Case number: 72
Article number: model arbitration law / 8(1)
Thessaurs issue:
Country of decision: Canada
Year of decision: 1994
Type of decision: Judicial decision

Case 72: MAL 8(1)
Canada: Federal Court of Canada, Trial Division (Strayer J.) 22 March 1994
Continental Resources Inc. v. East Asiatic Co. (Canada) et al.
Original in English and French
Unpublished

A dispute arose out of a charterparty for loss of cargo, and the plaintiff sued the defendants in court. The defendants requested
that the matter be referred to arbitration since the charterparty contained an arbitration clause and sought a stay of the
proceedings pursuant to article 8 (1) MAL. The plaintiff argued that the arbitration clause did not preclude the continuance of
litigation since the plaintiff had a claim, based on a bill of lading, against the ship and the shipowners, who were not bound by
the arbitration clause contained in the charterparty since they were not parties to to the charterparty. The defendant argued that
the bill of lading incorporated the terms and conditions of the charterparty, including the arbitration clause, by general
reference.

The court held that it was bound to submit the matter to arbitration since the dispute was within the scope of the arbitration
agreement and the defendant had not filed its first statement of defence on the substance of the dispute (article 8(1) MAL). The
court exercising its discretion under section 50 of the Federal Court Act granted a stay of the proceedings. It was noted that
the criteria followed by the court in exercising its discretion included the likelihood of injustice to the defendant if the action
proceeded and the unlikelihood of injustice to the plaintiff if it did not. It was also noted that, even if the plaintiff had a claim in
tort not covered by the arbitration agreement, the court could still exercise its discretion and grant a stay of proceedings
pending arbitration, and the plaintiff could seek the stay to be lifted if after arbitration it still had a claim.