Québec’s international (and domestic) arbitration rules are codified in the Code of Civil Procedure (the “CCP”) and were first enacted over thirty years ago as part of a major, progressive reform of arbitration law in the Province.  This reform was inspired by the 1985 UNCITRAL Model Law on International Commercial Arbitration (the “Model Law”) and sought to promote arbitration as a means of private dispute resolution.

Today, each of the other Canadian provinces have separate legislation that governs international arbitration that is, like Québec, largely based on the Model Law.

Frequently in the context of commercial arbitrations, a party seeks the specific enforcement of the terms of a contract, or, for example, other types of protective or preservation orders.  An important issue that has arisen under Québec law over the years is whether an arbitrator has the jurisdiction to render these types of orders, which are injunctive in nature.

Until 2011, there was serious debate in Québec as to whether an arbitrator had the power to render orders of specific performance, namely orders that force a party to an arbitration to do something, or not to do something.  The debate stemmed from the fact that: (1) orders of specific performance can be akin to an injunction – which is defined in the CCP as “an order enjoining a person not to do or to cease doing something or, in applicable cases, to perform an act or operation under pain of all legal penalties” – and the CCP expressly provides that the Superior Court of Québec, Québec’s court of original jurisdiction and the highest trial court in the Province (the “SCQ”), has the exclusive jurisdiction to issue the extraordinary remedy of an injunction; and (2) a specific article in the CCP provided that a “judge or court” (as opposed to an arbitrator) could grant provisional measures before or during arbitral proceedings.

In 2011, the Court of Appeal of Québec (the “QCA”), Québec’s highest court, rendered a decision (Service Bérubé Ltée v. General Motors du Canada Ltée, 2011 QCCA 567) (“Bérubé”) that examined the question of whether an arbitrator could order the performance of a contract by a party to an arbitration.  More specifically, in Bérubé, a key issue was whether the arbitrator could force General Motors to renew a franchise agreement with its franchisee.  The QCA held that not all orders of specific performance were akin to an injunction and that arbitrators can enforce the performance of a contract that is at issue before them.

A year later, in 2012, in a highly anticipated decision (Nearctic Nickel Mines Inc. v. Canadian Royalties Inc., 2012 QCCA 385) (“Nearctic Nickel”), the QCA reaffirmed that arbitrators can order specific performance of contractual obligations that do not amount to injunctions.  In Nearctic Nickel, consistent with the terms of a joint venture agreement between the parties, an arbitrator ordered a minority partner to transfer its interest in a mining property to the majority partner.  The QCA held that this order did not constitute an injunction but rather, “was tantamount to an order to convey title and where the award itself is equivalent to the specific performance of the contractual obligations.”  The QCA did not, however, expressly hold that an arbitrator could issue an injunction.

In rendering its decision in Nearctic Nickel, the QCA rejected the assertion that an arbitrator never possessed the power to grant orders of an injunctive nature because, without limitation: (1) in Québec, specific performance of an obligation (as opposed to pecuniary damages) is, in cases where this is possible, the rule and this can be obtained through an injunction or a simple court order; (2) this interpretation would be incompatible with the codified principle in the CCP that arbitrators “have all of the necessary powers for the exercise of their jurisdiction”; and (3) consistent with the Supreme Court of Canada’s (the “SCC”), Canada’s final court of appeal, modern interpretation of arbitration as a “complete system of alternate dispute resolution”, the powers granted to arbitrators should include the possibility for arbitrators to render awards to be executed by specific performance that do not require court intervention.

In deciding whether the order of an arbitrator is the equivalent of an injunction, the QCA noted as follows:

[63] In order to appreciate whether an arbitrator issued a particular order which would be tantamount to an injunction, one must look at the commercial agreement, determine the true intentions of the parties and decide whether, in light of all the circumstances, the pith and substance of the order truly constitutes an injunction with all of its known penal implications or whether it is more of a declaratory nature which serves the purpose of giving full effect to the Arbitrator’s determinations of the parties’ rights.

Of note in Nearctic Nickel, the QCA also indicated, in obiter, that an arbitral tribunal could grant provisional measures even where the parties’ agreement was silent on this issue. In support of this position, the QCA relied on the fact that the Model Law (article 17) expressly provides that arbitrators have the power to grant interim measures and this article was expressly incorporated in the CCP with respect to inter-provincial and international arbitration and that it would not make sense for domestic arbitration in Québec to follow different rules.

The SCC refused leave to appeal from the QCA’s decision in Nearctic Nickel (19 July 2012, No. 34801).  As is always the case when the SCC dismisses an application for leave to appeal, it did not provide reasons for its decision.

In 2016, the CCP provisions dealing with arbitration were amended, including to take into account amendments to the Model Law.  As part of these significant amendments, the legislator added article 638 CCP, which provides that “[t]he arbitrator may, on a party’s request, take any provisional measure or any measure to safeguard the parties’ rights […].”  The legislator also added article 639 CCP, which provides that in urgent situations, even before a party requests provisional or safeguard measures, the arbitrator may issue “provisional orders” for a period not exceeding twenty days.  In addition, in article 646 CCP, which deals with the grounds on which a court can refuse to homologate (recognize) an arbitral award, the legislator added the following underlined terms: “The court cannot refuse to homologate an arbitration award or a provisional or safeguard measure unless it is proved that […].”

Subsequent to the 2016 amendments to the CCP, the ratio of the QCA’s decisions in Bérubé and Nearctic Nickel was applied by the SCQ in a 2017 decision in Truong v. Syndicat des copropriétaires Appartements Miraflor, 2017 QCCS 3673 (“Truong”).  In Truong, the Court reaffirmed that in Québec, an arbitrator can issue an order of specific performance that is not necessarily an injunction.

More recently, the question of an arbitrator’s powers and more specifically whether an arbitrator can issue a safeguard order that was akin to a Mareva injunction (i.e., a freezing order to prevent a party from dealing with its assets) was considered by the SCQ in the case of Hachette Distribution Services (Canada) Inc. c. 2295822 Canada Inc., 2018 QCCS 1213 (“Hachette”).  In Hachette, the SCQ noted the legislator’s clear recognition, in enacting article 646 CCP, that an arbitral tribunal has the power to grant provisional measures or safeguard orders.  The SCQ noted that an arbitrator’s ability to do so must be linked to the arbitrator’s mandate, which must be interpreted in a broad and liberal manner.

It should be noted that in Ontario, the Arbitration Act (Ontario) expressly provides that an arbitrator can render orders of specific performance and injunctions.  The same is true under the relevant arbitration legislation in a number of other Canadian provinces.

The author of this post is David Stolow.

When negotiating contracts, parties typically focus on the key commercial terms of their agreement. The clauses that govern the term of the agreement (i.e., the duration, or how long the contract remains in force), the renewal of the term, and how the agreement can be terminated, however, merit careful consideration.

Under Québec law, contracts typically have terms that are either fixed (e.g., 5 years, 10 years etc.), or are for an indeterminate period of time (i.e., no specific term is provided for). Contracts with fixed terms may also contain automatic renewal clauses. In the case of an indeterminate term contract, a party to the contract can generally, absent specific terms or a notice provision to the contrary in the contract, terminate it, without cause, by providing reasonable notice of termination (what constitutes “reasonable notice” depends on a number of factors and is decided on the facts of each case). A third category of contracts are contracts with a potentially perpetual term. An example of a potentially perpetual contract is a contract that contains a renewal clause that is entirely under the control of only one of the parties who can, effectively, unilaterally decide whether the contract will go on indefinitely. In such a contract, the other contracting party does not have a right to terminate the contract by providing reasonable notice of termination. The validity of perpetual term contracts was precisely the issue before the Supreme Court of Canada in its July 28, 2017 decision in Uniprix inc. v. Gestion Gosselin et Bérubé inc. https://scc-csc.lexum.com/scc-csc/scc-csc/en/item/16746/index.do (“Uniprix“).

In Uniprix, the pharmacy chain entered into an affiliation agreement with various members of a pharmacists’ group pursuant to which said members operated a pharmacy under the Uniprix banner. The term of the contract was for a fixed term of 5 years and the renewal clause allowed members to provide a notice within a certain period of time, failing which the contract would automatically be renewed for an additional 5 years:

Regardless of any written or verbal provisions to the contrary, this agreement shall commence on the day of its signing and shall remain in effect for a period of sixty (60) months, or for a period equal to the term of the lease for the premises where the pharmacy is located. [The member pharmacist] shall, six (6) months before the expiration of the agreement, notify [Uniprix] of its intention to leave [Uniprix] or to renew the agreement; 

Should [the member pharmacist] fail to send the prescribed notice by registered mail, the agreement shall be deemed to have been renewed in accordance with the terms and conditions then in effect, as prescribed by the board of directors, except with regard to the fee.[Translation]

The Uniprix agreement did not provide any say to Uniprix in connection with its renewal and there were no limits on the number of times that the members could renew the agreement. As such, the contract could remain in force perpetually based entirely on the members’ decision. After the contract had been renewed twice, Uniprix sent the members a notice of non-renewal and purported to terminate the agreement. The members contested Uniprix’s decision based on the fact that under the affiliation agreement, the renewal clause could only be exercised by the members and, unless the members gave notice to the contrary, the contract was automatically renewed. Uniprix argued that the effect of the members’ position, which would bind the parties in perpetuity, was contrary to public order (i.e., it violated a fundamental societal value) and unlawful and, as such, the term of the agreement should be considered to be for an indeterminate period, which would allow either party to terminate it on reasonable notice.

In a 6-3 decision, the Supreme Court of Canada held (in upholding the decisions of the majority of the Québec Court of Appeal and of the Superior Court of Québec) that there was nothing under Québec law that prohibited a contract of affiliation from having a perpetual term and that this did not, in and of itself and in the context of corporate and commercial agreements, offend any fundamental societal values. The Court’s holding would equally apply to many other types of contracts such as, for example, franchise agreements and licensing agreements. The Court held, accordingly, that the affiliation agreement was not for an indeterminate term and, therefore, could be not be terminated by Uniprix by providing reasonable notice.

With respect to the holding in Uniprix , the following points should be kept in mind:

1. The Supreme Court of Canada expressly noted that in certain circumstances, such as where an individual’sperson and freedom are affected (e.g., a contract of employment), a perpetual obligation could offend public order.
2. In certain specific cases set out in the Civil Code of Québec, the legislator has provided maximum terms for certain types of contracts (e.g., a commercial lease cannot exceed 100 years, the duration of payment of an annuity is 100 years).
3. In the case of a contract of adhesion (which is generally defined as a contract where one of the parties was unable to negotiate its terms), the adhering or vulnerable party can argue that a perpetual term is abusive and, therefore, null.
4. The Court’s decision in Uniprixapplied to Uniprix’s ability to terminate the contract without cause. A party always retains the right to terminate a contract for cause. What constitutes “cause” is decided on a case by case basis and may also be governed by the terms of the contract.

When drafting contracts, parties are generally, subject to limitations imposed by the legislator or public order, permitted to structure their relationship as they see fit. Parties should carefully consider whether they truly intend the duration of their agreement to be entirely under the control of one of the parties to the agreement for an indefinite period of time because, as is made clear in Uniprix, perpetual commercial contracts are enforceable under Québec law.

The author of this post is David Stolow.

Québec’s international (and domestic) arbitration rules are codified in the Code of Civil Procedure (the “CCP”) and were first enacted over thirty years ago as part of a major, progressive reform of arbitration law in the Province.  This reform was inspired by the 1985 UNCITRAL Model Law on International Commercial Arbitration (the “Model Law”) and sought to promote arbitration as a means of private dispute resolution.

Today, each of the other Canadian provinces have separate legislation that governs international arbitration that is, like Québec, largely based on the Model Law.

Frequently in the context of commercial arbitrations, a party seeks the specific enforcement of the terms of a contract, or, for example, other types of protective or preservation orders.  An important issue that has arisen under Québec law over the years is whether an arbitrator has the jurisdiction to render these types of orders, which are injunctive in nature.

Until 2011, there was serious debate in Québec as to whether an arbitrator had the power to render orders of specific performance, namely orders that force a party to an arbitration to do something, or not to do something.  The debate stemmed from the fact that: (1) orders of specific performance can be akin to an injunction – which is defined in the CCP as “an order enjoining a person not to do or to cease doing something or, in applicable cases, to perform an act or operation under pain of all legal penalties” – and the CCP expressly provides that the Superior Court of Québec, Québec’s court of original jurisdiction and the highest trial court in the Province (the “SCQ”), has the exclusive jurisdiction to issue the extraordinary remedy of an injunction; and (2) a specific article in the CCP provided that a “judge or court” (as opposed to an arbitrator) could grant provisional measures before or during arbitral proceedings.

In 2011, the Court of Appeal of Québec (the “QCA”), Québec’s highest court, rendered a decision (Service Bérubé Ltée v. General Motors du Canada Ltée, 2011 QCCA 567) (“Bérubé”) that examined the question of whether an arbitrator could order the performance of a contract by a party to an arbitration.  More specifically, in Bérubé, a key issue was whether the arbitrator could force General Motors to renew a franchise agreement with its franchisee.  The QCA held that not all orders of specific performance were akin to an injunction and that arbitrators can enforce the performance of a contract that is at issue before them.

A year later, in 2012, in a highly anticipated decision (Nearctic Nickel Mines Inc. v. Canadian Royalties Inc., 2012 QCCA 385) (“Nearctic Nickel”), the QCA reaffirmed that arbitrators can order specific performance of contractual obligations that do not amount to injunctions.  In Nearctic Nickel, consistent with the terms of a joint venture agreement between the parties, an arbitrator ordered a minority partner to transfer its interest in a mining property to the majority partner.  The QCA held that this order did not constitute an injunction but rather, “was tantamount to an order to convey title and where the award itself is equivalent to the specific performance of the contractual obligations.”  The QCA did not, however, expressly hold that an arbitrator could issue an injunction.

In rendering its decision in Nearctic Nickel, the QCA rejected the assertion that an arbitrator never possessed the power to grant orders of an injunctive nature because, without limitation: (1) in Québec, specific performance of an obligation (as opposed to pecuniary damages) is, in cases where this is possible, the rule and this can be obtained through an injunction or a simple court order; (2) this interpretation would be incompatible with the codified principle in the CCP that arbitrators “have all of the necessary powers for the exercise of their jurisdiction”; and (3) consistent with the Supreme Court of Canada’s (the “SCC”), Canada’s final court of appeal, modern interpretation of arbitration as a “complete system of alternate dispute resolution”, the powers granted to arbitrators should include the possibility for arbitrators to render awards to be executed by specific performance that do not require court intervention.

In deciding whether the order of an arbitrator is the equivalent of an injunction, the QCA noted as follows:

[63] In order to appreciate whether an arbitrator issued a particular order which would be tantamount to an injunction, one must look at the commercial agreement, determine the true intentions of the parties and decide whether, in light of all the circumstances, the pith and substance of the order truly constitutes an injunction with all of its known penal implications or whether it is more of a declaratory nature which serves the purpose of giving full effect to the Arbitrator’s determinations of the parties’ rights.

Of note in Nearctic Nickel, the QCA also indicated, in obiter, that an arbitral tribunal could grant provisional measures even where the parties’ agreement was silent on this issue. In support of this position, the QCA relied on the fact that the Model Law (article 17) expressly provides that arbitrators have the power to grant interim measures and this article was expressly incorporated in the CCP with respect to inter-provincial and international arbitration and that it would not make sense for domestic arbitration in Québec to follow different rules.

The SCC refused leave to appeal from the QCA’s decision in Nearctic Nickel (19 July 2012, No. 34801).  As is always the case when the SCC dismisses an application for leave to appeal, it did not provide reasons for its decision.

In 2016, the CCP provisions dealing with arbitration were amended, including to take into account amendments to the Model Law.  As part of these significant amendments, the legislator added article 638 CCP, which provides that “[t]he arbitrator may, on a party’s request, take any provisional measure or any measure to safeguard the parties’ rights […].”  The legislator also added article 639 CCP, which provides that in urgent situations, even before a party requests provisional or safeguard measures, the arbitrator may issue “provisional orders” for a period not exceeding twenty days.  In addition, in article 646 CCP, which deals with the grounds on which a court can refuse to homologate (recognize) an arbitral award, the legislator added the following underlined terms: “The court cannot refuse to homologate an arbitration award or a provisional or safeguard measure unless it is proved that […].”

Subsequent to the 2016 amendments to the CCP, the ratio of the QCA’s decisions in Bérubé and Nearctic Nickel was applied by the SCQ in a 2017 decision in Truong v. Syndicat des copropriétaires Appartements Miraflor, 2017 QCCS 3673 (“Truong”).  In Truong, the Court reaffirmed that in Québec, an arbitrator can issue an order of specific performance that is not necessarily an injunction.

More recently, the question of an arbitrator’s powers and more specifically whether an arbitrator can issue a safeguard order that was akin to a Mareva injunction (i.e., a freezing order to prevent a party from dealing with its assets) was considered by the SCQ in the case of Hachette Distribution Services (Canada) Inc. c. 2295822 Canada Inc., 2018 QCCS 1213 (“Hachette”).  In Hachette, the SCQ noted the legislator’s clear recognition, in enacting article 646 CCP, that an arbitral tribunal has the power to grant provisional measures or safeguard orders.  The SCQ noted that an arbitrator’s ability to do so must be linked to the arbitrator’s mandate, which must be interpreted in a broad and liberal manner.

It should be noted that in Ontario, the Arbitration Act (Ontario) expressly provides that an arbitrator can render orders of specific performance and injunctions.  The same is true under the relevant arbitration legislation in a number of other Canadian provinces.

The author of this post is David Stolow.

When negotiating contracts, parties typically focus on the key commercial terms of their agreement. The clauses that govern the term of the agreement (i.e., the duration, or how long the contract remains in force), the renewal of the term, and how the agreement can be terminated, however, merit careful consideration.

Under Québec law, contracts typically have terms that are either fixed (e.g., 5 years, 10 years etc.), or are for an indeterminate period of time (i.e., no specific term is provided for). Contracts with fixed terms may also contain automatic renewal clauses. In the case of an indeterminate term contract, a party to the contract can generally, absent specific terms or a notice provision to the contrary in the contract, terminate it, without cause, by providing reasonable notice of termination (what constitutes “reasonable notice” depends on a number of factors and is decided on the facts of each case). A third category of contracts are contracts with a potentially perpetual term. An example of a potentially perpetual contract is a contract that contains a renewal clause that is entirely under the control of only one of the parties who can, effectively, unilaterally decide whether the contract will go on indefinitely. In such a contract, the other contracting party does not have a right to terminate the contract by providing reasonable notice of termination. The validity of perpetual term contracts was precisely the issue before the Supreme Court of Canada in its July 28, 2017 decision in Uniprix inc. v. Gestion Gosselin et Bérubé inc. https://scc-csc.lexum.com/scc-csc/scc-csc/en/item/16746/index.do (“Uniprix“).

In Uniprix, the pharmacy chain entered into an affiliation agreement with various members of a pharmacists’ group pursuant to which said members operated a pharmacy under the Uniprix banner. The term of the contract was for a fixed term of 5 years and the renewal clause allowed members to provide a notice within a certain period of time, failing which the contract would automatically be renewed for an additional 5 years:

Regardless of any written or verbal provisions to the contrary, this agreement shall commence on the day of its signing and shall remain in effect for a period of sixty (60) months, or for a period equal to the term of the lease for the premises where the pharmacy is located. [The member pharmacist] shall, six (6) months before the expiration of the agreement, notify [Uniprix] of its intention to leave [Uniprix] or to renew the agreement; 

Should [the member pharmacist] fail to send the prescribed notice by registered mail, the agreement shall be deemed to have been renewed in accordance with the terms and conditions then in effect, as prescribed by the board of directors, except with regard to the fee.[Translation]

The Uniprix agreement did not provide any say to Uniprix in connection with its renewal and there were no limits on the number of times that the members could renew the agreement. As such, the contract could remain in force perpetually based entirely on the members’ decision. After the contract had been renewed twice, Uniprix sent the members a notice of non-renewal and purported to terminate the agreement. The members contested Uniprix’s decision based on the fact that under the affiliation agreement, the renewal clause could only be exercised by the members and, unless the members gave notice to the contrary, the contract was automatically renewed. Uniprix argued that the effect of the members’ position, which would bind the parties in perpetuity, was contrary to public order (i.e., it violated a fundamental societal value) and unlawful and, as such, the term of the agreement should be considered to be for an indeterminate period, which would allow either party to terminate it on reasonable notice.

In a 6-3 decision, the Supreme Court of Canada held (in upholding the decisions of the majority of the Québec Court of Appeal and of the Superior Court of Québec) that there was nothing under Québec law that prohibited a contract of affiliation from having a perpetual term and that this did not, in and of itself and in the context of corporate and commercial agreements, offend any fundamental societal values. The Court’s holding would equally apply to many other types of contracts such as, for example, franchise agreements and licensing agreements. The Court held, accordingly, that the affiliation agreement was not for an indeterminate term and, therefore, could be not be terminated by Uniprix by providing reasonable notice.

With respect to the holding in Uniprix , the following points should be kept in mind:

1. The Supreme Court of Canada expressly noted that in certain circumstances, such as where an individual’sperson and freedom are affected (e.g., a contract of employment), a perpetual obligation could offend public order.
2. In certain specific cases set out in the Civil Code of Québec, the legislator has provided maximum terms for certain types of contracts (e.g., a commercial lease cannot exceed 100 years, the duration of payment of an annuity is 100 years).
3. In the case of a contract of adhesion (which is generally defined as a contract where one of the parties was unable to negotiate its terms), the adhering or vulnerable party can argue that a perpetual term is abusive and, therefore, null.
4. The Court’s decision in Uniprixapplied to Uniprix’s ability to terminate the contract without cause. A party always retains the right to terminate a contract for cause. What constitutes “cause” is decided on a case by case basis and may also be governed by the terms of the contract.

When drafting contracts, parties are generally, subject to limitations imposed by the legislator or public order, permitted to structure their relationship as they see fit. Parties should carefully consider whether they truly intend the duration of their agreement to be entirely under the control of one of the parties to the agreement for an indefinite period of time because, as is made clear in Uniprix, perpetual commercial contracts are enforceable under Québec law.

The author of this post is David Stolow.