Parties may be contractually obligated to resolve disputes between themselves by way of arbitration. There are a series of cases in which the Alberta Courts have made it clear that if the arbitration provision in question is mandatory, the parties are bound to arbitrate and the consequences for failing to do so may be draconian for the party that ignores the contractual commitment to arbitrate. Parties to a dispute may also agree to arbitrate regardless of whether they are contractually obligated to do so. In the case of Inter Pipeline v Teine Energy, we are reminded that, regardless of how adverse parties arrived at an arbitration, the resulting award is enforceable in the Court of King’s Bench. We are also reminded that a party appealing an arbitral award may well compromise its privacy interests.

Background

Teine shipped hydrocarbons on a pipeline owned by IPL. A dispute arose whether IPL was properly calculating “equalization” payments due to variances in the quality of the product Teine shipped. The underlying contract between the parties permitted but did not make mandatory the resolution of disputes by arbitration. IPL chose to join the arbitration proceedings initiated by Teine. A three-member panel conducted the arbitration, resulting in a monetary award in favour of Teine.

Enforcement Challenges + Application of the Irreparable Harm Test

IPL appealed the Award to the Court of King’s Bench on a number of grounds including “manifest unfairness.” For its part, Teine cross-applied to enforce the Award relying on its entitlement to do so under Alberta’s Arbitration Act. The decision subject of this discussion is the Court’s dismissal of IPL’s interim application to stay or suspend enforcement of the Award pending the disposition of the Appeal.

The test for an injunction or stay of a judgment is the well-established “tripartite” test which includes the requirement that the party seeking the stay (IPL) prove that it would suffer “irreparable harm” should the judgment in question be enforced before the Appeal of the judgment is concluded. IPL was unsuccessful in convincing King’s Bench Justice Feasby that he should follow Ontario case law which adopted the less onerous test of whether it was reasonable to maintain the status quo pending the Appeal. Justice Feasby rejected Ontario’s “stay friendly” approach as “not principled.” He ruled that once a party establishes the formal requirements for enforcement of an arbitral award, the Court must grant an order enforcing that award unless the opposing party meets the conventional requirements of a stay, including that enforcement would cause it to suffer irreparable harm.

In this case, irreparable harm was not proved as it was readily apparent that IPL was a well-resourced entity with an even larger parent company that could sustain being temporarily deprived of the Award funds should it later succeed on Appeal. Justice Feasby further observed that “Arbitration is a party-driven process.” If IPL wanted to be in the position of withholding payment of an arbitral award pending an appeal to the Court, it could have negotiated the right to do so as a condition of its agreement to arbitrate.

Open Courts Principle + Limits on Confidentiality

The Court then addressed the request by IPL for a sealing order preventing public access to the Court file. Justice Feasby agreed to the sealing of only third-party confidential information and derivative information, notwithstanding the significant time and costs of redacting voluminous records. In so doing, he recognized the policy reasons underlying the “open courts” principle and, again, noted that IPL could have negotiated for confidentiality to be sustained in Court proceedings post-Award or contracted for a private appeal process: “The parties chose private arbitration but their clear expectation in making that choice … was that once an award was rendered, any enforcement and appeal proceeding would take place in court according to normal court standards and practices including the open courts principle.”

Takeaways

Parties need to carefully consider the dispute resolution provision in the contracts they enter into or the agreements to arbitrate they enter into after a dispute arises. Teine Energy v. IPL and previous rulings make it clear that the Alberta Courts will compel parties to comply with mandatory arbitration agreements at the initiation of arbitration proceedings and then enforce the resulting arbitral awards. This case also demonstrates that the party appealing a loss in arbitration may, at least in part, compromise its interests in keeping confidential the evidence underlying the dispute.

It is always advisable to consult a lawyer before committing to alternative dispute resolution provisions in a commercial or construction contract. Contact Todd Kathol or Anthony Burden in Calgary, Ryan Krushelnitzky in Edmonton, or any member of Field Law’s Construction Group for assistance.

Link to decision: Inter Pipeline Ltd. v Teine Energy Ltd., 2024 ABKB 740