Protecting Minority Shareholders: Rights and Remedies under Alberta’s Business Corporations Act2/28/2025 Written by Sean Kimak
JD Candidate 2025 | UCalgary Law Traditionally, a minority shareholder (“MSH”) held minimal power to influence the decisions of directors, and therefore the overall direction of a corporation they owned a stake in.[1] In the absence of MSH rights provided by a shareholders agreement (such as a unanimous shareholders agreement), or by the articles or bylaws of the company, the majority shareholders of a corporation retain the right to appoint directors of the corporation and, therefore, to affect key decisions of the organization.[2] Where a MSH disagrees with these decisions, often their only recourse is to sell their shares in the company. However, even this option can be “somewhat illusory”, particularly in cases where there is a limited market for the shares or where resale restrictions exist.[3] Consider the following scenarios:
Despite each share having an equal per-share equity stake by default, the above scenarios are examples of how majority shareholders may make decisions contrary to the interest of a MSH, for their own benefit. Luckily, there are various protections afforded to MSHs by both statute and common law. This blog post provides a brief overview of the main protections afforded to MSHs of companies incorporated under the Alberta Business Corporations Act (“ABCA”)[4]. Primary Rights & Remedies Enshrined by the ABCA I. Fiduciary Duty & Duty of Care The most basic protections afforded to a MSH are provided by the fiduciary duty and duty of care owed by director and officer of a corporation, towards the corporation.[5] These duties are statutorily enshrined in section 122(1)(a) and 122(1)(b) of the ABCA, respectively: 122(1) Every director and officer of a corporation in exercising the director’s or officer’s powers and discharging the director’s or officer’s duties to the corporation shall (a) act honestly and in good faith with a view to the best interests of the corporation, and (b) exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. In Peoples Department Stores Inc (Trustee of) v Wise,[6] the Supreme Court of Canada held that the statutory fiduciary duty enshrined in section 122(1)(a) of directors is owed exclusively to the corporation, and not directly to shareholders or other stakeholders such as creditors.[7] In exercising this duty of loyalty, directors and officers may consider the long-term interests of the corporation, the environment, and the interests of shareholders, employees, retirees, pensioners, creditors, consumers, and governments.[8] As a result of Peoples and the subsequent Supreme Court decision in BCE Inc. v. 1976 Debentureholders[9], directors and officers do not owe their fiduciary duty solely to shareholders.[10] Still, a duty to shareholders (including MSHs) may arise on the facts, such as in the case of a sale of shares. Unfortunately for shareholders, these decisions permitted directors to consider a multitude of factors outside of shareholder value maximization, when making decisions. This may limit the ability of a MSH to enforce the fiduciary duty required by ABCA section 122(1)(a) through a legal action. Similarly, the duty of care owed by directors and officers per section 122(1)(b) does not refer to any specific party: it is an open-ended duty, and is owed to more than just the corporations shareholders to include parties such as creditors.[11] Furthermore, the Supreme Court determined that section 122(1)(b) of the CBCA does not provide an independent foundation for claims against directors or officers.[12] Thus, while actions may be brought against directors or officers who breach this duty in tort, or pursuant to other provisions of the ABCA, these actions are potentially difficult to enforce due to the multitude of parties to whom the duty is owed.[13] Thus, while these duties are not owed solely to shareholders, they arguably still provide safeguards to ensure that directors act in the interest of the corporation. In most (but not all) cases, this provides a degree of protection for MSH interests. In cases where directors act against the best interest of the corporation (as opposed to a MSH), a derivative action may be brought. II. Derivative Actions Derivative actions, codified by Section 239 of the ABCA, originate from the fact that corporations have their own legal status. Bringing a derivative action is akin to assuming the position of the corporation to bring an action against a director or officer for harm that was suffered as a result of their conduct.[14] To commence a derivative action, applicants require permission (known as “leave”) from the applicable court.[15] This is to prevent frivolous or vexatious actions, largely because the corporation must pay the legal fees for the action and because any decision will necessarily bind all shareholders of the company.[16] In considering whether to grant leave, the presiding court will ask whether the action is in the best interests of the company. Derivative actions can in theory be brought if a director breaches their fiduciary duty or duty of care towards the company as a whole; however if a MSH feels they are personally being treated unfairly and not the corporation as whole, a derivative action is of little use to them. Furthermore, derivative actions are difficult to litigate, so only a handful of derivative action cases have been brought in Canada against directors for breach of their duty of care.[17] III. Oppression Remedy By contrast, the oppression remedy, codified by section 242 of the ABCA, allows complainants such as MSH to bring personal actions against the corporation. Per the Supreme Court of Canada in BCE:[18] “[t]he oppression remedy focuses on harm to the legal and equitable interests of stakeholders affected by oppressive acts of a corporation or its directors. This remedy is available to a wide range of stakeholders — security holders, creditors, directors and officers.” To succeed in their claim, a complainant must establish (1) that they held a “reasonable expectation”, and (2) that the “reasonable expectation was violated by conduct falling within the terms ‘oppression’, ‘unfair prejudice’ or ‘unfair disregard’ of a relevant interest”.[19] If the court finds that a director’s conduct falls under any of these definitions, the court may “make any interim or final order it thinks fit”.[20] While there is some ambiguity regarding “reasonable” expectations and debate over what conduct meets the threshold of oppression, unfair prejudice, or unfair disregard, the oppression remedy may still be best way for a MSH to enforce their right to be treated fairly. IV. Right to Dissent & Right to Appraisal There are further remedial protections under ABCA section 191 and CBCA section 190 to allow individual shareholders to dissent in cases where they disagree with fundamental changes to the company, including cases where a corporation resolves to amend its articles, to change or remove provisions relating to the issue, transfer, or rights of a class or series of shares, to change the type of business that the corporation may carry on, to amalgamate with another corporation, or to sell, lease or exchange all or substantially all its property.[21] In these cases, a dissenting shareholder has the right to be paid out at fair value of their shares. If the corporation and dissenting shareholder cannot agree on this value, a court may step in to determine the share price, and to make related orders. The court also holds power under ABCA section 193 (Court Approved Arrangements), to approve or deny any proposed plan of arrangement[22]. Courts review proposed arrangements to determine if V. Various Additional Rights Provided by the ABCA All shareholders are entitled to access corporate records under section 23 of the ABCA. This includes articles, bylaws, unanimous shareholders agreements, meeting minutes, shareholder resolutions, notices of the appointment or election of directors, securities registers, copies of financial statements, and any corporate disclosures made relating to contracts under ABCA section 120.[25] Furthermore, the registered holders or beneficial owners of not less than 5% of the issued shares may force management to call a shareholders meeting pursuant to ABCA section 142. VI. Minority Protections under MI 61-101 In select circumstances, additional MSH protections are provided by Multilateral Instrument 61-101 (“MI 61-101”) as adopted by the Alberta Securities Commission, the provincial securities regulator.[26] The intent of MI 61-101 is to ensure that security holders are treated fairly in transactions where there is a potential material conflict between the interests of related parties and those of minority security holders”.[27] MI 61-101 protects minority shareholders in certain types of transactions, including:
The key protections that MI 61-101 provides include:
Importantly, MI 61-101 only applies to “reporting issuers”.[28] There are also various technical exceptions to the requirements of the instrument. Still any company listed on the TSX, TSX Venture Exchange, Cboe Canada, or the Canadian Securities Exchange are subject to its requirements, giving some additional certainty to MSHs where a company is publicly listed.[29] Conclusion This blog post outlines the main remedies that may be available to MSHs when their interests are being materially impacted by actions outside of their control, in a unfair manner. It is not an exhaustive list and other remedies may exist in common law, statute, or contract. Before becoming a MSH, it is important to consider the rights available to you and the potential costs to enforcing those rights. Since some of the above-mentioned rights and remedies are difficult to enforce, MSHs should look to further protect specific rights through well-defined shareholders’ agreements, or other agreements, where possible. Disclaimer: This post is intended for informational purposes only and does not constitute legal advice. For legal advice, consult a qualified lawyer. [1] L.M. Schaef, “The Oppression Remedy for Minority Shareholders” (1985) 23:3 Alta L Rev 511 [Schaef] at 512. [2] Business Corporations Act (Alberta), RSA 2000, c B-9 [ABCA]at s. 106; [3] Schaef, supra note 1, at 512. [4] This blog post refers to relevant sections of the ABCA, however, all provinces except PEI, Nova Scotia and Quebec have adopted a business corporation act substantially similar to the Canada Business Corporations Act, RSC 1985, c C-44 [CBCA]. Therefore equivalent sections likely exist those other jurisdictions, with only very minor differences, if any. This blog post applies only to corporations. It is a broad overview of statutory protections and does not discuss the interpretation of these protections by the courts. [5]BCE Inc. v. 1976 Debentureholders 2008 SCC 69 [BCE]: (“The directors are responsible for the governance of the corporation. In the performance of this role, the directors are subject to two duties: a fiduciary duty to the corporation under s. 122(1)(a) (the fiduciary duty); and a duty to exercise the care, diligence and skill of a reasonably prudent person in comparable circumstances under s. 122(1)(b) (the duty of care)” at para 36.) [6] Peoples Department Stores Inc (Trustee of) v Wise, 2004 SCC 68 [Peoples]. [7] Ibid, at para 42; This was reaffirmed in BCE, supra note 5, at paras 40-41; Both Peoples and BCE refer to the CBCA, but the same provisions exist in the ABCA. [8] F Stewart, “A History of Canadian Corporate Law: A Divergent Path from The American Model?” in Harwell Wells, ed, The Research Handbook on the History of Corporate and Company Law (2018) 451 [Stewart]: (“In 2004, when the Supreme Court ruled on the Peoples case, it interpreted this provision as follows: [I]n determining whether [directors] are acting with a view to the best interests of the corporation it may be legitimate, given all the circumstances of a given case, for the board of directors to consider, inter alia, the interests of shareholders, employees, suppliers, creditors, consumers, governments and the environment. This decision shocked Canadian corporate law observers…” at 20-21). [9] BCE, supra note 5. [10] Practical Law Canada Corporate and Securities “Duties of Directors: Fiduciary Duties - Practice Note 7-567-9614” (Accessed 23 Feb 2025) online: Thomson Reuters Canada [PL – Fiduciary Duties]. [11] Practical Law Canada Corporate and Securities “Duties of Directors: Duty of Care - Practice Note 7-586-6493” (Accessed 23 Feb 2025) online: Thomson Reuters Canada [Practical Law – Duty of Care]. [12] Ibid; BCE, supra note 5 at para 44: (“Section 122(1)(b) does not provide an independent foundation for claims. However, applying the principles of The Queen in right of Canada v. Saskatchewan Wheat Pool, 1983 CanLII 21 (SCC), [1983] 1 S.C.R. 205, courts may take this statutory provision into account as to the standard of behaviour that should reasonably be expected.”). [13] Practical Law - Duty of Care, supra note 11; Stewart, supra note 8: (“Iacobucci was critical, arguing that BCE ‘fails to articulate a determinate fiduciary duty’….He added that whether one believes… ….that such fiduciary duties ought to be owed to shareholders or stakeholders, ‘it is difficult to defend a fiduciary duty that fails to guide either directors or courts’… …VanDuzer worried about the wider discretion granted to directors, arguing they will ‘take comfort from the Court’s strong endorsement of the business judgement rule,’ foreseeing: ‘self-serving behaviors... dressed up as protecting the best interests of the corporation by reference to the interests of one stakeholder or another’”). [14] BCE, supra note 5 at para 43; Natalie Leclerc & Nicholas Ramessar, “Options for Minority Shareholders Oppression and Derivative Relief” (30 November 2022), online: Carscallen LLP https://carscallen.com/commercial-litigation/options-for-minority-shareholders-oppression-and-derivative-relief/ [Leclerc & Ramessar]. [15] BCE, supra note 5at para 43. [16] Ibid. [17] Stewart, supra note 8 at 24. [18] BCE, supra note 5 at para 45. [19] Ibid at para 68; BCE notes these terms are poorly defined, at para 54. [20] ABCA, supra note 2 at s 241. [21] Refer to ABCA, supra note 2, at s. 191 for scope of application and exceptions. [22] Defined by ABCA, supra note 2, at s 193(1). [23] BCE, supra note 5, at para 46. [24] Ibid. [25] Types of records listed at ABCA, supra note 2, at s 21(1). [26] Canadian Securities Administrators, “Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions”, (31 July 2017). [27] Goodmans LLP ,“Conflict of Interest Transactions in Canada and Recent Regulatory Guidance.” Goodmans LLP, online: https://www.goodmans.ca/docs/default-source/default-document-library/conflict-of-interest-transactions-in-canada-and-recent-regulatory-guidance.pdf?sfvrsn=5e33b2b6_2&t at 2. [28] “Reporting Issuer” is defined in the Securities Act RSA 2000, c S-4, at s 1(ccc). [29] Practical Law Canada Corporate and Securities “Roadmap to Multilateral Instrument 61-101” (Accessed 23 Feb 2025) online: Thomson Reuters Canada.
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Written by Matthew Carter
JD Candidate 2026 | UCalgary Law We live in a world that is increasingly more online, and the same is true for businesses. E-commerce has transformed the way businesses need to operate to grow and survive. Online sales give start-ups, growth companies and entrepreneurs across Canada the opportunity to reach customers outside their local markets and across-borders. However, this opportunity comes with a myriad of legal considerations that businesses should be cognizant of in order to comply with federal and provincial law. This post explores several key legal issues for e-commerce businesses in Alberta, covering privacy laws, online contracts, tax implications and intellectual property. Privacy Laws and Data Protection In Canada, the Personal Information Protection and Electronic Documents Act (PIPEDA) governs how businesses collect, use, and disclose personal information during commercial activities [1]. For e-commerce businesses, selling products/services online often includes the collection of customer data such as names, addresses, payment information, and browsing habits. Alberta has its own legislation, the Personal Information Protection Act (PIPA), which applies to private-sector organizations within the province and further regulates how businesses handle customer data [2]. Under PIPA, businesses must obtain meaningful consent from customers before collecting their personal information [3]. This means clearly explaining what data will be collected, how it will be used, and whether it will be shared with third parties. Both PIPEDA and PIPA require businesses to implement reasonable security measures to protect customer data [4]. Failure to do so can result in significant legal and reputational consequences. For example, data breaches can lead to regulatory investigations, fines, and loss of customer trust [5]. Businesses are also required to report data breaches that pose a real risk of significant harm to affected individuals and to the Office of the Information and Privacy Commissioner of Alberta (OIPC). Timely notification is critical to mitigating the impact of a breach and the liability to the business. In 2024, the Office of the Privacy Commissioner of Canada (OPC) launched an investigation into Ticketmaster following a data breach that exposed customer information [6]. The breach involved an unauthorized third party accessing a cloud database containing names, contact information, and payment details. The investigation highlighted Ticketmaster’s failure to promptly notify affected customers and regulators, as well as concerns about third-party vendor management. This case serves as a cautionary tale for e-commerce businesses about the importance of robust data security and compliance with privacy laws. Online Contracts Online contracts are essential for e-commerce businesses to establish the rules governing their relationship with customers. However, these contracts must be carefully drafted to ensure they are enforceable under Canadian law. The substance of the formation of these contracts is vital to ensure the contract is valid and enforceable. There must be an offer, acceptance and consideration [7]. Businesses must ensure that customers are actively agreeing to the terms (i.e. by clicking “I agree”) rather than burying the terms in fine print. E-commerce businesses should specify the jurisdiction and governing law that apply to disputes. This is to reduce costs in the event there is a dispute and avoid litigation in an unfavourable or distant location. Alberta based companies may want to specify within their online contracts that Alberta law governs its contracts and will be used to adjudicate disputes. In Rudder v. Microsoft, the Ontario Superior Court upheld the enforceability of an online contract, emphasizing the importance of providing users with reasonable notice of the terms and an opportunity to review them [8]. The case highlights the need for e-commerce businesses to design their websites in a way that ensures customers are acutely aware of the terms they are agreeing to. Cross-Border Sales and Tax Compliance E-commerce businesses in Alberta that sell to customers in other provinces or countries must navigate additional legal and tax considerations. Businesses must charge the appropriate sales tax based on the customer’s location. For example, Alberta does not have a provincial sales tax, but businesses selling to customers in other provinces (such as Ontario) may need to charge GST/HST or provincial sales tax. In addition, e-commerce businesses conducting cross border transactions must have the proper transfer pricing documentation for any good passed within the business across borders. Selling internationally may require compliance with customs regulations and import/export laws. This includes properly classifying goods, paying duties, and ensuring compliance with trade agreements. The decision in Canada v Dawn’s Place Ltd by the Federal Court of Appeal stresses the necessity of properly applying GST/HST regulations to avoid penalties [9]. The ruling serves as a reminder for businesses to accurately assess their tax obligations to ensure compliance and prevent expensive disputes with tax authorities. Intellectual Property Protection E-commerce businesses should also consider potential infringement on established IP, trademark and copyright. Barbie’s Shop is a relevant IP case that covers trademark infringement in the context of e-commerce [10]. The plaintiff, Barbie’s Shop Ltd, operated a retail store and website selling merchandise under the name “Barbie’s Shop.” Mattel is the international business known for owning the Barbie trademark associated with the children’s toys and sued the plaintiff for infringement due to the confusion it would cause customers and damage to the brand. The Federal Court of Canada ruled in favour of Mattel, finding that the use of the name depreciated the goodwill associated with the brand name. The case emphasizes the importance for an e-commerce business to research potential infringements before conducting business under a trade name. Registering a trademark can help protect a business’s brand name, logo, and slogans from being used by competitors as well as turn up any potential conflicts that a name would have with an already existing business. It is important for e-commerce businesses to avoid the costly lawsuits associated with trademark infringement that hinder the company's growth and profitability. Conclusion Operating an e-commerce business in Alberta offers a myriad of growth opportunities to entrepreneurs but also calls for careful consideration of a number of legal issues that have stifled other businesses in the past. Owners of these e-commerce businesses should be aware of the legal issues concerning privacy of customer data, online legal contracts, tax considerations and IP infringements. Taking the time to review the various legal considerations outlined in this blog and seeking legal advice when necessary is important for Alberta entrepreneurs to scale their businesses while reducing their legal liabilities.
Written by Lucas Pelster
JD Candidate 2026 | UCalgary Law Mandatory arbitration clauses have become a common feature in contracts across various industries in Canada. These clauses require parties to resolve disputes through arbitration rather than through litigation, often promising an expedited and less expensive resolution. However, binding oneself to an arbitration process is not without it’s risks. When considering whether to include a mandatory arbitration clause in a contract, it is crucial to understand not only the rights gained but also the rights potentially forfeited. Advantages and Disadvantages of an Expedited Process Dispute resolution through arbitration makes intuitive sense, especially within the small business venture sector. Business look to grow as large as possible in as small as possible time frame. Litigation is a large deterrent to a company trying to keep up with the market or beat its competitors in product development. Further still, businesses seek investment from shareholders, shareholders would be weary to trust a business that is tied up with disputes in court. The solution, then, in dealing with disputes is mandatory arbitration set out by contract. One of the primary advantages of arbitration over litigation is its potential for speed and cost-efficiency. For smaller disputes that involve moderate sums of money, or require quick resolution, arbitration can be highly beneficial. However, this expediency often comes at the cost of procedural rigor. For example, arbitration typically involves fewer document production obligations compared to civil litigation. This can hinder a party's ability to demand crucial documentary evidence from the other side. An arbitrator may disallow document production requests to maintain the speed and cost-effectiveness of the process, even if such documents would be producible under civil litigation rules. In complex disputes, where documents are a significant source of evidence, mandatory arbitration may do more harm than good. Appeal rights are another area where mandatory arbitration clauses significantly limit parties' rights. While civil litigation allows for extensive appeals and reviews, such rights are almost entirely removed in arbitration. Interlocutory decisions, such as those on document production, are generally not appealable, forcing parties to accept decisions that could have substantial consequences on their case development. The ultimate decision of an arbitrator is only appealable in narrow circumstances, typically concerning the application of law rather than factual determinations. This limitation can be risky when significant amounts are at stake, as parties may want to exhaust all procedural remedies to ensure the correct decision is made. Concerns of Enforceability The enforceability of arbitration clauses is another critical consideration. Once entered, such clauses are usually binding. However, there are exceptions. In Uber Technologies Inc. v. Heller, the Supreme Court invalidated Uber's arbitration clause on the grounds of unconscionability and public policy.[1] The Court found that the inequality of bargaining power between Uber and its drivers resulted in an "improvident bargain," making the arbitration clause unenforceable.[2] This decision highlighted that arbitration clauses in standard form contracts, especially those involving significant power imbalances, could be struck down if they are deemed unfair. In contrast, the Court of Appeal of British Columbia in Williams v. Amazon.com upheld an arbitration clause in a standard form contract, distinguishing it from the Uber case.[3] The Court found that the arbitration agreement did not unduly advantage Amazon or disadvantage the plaintiff, and thus, it was enforceable. This case underscores that while some provinces preclude mandatory arbitration clauses in consumer contexts, others, like British Columbia, do not. The Telus Communications Inc. v. Wellman Case The Supreme Court of Canada's decision in Telus Communications Inc. v. Wellman further illustrates the complexities surrounding mandatory arbitration clauses.[4] In this case, Wellman filed a class action against Telus, alleging that customers had been overcharged due to undisclosed billing practices.[5] The contracts included a mandatory arbitration clause for resolving disputes. The class action involved both consumers and business customers. Ontario's Consumer Protection Act prohibits mandatory arbitration clauses and class action waivers in consumer agreements.[6] However, this protection does not extend to business customers. Telus argued that the business customers were bound by the arbitration clause, while the consumers were not. The lower courts sided with Wellman, allowing the lawsuit to proceed despite the arbitration clause. However, the Supreme Court reversed this decision, ruling that the business customers were bound by the arbitration clause and their claims must be stayed in favor of arbitration. This decision underscores that arbitration clauses in commercial contracts will generally be upheld, even in the context of class actions. It also highlights the importance of clear legislative frameworks to protect consumers while balancing the interests of businesses. Insolvency and Arbitration The protections of arbitration agreements in Canada are generally robust, but they can be challenged in the context of insolvency. When one party to a dispute is in an insolvency proceeding, the rules can change, and the agreement to arbitrate may not proceed as expected. If the insolvent party is the target of a claim, arbitration is generally stayed, and the claim is dealt with through a centralized claims process in the insolvency proceeding. This approach, known as the "single control model," ensures that all claims against an insolvent party are handled in a single forum, preventing the debtor from expending extensive resources defending claims in various jurisdictions. However, if the insolvent party or its estate representative is asserting the claim, the appropriate venue for resolution is less clear. The insolvent party may advocate for an expedited court process for speed and efficiency, while the counterparty may argue for arbitration based on their contractual rights. This complex scenario was recently addressed by the British Columbia Court of Appeal in Petrowest Corporation v. Peace River Hydro Partners.[7] In the Petrowest case, the receiver pursued claims under several agreements that included arbitration clauses. The Court of Appeal determined that a receiver cannot selectively enforce favorable terms of an agreement while disclaiming unfavorable ones. However, the court also concluded that the receiver could avoid the arbitration clauses based on the doctrine of separability, which treats arbitration clauses as independent agreements. The receiver, not being a party to the original arbitration agreements, was not bound by them and could pursue claims through the court. Implications for Commercial Corps. The Petrowest decision has significant implications for parties to agreements with Canadian counterparties that contain arbitration clauses. It highlights that arbitration clauses may not be enforceable when defending claims by the receiver of an insolvent counterparty. The analysis may differ in a debtor-in-possession restructuring scenario, where the debtor itself is pursuing claims and could disclaim agreements. Courts will consider whether the disclaimer enhances the prospects of a viable compromise and whether it causes significant financial hardship to the counterparty. Third-Party Beneficiaries The recent decision in Husky Oil Operations Limited v. Technip Stone & Webster Process Technology Inc. by the Court of Appeal of Alberta further complicates the enforceability of arbitration clauses, particularly concerning third-party beneficiaries.[8] The Court cautioned against enforcing arbitration provisions on third-party beneficiaries unless the requirement to arbitrate is manifest and expressed in clear and explicit language. This decision emphasizes the importance of clear contractual language and the limitations of imposing arbitration obligations on parties who did not expressly agree to them. The Orica Canada Inc. v. ARVOS GmbH Case Another important case is Orica Canada Inc. v. ARVOS GmbH, wherein the Alberta Court of King’s Bench addressed the kompetenz-kompetenz principle and the interpretation of arbitration clauses.[9] The court found that the kompetenz-kompetenz principle, which allows an arbitral tribunal to rule on its own jurisdiction, does not apply to jurisdictional challenges involving pure questions of law or mixed fact and law requiring only superficial consideration of the record. Additionally, the court held that claims arising by operation of law, such as indemnity claims under the Tort-Feasors Act (Alberta), do not fall within the scope of an arbitration agreement. This case focused on a third-party claim which arose in the context of litigation but was subject to an arbitration agreement. The plaintiffs, Orica Canada Inc. and Orica International Pte. Ltd., filed a claim against ARVOS GmbH for fabrication and assembly deficiencies in industrial equipment. ARVOS, in turn, filed a third-party claim against Arsopi, the equipment's manufacturer, under a purchase order that included an arbitration clause. The court applied the principles established by the Supreme Court in Peace River Hydro Partners v. Petrowest Corp. and Uber Technologies Inc. v. Heller. It found that the kompetenz-kompetenz principle did not apply because the jurisdictional challenge involved pure questions of law and there was a real prospect that the challenge might never be resolved by an arbitrator due to time-barred arbitration under German law. The court also determined that while the Tort Claim and Contract Claim fell within the scope of the arbitration clause, the TFA Claim did not, as it arose by operation of law under the Tort-Feasors Act and common law. This decision introduces potential for bifurcation of arbitration proceedings, leading to increased costs and risks of inconsistent results. Main Takeaways While arbitration offers speed and cost-efficiency, it often comes at the expense of procedural rights such as document discovery and appeals. The decision to include an arbitration clause should be carefully considered, considering the relationship between the parties, the nature of potential disputes, and the monetary stakes involved. Arbitration clauses can be beneficial for timely dispute resolution but are not a one-size-fits-all solution. Both the decision to include such a clause and its contractual language should be carefully evaluated. In conclusion, while mandatory arbitration clauses can streamline dispute resolution, they also pose significant risks and limitations. Parties should weigh these factors carefully and ensure that any arbitration clause is tailored to their specific needs and circumstances. Clear and explicit language is essential, especially when dealing with third-party beneficiaries, to avoid unintended obligations and ensure enforceability. [1] Uber Technologies Inc. v Heller, 2020 SCC 16 [Uber]. [2] Ibid at para 64. [3] Williams v Amazon.com Inc., 2023 BCCA 314 [Amazon]. [4] Telus Communications inc. v Wellman, 2019 SCC 19. [5] Ibid at para 10. [6] Consumer Protection Act, 2002 S.O. 2002, c. 30, Sched. A at section 7(2). [7] Peace River Hydro Partners v Petrowest Corp., 2022 SCC 41. [8] Husky Oil Operations Limited v Technip Stone & Webster Process Technology Inc, 2024 ABCA 369. [9] Orica Canada Inc. v ARVOS GmbH, 2024 ABKB 97. |
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