Virtual Arbitration and Uber Technologies Inc. v. Heller

Almost a year after the Supreme Court of Canada affirmed the decision of the Ontario Court of Appeal in Uber Technologies Inc. v. Heller, 2020 SCC 16, to hold a mandatory arbitration clause as unconscionable, courts across Canada have yet to apply the findings of this case to strike an arbitration clause for similar reasons. In the age of virtual legal proceedings, it may be that the reasons articulated in this case for finding an arbitration clause as unconscionable have less applicability.

The respondent in Uber worked as both an Uber and UberEats driver. As a condition to accessing the app, workers had to “agree” to the terms and conditions of a service agreement. That agreement included an arbitration clause which required all disputes be (1) exclusively governed by and construed in accordance with the laws of The Netherlands, excluding its rules on conflict of laws; and (2) submitted first to mandatory mediation and then to arbitration, according to the International Chamber of Commerce (“ICC”) Rules. The place of arbitration was set to be Amsterdam and the financial requirements for accessing this dispute resolution process required at least a $14,500 USD administrative fee.

In holding the clause invalid on grounds of unconscionability, the court stated that the particularly onerous terms of the arbitration clause effectively denied the respondent access to a dispute resolution process especially if the claimant had to travel internationally to have their dispute heard.

Uber was subsequently distinguished in Prairies Tubulars (2015) Inc. v. Canada (Border Services Agency), 2021 FC 36. In this case, Canada Border Services Agency (CBSA) determined that the applicant owed anti-dumping duties on goods imported into Canada per the Special Import Measures Act (“SIMA”). In order to commence an appeal of such charges under SIMA, all outstanding duties must be paid. The applicant challenged these provisions and relied on the case of Uber as the case also involved the imposition of legal obligations that prevented litigants from pursuing their claims.

The Court denied this argument. Though the facts of Prairies Tubulars involved obligations under statute versus the applicability of a contractual agreement, Uber was nonetheless a helpful case as it describes several factors for determining when undue hardship occurs, such as when the cost to pursue a claim is disproportionate to the relief sought or when there is unequal bargaining power between the parties. Where there are two sophisticated parties with full knowledge of their obligations under a statute, for example, there is no undue hardship.

In Uber, it was also held that the arbitration agreement may be unconscionable where the arbitration is fundamentally too costly or otherwise inaccessible. This can occur in cases where the fee is exorbitantly high relative to the claim or the plaintiff cannot reasonably reach the physical location for the arbitration. With increasing use of virtual technology in legal forums during the COVID-19 pandemic, it may be that the barriers to accessing arbitration have decreased. It remains to be seen whether an arbitration clause that mandates arbitration in another country would be as readily struck down by the courts.

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You Snooze You Lose: Court Declines to Stay Proceeding Despite Existence of Arbitration Clause

In the recent decision Paulpillai v. Yusuf, 2020 ONSC, the Superior Court of Justice refused to stay litigation in favour of arbitration, because the Respondent delayed in seeking the stay.

In this case, the Applicant and Respondent signed a partnership agreement which contained an arrangement to arbitrate any disputes. The Applicant passed away, and contentions arose between the Respondent and the Applicant’s estate. The parties attempted to divide the partnership enterprise, and the Applicant’s estate commenced a court application. For the next seven months, the parties made court appearances for several interlocutory motions. At the hearing itself, the Respondent wished to rely on the arbitration agreement to seek a stay of proceedings. The court declined to grant this stay.

The court held that it had jurisdiction to hear the application because the Respondent took steps in moving matters forward, and neglected to bring a motion to stay the application in advance of the hearing. The court relied on the provision of the Arbitration Act, 1991, which allows courts to stay a proceeding if an arbitration agreement exists, but on motion of the other party. The exception to this rule is that such motion must be brought without undue delay.

In this case, though the Respondent indicated in his affidavit evidence that this matter should proceed by way of an arbitration, he failed to bring a motion, or do so in a timely manner. Once the Respondent took steps in advancing the proceeding, he abandoned his right to have the matter be determined by an arbitration.

This decision serves as a cautionary tale for parties wising to continue by way of arbitration when a proceeding has already commenced. In such cases, counsel should bring a motion to stay the matter immediately at the commencement of the proceeding. A party is deemed to acquiesce to the proceeding if they take actions to move the litigation along. This can result in the party forfeiting their right to have the action or application stayed at a later time.

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