The recent decision by the Québec Court of Appeal in a case between Terrassement St-Louis Inc. (hereinafter "Terrassement") and a Crown corporation raises issues regarding access to justice. Arbitration clauses are generally respected by the courts because of their effectiveness in resolving disputes. However, their application can raise difficulties when they impose rigid terms on contracting parties in an economically disadvantaged position.
In this case, Terrassement is claiming unpaid amounts under a contract for environmental work1. Notwithstanding the arbitration clause and the jurisdiction clause designating the judicial district of Montreal in the public tender documents, Terrassement brought its action before the civil courts of the district of Chicoutimi. This choice of district was challenged by a request for referral to arbitration and a motion to decline jurisdiction2.
Superior Court decision
In response to a request for referral to arbitration, the Superior Court concluded that the arbitration clause was invalid on the grounds that it was abusive.
In its analysis, the Court first concluded that the contract, which resulted from a public call for tenders, was a contract of adhesion. As a bidder, Terrassement was selected to perform the work, the essential terms of which were established unilaterally by Hydro-Québec in the tender documents3. Since the contract was not freely negotiated between the parties, the Court considered that the arbitration clause, reproduced below, created a significant financial burden to the detriment of the adherent4:
18.7 ARBITRATION
18.7.1 Arbitration clause
The parties agree that any disagreement, dispute, or claim
relating to this contract or arising directly or indirectly from
its interpretation or application shall be settled definitively and
exclusively by arbitration, to the exclusion of the courts, in
accordance with the laws of Québec. Unless the parties
decide otherwise in an arbitration agreement, the arbitration shall
be conducted by three arbitrators, shall be confidential, and shall
be conducted in French in Montreal, in accordance with the rules of
law and the provisions of the Code of Civil Procedure of
Québec in force at the time of the dispute. The arbitral
award shall be final, binding, and without appeal, and shall be
binding on the parties.
[Note: This clause has been freely translated from the
judgement.]
The core of the dispute stems from this context, in which the imposition of a dispute resolution process before a three-arbitrator tribunal, combined with the relatively modest value of the dispute ($253,128.00), creates a disproportionate financial burden for the adherent, effectively compromising his access to justice5.
Decoding the Court of Appeal's decision
The Court of Appeal recognizes and confirms that, in the specific context of a call for tenders, the main contractual terms, including the arbitration and choice of forum clauses, are imposed unilaterally on the other party. This lack of negotiation gives the contract its nature as a contract of adhesion6.
In the Court's opinion, the arbitration clause imposed by Hydro-Québec did not provide for any differentiated mechanism based on the amount claimed. Regardless of the amount at stake, the contract requires arbitration before a tribunal composed of three arbitrators, resulting in significant arbitration costs. As a result, the regional company Terrassement would have seen its claim neutralized by the high costs of arbitration. Following the trial judge, the Court of Appeal considers that such a requirement makes the procedure unsuitable in cases where the value of the dispute is low7.
Considering the imbalance of power between the parties, the Court is of the opinion that this arbitration clause gives the Crown corporation an unjust advantage and deprives Terrassement of the real possibility of pursuing its claim. Essentially, this conclusion is based primarily on Terrassement's economic situation, the modest amount at stake, and the finding that the costs of arbitration in Montreal before three arbitrators would likely exceed the amount claimed.
The disputed clause thus appears to have been drafted solely for large-scale disputes. It does not provide adjustment of the number of arbitrators, nor a simplified or expedited arbitration procedure, and there is no possible intervention by the arbitration institution in the absence of mutual consent. The absence of any simplification or adaptation mechanism makes this clause excessively rigid. When applied to a smaller dispute, the Court considers it to be abusive, even though the overall contract is of high value8.
It is recognized that arbitrators have a certain degree of discretion to regulate the proceedings. However, they do not have the power to adapt the practical application of the clause to the context of a dispute by reducing the number of arbitrators. The Court notes that a clause expressly providing for an expedited procedure for claims of lesser value could have mitigated the unreasonableness of the clause9.
Key takeaways
In a ruling written by Justice Ruel and with a perspective of respecting the right of access to justice and promoting arbitration as a model for dispute resolution, the Court reiterates that the examination of the excessive nature of a clause must take into account a subjective criterion, namely the particular situation of the co-contracting party and the practical obstacles to the enforcement of that clause10. It also emphasizes the importance of drafting arbitration clauses that are sufficiently flexible to allow for adaptation to the specific characteristics of each dispute, particularly when the amounts at stake vary significantly. It specifies that the terms of an arbitration agreement must not restrict effective access to justice11.
The Hydro-Québec v. Terrassement St-Louis Inc. case highlights the ongoing tension between contractual efficiency and procedural justice. By proposing the adoption of flexible and adaptable arbitration clauses, the Court of Appeal is not merely settling a dispute but offering a forward-looking vision of public contract law that is fair, more balanced, and more respectful of the realities of business.
Footnotes
1. Terrassement Saint-Louis c. Hydro-Québec, 2024 QCCS, para. 53.
2. Hydro-Québec c. Terrassement Saint-Louis, 2025 QCCA 900, paras. 52 and 57.
3. Terrassement Saint-Louis c. Hydro-Québec, 2024 QCCS, para. 80.
4. Terrassement Saint-Louis c. Hydro-Québec, 2024 QCCS, paras. 91-92.
5. Hydro-Québec c. Terrassement Saint-Louis, 2025 QCCA 900, para. 24.
6. Hydro-Québec c. Terrassement Saint-Louis, 2025 QCCA 900, paras. 13-14.
7. Hydro-Québec c. Terrassement Saint-Louis, 2025 QCCA 900, para. 17.
8. Hydro-Québec c. Terrassement Saint-Louis, 2025 QCCA 900, para. 22.
9. Hydro-Québec c. Terrassement Saint-Louis, 2025 QCCA 900, para. 23.
10. Hydro-Québec c. Terrassement Saint-Louis, 2025 QCCA 900, para. 24.
11. Hydro-Québec c. Terrassement Saint-Louis, 2025 QCCA 900.
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