Canada: Alberta Court Grants Encana's Application For A Stay Of Action And Referral To Arbitration

On April 12, 2016, the Alberta Court of Queen’s Bench stayed an action started by Toyota Tsusho Wheatland Inc. (TTWI) against Encana Corporation (Encana) and referred the vast majority of the claims to arbitration.  The Court’s decision, reported in Toyota Tsusho Wheatland Inc. v. Encana Corporation, 2016 ABQB 209, upholds the contractual autonomy of parties to have their disputes determined by mandatory arbitration, even where the arbitration touches on the interests of third parties not privy to the arbitration agreement.


A dispute arose between TTWI and Encana regarding a clause in their Royalty Agreement that prohibits either party from disposing of any of its interest in the Royalty Agreement without “the prior consent in writing of the other Party, which shall not be unreasonably withheld” and “unless the proposed assignee shall deliver an agreement agreeing to be bound by and to assume and comply with the provisions of this Agreement with respect to the assigned interest.”  TTWI alleges that Encana breached this provision as the result of a corporate restructuring in which Encana transferred title in the lands subject to the Royalty Agreement to a wholly-owned subsidiary: PrairieSky Royalty Ltd. (PrairieSky). PrairieSky, now a publicly-traded company, is not a party to the Royalty Agreement between Encana and TTWI. 

The Royalty Agreement contains an arbitration clause that requires Encana and TTWI to refer any “Dispute” to arbitration. Dispute is broadly defined in the Royalty Agreement; it means:

any dispute, controversy or Claim (of any and every kind or type, whether based on contract, tort, statute, regulation, or otherwise) arising out of, relating to, or connected with this Agreement, including any dispute as to the construction, validity, interpretation, enforceability or breach of this Agreement […]

However, Section 6.04 of the Royalty Agreement also provides that:

[Encana] agrees and irrevocably consents to the granting of an order by the Court of Queen’s Bench of Alberta requiring [Encana] to specifically perform its obligations set forth in this Agreement, and to a mandatory injunction compelling [Encana] to perform such obligations.

TTWI commenced an action in the Alberta Court of Queen’s Bench against Encana and PrairieSky alleging, inter alia, that the disposition to PrairieSky was a breach of the Royalty Agreement and seeking specific performance, declaratory relief and damages. TTWI also commenced an arbitration against Encana seeking a declaration that it was entitled to terminate the Royalty Agreement as a result of the disposition to PrairieSky and seeking damages or restitution.  Encana applied to the Court to stay the action and to refer the matters raised in the action to arbitration.

Which arbitration act: domestic or international?

First, the Court had to determine whether the arbitration commenced by TTWI was governed by the Arbitration Act, R.S.A. 2000 c. A-43 (the Domestic Act) or the International Commercial Arbitration Act, R.S.A. 2000 c. I-5 (the International Act). Although TTWI and Encana agreed that the International Act governed the arbitration, PrairieSky took the position that the arbitration was governed by the Domestic Act.   

Pursuant to Article 1(3) of the United Nations Model Law on International Commercial Arbitration, the International Act governs arbitrations if the parties to an arbitration agreement have their places of business in different States at the time the agreement is made.

Encana and TTWI argued that Encana and TTWI had their places of businesses in different States at the time the Royalty Agreement was made. Encana had its place of business in Canada. TTWI was incorporated in New Brunswick and extra-provincially registered in Alberta; however, Encana and TTWI argued that at the time the Royalty Agreement was executed, all of TTWI’s business was in fact conducted from either Tokyo or Houston, such that its place of business was located either in Japan or the United States.

On the other hand, PrairieSky argued that TTWI had its place of business in Canada when the Royalty Agreement was made. In particular, PrairieSky noted that presentations and meetings were held in Calgary on TTWI’s behalf during the negotiation of the Royalty Agreement; that TTWI used a Calgary-based reserves firm to evaluate the transaction and had lawyers conduct due diligence at Encana’s offices in Calgary; that TTWI was extra-provincially registered in Alberta and had by implication commenced carrying on business in Alberta; that TTWI had represented in the Royalty Agreement that it was “authorized to carry on business in Alberta”; and that TTWI attended the closing of the transaction in Calgary and executed the Royalty Agreement, which relates to the development of oil and gas interests in Alberta and is governed by Alberta law.

Ultimately, the Court agreed with Encana and TTWI and held that the International Act governs the arbitration. The Court concluded that the arbitration is an international arbitration within the meaning of Article 1(3)(a) of the Model Law because the parties had their places of business in different States when the Royalty Agreement was made. In particular, the Court held that TTWI’s “place of business” for the purposes of Article 1(3)(a) of the Model Law was the place where its business decisions were being made, which in this case was either Tokyo, Japan or Houston, USA.  The Court expressly rejected PrairieSky’s arguments that the place of business could be determined by TTWI’s place of incorporation; the fact that it was extra-provincially registered in Alberta; or that it had represented in the Royalty Agreement that it was authorized to carry on business in Alberta.

The stay of the action and referral to arbitration

Next, the Court considered whether the action ought to be stayed and the claims referred to arbitration. The Court emphasized the limited role for judicial intervention in disputes that are subject to an arbitration agreement. The Court further noted that the legislative direction for limited judicial intervention was perhaps even stronger under the International Act than under the Domestic Act. Disputes that are subject to an arbitration agreement governed by the International Act must be referred to arbitration, unless the arbitration agreement is null and void, inoperative or incapable of being performed. This remains the case even where the interests of third parties not privy to the arbitration agreement are involved. 

The Court then considered whether all of the issues advanced by TTWI in the action were subject to arbitration, or whether there were aspects of the dispute that fell within the jurisdiction of the Court pursuant to Section 6.04 of the Royalty Agreement. To determine this issue, the Court had to interpret in a cohesive fashion the various provisions of the Royalty Agreement, which stated that all “Disputes” would be dealt with by arbitration, subject to applications for specific performance against Encana, which could be brought in the Court of Queen’s Bench.

TTWI argued that Section 6.04 of the Royalty Agreement carved out specific performance claims from the arbitration agreement and that if specific performance was the relief sought, then the Court would be entitled to consider all of the issues necessary to determine if that remedy was appropriate. In other words, as long as specific performance was the remedy sought in an action commenced by TTWI, the Court would be entitled to consider questions of law as to how the Royalty Agreement should be interpreted, questions of disputed fact as to what occurred and questions of mixed fact and law as to whether that conduct constituted a breach of the Royalty Agreement. 

On the other hand, Encana argued that Section 6.04 was limited to giving the Court the ability to order specific performance as a remedy, in lieu of damages, after an arbitrator had determined that there had been a breach of the Royalty Agreement. Further, Encana questioned whether specific performance was in fact the primary remedy sought by TTWI in its action against Encana. 

Ultimately, the Court preferred Encana’s interpretation of the Royalty Agreement and held that the issues raised in the action were to be referred, at least in the first instance, to arbitration. The Court was satisfied that it was the intention of the parties that any disputes regarding the appropriate interpretation of the Royalty Agreement and whether or not it had been breached ought to be determined by arbitration. The Court also noted that it appeared that at least some of the issues advanced in the action fell within the scope of the arbitration clause in the Royalty Agreement. As a result, it was appropriate for an arbitrator to determine the scope of Encana’s obligations under the Royalty Agreement, and whether it was in breach of those obligations, before TTWI could seek specific performance of those obligations in the Court of Queen’s Bench. 

The Court therefore stayed the action but held that the limited aspect related to the remedy of specific performance could proceed in Court after the determination of the dispute through arbitration. Although the Court stayed the action against Encana pending the determination of the arbitration, it allowed the action to continue as is against PrairieSky, being a non-party to the Royalty Agreement.


This case illustrates the deference showed by the Court to arbitration agreements. It also highlights the importance of ensuring that all clauses in the agreement that relate to dispute resolution work together harmoniously. Finally it illustrates a substantive rather than formal approach to determining whether the parties “have their places of business in different states”, which determines whether the International or Domestic Act – and their different protections and rights – applies to an arbitration agreement.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions