The lean towards arbitration ...

A recent decision of the Nova Scotia Supreme Court concludes that where the parties use a "specific" rather than a "universal" arbitration clause the court will still lean towards remitting the matter to arbitration.

In Black & MacDonald Ltd v. Degremont Ltee 2009 NSSC 85. In the case the defendant ("DL") had contracted with Halifax to build three sewage treatment plants. DL then contracted with the plaintiff ("BM") for the supply and installation of some of the treatment systems and equiptment. The contract between DL and BM contained a clause wherein the parties agreed to submit disputes about interim payments to arbitration. A dispute arose over an interim payment and BM commenced an action in the Supreme Court of Nova Scotia. DL then applied for a stay of the action, on the grounds that the arbitration clause applied to the dispute in question.

Justice Coady considered the law. Because the arbitration clause was not a "universal clause" (that is, one that remitted all disputes to arbitration). It was a "specific" clause. His Lordship was accordingly required to analyse carefully the nature of the dispute to see if it came within the arbitration clause. Normal contractual interpretation principles were to be used to determine whether the dispute fell within the arbitration clause. He noted too however that if there was any doubt the matter should be resolved in favour of arbitration. In the end he concluded that the matter did fall within the clause. He stayed the action and remitted the parties to arbitration.

The moral of the story? If parties are to consider arbitration as an alternative dispute resolution system they should use "universal" rather than "specific" arbitration clauses. Use of "specific" clauses simply invites litigation over whether the dispute should be resolved through arbitration or the court--which in the end surely defeats the entire purposes of having any type of arbitration clause in the first place.