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Case #0119M – Orica Canada Inc. v. ARVOS GmbH
March 11, 2024

ALBERTA – Arbitration – Jurisdiction – Despite the competence-competence principle, courts may resolve a challenge to an arbitrator’s jurisdiction where it involves pure questions of law or questions of mixed fact and law that only require a superficial consideration of the evidence. Where there is a real prospect that referring a bona fide challenge to jurisdiction to the arbitrator would result in the challenge never being resolved, the court may resolve the issue.

ALBERTA – Arbitration – Jurisdiction – Stay of Proceedings – Under the International Commercial Arbitration Act (“ICC”), the threshold question in determining whether to stay a proceeding is whether or not the proceeding, in whole or in part, is brought in a matter that is the subject of an arbitration agreement. If the claims are arbitrable, the ICC mandates a stay.

ALBERTA – Arbitration – International Commercial Arbitration Act – Where the parties do business primarily in different countries, the ICAA applies.

Orica Canada Inc. v. ARVOS GmbH
2024 ABKB 97 (February 20, 2024)
Court of King’s Bench of Alberta (Reed J.)

The Third Party Defendants (“Arsopi”) applied to have the Third Party Claim stayed under the International Commercial Arbitration Act, RSA 2000, c I-5 (“ICAA”). There was no dispute that the ICAA applied given that the Defendant/Third Party Plaintiff ARVOS GmbH (“ARVOS”) primarily did business in Germany and Arsopi primarily did business in Portugal. The contract at issue between them was made outside Canada and subject to German law. (para. 2)

Arsopi argued that the arbitration clause applied to ARVOS’ claims against it and that the ICAA required the court to refer the parties to arbitration and stay the Third-Party claim. ARVOS opposed the application. (paras. 3-4)


Both parties tendered evidence of German law, which the court accepted as admissible opinion evidence. (paras. 5-7)

The Third-Party claim involved negligence, negligent misrepresentations, and breach of contract claims in respect of certain equipment that Arsopi had fabricated and assembled for ARVOS. ARVOS relied on the Tort-Feasors Act, RSA 2000, c. T-5 and the Contributory Negligence Act, RSA 2000, c. C-27 of Alberta. (para. 11)

ARVOS and Arsopi were parties to a purchase order (“PO”), which provided that the contract and any disputes in relation thereto shall be governed by the laws of Germany. The PO also contained a dispute resolution clause (“DR Clause”), which provided that:

All disputes arising out of or in connection with the Contract shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by three arbitrators appointed in accordance with the said Rules of Arbitration. The place of arbitration shall be in Frankfurt am Main, Germany. The language shall be English, provided that documentary evidence submitted to the arbitral tribunal in German shall not need to be translated into English. The arbitration shall be confidential. (para. 26)


Issue One – Should the Competence-Competence Principle Apply Such That ARVOS Should be Directed to Commence Arbitral Proceedings in Germany?

Arsopi argued that the competence-competence principle required the court to stay the Third-Party Claim and refer all issues in dispute as to the scope of the DR Clause to an arbitration tribunal. It argued that section 2, Article 16 of the ICAA supported this result by requiring that the “arbitral tribunal may rule on its own jurisdiction.” (para. 28)

ARVOS responded that the determination of the scope of the DR Clause can be “made at law as an exception to the competence-competence principle.” It also argued that it was untenable in circumstances where it was more likely “that any chance of arbitration in Germany could well be barred by operation of German limitations law, and as a practical consequence, giving credence to the competence-competence principle in this case will have the practical effect of the matters in issue before the court not being determined at all as ARVOS is not likely to commence arbitration in such circumstances.” (para. 29)

Both parties relied on the Supreme Court of Canada’s decision in Peace River Hydro Partners v. Petrowest Corp., 2022 SCC 41. There, the SCC held that while the competence-competence principle gives precedence to the arbitration process, there are limits on and exceptions to the principle. Courts may resolve a challenge to an arbitrator’s jurisdiction where it involves pure questions of law or questions of mixed fact and law that only require a superficial consideration of the evidence. (paras. 31-32)

The court applied the SCC’s definition of “superficial considerations” from Uber Technologies Inc. v Heller, 2020 SCC 16 that “[t]he essential question, in our view, is whether the necessary legal conclusions can be drawn from the facts that are either evidence on the face of the record or undisputed by the parties.” (para. 33)

Justice Reed did not exercise the competence-competence principle because this was a case where the challenge involved pure questions of law, or questions of mixed fact and law that only required a superficial consideration of the evidentiary record. There was no challenge or conflict on the evidence of German law that the court had to find as a fact. (para. 38)

The court also held that there was a “genuine challenge to arbitral jurisdiction” and a real prospect that if a stay were granted, the challenge and the issues before the court may never be resolved by an arbitrator. (paras. 39-40) Justice Reed dismissed the competence-competence argument and refused to stay the Third Party Claim. (para. 41)

Issue Two –Should the Third-Party Claim Be Struck Under the ICAA?

The parties agreed that the operative sections of the ICAA were sections 2 and 10 and Schedule 2, Article 8. The court articled the threshold question as “whether or not the Third Party Claim, in whole or in part, is ‘an action brought in a matter which is the subject of an arbitration agreement’ such that I must refer the parties to arbitration and stay the proceedings, in whole or in part.” (paras. 44-45)

The court found that it was clear that the laws of Germany applied to the DR Clause. Under German law, the court held that the DR Clause was:

  1. Valid, clear, and enforceable.
  2. To be construed broadly where there is a clear intent to refer the dispute to arbitration; and
  3. To be interpreted as “all-encompassing as between claims that exist at law in Germany between Arsopi and ARVOS, which extends to product liability and damage claims, irrespective of whether they are based in tort or contract law.” ( 52)

Justice Reed found that the DR Clause excluded regular litigation proceedings in Germany and under its third-party process as long as the alleged claims against Arsopi were related to their contractual relationship with ARVOS. The court also found that despite the existence of the Canadian litigation, an arbitral tribunal in Germany would proceed with any arbitration. (para. 52)

Justice Reed found that a sub-issue of the process related to German Third Party Notices was a “red herring” given the expert conclusion, which the court had accepted, that the DR Clause would exclude Third Party proceedings in Germany. (para. 56)

Justice Reed applied the legal framework to the claims at issue in the Third-Party proceedings and held that two of the claims (the AA Tort Claim and the AA Contract Claim) were subject to the DR Clause and to arbitration and were governed by German law. However, the court found that one of the claims (the OA TFA Claim) was not subject to the DR Clause because it was premised on a cause of action between Arsopi and the Plaintiff, not ARVOS, and thus fell outside the scope of the clause and was governed by Canadian law. (paras. 67-68)

Given that it was outside the DR Clause, the OA TFA Claim was not subject to the ICAA. It therefore was not stayed or struck and remained to be determined in Alberta. [para. 80]

In assessing the two claims that were within the DR Clause, the court held that under the ICAA as interpreted by Canadian courts, “if the claims in question are arbitrable, the ICC mandates a stay.” (para. 82) The only exception is if the court found that the DR Clause was “null and void, inoperative or incapable of being performed.” In assessing what that meant, the court applied the Alberta Court of Appeal’s decision in Kaverit Steel & Crane Ltd. v Kone Corp., 1992 ABCA 7 at para. 47; leave to appeal dismissed, [1992] S.C.C.A. No 117 [“Kaverit”]. The court in Kaverit determined that “the arbitrator cannot decide whether the submission is valid. Its validity and enforceability must be pronounced upon before the referring Court can enforce it by a reference and stay. It is not valid if it, or the contract in which it is found, is, by operation of domestic law in the referring tribunal, either void or unenforceable.” (para. 83)

Neither party had argued that the DR Clause was null and void, inoperative or incapable of performance. The court found that it was not and then held that “the mere fact that the substantive claims that could be arbitrated may ultimately be determined by an arbitrator to be statute barred does not make the agreement inoperative or incapable of being performed in any way.” The court referred the parties to arbitration and stayed the AA Tort Claim and the AA Contract Claim under Schedule 2, Article 8, and s. 10 of the ICAA. (paras. 84-85)

Finally, the court dismissed Arsopi’s request that it exercise its discretion to permit it to seek an order striking ARVOS’ claims instead of staying them. Arspoi had refused to file a Statement of Defence to the Third-Party Claim pending this application. To properly seek an order to strike, the court held that Arsopi should have expressly pleaded that relief and properly cited the applicable Alberta Rule and the provision of the Limitations act it wanted to rely upon to put ARVOS on notice. (para. 96)

About Us

Arbitration & Business Cases is a blog created by Igor Ellyn and Robin Dodokin in September 2021. Kathryn Manning joined us in October 2022. Our intention is to provide timely, concise summaries and commentary of Ontario and Canadian case law on arbitration and business matters.


Igor Ellyn,
416-540-6611 | 416-365-3750

Robin Dodokin,
FCIArb., Q.Arb., LL.M, Q.Med.

Kathryn J. Manning,