In Trade Finance Solutions Inc. v. Equinox Global Limited, the Ontario Court of Appeal reversed the motion judge and found that an international insurance agreement that contains both an arbitration provision and an "Action Against Insurer" clause cannot proceed by way of an action in Ontario for breach of that agreement.

The insured TFS was in the business of providing short term financing to small and medium size businesses. For a fee, it immediately advanced funds to the contracting business in return for that business assigning its receivables to TFS which received payment over time (referred to as "factoring"). To address risks posed, the insured obtained "trade credit" insurance on its factored accounts from the defendant Equinox headquartered in London, England. The insured made several claims for loss under the policy and, in response, the insurers identified a number of "concerns" related to the claim, and made requests for further informatio. The insured viewed the response as an attempt to frustrate the claims process, and it commenced an action against the insurers in Ontario for losses under the insurance contract. In response, the insurers asserted that any dispute relating to the insurance contract had to be submitted to arbitration in England under the LCIA rules, in accordance with the policy's arbitration clause, and brought a motion for a stay.

While a stay was not granted at first instance, on appeal the Court stayed the action and referred the matter to arbitration in London, England, on the basis of the following reasoning:

i) the insurance policy interpreted objectively, in a manner that gave meaning to all of its terms, provided for mandatory arbitration in London, England as agreed to by the parties as the sole method of dispute resolution; and

ii) Ontario has adopted the UNCITRAL Model Law on International Commercial Arbitration (the "Model Law") which requires a court, before which an action is brought in a matter that is the subject of an arbitration agreement, to refer the parties to arbitration if it is arguable that (a) the arbitration agreement is binding on the parties; and (b) the claims at issue fall within the scope of the agreement.

The Court held the "Action Against Insurer" endorsement did not clearly provide for an alternative right of the insured to commence a domestic action against the insurers. Rather, it was arguably a service of suit clause, so could not be said to render the arbitration provision clearly inoperative on the facts of the case. To hold otherwise would require the Court to read-out the mandatory language of the arbitration clause.

A decision released several days later, Heller v. Uber Technologies Inc., applied substantially the same legal principles as set out in Trade Finance. On the facts of the matter, as decided by Justice Perell, the defendant brought a motion to stay a proposed class proceeding brought by the putative representative plaintiff, an Ontario resident who sought to represent a class of Uber divers who claimed entitlements to benefits under Ontario's employment legislation. The agreements entered into between Uber and its drivers contained an agreement to arbitrate disputes in Amsterdam, Netherlands.

On finding that the International Commercial Arbitration Act, 2017 applied to the agreements at issue, Perell J. concluded that an initial challenge to an arbitrator's jurisdiction ought to be heard by the arbitrator himself, and the Court should only refuse to refer the parties to arbitration if it is clear that the matter falls outside the arbitration agreement.

On the face of the arbitration clause, it was not clear that the dispute fell outside of the agreement to arbitrate. Moreover, the argument that the arbitration clause was null and void on grounds of unconscionability was rejected. While Uber undoubtedly possessed greater bargaining power, nothing on the record indicated the agreement was made under duress or rendered improvident.

The decisions in Trade Finance and Heller, albeit in different procedural contexts, reinforce the application of the competence-competence principle, which generally dictates that where a contract contains an arbitration clause, questions about the proper forum for dispute resolution and scope of the clause, as well as the underlying dispute, ought to be first determined by the arbitrator. This reflects the strong policy preference to accord deference to arbitral dispute resolution.