On November 10, 2022, the Supreme Court of Canada released reasons for judgment in Peace River Hydro Partners v. Petrowest Corp., 2022 SCC 41, a much-anticipated decision that called upon the Court to reconcile the policy favouring enforcement of arbitration agreements with the “public interest in the orderly and efficient resolution of court-ordered receiverships under the Bankruptcy and Insolvency Act (“BIA”)."
Fasken acted for the Insolvency Institute of Canada (“IIC”). The IIC was granted intervener status in the Petrowest case to provide the Court with the perspective and expertise of insolvency practitioners across Canada.
Before the Supreme Court of Canada, the IIC argued that insolvency courts across Canada had the jurisdiction under the BIA to find that an arbitration agreement is inoperative where enforcement of such agreements and arbitral proceedings would interfere with the orderly and efficient resolution of an insolvency proceeding.
The IIC proposed a number of factors that would guide a court in assessing whether to render inoperative an arbitration clause in the context of an insolvency, including (i) the stage of the insolvency proceedings and the effect if an order referring the dispute to arbitration; (ii) the need to maintain the integrity of the bankruptcy or receivership process; (iii) whether there is any urgency in resolving the dispute; (iv) the relative prejudice to the parties to the agreement and the debtor’s stakeholders, and (v) any other factors the court considers material in the circumstances.
The Supreme Court of Canada unanimously dismissed the appeal, concluding that insolvency courts do have the statutory authority to declare that an arbitration agreement is inoperative and allow the receiver to proceed through the court process.
The Court accepted that it would not be automatically the case that a receivership or insolvency proceeding renders an arbitration agreement inoperative.
The Court agreed that courts empowered under the BIA “may find an arbitration agreement ‘inoperative’ where enforcing it would compromise the orderly and efficient resolution of insolvency proceedings, including a court ordered receivership under the BIA.” The Court substantially accepted the factors identified by the IIC as being material to the question of whether a court may find an arbitration agreement inoperative.
The IIC was represented by Kibben Jackson, Tom Posyniak, and Glen Nesbitt.
Jurisdiction
- Canada
