Traditionally, the view of many practitioners in Québec
has been that arbitrators did not have the power to force parties
to an arbitration agreement to do or cease doing something,
including the performance of their contractual obligations. This
view was based on, among other things: (a) Article 751 of the
Code of Civil Procedure (the
"CCP") and the case-law
applying that provision which provides that the Québec
Superior Court (the "QSC") has the
exclusive jurisdiction to issue the extraordinary remedy of
injunctions (i.e. an order enjoining a person not to do or to cease
doing something or, in applicable cases, to perform an act or
operation, under pain of all legal penalties); and (b) Article
940.4 of the CCP which provides that "a judge or the
court may grant provisional measures [seizures before judgment,
judicial sequestration, and provisional and interlocutory
injunctions] before or during the arbitration proceedings
[...]".
Recently, however, this position has been nuanced by the courts in
Québec who have distinguished between
injunctions—which arbitrators cannot
order—and arbitrators' powers to
enforce specific performance of contractual obligations.
In Canadian Royalties Inc. v. Nearctic Nickel Mines Inc.,
2010 QCCS 4600, the defendant challenged an arbitral award on the
basis that the arbitrator had exceeded its jurisdiction by
rendering conclusions that were akin to an injunction, namely,
ordering the defendant to transfer ownership interest in property
to the plaintiff and to take all necessary steps to complete this
transfer. The QSC dismissed the defendant's challenge and, in
so doing, distinguished between injunctions and orders for specific
performance of contractual obligations. It noted that "all
orders to perform contractual obligations are, taken in a large
sense, orders of specific performance, but not all such orders are
injunctions". The nuanced distinction between the two,
according to the QSC, was that "orders are not injunctive if
they do not require the exercise of judicial discretion to make
them and further judicial intervention to enforce them
thereafter" and that "they depend on conclusions [...]
that automatically entail access to execution rather than
punishment [such as by fines or imprisonment] of the debtor in
order to obtain compliance." Examples of non-injunctive orders
include orders to pay money, to vacate property, returning what was
received under a contract, ordering a creditor to perform a
contractual obligation in the place of a debtor, and an obligation
to enter into a deed of sale. Ultimately, the QSC concluded that
"if Quebec arbitrators could not give orders of specific
performance of contracts not amounting to injunctions, they would
be lame ducks and arbitration would not be taken seriously as an
effective and complete means of resolving commercial
disputes."
More recently, in Service Bérubé Ltée v.
General Motors du Canada Ltée, 2011 QCCA 567, the
Québec Court of Appeal (the
"QCA") analyzed the powers of
arbitrators to order the performance of a contract. In Service
Bérubé, the plaintiff, a car dealer, asked the
QSC to render various declaratory and injunctive orders to allow it
to remain open pending a final resolution of its dispute with GM
and to force GM to renew a franchise agreement. The parties were
bound by an arbitration agreement and GM asked the QSC to refer the
matter to arbitration. Service Bérubé opposed this
request on the grounds that only the QSC could issue the other
measures that were being sought. The QCA upheld the decision of the
lower court and referred the parties to arbitration. Consistent
with the decision in Canadian Royalties, the QCA concluded
that in contractual matters, not all orders for specific
performance constituted an injunction and that the relief sought in
this case was compliance with a contract.
The decision in Canadian Royalties is under appeal and it
is expected that a decision, which may provide further
clarification on the jurisdiction of arbitrators and the
distinction between injunctions and specific performance of
contractual obligations, will be rendered by the QCA in the
upcoming months.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.