occupied the field for consumer class proceedings in Canada. For example, in Ontario, the Consumer Protection Act expressly prohibits class action waiver clauses. As such, any binding arbitration clause which purports to compel collective arbitration is null. Further, the Supreme Court of Canada has consistently upheld consumer protection legislation that renders void any arbitral clause that would otherwise govern a consumer dispute.
Third, the Supreme Court of Canada has held that standard form arbitral agreements are susceptible to being challenged as unconscionable, as such agreements are often characterized by an inequity in bargaining power, a significant gulf in sophistication of the parties, and substantial up-front costs associated with commencing an arbitration which may prevent claimants from pursuing claims. However, the Supreme Court of Canada has declined to determine the issue of whether class action waivers are unconscionable in general. 
In British Columbia, the courts have found that a class action waiver could be unconscionable and unenforceable depending on the arbitration clause and the circumstances of the case, but have signaled that more guidance is required from the Supreme Court of Canada.
Collective arbitrations have not been adopted in Canada and are unlikely to be adopted in Canada under the current statutory and policy framework. Canadian courts have recognized the importance of class proceedings in the Canadian judicial system and suggest that any contractual term that precludes such proceedings is not enforceable. Parties in Canada should therefore carefully consider the extent to which they are relying on contractual terms that purport to restrict access to class action proceedings.
 Consumer Protection Act, 2002, S.O. 2002, c. 30, Sched. A, s. 8. See also Consumer Protection Act, CQLR c P-40.1, s. 11.1 [Quebec CPA]; The Consumer Protection and Business Practices Act, SS 2014, c C-30.2, s. 101 [Saskatchewan CPA].
Alexandra Mitretodis is a Partner in Vancouver at Fasken Martineau DuMoulin LLP with a practice in international and domestic arbitration and class actions. Alexandra is also an Adjunct Professor at the Peter A. Allard School of Law at the University of British Columbia.
Paige Mueller is a lawyer in Vancouver at Fasken Martineau DuMoulin LLP with a practice in commercial litigation and arbitration.