Ontario Court issues an anti-arbitration injunction against a Hong Kong-seated arbitration brought to circumvent the Court’s previous ruling that the arbitration agreement was unenforceable.

Facts

Teine, a shipper on IPL’s Mid Saskatchewan Pipeline System, arbitrated a dispute over IPL’s methodology for compensating Teine for quality changes in its product under a pipeline connection agreement between the parties. The Arbitral Tribunal issued a substantial net award in favour of Teine. IPL applied to have the award set aside for manifest unfairness, sought a stay of enforcement of the award pending appeal, and requested a sealing order due to the commercially sensitive nature of the arbitral record. Teine, in turn, applied to enforce the award.

Decision

The Alberta Court of King’s Bench denied IPL’s stay application and granted Teine’s enforcement application. The Court declined to apply a modified test for injunctive relief, developed under Ontario’s sister domestic arbitration statute, and opted for the standard test for a stay set out by the Supreme Court in RJR-MacDonald Inc v. Canada (Attorney General).

The test requires the applicant to show that: 

  1. there is a serious issue to be tried;
  2. the applicant will suffer irreparable harm if the stay is refused; and
  3. the balance of convenience favours granting a stay of enforcement.

The Court reasoned that the parties could have accounted for an automatic stay pending an appeal in their arbitration agreement. They did not, so there was no equitable reason for the Court to relieve IPL from the consequences of that choice.

The Court granted IPL’s application for a sealing order but limited any sealing or redaction strictly to confidential third-party information and derivative information. The Court rejected the argument that promoting private arbitration, conserving judicial resources, or respecting parties’ expectations of confidentiality, constitute public interests capable of displacing the open court principle. The Court accepted, however, that protecting third-party confidentiality could amount to a sufficient public interest justifying targeted redactions.

Analysis

This decision has immediate and practical implications for parties who arbitrate in Canada and may later seek court intervention.

First, it suggests that enforcement pending appeal is the presumptive outcome if the enforcement application and the application to appeal or set aside an award are not to be heard together. Courts will not automatically grant a stay merely because an appeal or set-aside application has been filed.

Arguments based on liquidity concerns, capital constraints, or lost commercial opportunities will be assessed against the applicant’s overall financial capacity and access to capital. For owners, developers, and contractors operating in capital-intensive commercial construction environments, the Court’s message is clear: financial sophistication cuts both ways. Well-capitalized parties will face a steep uphill battle in establishing irreparable harm from enforcement of an arbitral award pending appeal. Courts will expect such parties to absorb interim payment risk as a foreseeable cost of doing business.

To manage that risk, parties should give serious consideration at the contract-drafting stage to including express “automatic stay pending appeal” provisions in their arbitration clauses, particularly where projects involve large progress payments, milestone-based compensation, or infrastructure-scale capital commitments that could be materially impacted by immediate enforcement.

Equally significant is the Court’s treatment of confidentiality. The decision serves as a clear warning that parties effectively relinquish broad confidentiality protections once they bring arbitration materials before the courts.

Once again, this stands in contrast with other courts’ greater willingness to extend confidentiality in arbitration to related court proceedings (see for example: Telesat v. Boeing, 2010 ONSC 22; SNC-Lavalin inc. c. ArcelorMittal Exploitation minière Canada, 2018 QCCS 3024).

Although arbitration presents different considerations when it comes to sealing all or part of the court record, the open court principle remains constitutionally entrenched and will only yield where disclosure would undermine a compelling public interest. Generalized appeals to the private nature of arbitration or commercial sensitivity will not always suffice.

As a result, counsel should approach arbitration proceedings, and the creation of the arbitral record, on the assumption that, in a worst-case scenario, key documents may ultimately become public, subject only to narrow and carefully justified redactions.

However, and as noted above, the jurisprudence is inconsistent on this point. Parties and counsel would benefit from guidance from appellate courts on the extent to which they can expect confidentiality in arbitration to continue into the courts.

Even when appeals are excluded under the parties’ arbitration agreement, the parties cannot exclude challenges to awards based on procedural grounds, such as jurisdiction, bias or procedural fairness. As such, it may not be possible to fully insulate confidential material from disclosure should a dispute find its way into the court system.

 

Inter Pipeline Ltd v. Teine Energy Ltd., 2024 ABKB 740