Section 47 of Alberta’s Arbitration Act (the Act) provides that a party “who has not participated in” an arbitration may apply to the court to have the arbitration declared invalid for certain prescribed reasons, including because the arbitration agreement is invalid, the dispute is not arbitrable as a matter of Alberta law, or the arbitration agreement does not apply to the issue in dispute.
Very little judicial attention has been given to s. 47 and equivalent provisions in other Canadian jurisdictions (e.g., s. 48 of the Ontario Arbitration Act, 1991) until the Alberta Court of Appeal’s decision in Dow Chemical Canada ULC v NOVA Chemicals Corporation, 2023 ABCA 343.1
This decision is a significant precedent because it restricts the circumstances in which an arbitration can be avoided by a belated objection to arbitrability.
Dow and NOVA are co-owners of a petrochemical facility called E3. The project agreements between the parties contemplate the proposal, review, and ultimate approval of an annual budget for E3. The agreements require any budgetary dispute to be arbitrated.
Dow refused to approve a budget, which prompted NOVA to commence an arbitration. A panel of arbitrators (the Tribunal) was appointed and the parties appeared before the Tribunal.
More than six months after the arbitration started, Dow expressed a concern about the Tribunal’s jurisdiction and eventually filed an application in the Court of King’s Bench, under s. 47, to challenge the dispute’s arbitrability. Dow argued that it was entitled to relief under s. 47 because it had not “participated in” the arbitration substantively or jurisdictionally, and the court (not the Tribunal) should decide if the dispute was arbitrable.
NOVA successfully opposed that application at first instance.2 However, Dow was granted permission to appeal on two discrete grounds:
- Did the lower court err in the test for the interpretation of “has not participated in the arbitration” in s. 47 of the Act?
- Did the lower court err in applying the competence-competence principle to s. 47?3
The Court of Appeal dismissed Dow’s appeal, finding no reviewable errors in the lower court’s decision.
What does it mean to “participate in” an arbitration?
A party who “participated in” an arbitration is expressly disentitled to relief under s. 47. After a party participates, any jurisdictional objection must be made to the arbitral tribunal, not the court.
The Court of King’s Bench held that whether a party “participated in” an arbitration “should be approached objectively and practically, in light of the circumstances of a particular case.” It was held that Dow had, in fact, “participated in” the arbitration.
On appeal, Dow argued that the Court of King’s Bench erred because Dow had not meaningfully participated in the arbitration’s substantive or jurisdictional questions.
The Court of Appeal disagreed, stating: “[T]here is no basis for such a limited interpretation of s. 47. Participation in the substantive or jurisdictional issues in an arbitration might well be determinative, but other participation in the arbitration procedure short of that can nevertheless be sufficient.”
By so holding, the Court of Appeal affirmed that participation need not be substantive or jurisdictional to be disqualifying under s. 47.
Competence-competence and the need for a complete record
Competence-competence is a legal principle pursuant to which any challenge to an arbitrator’s jurisdiction should presumptively first be resolved by the arbitrator.
Dow argued that its arbitral challenge should be determined by the court because competence-competence does not apply under s. 47 or, alternatively, because its arbitrability challenge could be determined based on just a superficial consideration of documentary evidence.
The Court of Appeal affirmed the court at first instance, holding the competence-competence doctrine applies under s. 47, such that an objection to arbitral jurisdiction can be resolved under that section only if it is a pure question of law or requires just a superficial consideration of documentary evidence.
The Court of Appeal took the opportunity to again confirm the overriding legal philosophy toward arbitration in Canada: that intervention by the court in arbitrations should be limited, except to assist in the arbitration process. The competence-competence principle is a manifestation of that philosophy of judicial restraint. Any challenge to an arbitrator’s jurisdiction should presumptively be resolved by the arbitrator or tribunal first.
The Court of Appeal affirmed the lower court’s decision, holding that Dow’s arbitrability challenge had to be decided by considering the whole of the parties’ Operating and Services Agreement in the factual context of the budget disagreement. This was a mixed question of fact and law that should be decided, at least initially, by the Tribunal.
Conclusion
The Arbitration Act narrowly limits the circumstances in which the court may intervene in an arbitration. A non-participant may legitimately seek court intervention in aid of a jurisdictional challenge under s. 47; however, “participation” will be evaluated objectively, practically, and generally in a manner that precludes changes of mind and unreasonable delay in raising the objection. Even then, the competence-competence principle applies under s. 47, such that the court may decline to determine a jurisdictional objection that is not purely legal in nature, or that would be better determined by an arbitrator or tribunal with the benefit of a more comprehensive record.
