Québec Court of Appeal Endorses Pro-Arbitration Approach

In a recent decision, the Québec Court of Appeal reaffirmed the importance of adopting a broad and liberal interpretation of arbitration clauses. It also held that the use of the verb “may” in an arbitration clause does not undermine its fully mandatory character. This decision underscores the pro-arbitration approach in Québec law.

Key Takeaways

• In the context of international commercial arbitration, arbitration clauses serve to promote legal certainty and predictability.
• Under Québec law, arbitration agreements – even those with deficiencies – must receive a broad and liberal interpretation.
• That said, clear and binding language should be preferred when drafting arbitration clauses.

The Dispute

Avalin, a company based in Dubai, and Lauzon, a company based in Gatineau, maintained a business relationship since 2012 involving the sale of wood-flooring materials produced in China. On May 21, 2021, they signed a framework agreement for the sale of flooring products that included a dispute-resolution clause providing for arbitration:

15) Disputes: Parties shall endeavour to solve disputes through good faith negotiations; if necessary, they may resort to mediation at an accredited Commission of the following Commonwealth countries: Australia, Canada, New Zealand, Singapore, or United Kingdom. If Mediation is not successful, any party may request arbitration at the same Commission where one arbitrator shall, through the most simplified procedure available, issue a binding and final award based on the Convention for the International Sale of Goods. If a party declines to engage in a mediation process suggested by the other party, it shall be liable for any ensuing arbitration costs (cost of arbitrators, costs of arbitration institution and legal coasts [sic]) regardless of the award’s decision on the merits. [emphasis added]

A dispute arose between the parties regarding the quality of certain products delivered by Avalin. In October 2024, Lauzon filed a claim against Avalin before the Superior Court of Gatineau for non-conforming products and loss of profits.

A month and a half later, in response, Avalin filed a mediation notice with the London Court of International Arbitration. Avalin also simultaneously filed a motion to decline jurisdiction before the Superior Court of Gatineau.

The trial judge dismissed the jurisdictional motion. In his view, clause 15 was unambiguous and the use of the verb “may” rendered arbitration purely optional. He concluded that the parties had not clearly excluded recourse to the ordinary courts.

The Court of Appeal reversed this judgment, concluding that the arbitration agreement constituted a complete and binding arbitration clause.

The Court of Appeal explained that the following three factors should be considered in determining the common intention of the parties when interpreting an arbitration clause: (i) the nature of the contract (i.e., that it is an arbitration agreement); (ii) the circumstances in which it was concluded (e.g., an international sale of goods between parties domiciled in different jurisdictions); and (iii) the established practices in international arbitration agreements (i.e., an interpretation that allows the parties to free themselves from the process of courts of law should be favoured).

Taking these factors into account, the Court concluded that the verb “may” was used to specify that either party was free to request arbitration without requiring the other party’s consent. In other words, “may” was used because a party always remained free to abandon its claim and not initiate any proceedings. The arbitration contemplated by the parties remained mandatory.

In this regard, the Court of Appeal’s reasoning reflects the broad and liberal approach favoured by contemporary and international case law trends. In doing so, it departs from the traditional approach, which held that arbitration clauses using the term “may” were deficient and therefore “pathological” and invalid.

Practical Guidance

Courts recognize the parties’ intention to be bound by an arbitration agreement when two conditions are met: (i) the clause must confer exclusive jurisdiction on the arbitrator and (ii) it must provide that the award is final and binding on the parties. Accordingly, arbitration clauses should be drafted in clear and precise terms to satisfy these two conditions. Terms such as “may”/“pouvoir” should be avoided. Moreover, unlike what the parties did in this case, it is important to specify the seat of the arbitration and, where applicable, the arbitration rules or arbitral institution chosen by the parties.