The Quebec Superior Court, in a decision rendered in Canadian Royalties Inc. v. Nearctic Nickel Mines Inc. on September 22, 2010, confirmed a consensual arbitrator's ability to order specific performance of contracts.

Briefly, the two parties had entered into an option and joint venture agreement for the commercial development of a mining property in Northern Québec. Under the agreement, the minority partner had an obligation to transfer 10% of its interest in the property to the majority partner subject to obtaining a bankable feasibility study that was to be financed by the majority partner.

The majority partner financed the feasibility study, but the minority partner refused to transfer 10% of its interest in the property on the grounds that the feasibility study did not satisfy the contractual condition for the transfer of the interest. Pursuant to the joint venture agreement, the dispute went to arbitration. The arbitrator found that the feasibility study did satisfy the contractual condition and ordered the minority partner to transfer 10% of its interest in the mining property to the majority partner.

The case was brought before the Superior Court. While the majority partner asked for the homologation of the final award, the minority partner asked to have the award annulled on the grounds that the transfer order issued by the arbitrator was injunctive in nature and only the Superior Court could grant injunctions.

The Superior Court homologated the award and dismissed the motion to annul it. Justice Fraiberg, while recognizing that arbitrators did not have the power to grant injunctions, distinguished between an injunction and specific performance of a contract and concluded that arbitrators could give orders of specific performance of contractual obligations.

According to Justice Fraiberg, the power to grant injunctions is a discretionary power of the Court, while specific performance falls within the terms of the contract. The Court added that what made injunctions different from orders of specific performance was that defaulters could be punished by imprisonment. Justice Fraiberg ended by saying that:

If Quebec arbitrators could not give orders of specific performance of contracts not amounting to injunctions, they would be lame ducks and arbitration would not be taken seriously as an effective and complete means of resolving commercial disputes. This surely was not the intent of the 1986 legislative reform.

The decision of the Quebec Superior Court is being appealed. A decision by the Quebec Court of Appeal on this important matter is expected before the end of 2011 and will no doubt be the topic of another information bulletin.

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