Arbitration Clauses and the Competence-Competence Principle
The dispute involved three parties: the Ontario Medical Association (“OMA”) which is an umbrella body that represents the interests of the Ontario medical profession; Aviva Canada Inc. (“Aviva”) which is a personal and commercial insurance provider; and Willis Canada Inc. (“Willis”), which is an insurance broker. Willis and Aviva entered into a written agreement, whereby Willis acted as a broker for Aviva who provided insurance coverage to OMA. This agreement included an arbitration clause, to the effect that any dispute between Aviva and Willis was to be submitted to binding arbitration.
OMA commenced an action against both Willis and Aviva alleging default of payment of fees contemplated in their agreement. Aviva brought a motion to stay the proceeding pursuant to section 7 of the Arbitration Act, 1991, S.O., to have the matter dealt with through binding arbitration. The motion Judge granted the stay, reasoning that—based on the competence-competence principle—an arbitrator has the prerogative of determining their own jurisdiction. The OMA appealed the Superior Court’s ruling in the motion to stay and the Court of Appeal dismissed the appeal on the basis that the Superior Court did not err in its reasoning and application of the competence-competence principle.
Arbitration is typically preferred by employers because it keeps disputes out of the public sphere and avoids attracting attention in disputes that may shed a negative light on an employer. Arbitrations are usually binding and are often difficult to appeal.
Arbitrations are supposed to be more accessible and cheaper for employees or smaller, independent parties. However, parties usually decide to retain legal counsel, especially when the dispute involves complicated proceedings with high financial stakes. As a result, arbitrations tend to be more costly for both parties involved as they typically involve higher administrative fees, which can lead to a costly proceeding for everyone involved.
When negotiating any kind of contract, it is important to bring one’s mind to the issue of what occurs if a dispute arises. Many people shy away from this kind of thinking because they feel it will taint the negotiation process, but it is always better to cover all of your bases. A well-placed arbitration clause can go a long way in protecting one’s interests if an issue arises, or vice versa. That is why it is always important to closely consider one’s circumstances and whether they favour dispute settlement through arbitration or through the courts.
The above article is for general information purposes only and does not constitute legal advice. If you have concerns with regard to the foregoing issues, please make an appointment with one of our lawyers or a qualified legal practitioner elsewhere.