When multiple international commercial arbitration proceedings are initiated between the same parties, does the court have jurisdiction to consolidate the proceedings without the consent of all the parties? Two decisions of the Alberta Court of the Queen’s Bench recently gave opposite answers to this question, and this is not the first time the court has been split on this issue.
At the core of this debate are differing interpretations of section 8(1) of the International Commercial Arbitration Act (“ICAA“), which reads:
“The Court of the Queen’s Bench, on application of the parties to 2 or more arbitration proceedings, may order
(a) the arbitration proceedings to be consolidated, on terms it considers just…”
In Japan Canada Oil Sands Limited v Toyo Engineering Canada Ltd, 2018 ABQB 844, Madam Justice Romaine found that she had jurisdiction to consolidate a domestic arbitration into an international arbitration on the contested application of one of the parties.
Japan Canada Oil Sands Limited (“JACOS“) and Toyo Engineering Canada Ltd (“Toyo Canada“) were parties to a project agreement for the expansion of the Hangingstone oil sands project in Northern Alberta. Toyo Engineering Construction Ltd (“Toyo Japan“), the parent company of Toyo Canada, entered into a separate guarantee and indemnity agreement with JACOS to indemnify any losses resulting from Toyo Canada’s failure to satisfy its obligations under the project agreement. A series of disputes arose that led both JACOS and Toyo Canada to initiate arbitral proceedings. Toyo Canada initiated a domestic arbitration against JACOS, and JACOS initiated an international arbitration against both Toyo Canada and Toyo Japan. JACOS applied to have the proceedings consolidated under a single international arbitration, and Toyo cross-applied to have the proceedings consolidated under the domestic proceeding and to have the claims against Toyo Japan stayed.
As a threshold matter, Romaine J found that JACOS’ international arbitration had been validly initiated, and that an arbitration involving Toyo Japan could only proceed as an international proceeding. Romaine J found that Toyo Canada had consented to the consolidation through a provision in the project agreement that allowed JACOS to request consolidation of multiple disputes that arise under the project agreement or between JACOS and a third party to an agreement relating to the project. This reasoning did not extend to a finding that Toyo Japan had consented to consolidation.
Romaine J was persuaded by the reasoning of then Chief Justice Whittman in Pricaspian Development Corp. v BG International Ltd, 2016 ABQB 611. Whittman CJQB applied Alberta’s Interpretation Act to s. 8(1) of the ICAA to conclude that the term “parties” includes the singular “party.” He reasoned that “[i]f the section indeed did require the consent of both parties, the result would be that there would be no available avenue for an aggrieved party to bring a contested consolidation application to the Court…This would mean that a party to an arbitration could bring multiple, similar arbitrations, and then withhold their consent to consolidate unreasonably, without the aggrieved party having recourse.”
In Japan Canada Oil Sands Limited, Romaine J held that consolidation was a “just decision” given that the disputes involved the same parties and similar questions of law and fact. She also appears to have been persuaded by JACOS’ argument that it would be prejudiced if consolidation were not ordered and it were required to pursue its claims against Toyo Japan in separate proceedings.
The decision in Japan Canada Oil Sands runs contrary to a decision of the same court handed down just a few months earlier in Alberta Motor Association Insurance Company v Aspen Insurance UK Limited, 2018 ABQB 207. In that case, Madam Justice Pentelechuk was tasked with considering a contested application to consolidate two international arbitrations. Pentelechuk J acknowledged that Whittman CJQB’s reasoning in Pricaspian was tempting, and added: “[i]t does seem counter-intuitive to allow one party…to refuse consolidation, and insist on multiple arbitrations which serve to erode many of the inherent benefits of consolidation.” Nevertheless, she preferred the reasoning of Justice Hawco in Western Oil Sands v Allianz Insurance Co of Canada, 2004 ABQB 79. Hawco J held that “parties” in s. 8(1) refers to all parties, meaning the consent of all parties is required to consolidate multiple international arbitral proceedings. He disagreed that it would be “absurd or superfluous” for the legislation to provide a means for parties to seek a court order on a matter consented to by all.
Despite the temptation to follow Pricaspian, Pentelechuk J found Hawco J’s decision to be more consistent with commentary on the issue. In 2012, the Uniform Law Conference of Canada (ULCC), International Commercial Arbitration: Report and Commentary of the Working Group on New Uniform Arbitration Legislation considered consolidation provisions and in 2013 it did not recommend changing the ICAA‘s requirement for consent of all parties to consolidation, determining such a change “is not feasible or advisable.” Also in 2013, the Alberta Law Reform rejected a proposal to allow courts to consolidate arbitrations without all parties’ consent in favour of protecting party control. Pentelechuk J held that that “[p]arty control, the hallmark of the arbitration process” would be sacrificed if the court were to find such jurisdiction.
In Ontario, the courts have not yet considered whether they have jurisdiction to order consolidation under the Ontario International Commercial Arbitration Act, and in British Columbia the International Commercial Arbitration Act expressly requires the consent of “all parties” to consolidate.
At the time of writing, neither Japan Canada Oil Sands nor Alberta Motor Association Insurance Company has been filed for appeal. For now, as evidenced by these two recent decisions, the debate in Alberta over whether the court has the jurisdiction to hear contested consolidation applications continues.