The Supreme Court of Canada recently rendered its much-anticipated decision in Dell Computer Corp. v. Union des consommateurs (“Dell”),[1] an appeal in which Ogilvy Renault acted for the London Court of International Arbitration (“LCIA”), which was granted intervener status by the Court.

The case concerned an objection by Dell, an online retailer, to a consumer class action commenced before Quebec courts by relying on an arbitration clause inserted in the terms and conditions posted on Dell’s website. Dell argued that members of the class action were bound by an enforceable arbitration agreement that allowed them to bring only individual claims before an arbitral tribunal under the auspices of the U.S. National Arbitration Forum.

Dell had been unsuccessful before the Quebec Superior Court and the Court of Appeal in having the matter referred to arbitration. The Supreme Court reversed the decision of the Quebec Court of Appeal and held that Dell’s arbitration clause was enforceable. The majority of the Court therefore dismissed the class action and referred the consumer claims to individual arbitration. Three judges dissented, and would have allowed the class action to proceed before the Quebec courts.

Of particular interest, given the increase in online commerce, was the Supreme Court’s analysis of the mechanics of a contract over the Internet. The Court held that to determine whether clauses on the Internet are external clauses, the analysis should focus on accessibility, given that in the paper world, accessibility is an implied precondition for setting up the clause against another party. Thus, a clause that requires operations of such complexity that the text is not reasonably accessible cannot be regarded as an integral part of the contract. The evidence established that the consumer could access the arbitration clause by clicking on a hyperlink entitled “Terms and Conditions of Sales”, which link re-appeared on every page the consumer accessed. The Court found that the clause was no more difficult for consumers to access than would have been the case had they been provided with a paper copy of the entire contract. The Court unanimously agreed that the arbitration clause was not an external clause within the meaning of the Civil Code, in that the consumer’s access to the clause was not impeded by the configuration.

Another key feature of the decision was that the Court was unanimous in its view that, absent a clear legislative provision to the contrary, the right to proceed by way of a class action is not a public order right and can thus be waived, including through a pre-dispute arbitration clause.[2] While the Court accepted that the class action has a “social dimension” and is of “public interest”,[3] it stated that it is only procedural and does not create new rights. The Court noted that the mere fact the plaintiff had decided to bring the action as a class action as opposed to an individual action could not affect the admissibility of the action. The Court re-affirmed its position that class actions cannot serve as a basis for legal proceedings if the various claims it covers, taken individually, would not.

In addition to stating that the right to filing a class action is not a public order right, the Court also unanimously held that arbitration clauses in a consumer context do not violate public order. The Supreme Court’s decision confirms that the strong pro-arbitration stance adopted in its earlier decisions of Desputeaux v. Éditions Chouette (1987) inc.[4] and GreCon Dimter inc. v. J.R. Normand inc.[5] is not limited to the commercial sphere.

The Court’s reasoning reflects most of the submissions of the LCIA. The LCIA, as an intervener providing assistance to the Court on the matter of international trends in arbitration law, made two principal points. First, it submitted that consumer and class action arbitrations are not necessarily against public order. Second, it submitted that courts should be deferential to the arbitration process. Notably, courts should not engage in a comprehensive analysis of the validity and enforceability of arbitration clauses, but rather, they should refer the issue to the arbitral tribunal. On every point, the majority of the Court adopted the position advocated by the LCIA. The Supreme Court decision in Dell is consistent in many respects with international trends in arbitration law.

The impact of Dell in Quebec will be limited because the provincial Consumer Protection Act was amended on December 14, 2006, so as to limit the enforceability of arbitration clauses and no-class action stipulations in consumer contracts. The new legislation indeed provides that an arbitration agreement can only be invoked against a consumer if the latter agrees to arbitrate an existing dispute. That being said, the new prohibition applies only to contracts that fall within the ambit of the Consumer Protection Act and does not apply to all adhesion contracts. Therefore, insurance contracts, franchise contracts and all other contracts between corporations are not covered by the new legislation. The Court was aware of this recent legislative amendment, but held unanimously that it had no retroactive effect and was thus of no relevance to the case. Similar legislation exists in other provinces, for example in Ontario, where the Consumer Protection Act, 2002 allows a consumer to commence or join a class proceeding arising out of a consumer agreement even if it includes a mandatory arbitration clause.