The Perennial (Unrealized) Promise Of Class Arbitration

Author:The International Arbitration Blog, F. Paul Morrison and Ljiljana Stanic
Profession:McCarthy Tétrault LLP

Class arbitrations are commonly hailed as the "next big thing" in the realm of private dispute resolution. Their advantages would be many: class arbitrations would, in much the same way as class actions, provide a procedural vehicle for individuals to assert their rights in cases where individual damages may be small but the collective liability is large, while also avoiding the often delay-plagued and overburdened civil justice system and the costs of litigation. Class arbitrations, may, in certain ways, be better than class actions at achieving the goals of improved access to justice, judicial economy, and behaviour by taking advantage of the efficiencies built into arbitration as a judicially-sanctioned means of alternative dispute resolution.

Yet, to date, this promise has come to naught. The United States is, famously (within arbitral and class actions circles, at least), still the only jurisdiction that provides for class arbitrations. Canada has lagged behind in part because no significant Canadian contracts (and likely no contracts at all) contain group arbitration provisions. Group arbitration provisions have yet to come before a Canadian court, and, as noted by the Saskatchewan Court of Appeal in 2014 (and still true today), "There is no Canadian jurisprudence which even remotely suggests that class-wide arbitration can be ordered within the context of a class action. [...] No lower level court has thoroughly considered this issue."1

Nevertheless, contractual class arbitration provisions are likely to have a significant, overlooked benefit to those Canadian enterprises that adopt them: shielding the enterprise from class actions regarding non-consumer claims.

A number of provinces have consumer protection legislation containing such statutory provisions. In Ontario, for example, s. 7(2) of the Consumer Protection Act renders mandatory arbitration clauses in consumer agreements invalid insofar as they prevent consumers from seeking relief in the courts. While the provision applies to all arbitration clauses, no contracts containing a group arbitration provision have been considered by Ontario (or Canadian) courts, and it is unlikely that this section of the CPA was drafted with such a possibility in mind. Rather, it was drafted in order to respond to clauses imposing mandatory individual arbitration.

The question then becomes what to do in cases where there are both consumer and non-consumer claims in respect of the same product or...

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