CLOUT
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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.

Additional Information published in later CLOUT issue (on "9 February 2000"):

Abstract published in English: [1996] Model Arbitration Law Quarterly Reports, Vol. 2, issue 2, 11

Text of the court decision published in English: [1996] Model Arbitration Law Quarterly Reports, Vol. 2, issue 2, 15

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