Case number: 70
Article number: model arbitration law / 8
Thessaurs issue:
Country of decision: Canada
Year of decision: 1994
Type of decision: Judicial decision

Case 70: MAL 8
Canada: Federal Court of Appeal (Mahoney, MacGuigan and Linden, JJ.A.) 10 February 1994
Nanisivik Mines Ltd. and Zinc Corporation of America v. Canarctic Shipping Co. Ltd.
Original in English and French
Unpublished

The case involved an appeal against the decision of the court of first instance (case 36). There were three issues involved: first,
whether the first instance court had discretion as to referring the claim against Canarctic to arbitration and whether it erred in
exercising that discretion; second, if the court had no discretion to refer the matter to arbitration, whether it had discretion as to
staying the proceedings and whether it erred in the exercise of its discretion; and third, whether, in any event, the court erred in
referring the claim of Zinc Corp. to arbitration and, if so, in staying the proceedings in the action by it.

As to the first issue, which was before the Court of Appeal for the first time, the Court of Appeal upheld the decision of the
court of first instance that if the conditions of article 8 MAL are met, namely if an arbitration agreement is in writing, is not null
and void or inoperative or incapable of performance, the court, if asked by a party, has no discretion but is obliged to refer the
matter to arbitration ("shall" in article 8 MAL clearly means "must", not "may").

As to the second issue, the Court of Appeal noted that there were two approaches followed by courts with regard to a stay of
proceedings after a mandatory reference has been made. In some cases, courts held that the reference to arbitration is
mandatory pursuant to article 8 MAL, but with regard to the stay of the proceedings the courts have a residual "permissive"
jurisdiction under section 50 of the Federal Court Act to grant a discretionary stay unless there are "strong reasons" not to
(case 15). In other cases, it was held that reference of a matter to arbitration pursuant to article 8 MAL left the courts no
discretion but to stay the proceedings (case 9). The Court of Appeal found that the same policy considerations existing in
favour of a mandatory legislative requirement that a dispute subject to an arbitration agreement be referred to arbitration seem
to be conclusively in favour of the staying of litigation of the same issues until the issuance of an arbitral award. Thus the Court
of Appeal, overturning the decision of the court of first instance, held that once a reference to arbitration had been made, there
was no residual discretion in the court to refuse to stay the proceedings between the parties to arbitration even though there
may be particular issues between them that are not subject to arbitration.

As to the third issue, the Court of Appeal found that Zinc Corp. was a party to the bill of lading but not to the charterparty out
of which the present dispute arose. It was held that the arbitration clause of the charterparty, incorporated in the bill of lading
by general reference to the terms and conditions of the charterparty, did not bind the parties to the bill of lading. It was noted
that that result could only be achieved by an arbitration clause in a charterparty which expressly provided that it applied to
disputes arising in connection with bills of lading that incorporated generally the terms of the charterparty without specific
reference to the arbitration clause, or by way of a provision in the bill of lading incorporating the terms and conditions of the
charterparty including, by specific reference, its arbitration clause. The Court of Appeal overturned the decision of the court of
first instance with regard to the reference of the claim of Zinc Corp. to arbitration on the ground that Zinc. Corp. was not
bound by the arbitration clause contained in the charterparty, but upheld that decision with regard to the stay of proceedings
holding that under section 50(1)(b) of the Federal Court Act the court had discretion to stay the litigation of the claim of Zinc
Corp. against Canarctic pending arbitration of Nanisivik's claim.