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9 January 2025

Inter Pipeline v Teine Energy: Sealing Orders For Arbitration-Related Court Proceedings

SU
Singleton Urquhart Reynolds Vogel LLP

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A Canadian national law firm that specializes in the construction and infrastructure, insurance, and real estate sectors. The firm consistently ranks first among Canadian construction and infrastructure firms and features prominently in the delivery of commercial litigation, corporate-commercial and employment law services.
In Inter Pipeline Ltd v Teine Energy Ltd, 2024 ABKB 740 ("Inter Pipeline"), the Court of King's Bench of Alberta considered the appropriate test for enforcing arbitral awards...
Canada Litigation, Mediation & Arbitration

In Inter Pipeline Ltd v Teine Energy Ltd, 2024 ABKB 740("Inter Pipeline"), the Court of King's Bench of Alberta considered the appropriate test for enforcing arbitral awards, and similarly provided guidance on sealing orders in the arbitral context. On the latter point, the Court provided a thorough consideration of the open court principle in the context of third-party confidentiality interests, the promotion of private arbitration, and respecting parties' choice of private, confidential dispute resolution. Below, we review the case.

Factual Background

Teine Energy Ltd ("TEL") was a shipper on Inter Pipeline Ltd's ("IPL") Mid-Saskatchewan Pipeline System ("MSPS"). TEL commenced an arbitration against IPL alleging, among other things, that IPL did not follow the correct methodology to compensate TEL for quality changes in its product occurring between the entry and exit points of the MSPS. The arbitral tribunal issued an award in favour of TEL (the "Award"), which TEL sought to enforce in this case.

IPL, however, appealed the Award based on alleged errors of law, and additionally sought to have the Award set aside due to "manifest unfairness". IPL also asked the Court to stay enforcement of the Award pending the determination of the appeal and set-aside application, and asked to seal the court record so that none of the documents filed in the proceeding would be available to the public.

On the issue of staying enforcement of the Award, IPL submitted that the correct test for enforcement of an award (and stay of enforcement of that award) was a simplified, two-part test that did not consider irreparable harm, while TEL submitted that the correct test was the usual three-part test set out in RJR-MacDonald.

On the issue of sealing the court record, IPL submitted that the subject matter of the arbitration was commercially sensitive, as the arbitration record contained confidential information from IPL and third parties. In comparison, TEL submitted that only some genuinely confidential information should be protected, and that a redacted version of the arbitration record should be available to the public in the court file.

The Court's Decision

The correct test for enforcement and stay of enforcement of an arbitral award

As readers are aware, the standard three-part test for stays and injunctions considers three questions:1

  • is there a serious issue to be determined;
  • will the applicant suffer irreparable harm if the stay is refused; and
  • does the balance of convenience favour the granting of the stay.

IPL relied on certain Ontario cases in the arbitral context where the irreparable harm requirement was removed. However, the Court noted that Ontario's approach was not capable of consistent application, which was (in the Court's view) apparent in circumstances where there is an application for enforcement and a cross-application for a stay. In that scenario, a court would only consider steps 1 and 3 for the enforcement application, while on the cross-application, the court would have to consider all three steps. The Court also noted that Alberta courts applied the standard three-part test. Accordingly, the Court concluded that the three-part test was appropriate; with that in mind, the Court found that IPL did not demonstrate irreparable harm, nor did the balance of convenience favour IPL.

On irreparable harm, IPL argued that without a stay it would lose market share and market opportunities. IPL also submitted that as it was the party to the action, the fact that IPL was owned by Brookfield Infrastructure (which had a market capitalization of approximately USD $16 billion) was irrelevant to the question of irreparable harm.

However, the Court noted that IPL was seeking a stay – an equitable remedy – partly because it would suffer financial harm. In such circumstances, the Court could consider the broader financial context in which IPL existed, as equity looked to substance rather than form. The Court also noted that IPL was itself a significant entity, regardless of its relationship to Brookfield. There was no evidence suggesting that IPL could not go to market to raise or borrow funds, nor was there evidence that IPL could not afford the costs of doing so. Finally, there was no evidence that TEL would be unable to repay the Award if IPL was successful on appeal.

As both parties could bear the burden of not having the amount of the Award, there was no reason to deny TEL the benefit of its victory in the arbitration pending IPL's appeal.

Finally, the Court observed that arbitration was a party-driven process. Parties are free to determine most of the rules governing this process, meaning that the arbitration agreement could have provided for an automatic stay pending appeal, but it did not. Therefore, IPL was unsuccessful in its application for a stay.

Sealing Order

IPL sought a sealing order since, in its view, either the whole arbitration record was confidential, or alternatively, it was too onerous to sift through the record to separate confidential information from non-confidential information. By contrast, TEL submitted that the parties had already redacted confidential information; therefore, redacted versions of the Award and other exhibits, to the extent required for the appeal, could be put in the court file.

To determine whether a sealing order was warranted, the Court relied upon the three-part test set out inSherman Estate v Donovan.Under that test, the party seeking a sealing order must establish that:2

  • court openness poses a serious risk to an important public interest;
  • the order sought is necessary to prevent this serious risk to the identified interest because reasonably alternative measures will not prevent such risk; and
  • as a matter of proportionality, the benefits of the order outweigh its negative effects.

In that regard, the Court observed that the open court principle could only be limited to protect a public interest – not a private business interest. IPL therefore asserted three public interests: (1) protecting the integrity of the midstream industry in general, and third-party confidentiality interests; (2) the promotion of private arbitration to preserve public court resources; and (3) respecting the parties' choice of private, confidential dispute resolution.

Regarding the midstream industry and third-party confidentiality interests, the Court distinguished between (1) IPL's proprietary business information and the way that it administered the MSPS, and (2) third-party information in IPL's possession. While the Court understood why IPL would be protective of disclosing commercially sensitive information on how it conducted business (which IPL compared to a trade secret), commercial sensitivity alone was insufficient to justify a sealing order.

In comparison, third-party information possessed by IPL was different, insofar as the Supreme Court of Canada has previously found that protecting the confidentiality expectations of third parties (who are strangers to the legal proceeding) could be a public interest.3

Here, the Court was receptive to the fact that the arbitral tribunal accepted that the parties had bona fide third-party confidentiality obligations when granting a confidentiality order. The tribunal also honoured this confidentiality order throughout the arbitration proceedings. Thus, the Court held that there was a risk to an important public interest: maintaining the confidentiality of third-party information.

On the subject of promoting private arbitration to preserve public court resources, the Court noted that while there could be valid reasons why parties could choose private arbitration over public litigation, this did not mean that judges should deliberately shape the law in ways that would encourage the movement of disputes into private arbitration to preserve public court resources. The premise of IPL's argument was that courts were under-resourced, but without reliable evidence, the Court concluded that it could not accept this premise, and that it would not be appropriate to shape legal doctrine simply to make the lives of judges easier.

Instead, the answer to under-resourced courts would be more resources, not judges altering legal doctrine to facilitate privatizing civil justice. In fact, the Court observed that although private arbitration was a legitimate forum for dispute resolution, there was a public interest in ensuring that the Court maintain a healthy docket so that the Court could continue to fulfil its role as custodian of the common law and interpreter of statutes. Thus, IPL's submission on this front was unsuccessful.

Regarding IPL's argument on respecting the parties' choice of private and confidential dispute resolution, the Court stipulated that while privacy was a reason why parties would choose arbitration, it was not thereason. Even if the parties chose arbitration mainly because it offered privacy, it did not automatically follow that their choice for private dispute resolution should carry forward into proceedings in public courts.

After all, the parties' choice of private arbitration was made against the backdrop of Alberta'sArbitration Actrequiring a court application to authorize award enforcement, and an appeal process in the Court.4 While the legislature could have reduced Court involvement in this, it did not.

In addition, the arbitration was governed by ADRIC Rules, the relevant rule of which provided as follows:

1.18.2 Unless the parties agree otherwise, the parties, any other person who attends any portion of the arbitral hearings or meetings, the Tribunal, and the Institute must keep confidential all Confidential Information except where disclosure is:

[...]

(b)necessary in connection with a judicial challenge to, or enforcement of, an award...

[emphasis in original]

The confidentiality order issued by the tribunal mirrored the ADRIC Rules, providing an exception to confidentiality for enforcement and appeal proceedings. Thus, the clear expectation of the parties – based on Alberta's Arbitration Act, the ADRIC Rules, and the confidentiality order – was that once an award was rendered, any enforcement and appeal proceedings would take place in the Court, according to normal Court standards and practices. If privacy was an overriding concern, the parties could have contracted for a private appeal, but they did not. Thus, IPL failed in this argument.

The final issue was whether third-party confidential information and material derived therefrom could be identified and redacted from parts of the arbitration record that would be placed in the public court file.

The Court was satisfied that the proposed redacted documents were sufficient for a reader to understand the subject matter without disclosing confidential information. Rather than the binary choice between a blanket sealing order and the redacted records provided to the business principals of IPL and TEL, the Court identified an alternative option which used the redacted arbitration record as the starting point, but allowed for potential additional redactions as necessary to protect third-party confidential information.

The Court noted that this was in line with the proportionality stage of the Sherman Estate test, as the cost to the open court principle by removing third-party confidential information from the documents to be filed with the Court was low. This removal would benefit third parties who did not consent to their private business being the subject of IPL and TEL's dispute, which would in turn reinforce public confidence that parties could order their affairs by contract.

Commentary

While Inter Pipeline may be of limited guidance to Ontario readers in relation to the applicable test for a stay of enforcement of an arbitral award (given the existing Ontario case law to the contrary), the Court's analysis is nevertheless insightful on the issue of when and how a sealing order may be granted in the context of litigation involving an arbitral award (whether that be an appeal or a set-aside application).

Although it appears clear that the protection of third-party confidentiality interests constitutes a public interest worthy of protection, it will nevertheless be difficult to obtain a blanket sealing order that covers the entirety of the arbitral record (as shown by the Court's alternative approach in this case). Indeed, the Court itself observed that blanket sealing orders involving arbitration are not the norm.5

Of the same token, the Court's comments on preserving public court resources and respecting the parties' choice of private dispute resolution are intriguing.

On the one hand, it would be difficult to argue against the Court's observation that it is the custodian of the common law and of the interpretation of statutes, and that depriving the Court of cases in favour of arbitration would be detrimental to the development of the common law. Indeed, this is a not-uncommon criticism that readers will be familiar with in the corporate-commercial context generally, insofar as the rise of alternative dispute resolution has arguably deprived courts of their lawmaking function as a result (an issue that the Court in Inter Pipeline itself observed). In that regard, the Court's caution against shaping common law doctrine for policy reasons (i.e. freeing up court resources) is well taken.

On the other hand, however, a practical perspective would seemingly suggest the opposite. It is trite that Canadian courts have long been overburdened and under-resourced, which state of affairs has persisted for several years and which was significantly aggravated by the backlog occasioned by the COVID pandemic. Indeed, the problem is so entrenched that the Chief Justice of Canada has publicly commented on the issue in order to raise awareness of the need for additional resources.6

In that regard, it is notable that in Ontario, Chief Justice Winkler (as he then was) expressed a more positive view – speaking extra-judicially in 2010 – on the use of arbitration as a means of freeing up judicial resources, observing that "when the parties select arbitration, they free up valuable court time and thus shorten waiting periods for other litigants."7 As a result, it is interesting to speculate whether an Ontario court confronted with the same issue as inInter Pipelinewould give greater weight to the freeing up of judicial resources as a valid public interest. Ultimately, that question might have to await further consideration by other appellate courts.

Finally, with respect to the issue of respecting the parties' choice of private dispute resolution, it is worth observing the extent to which parties, in practice, actually expect to commence litigation in order to appeal or set aside an award. The Court in Inter Pipeline referred to the possibility of the parties having arranged for a private right of appeal, and alegislative framework that requires a court application to authorize enforcement of awards and an appeal process in the Court. However, in the authors' experience, it is rare for parties to arrange for a private appeal process, and – at least in the Canadian construction industry – it is more so the exception than the norm for parties to seek enforcement of an award. More typically, parties will accept the outcome of an arbitration and abide by the tribunal's award.

Bearing the foregoing in mind, the Court's reference to the parties' disclosure obligations under the ADRIC Rules and the tribunal's confidentiality order also leaves open a question as to what the parties reasonably expected in subscribing to those rules (it is unclear whether the confidentiality order was issued by the tribunal on consent). As the Court observed, both the ADRIC Rules and the confidentiality order contained carve-outs for disclosure that was "necessary" or "required" in order to pursue a challenge or enforcement of the tribunal's award.

In that context, it is arguable that the parties would have understood such a carve-out to be limited to a requirement that disclosure be made to the Court (rather than the public) and only to the extent necessary for the Court to sufficiently understand the basis for enforcing (or challenging) the award. On the other hand, however, the Court rightly suggested that parties coming to court would (or should) expect the open-court principle to be the default presumption, such that this point perhaps calls out a more fundamental tension between what parties ought to reasonably expect versus what they do reasonably expect.

Ultimately, Inter Pipeline presents a fascinating discussion of confidentiality in the context of arbitration-related litigation that will hopefully be considered in further detail by Canadian courts in future.

Footnotes

1. Inter Pipeline Ltd v Teine Energy Ltd, 2024 ABKB 740at para 20.

2. Ibid at para 33.

3. Ibid at para 41, referencing Sierra Club of Canada v Canada (Minister of Finance), 2002 SCC 41 at para 55.

4. em>Ibid at paras 11, 52, and 56.

5. Ibid at para 59.

6. Including his most recent annual press conference on June 3, 2024 (his remarks are available here).

7. https://www.ontariocourts.ca/coa/about-the-court/archives/commercial_arbitration_courts/.

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.

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