In our July 6, 2011 Flash, titled " No Lame Ducks: The Power of Arbitrators to Force Performance of Contractual Obligations", we reviewed the decisions of the Québec Superior Court (the "QSC") in Canadian Royalties Inc. v. Nearctic Nickel Mines Inc., 2010 QCCS 4600 ("Canadian Royalties") and the Québec Court of Appeal (the "QCA") in Service Bérubé Ltée v. General Motors du Canada Ltée, 2011 QCCA 567 ("Service Bérubé"). In these decisions, the courts distinguished between injunctions - which arbitrators cannot order - and orders of specific performance and held that arbitrators have the power to enforce specific performance of contractual obligations (i.e., they can compel parties to comply with their contractual obligations). At the time of our Flash, the decision of the QCA in Canadian Royalties was pending.

On February 29, 2012, the QCA rendered its decision in Canadian Royalties. In Canadian Royalties, the parties executed an agreement pursuant to which the Appellant granted the Respondent an option to purchase an ownership interest in property subject to the fulfillment of certain conditions. The agreement contained a binding arbitration clause. The Appellant argued that the conditions had not been met and the Respondent submitted the dispute to arbitration. The arbitrator found in favor of the Respondent and ordered the Appellant to transfer to the Respondent the ownership interest in the property and to perform all acts necessary to do so. The Appellant challenged the arbitrator's award based on its position that in rendering an order akin to an injunction, the arbitrator exceeded his jurisdiction.

In its February 29th decision, the QCA endorsed its earlier decision in Service Bérubé and indicated that the arbitrator's order was tantamount to an order to convey title and was the equivalent of the specific performance of contractual obligations (as opposed to an injunction which is within the exclusive jurisdiction of the QSC). The QCA noted as follows:

[55] Determining as a general rule that an arbitrator never possesses the power to grant orders of an injunctive nature also seems incompatible with the terms of article 944.1 C.C.P., which provides that "arbitrators have all for the necessary powers for the exercise of their jurisdiction [...]". Furthermore, following the Supreme Court decision in Desputeaux c. Chouette [footnote omitted], the scope of arbitration agreements must be interpreted liberally and the arbitrator's mandate should include all matter connected to the agreement or the questions in dispute. The arbitration process is understood to constitute a complete system of alternate dispute resolution. In my view, such a system would not be complete if it was unable to ascertain that its decisions be executed through comprehensive orders of specific performance.
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[63] In order to appreciate whether an arbitrator issued a particular order which would be tantamount to an injunction, one must look at the commercial agreement, determine the true intention of the parties and decide whether, in light of all the circumstances, the pith and substance of the order truly constitutes an injunction with all of its known penal implications or whether it is more of a declaratory nature which serves the purpose of giving full effect to the Arbitrator's determinations of the parties' rights.

It should be noted that under the law of Ontario, the Arbitration Act (Ontario) explicitly provides that arbitrators can issue orders of specific performance and injunctions.

The decisions of the QCA in Canadian Royalties and Service Bérubé confirm that arbitrators have all the powers necessary for the exercise of their jurisdiction and provide further support for the fact that arbitration can be a highly effective and complete means of resolving commercial disputes.

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