Why This Decision Matters
The Alberta Court of King's Bench recently clarified key issues that often arise in appeals of arbitration awards relating to enforcement, the test for staying enforcement, and the balance between transparency and confidentiality. Inter Pipeline Ltd v Teine Energy Ltd highlights the need for comprehensive arbitration agreements that explicitly address enforcement and confidentiality expectations in any subsequent court proceedings.
The Dispute
Teine Energy Ltd (Teine) is a shipper of crude oil on Inter Pipeline Ltd's (IPL) Mid-Saskatchewan Pipeline System. A dispute arose under a Pipeline Connection Agreement between the parties. Teine initiated arbitration, claiming that IPL did not follow the methodology for compensating Teine for quality changes in its crude oil, a process known as "equalization", between the pipeline's entry and exit points.
The arbitral award resulted in a substantial net amount owing to Teine. IPL initiated court proceedings under the Arbitration Act, RSA 2000, c A-43, seeking permission to appeal and set aside the award and a stay of enforcement. Concurrently, Teine applied to enforce the award. Adding another layer of complexity, IPL sought a blanket sealing order over the entire court file.
Decision on Stay and Enforcement Applications
A central issue before the Court was determining the appropriate test for granting a stay of enforcement of an arbitral award in Alberta. Teine argued for the application of the standard tripartite test for stays, as established by the Supreme Court of Canada in RJR-MacDonald Inc v Canada (Attorney General) ("RJR"). This test requires the applicant to prove three elements: a serious issue to be determined, irreparable harm if the stay is denied, and that the balance of convenience favours granting a stay.
Conversely, IPL advocated for a modified two-part test based on Ontario case law that omits the irreparable harm requirement and instead considers whether the appeal is bona fide (similar to the serious issue element of the RJR test), the hardship to the parties if a stay is granted, and the appropriateness of maintaining the status quo pending the resolution of the application (together, equivalent to the balance of convenience element of the RJR test).
The Court rejected the two-part test as unprincipled, highlighting inconsistencies in Ontario case law, where courts applied the test to enforcement applications but followed the RJR test in stay applications. The Court also observed that the two-part test was more likely to delay the enforcement of an arbitral award pending an appeal – a result that may be influenced by Ontario's Rules of Civil Procedure, which, unlike the Alberta Rules of Court, provide for an automatic stay of a judgment under appeal. After reviewing case law from Alberta, Manitoba, and British Columbia, and the wording of section 49(5) of Alberta's Arbitration Act, the Court concluded that the RJR test governs applications to stay the enforcement of an arbitral award in Alberta.
Applying the RJR test, the Court held that IPL was not entitled to a stay of enforcement. The Court emphasized that arbitration is a party-driven process. The parties' arbitration agreement could have included a provision for an automatic stay pending appeal. The absence of such a clause further weighed against granting IPL's stay application, as the circumstances stemmed from the parties' contractual choices.
Decision on Sealing Order Application
IPL requested a blanket sealing order to restrict public access to the court file, arguing that the entire arbitration record was confidential because it contained IPL's proprietary information and sensitive customer and competitor data, much of which was subject to confidentiality agreements with third parties. Teine acknowledged that portions of the arbitration record contained confidential information properly subject to a sealing order. However, it argued that redacted versions of much of the record had already been prepared for the arbitration and could be placed on the court file.
The Court applied the framework established in Sherman Estate v Donovan ("Sherman Estate"), which requires the applicant to demonstrate that court openness poses a serious risk to an important public interest, the order sought is necessary to prevent the serious risk to the identified interest because reasonably alternative measures will not prevent this risk, and as a matter of proportionality, the benefits of the order outweigh its negative impacts.
The Court held that the only sufficiently important public interest raised by IPL was maintaining the confidentiality of third-party business information. It declined to recognize an important public interest in respecting parties' choice of private and confidential dispute resolution and highlighted two key points in this regard. First, private arbitration occurs within a legislative framework that requires public courts for enforcement and appeal proceedings. The open courts principle is the default position; parties must meet strict standards to obtain a sealing order. Second, parties concerned about confidentiality can reduce the risk of publicity by opting for a private appeal.
The Court denied IPL's request for a blanket sealing order, emphasizing that such orders are exceptional. Instead, the Court directed that the redacted arbitration record serve as the starting point and it established a procedure for the parties to propose additional redactions to protect third-party confidential information.
Conclusion and Key Takeaways
Inter Pipeline Ltd v Teine Energy Ltd is a significant contribution to Alberta's limited jurisprudence on commercial arbitration. It provides much needed clarity on the enforcement of arbitral awards, the criteria for staying enforcement, and the balance between transparency and confidentiality in subsequent court proceedings. Key lessons from this decision include:
- The RJR test applies to applications to stay of enforcement of an arbitral award: Although it was generally assumed that the RJR test applied to all stay applications in Alberta, there was previously limited direct analysis of its application to the stay of enforcement of arbitral awards, particularly in commercial cases. The Court's decision fills a notable gap in Alberta's jurisprudence by affirming that the RJR test governs these applications.
- Arbitration proceedings can be private and confidential, but they are not inherently so: A key advantage of arbitration is its private and confidential nature. However, the extent of confidentiality in arbitration is determined by the rules governing the arbitration and the parties' agreement. In other words, arbitral awards under appeal are not inherently confidential and parties should not assume that the arbitration record will remain confidential in subsequent judicial proceedings. To seal all or part of the record, parties must satisfy the stringent requirements of the Sherman Estate test. Moreover, blanket sealing orders are exceptional and rarely granted.
- Parties should draft comprehensive arbitration agreements to pre-empt issues around enforcement and confidentiality: The Court's decision underscores that arbitration is a party-driven process, giving parties the ability to address enforcement and confidentiality upfront in their arbitration agreement. Parties should consider including provisions in their arbitration agreement relating to an automatic stay of an arbitral award pending an appeal if they foresee that such protection may subsequently be important. If confidentiality is a priority, parties may also choose to contract for a private appeal, rather than risk public court proceedings and the uncertainty of obtaining a sealing order.
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