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In Peace River Hydro Partners v. Petrowest Corp., the Supreme Court of Canada (SCC) refused to stay a receiver’s civil lawsuit in favour of multiple arbitration proceedings, finding the arbitration agreements were made inoperative by court order to facilitate an orderly and single insolvency process.

This case helps resolve a tension between the expedience of a single insolvency process and the presumptive enforceability of arbitration agreements.

Factual Background

Peace River subcontracted various Petrowest entities to work on a construction project. The Petrowest entities subsequently fell into receivership and bankruptcy. Their court-appointed receiver/trustee commenced a civil action against Peace River to collect money allegedly owed under various subcontracts containing arbitration clauses. Peace River applied to the court for a stay pursuant to s. 15 of British Columbia’s domestic Arbitration Act (“AA”).[1] This section requires a court to stay a legal action in favour of arbitration unless the arbitration agreement is void, inoperative, or incapable of being performed.

The chambers judge and the British Columbia Court of Appeal denied the stay, but for different reasons.[2] The SCC unanimously dismissed the appeal.

Majority Analysis

Justice Côté, writing for the majority, held that the arbitration agreement was inoperative.

Justice Côté held that the court could resolve this issue without offending the principle of competence-competence, which establishes that a “challenge to an arbitrator’s jurisdiction should generally be decided at first instance by the arbitrator.” This case represented an exception to the rule because the court could decide the issue by interpreting legislation with minimal consideration of evidence.

Justice Côté set out a two-part framework to determine whether to grant the stay in favour of arbitration.

First, the party seeking the stay has the burden to establish, on a low “arguable case” standard, the four technical prerequisites for a mandatory stay of court proceedings :

  1. an arbitration agreement exists;
  2. court proceedings have been commenced by a “party” to the arbitration agreement;
  3. the court proceedings are in respect of a matter that the parties agreed to submit to arbitration; and
  4. the party applying for a stay in favour of arbitration does so before taking any “step” in the court proceedings.

Second, the party resisting the stay has the burden to establish, on a balance of probabilities, that the arbitration agreement is “void, inoperative, or impossible of being performed.” Relevant factors include:

  1. the effect of arbitration on the integrity of the insolvency proceedings;
  2. the relative prejudice to the parties from the referral of the dispute to arbitration;
  3. the urgency of resolving the dispute;
  4. the applicability of a stay of proceedings under bankruptcy or insolvency law; and
  5. any other factor the court considers material in the circumstances.

The first part was met. The parties agreed that (1) and (3) existed. Regarding (2), the majority held that a court-appointed receiver can be a party to an arbitration agreement.  Regarding (4), the majority held that no step in the proceeding was taken. Undertaking to file a defence was not a step in the proceeding.

The second part was also met. The majority found that the agreement was inoperative. A single insolvency process was more expedient than multiple arbitral proceedings which the Court deemed “chaotic”. The parties would suffer no prejudice from foregoing arbitration.

Importantly, the majority rejected the Court of Appeal’s reasoning that the receiver was at liberty to unilaterally disclaim the arbitration agreement. Only a court can determine whether an arbitration agreement is void, inoperative, or impossible of being performed.[3]  

Concurring Analysis

Justice Jamal, writing a short concurring opinion on behalf of four justices, agreed that the arbitration agreements were inoperative. However, they held that the receiver was at liberty to disclaim and render inoperative the arbitration agreement, while suing to collect debts under the underlying contracts, because the reciever was so authorized by the receivership order. They agreed with the majority that a receiver cannot unilaterally “revoke” a valid arbitration agreement. Rather, a receiver can implicitly disclaim an arbitration agreement by starting a court action pursuant to a receivership order.


  • Generally, arbitration agreements will be enforced in the face of insolvency. However, a stay in favour of arbitration will be refused if enforcing the clause prevents an orderly and efficient resolution of the receivership.
  • Justice Côté highlighted the shared interest between insolvency and arbitration law in efficiency and expediency, procedural flexibility, and decision makers with specialized expertise.

Disclosure: Baker McKenzie LLP acted as an intervener for the Chartered Institute of Arbitrators (Canada) Inc. during the Supreme Court of Canada hearings, whose submissions were specifically endorsed and accepted by the majority.[4]

The authors thank Anton Rizor for assisting with this post.

[1] The Arbitration Act, RSBC 1996 c 55 has been replaced by Arbitration Act, SBC 2020, c 2. The relevant provisions regarding a stay of court proceedings can be found in s. 7.

[2] For a review of those cases please refer to last year’s blog post on the appeal decision.

[3] In fact, the receiver conceded that they had not even expressly disclaimed the agreements.

[4] At paras 123 and 128.


Christina Doria co-chairs Baker McKenzie's North American International Arbitration Group and is a steering committee member of the Firm's Global Arbitration Group. Among other rankings, she is recognized by Who's Who Legal (WWL) Canada - Arbitration as a national leader and by WWL Arbitration as a Future Leader. She has been praised for her "[e]xtraordinarily strong counsel skills and an excellent command of international arbitration practice." Christina has served as an arbitrator and has acted on commercial arbitrations under UNCITRAL, AAA/ICDR, BCICAC, ADRIC and CPR rules, as well as on investor-state arbitrations under ICSID, UNCITRAL and NAFTA.


Michael Nowina is a partner who advises on a broad range of commercial disputes including fraudulent investment schemes, mortgage and credit fraud, tort, breach of contract, and negligence claims. Michael acts for financial institutions and on disputes involving the energy and resource sectors. He is a part of the Firm's Dispute Resolution and Global Restructuring & Insolvency practice groups. He has appeared before all levels of courts in Ontario and frequently appears on matters on the Commercial List in Toronto. Michael regularly speaks, publishes and appears in the media on fraud and insolvency matters. Michael can be reached at and + 1 416 865 2312.


Brendan O'Grady is a senior associate advising on complex commercial arbitration and litigation. He is a member of Baker McKenzie's North American Litigation & Government Enforcement Practice Group in Toronto. Brendan has represented Fortune 500, state-owned and private companies in high-stakes litigation, class actions, and international commercial arbitrations in Canada and around the world. He is recognized by Chambers & Partners (2024) among the top commercial arbitration practitioners in Canada, and he is the sole recipient of the Lexology Client Choice Award (2024) for commercial arbitration in Canada. Both distinctions are based on client feedback, including: "He is a fantastic attorney—he is whip-smart, has a very high IQ and is great in high-pressure situations" (Chambers 2024) and "Working with Brendan O'Grady has enabled us to win difficult cases where the outcome was not certain." (Lexology 2024)