Trends and Developments

The Environment, Indigenous Rights, Property Ownership Transparency... and Uber... A 5 Star Review!

Introduction and summary

Canada's provinces and territories are common law jurisdictions, other than Quebec, where the Civil Code of Quebec governs private law. It is a hierarchical court system, comprised of both provincially and federally constituted courts. The Canadian Constitution of 1867 dictates the subject-matter jurisdiction of the country's courts and regulatory tribunals. The jurisdiction of the Federal Courts is restricted to those matters governed by federal statutes, which expressly confer jurisdiction on these courts. The decisions of the provinces' appellate courts and the Federal Court of Appeal are subject to review by the Supreme Court of Canada (SCC). And you thought Canada was just Celine Dion, maple syrup and ice hockey!

Despite the uncertainty and disruption caused by the COVID-19 pandemic, the SCC released several landmark decisions in 2020 that have important commercial and constitutional implications.

In Uber v Heller, released in June 2020, the SCC declared that the arbitration clause in Uber's standard form service agreement with its Canadian drivers was unconscionable and therefore invalid. The SCC further held that, in the circumstances, the courts could properly determine the arbitrator's jurisdiction to resolve the dispute, creating an exception to the "competence-competence" principle. The arbitration clause stipulated that arbitration was to take place in the Netherlands, and an Uber driver was required to pay a USD14,500 filing fee to commence arbitration (roughly half an average Uber driver's annual salary). In this context, the SCC found the arbitration clause to be unconscionable, confirming that the doctrine can be applied to invalidate a contract even if one party does not knowingly take advantage of another's vulnerability.

In September 2020, the SCC released two decisions that provide clarity in the ongoing judicial and legislative effort to prevent "strategic lawsuits against public participation" (SLAPP) from chilling debate on matters of public interest (170 v Pointes Protection and Bent v Platnick). The SCC has confirmed that anti-SLAPP legislation can be used to dismiss SLAPPs outside of the usual defamation context.

Also in September 2020, the SCC heard arguments in three cases known together as the Reference re Greenhouse Gas Pollution Pricing Act, concerning the constitutionality of the federal Greenhouse Gas Pollution Pricing Act, which came into force in June 2018 with the aim of instituting a national carbon pricing standard. The SCC's decision is expected to be ground-breaking.

The SCC also considered the complex issue of Indigenous rights and claims over resource-rich lands in multiple jurisdictions. In February 2020 in Newfoundland and Labrador v Innu of Uashat, the SCC signalled that attempts to restrict claims of Aboriginal peoples to within provincial or territorial limits may not be tenable. In October 2020, the Court heard argument in R. v Deslautel, another case involving the inter-jurisdictional practising of Aboriginal rights, in which an American citizen who is a member of the Lakes Tribe of the Colville Confederated Tribes asserts that he was exercising his Aboriginal right to hunt in traditional territory when he killed an elk in British Columbia without a hunting licence.

Turning from cases to legislation and from the national to the provincial level, a novel piece of legislation coming into force in November 2020 is British Columbia's Land Owner Transparency Act (LOTA). This first-of-its-kind undertaking in Canada is aimed at identifying all individuals who ultimately own real estate in British Columbia for the purposes of allowing government authorities and law enforcement agencies to address tax evasion and money laundering activities connected to the ownership of land. The scope of the reporting obligations under LOTA is extensive.

SCC on unconscionable arbitration clauses - Uber v Heller

In 2017, on behalf of Uber drivers in Ontario, David Heller commenced a CAD400 million class action in the Ontario courts for alleged violations by Uber of provincial employment standards legislation (ESA). The arbitration clause of Uber's standard form service agreement with its Canadian drivers designates Amsterdam as the "place of arbitration" and requires drivers to pay a filing fee of USD14,500 to commence an arbitration. Uber applied to stay Heller's proposed class action, relying on the arbitration clause. Heller argued that the arbitration clause was invalid because it was unconscionable - the cost to an Uber driver to pursue arbitration in the Netherlands exceeded the driver's annual income. Heller also argued that the agreement contracted Uber drivers out of the mandatory provisions of the ESA.

At first instance, the Ontario Superior Court ruled in Uber's favour, concluding that the validity of the arbitration clause had to be referred to arbitration in the Netherlands in accordance with the "competence-competence" principle that arbitrators are competent to determine their own jurisdiction. The Ontario Court of Appeal overturned this decision, finding that, in the circumstances of this case, a court should determine jurisdiction at first instance. The appellate court found that the arbitration provision was unconscionable, given the inequality of bargaining power between Uber and its drivers and the costs of arbitration that Uber drivers would have to incur.

On 26 June 2020, the SCC released its decision in Uber Technologies Inc. v Heller, 2020 SCC 16 (Uber). The majority (seven of nine justices, with another concurring in the result) agreed with the Ontario Court of Appeal and dismissed Uber's appeal. The lone dissenting justice focused on the freedom to contract and would have stayed the action in favour of Uber's arbitration agreement.

The competence-competence principle is a foundational feature of domestic and international commercial arbitration, recognising that an arbitral tribunal normally determines its own jurisdiction. A court may only review that decision at a later stage, upon application by one of the parties. Of particular note to commercial arbitration practice in Canada, in Uber the SCC has carved out a new - albeit narrow - exception to the competence-competence principle, allowing a court to determine an arbitral tribunal's jurisdiction in the first instance where there is a real prospect that the challenge to the arbitrator's jurisdiction may never be resolved.

Under this new exception, the court (and not the arbitral tribunal itself) can resolve whether the arbitrator has jurisdiction over the dispute in the first instance if there is a genuine challenge to arbitral jurisdiction (it cannot be merely a delay tactic, for example) and a real prospect that the jurisdictional challenge may never be resolved by the arbitrator if the stay of the court action is granted and the matter is referred to arbitration.

The SCC did not consider Heller's challenge to the validity of Uber's service agreement on the grounds that it contracted drivers out of the mandatory provisions of the ESA. However, the Court found the arbitration clause in Uber's service agreement was unconscionable and, therefore, invalid. In doing so, the SCC arguably expanded the doctrine of unconscionability by removing a strict "knowledge requirement".

The two prongs for assessing whether an agreement is unconscionable are (i) inequality of bargaining power and (ii) an improvident bargain.

In finding that an inequality of bargaining power existed in Uber, the majority noted the following key factors:

  • the difference in sophistication between Heller and Uber;
  • the lack of information in the contract about the cost of filing an arbitration claim; and
  • the foreign choice of law clause, which circumvented legal protections in the domestic ESA that Heller would otherwise enjoy.

In the SCC's view, the unfair terms prevented Heller from effectively seeking resolution of a claim, regardless of its legal merit. The bargain struck in the arbitration clause was held to be improvident for Heller and, ultimately, unconscionable and thus invalid.

The SCC made it clear in Uber that arbitration clauses should be tailored to the circumstances and should provide enough information to make the legal and financial consequences of the clause reasonably clear to the parties.

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Originally published in Chambers Global Practice Guides

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