SUPREME COURT OF CANADA

Citation: Dell Computer Corp. v. Union des consommateurs, [2007] 2 S.C.R. 801, 2007 SCC 34

Date: 20070713

Docket: 31067

Between:

Dell Computer Corporation

Appellant

and

Union des consommateurs and Olivier Dumoulin

Respondents

‑ and ‑

Canadian Internet Policy and Public Interest Clinic, Public Interest Advocacy Centre, ADR Chambers Inc., ADR Institute of Canada, Inc., and London Court of International Arbitration

Interveners

Official English Translation: Reasons of Deschamps J.

Coram: McLachlin C.J. and Bastarache, Binnie, LeBel, Deschamps, Fish, Abella, Charron and Rothstein JJ.

Reasons for Judgment: (paras. 1 to 121)

Joint Dissenting Reasons: (paras. 122 to 242)

Deschamps J. (McLachlin C.J. and Binnie, Abella, Charron and Rothstein JJ. concurring)

Bastarache and LeBel JJ. (Fish J. concurring)

Dell Computer Corp. v. Union des consommateurs, [2007] 2 S.C.R. 801, 2007 SCC 34

Dell Computer Corporation Appellant

v.

Union des consommateurs and Olivier Dumoulin Respondents

and

Canadian Internet Policy and Public Interest Clinic, Public Interest Advocacy Centre, ADR Chambers Inc., ADR Institute of Canada and London Court of International Arbitration Interveners

Indexed as: Dell Computer Corp. v. Union des consommateurs

Neutral citation: 2007 SCC 34.

File No.: 31067.

2006: December 13; 2007: July 13.

Present: McLachlin C.J. and Bastarache, Binnie, LeBel, Deschamps, Fish, Abella, Charron and Rothstein JJ.

on appeal from the court of appeal for quebec

Private international law — Jurisdiction of Quebec courts — Arbitration — Sale of computer equipment over Internet — Arbitration clause contained in terms and conditions of sale — Consumer instituting class action against seller — Article of book of Civil Code on private international law providing that Quebec authority has jurisdiction to hear action involving consumer contract if consumer has domicile or residence in Quebec, and that waiver of that jurisdiction by consumer may not be set up against consumer — Whether arbitration clause can be set up against consumer — Whether arbitration clause contains foreign element that renders rules on international jurisdiction of Quebec authorities applicable — Civil Code of Québec, S.Q. 1991, c. 64, art. 3149.

Arbitration — Review of application to refer dispute to arbitration — Whether arbitrator or court has jurisdiction to rule first on parties’ arguments on validity or applicability of arbitration clause — Limits of intervention by court in case involving arbitration clause — Code of Civil Procedure, R.S.Q., c. C‑25, arts. 940.1, 943.

Contracts — Consumer contract or contract of adhesion — External clause — Electronic commerce — Validity of arbitration clause — Whether arbitration clause that can be accessed by means of hyperlink in contract entered into via Internet is external clause — Civil Code of Québec, S.Q. 1991, c. 64, art. 1435.

The Dell company sells computer equipment retail over the Internet. It has its Canadian head office in Toronto and a place of business in Montreal. On April 4, 2003, the order pages on its English‑language Web site indicated prices of $89 rather than $379 and of $118 rather than $549 for two models of handheld computers. On April 5, on being informed of the errors, Dell blocked access to the erroneous order pages through the usual address. D, circumventing the measures taken by Dell by using a deep link that enabled him to access the order pages without following the usual route, ordered a computer at the lower price indicated there. Dell then posted a price correction notice and at the same time announced that it would not process orders for computers at the prices of $89 and $118. When Dell refused to honour D’s order at the lower price, the Union des consommateurs and D filed a motion for authorization to institute a class action against Dell. Dell applied for referral of D’s claim to arbitration pursuant to an arbitration clause contained in the terms and conditions of sale, and dismissal of the motion for authorization to institute a class action. The Superior Court and the Court of Appeal held, for different reasons, that the arbitration clause could not be set up against D.

Held (Bastarache, LeBel and Fish JJ. dissenting): The appeal should be allowed. D’s claim should be referred to arbitration and the motion for authorization to institute a class action should be dismissed.

Per McLachlin C.J. and Binnie, Deschamps, Abella, Charron and Rothstein JJ.: To ensure the internal consistency of the Civil Code of Québec, it is necessary to adopt a contextual interpretation that limits the scope of the provisions of the title on the international jurisdiction of Quebec authorities to situations with a relevant foreign element. Since the prohibition in art.3149 C.C.Q. against waiving the jurisdiction of Quebec authorities is found in that title, it applies only to situations with such an element. The foreign element must be a point of contact that is legally relevant to a foreign country, which means that the contact must be sufficient to play a role in determining whether a court has jurisdiction. An arbitration clause is not in itself a foreign element warranting the application of the rules of Quebec private international law. The neutrality of arbitration as an institution is one of the fundamental characteristics of this alternative dispute resolution mechanism. Unlike the foreign element, which suggests a possible connection with a foreign state, arbitration is an institution without a forum and without a geographic basis. The parties to an arbitration agreement are free, subject to any mandatory provisions by which they are bound, to choose any place, form and procedures they consider appropriate. The choice of procedure does not alter the institution of arbitration. The rules become those of the parties, regardless of where they are taken from. As a result, an arbitration that contains no foreign element in the true sense of the word is a domestic arbitration. In the instant case, the facts that the applicable rules of the American arbitration organization provide that arbitrations will be governed by a U.S. statute and that English will be the language used in the proceedings are not relevant foreign elements for purposes of the application of Quebec private international law. [3] [26] [50‑53] [56‑58]

In a case involving an arbitration agreement, any challenge to the arbitrator’s jurisdiction must be resolved first by the arbitrator in accordance with the competence‑competence principle, which has been incorporated into art. 943 C.C.P. A court should depart from the rule of systematic referral to arbitration only if the challenge to the arbitrator’s jurisdiction is based solely on a question of law. This exception, which is authorized by art. 940.1 C.C.P., is justified by the courts’ expertise in resolving such questions, by the fact that the court is the forum to which the parties apply first when requesting referral and by the rule that an arbitrator’s decision regarding his or her jurisdiction can be reviewed by a court. If the challenge requires the production and review of factual evidence, the court should normally refer the case to arbitration, as arbitrators have, for this purpose, the same resources and expertise as courts. Where questions of mixed law and fact are concerned, the court must refer the case to arbitration unless the questions of fact require only superficial consideration of the documentary evidence in the record. Before departing from the general rule of referral, the court must be satisfied that the challenge to the arbitrator’s jurisdiction is not a delaying tactic and that it will not unduly impair the conduct of the arbitration proceeding. In the case at bar, the parties have raised questions of law relating to the application of the provisions on Quebec private international law and to whether the class action is of public order. There are a number of other arguments, however, that require an analysis of the facts in order to apply the law to this case, such as those relating to the existence of a foreign element and to the external nature of the arbitration clause. Consequently, the matter should have been referred to arbitration. [84‑88]

The arbitration clause in issue, which could be accessed by means of a hyperlink in a contract entered into via the Internet, is not an external one within the meaning of art.1435 C.C.Q. and is valid. Analogously to paper documents, some Web documents contain several pages that can be accessed only by means of hyperlinks, whereas others can be viewed by scrolling down them on the computer’s screen. The traditional test of physical separation, which is applied to determine whether contractual stipulations in paper documents are external, cannot be transposed without qualification to the context of electronic commerce. To determine whether clauses on the Internet are external clauses, therefore, it is necessary to consider another rule that is implied by art.1435 C.C.Q.: the precondition of accessibility. This precondition is a useful tool for the analysis of an electronic document. Thus, a clause that requires operations of such complexity that its text is not reasonably accessible cannot be regarded as an integral part of the contract. Likewise, a clause contained in a document on the Internet to which a contract on the Internet refers, but for which no hyperlink is provided, will be an external clause. It is clear from the interpretation of art. 1435 C.C.Q. and from the principle of functional equivalence that underlies the Act to establish a legal framework for information technology that access to the clause in electronic format must be no more difficult than access to its equivalent on paper. In the instant case, the evidence shows that the consumer could access the page of Dell’s Web site containing the arbitration clause directly by clicking on the highlighted hyperlink entitled “Terms and Conditions of Sale”. This link reappeared on every page the consumer accessed. When the consumer clicked on the link, a page containing the terms and conditions of sale, including the arbitration clause, appeared on the screen. From this point of view, the clause was no more difficult for the consumer to access than would have been the case had he or she been given a paper copy of the entire contract on which the terms and conditions of sale appeared on the back of the first page. [94] [96‑97] [99‑101]

Although the class action is of public interest, it is a procedure, and its purpose is not to create a new right. The mere fact that D decided to bring the matter before the courts by means of a class action rather than an individual action does not affect the admissibility of his action. An argument based on the class action being of public order cannot therefore be advanced to prevent the court hearing the action from referring the parties to arbitration. [105‑106] [108]

Since the facts triggering the application of the arbitration clause occurred before the coming into force of s. 11.1 of the Consumer Protection Act, which prohibits any stipulation that obliges a consumer to refer a dispute to arbitration, that provision does not apply to the facts of this case. [111] [120]

Per Bastarache, LeBel and Fish JJ. (dissenting): One should not attach any significance to the structure of the Civil Code of Québec or the Code of Civil Procedure when interpreting the substantive provisions under review here. The coherence of the regime is not dependent on the particular Book of the C.C.P. that deals with arbitrations, or the particular title and Book of the C.C.Q. containing art.3149. The C.C.Q. itself constitutes an ensemble which is not meant to be parcelled out into chapters and sections that are not interrelated. [141]

Quebec’s acceptance of jurisdiction clauses is rooted in the principle of primacy of the autonomy of the parties. Both art. 3148, para. 2 C.C.Q. and art. 940.1 C.P.C. can be interpreted as giving practical effect to that principle and are consistent with the international movement towards harmonizing the rules of jurisdiction. On that point, art. 940.1 C.C.P. seems clear: if the parties have an agreement to arbitrate on the matter of the dispute, on the application of either of the parties, the court “shall” refer the parties to arbitration, unless the case has been inscribed on the roll or the court finds the agreement to be null. The reference to the nullity of the agreement is clearly also meant to cover the situation where the arbitration agreement, without being null, cannot be set up against the applicant. By using the term “shall”, the legislator has indicated that the court has no discretion to refuse, on the application of either of the parties, to refer the case to arbitration when the appropriate conditions are met. [142] [144] [149]

The courts below were correct to fully consider D’s challenge to the validity of the arbitration agreement based on the application of art. 3149 C.C.Q. Although art. 940.1 C.C.P. is not clear regarding the extent of the analysis the court should undertake, a discretionary approach favouring resort to the arbitrator in most instances would best serve the legislator’s clear intention to promote the arbitral process and its efficiency, while preserving the core supervisory jurisdiction of the Superior Court. When seized with a declinatory exception, a court should rule on the validity of the arbitration agreement only if it is possible to do so on the basis of documents and pleadings filed by the parties without having to hear evidence or make findings about its relevance and reliability. That said, courts may still exercise some discretion when faced with a challenge to the validity of an arbitration agreement regarding the extent of the review they choose to undertake. In some circumstances, particularly in those that truly merit the label “international commercial arbitration”, it may be more efficient to submit all questions regarding jurisdiction for the arbitrator to hear at first instance. In other circumstances, such as in the present case where provisions of the C.C.Q. must be interpreted, it would seem preferable for the court to fully entertain the challenge to the arbitration agreement’s validity. [176] [178]

The arbitration agreement at issue here cannot be set up against D because it constitutes a waiver of the jurisdiction of the Quebec authorities under art. 3149 C.C.Q. In determining whether art.3149 applies, it is necessary to ask whether the jurisdiction chosen in the contract through a forum selection or arbitration clause is a “Québec authority”. If that jurisdiction is not a “Québec authority”, art.3149 comes into play to permit the consumer or worker to bring his or her dispute before a “Québec authority”. An arbitration clause is itself sufficient to trigger the application of art. 3148, para. 2, and hence the exceptions that apply to it, including art. 3149. Forum selection and arbitration clauses constitute on their own the requisite foreign element for these rules of private international law to be engaged. A contractual arbitrator cannot be a “Québec authority” for the purposes of art.3149. A “Québec authority” must mean a decision‑maker situated in Quebec holding its authority from Quebec law. No arbitrator who is bound by U.S. law could be a “Québec authority”. Moreover, one would think a “Québec authority” would be required to provide arbitration services in French, whereas here, the American arbitration body’s code of procedure provides that all arbitrations will be in English. Finally, it seems completely incongruous that in order to begin the process attributing to the purported “Québec authority” power to hear the dispute, the consumer must first contact an American institution, located in the U.S., that is in charge of organizing the arbitration. [152] [184] [200] [204] [212‑216]

The argument that a consumer dispute could never be arbitrated because it would constitute an arbitration over matter of public order must be rejected. Article 2639 C.C.Q. deals with the kind of disputes that cannot be submitted to arbitration, namely “[d]isputes over the status and capacity of persons, family matters or other matters of public order”. A consumer dispute does not constitute another matter of public order. Furthermore, the fact that certain Consumer Protection Act rules to be applied by the arbitrator are in the nature of public order does not constitute a bar for the hearing of the case by an arbitral tribunal. Finally, the fact that the Consumer Protection Act and the C.C.Q. are silent as to the arbitrability of a consumer dispute suggests its permissibility. An act should only be interpreted as excluding the possibility of arbitration if it is clear from it that this is what the legislator intended. No provisions of the Consumer Protection Act or the C.C.Q. indicate that this is the case for consumer disputes. [218‑221]

The argument that the principle of the autonomy of the parties has no bearing on this case as the arbitration clause is found in a contract of adhesion must also fail as it is based on the false assumption that an adhering party does not truly consent to be bound by the obligations contained in a contract of adhesion. Therefore, it is not sufficient for the respondents to raise the fact that the arbitration clause is found in a contract of adhesion in order to demonstrate that D should not be bound by it. Moreover, an arbitration clause cannot be said to be abusive, and therefore void, only because it is found in a consumer contract or in a contract of adhesion. [227‑229]

The arbitration agreement is not null on the ground that it is found in an external clause that was not expressly brought to the attention of D as required under art. 1435 C.C.Q. While the hyperlink to the Terms and Conditions of Sale was in smaller print, located at the bottom of the Configurator Page, this is consistent with industry standards. It can therefore be concluded that the hyperlink was evident to D. Furthermore, the Configurator Page contained a notice that the sale was subject to the Terms and Conditions of Sale, available by hyperlink, thus bringing the Terms and Conditions expressly to D’s attention. [152] [238]

The recent amendment to the Consumer Protection Act does not apply to this case as the arbitration agreement was concluded before the new provision came into force and the general presumption against retroactivity has not been rebutted. [162]

Cases Cited

By Deschamps J.

Followed: Bisaillon v. Concordia University, [2006] 1 S.C.R. 666, 2006 SCC 19; referred to: Dominion Bridge Corp. v. Knai, 1997 10221 (QC CA), [1998] R.J.Q. 321; Desputeaux v. Éditions Chouette (1987) inc., [2003] 1 S.C.R. 178, 2003 SCC 17; Quebecor Printing Memphis Inc. v. Regenair Inc., 2001 27960 (QC CA), [2001] R.J.Q. 966; Condominiums Mont St‑Sauveur inc. v. Constructions Serge Sauvé ltée, 1990 2867 (QC CA), [1990] R.J.Q. 2783; GreCon Dimter inc. v. J.R. Normand inc., [2005] 2 S.C.R. 401, 2005 SCC 46; Laurentienne‑vie, compagnie d’assurance inc. v. Empire, compagnie d’assurance‑vie, 2000 9001 (QC CA), [2000] R.J.Q. 1708; Fondation M. v. Banque X., BGE 122 III 139 (1996); C.C.I.C. Consultech International v. Silverman, 1991 2868 (QC CA), [1991] R.D.J. 500; Banque Nationale du Canada v. Premdev inc., [1997] Q.J. No. 689 (QL); Acier Leroux inc. v. Tremblay, 2004 76436 (QC CA), [2004] R.J.Q. 839; Robertson Building Systems Ltd. v. Constructions de la Source inc., [2006] Q.J. No. 3118 (QL), 2006 QCCA 461; Compagnie nationale algérienne de navigation v. Pegasus Lines Ltd. S.A., [1994] Q.J. No. 329 (QL); Kingsway Financial Services Inc. v. 118997 Canada inc., [1999] Q.J. No. 5922 (QL); Gulf Canada Resources Ltd. v. Arochem International Ltd. (1992), 1992 4033 (BC CA), 66 B.C.L.R. (2d) 113; Dalimpex Ltd. v. Janicki (2003), 2003 34234 (ON CA), 228 D.L.R. (4th) 179; Ford v. Quebec (Attorney General), 1988 19 (SCC), [1988] 2 S.C.R. 712.

By Bastarache and LeBel JJ. (dissenting)

Dominion Bridge Corp. v. Knai, 1997 10221 (QC CA), [1998] R.J.Q. 321; Zodiak International Productions Inc. v. Polish People’s Republic, 1983 24 (SCC), [1983] 1 S.C.R. 529; Masson v. Thompson, 1994 3781 (QC CS), [1994] R.J.Q. 1032; Syndicat de Normandin Lumber Ltd. v. The “Angelic Power”, [1971] F.C. 263; Desputeaux v. Éditions Chouette (1987) inc., [2003] 1 S.C.R. 178, 2003 SCC 17; GreCon Dimter inc. v. J.R. Normand inc., [2005] 2 S.C.R. 401, 2005 SCC 46; La Sarre (Ville de) v. Gabriel Aubé inc., 1991 3478 (QC CA), [1992] R.D.J. 273; Bisaillon v. Concordia University, [2006] 1 S.C.R. 666, 2006 SCC 19; Royal Bank of Canada v. Concrete Column Clamps (1961) Ltd., 1971 148 (SCC), [1971] S.C.R. 1038; In re Athlumney, [1898] 2 Q.B. 547; Gustavson Drilling (1964) Ltd. v. Minister of National Revenue, 1975 4 (SCC), [1977] 1 S.C.R. 271; Kingsway Financial Services Inc. v. 118997 Canada inc., [1999] Q.J. No. 5922 (QL); World LLC v. Parenteau & Parenteau Int’l Inc., [1998] Q.J. No. 736 (QL); Automobiles Duclos inc. v. Ford du Canada ltée, 2000 19347 (QC CS), [2001] R.J.Q. 173; Simbol Test Systems Inc. v. Gnubi Communications Inc., [2002] Q.J. No. 437 (QL); Sonox Sia v. Albury Grain Sales Inc., [2005] Q.J. No. 9998 (QL); Martineau v. Verreault, [2001] Q.J. No. 3103 (QL); Chassé v. Union canadienne, compagnie d’assurance, [1999] R.R.A. 165; Lemieux v. 9110‑9595 Québec inc., [2004] Q.J. No. 9489 (QL); Joseph v. Assurances générales des Caisses Desjardins inc., SOQUIJ AZ‑99036669; Bureau v. Beauce Société mutuelle d’assurance générale, SOQUIJ AZ‑96035006; Richard‑Gagné v. Poiré, [2006] Q.J. No. 9350 (QL), 2006 QCCS 4980; MacMillan Bloedel Ltd. v. Simpson, 1995 57 (SCC), [1995] 4 S.C.R. 725; Tolofson v. Jensen, 1994 44 (SCC), [1994] 3 S.C.R. 1022; Lipohar v. The Queen (1999), 200 C.L.R. 485, [1999] HCA 65; Morguard Properties Ltd. v. City of Winnipeg, 1983 33 (SCC), [1983] 2 S.C.R. 493; Rees v. Convergia, [2005] Q.J. No. 3248 (QL), 2005 QCCA 353; Garcia Transport Ltée v. Royal Trust Co., 1992 70 (SCC), [1992] 2 S.C.R. 499; Rudder v. Microsoft Corp. (1999), 1999 14923 (ON SC), 2 C.P.R. (4th) 474; Kanitz v. Rogers Cable Inc. (2002), 2002 49415 (ON SC), 58 O.R. (3d) 299.

Statutes and Regulations Cited

Act to add the reformed law of evidence and of prescription and the reformed private international law to the Civil Code of Québec, Draft Bill, 2nd Sess., 33rd Leg., Quebec, 1988, ss. 3477, 3511.

Act to amend the Civil Code and the Code of Civil Procedure in respect of arbitration, S.Q. 1986, c. 73.

Act to amend the Consumer Protection Act and the Act respecting the collection of certain debts, Bill 48, 2nd Sess., 37th Leg., Quebec, 2006.

Act to amend the Consumer Protection Act and the Act respecting the collection of certain debts, S.Q. 2006, c. 56, ss. 2, 17, 18.

Act to establish a legal framework for information technology, R.S.Q., c. C‑1.1, s. 5.

Civil Code of Lower Canada, arts. 8.1, 27, 85.

Civil Code of Québec, Bill 125, 1st Sess., 34th Leg., introduced December 18, 1990.

Civil Code of Québec, S.Q. 1991, c. 64, arts. 1379, 1435, 1436, 1437, 2639, 2640, 2642, 3094, 3111, 3117, 3118, 3134, 3139, 3141 to 3147, 3148, 3149, 3150, 3151, 3152 to 3154.

Code de procédure civile (France), arts. 1458, 1492.

Code Napoléon.

Code of Civil Procedure, R.S.Q., c. C‑25, arts. 21.1, 31, 33, 68, 940, 940.1, 940.6, 943, 943.1, 943.2, 946.4, para. 1(2), 948 to 951.2, 999(d), 1000, 1051.

Commercial Arbitration Act, R.S.C. 1985, c. 17 (2nd Supp.).

Constitution Act, 1867, s. 96.

Consumer Protection Act, R.S.Q., c. P‑40.1, ss. 8, 11.1, 54.8 to 54.16, 271, para. 3.

Courts of Justice Act, R.S.Q., c. T‑16, s. 10.

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International Documents

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APPEAL from a judgment of the Quebec Court of Appeal (Mailhot and Morissette JJ.A., and Lemelin J. (ad hoc)), [2005] R.J.Q. 1448, [2005] Q.J. No. 7011 (QL), 2005 QCCA 570, affirming a decision of Langlois J., J.E. 2004‑457, [2004] Q.J. No. 155 (QL). Appeal allowed, Bastarache, LeBel and Fish JJ. dissenting.

Mahmud Jamal, Anne‑Marie Lizotte and Dominic Dupoy, for the appellant.

Ronald Bourguignon, Yves Lauzon and Careen Hannouche, for the respondents.

Mistrale Goudreau and Philippa Lawson, for the interveners the Canadian Internet Policy and Public Interest Clinic and the Public Interest Advocacy Centre.

J. Brian Casey, Janet E. Mills and John Pirie, for the intervener ADR Chambers Inc.

Stefan Martin and Margaret Weltrowska, for the intervener ADR Institute of Canada.

Pierre Bienvenu, Frédéric Bachand and Azim Hussain, for the intervener the London Court of International Arbitration.

English version of the judgment of McLachlin C.J. and Binnie, Deschamps, Abella, Charron and Rothstein JJ. delivered by

1Deschamps J. — The expansion of trade is without question spurring the development of rules governing international relations. Alternative dispute resolution mechanisms, including arbitration, are among the means the international community has adopted to increase efficiency in economic relationships. Concomitantly, in Quebec, recourse to arbitration has increased greatly owing this mechanism’s flexibility when compared with the traditional justice system.

2This appeal relates to the debate over the place of arbitration in Quebec’s civil justice system. More specifically, the Court is asked to consider the validity and applicability of an arbitration agreement in the context of a domestic legal dispute under the rules of Quebec law and international law, and to determine whether the arbitrator or a court of law should rule first on these issues.

3To ensure the internal consistency of the Civil Code of Québec, S.Q. 1991, c. 64 (“C.C.Q.”), it is necessary to adopt a contextual interpretation that limits the scope of the provisions of the title on the international jurisdiction of Quebec authorities to situations with a relevant foreign element. The prohibition in art. 3149 C.C.Q. against waiving the jurisdiction of Quebec authorities is found in that title and accordingly applies only to situations with a relevant foreign element. Since arbitration is in essence a neutral institution, it does not in itself have any foreign element. An arbitration tribunal has only those connections that the parties to the arbitration agreement intended it to have. The independence and territorial neutrality of arbitration are characteristics that must be promoted and preserved in order to foster the development of this institution. In the case at bar, the arbitration clause was not prohibited by any provision of Quebec legislation at the time it was invoked. Consequently, for the reasons that follow, I would allow the appeal, refer Mr. Dumoulin’s claim to arbitration and dismiss the motion for authorization to institute a class action.

1. Facts

4Dell Computer Corporation (“Dell”) is a company that sells computer equipment retail over the Internet. It has its Canadian head office in Toronto and a place of business in Montreal. In the late afternoon of Friday, April 4, 2003, the order pages on Dell’s English‑language Web site indicated a price of $89 rather than $379 for the Axim X5 300 MHz handheld computer and a price of $118 rather than $549 for the Axim X5 400 MHz handheld computer. The pages of the site where the products were advertised listed the correct prices, however. On April 5, on being informed of the errors, Dell blocked access to the erroneous order pages through the usual address, although the pages were not withdrawn from the site. On the morning of April 7, Olivier Dumoulin, a Quebec consumer, was told about the prices by an acquaintance who sent him the detailed links, which the parties described as “deep links”. These links made it possible to access the order pages without following the usual route, that is, through the home page and the advertising pages. In short, the deep links made it possible to circumvent the measures taken by Dell. Using a deep link, Mr. Dumoulin ordered a computer at the price of $89. Shortly after Mr. Dumoulin placed his order, Dell corrected the two price errors. That same day, Dell posted a price correction notice and at the same time announced that it would not process orders for computers at the prices of $89 and $118. At trial, a Dell employee testified that over the course of that weekend, 354 Quebec consumers had placed a total of 509 orders for these Axim computers, whereas on an average weekend, only one to three of them were sold in Quebec.

5On April 17, Mr. Dumoulin put Dell in default, demanding that it honour his order at the price of $89. When Dell refused, the Union des consommateurs and Mr. Dumoulin (“Union”) filed a motion for authorization to institute a class action against Dell. Dell applied for referral of Mr. Dumoulin’s claim to arbitration pursuant to an arbitration clause contained in the terms and conditions of sale, and dismissal of the motion for authorization to institute a class action. The Union contended that the arbitration clause was null and that, in any event, it could not be set up against Mr. Dumoulin.

2. Judicial History

6The trial judge noted that according to the arbitration clause, arbitration proceedings were to be governed by the rules of the National Arbitration Forum (“NAF”), which is [translation] “located in the United States”. This led her to conclude that there was a foreign element for purposes of the rules of Quebec private international law and that the prohibition under art. 3149 C.C.Q., as interpreted in Dominion Bridge Corp. v. Knai, 1997 10221 (QC CA), [1998] R.J.Q. 321 (C.A.), should apply. In her view, the arbitration clause could not be set up against Mr. Dumoulin. She then considered the criteria for instituting a class action and authorized the action against Dell ([2004] Q.J. No. 155 (QL)).

7The Court of Appeal dismissed Dell’s appeal from that decision ([2005] R.J.Q. 1448, 2005 QCCA 570). It began by expressing its disagreement with the Superior Court’s application of the rules of Quebec private international law. According to the Court of Appeal, this was not a situation in which the consumer had waived the jurisdiction of Quebec authorities. It noted that the parties had agreed that the dispute was governed by the laws applicable in Quebec and that the arbitration could take place in Quebec. In its view, the instant case could be distinguished from Dominion Bridge, a case in which a foreign element had triggered the application of art. 3149 C.C.Q. However, the Court of Appeal concluded that the arbitration clause was external to the contract. Since Dell had not proven that the clause had been brought to the consumer’s attention, the effect of art. 1435 C.C.Q. was that the clause could not be set up against him. The Court of Appeal then briefly discussed whether an issue arising under the Consumer Protection Act, R.S.Q., c. P‑40.1, could be referred to arbitration and held that the Quebec legislature did not intend to preclude arbitration in such matters. Finally, it discussed, but did not accept, the argument that the class action should take precedence over arbitration, mentioning that the disputes that may not be submitted to arbitration are identified in the Civil Code of Québec and certain specific statutes.

8On November 9, 2006, the Quebec Minister of Justice tabled Bill 48, An Act to amend the Consumer Protection Act and the Act respecting the collection of certain debts (2nd Sess., 37th Leg.) (“Bill 48”), in the National Assembly. One of the Bill’s provisions prohibits obliging a consumer to refer a dispute to arbitration. Bill 48, which came into force the day after the hearing of the appeal to this Court, does not include any transitional provisions applicable to this case.

3. Positions of the Parties

9In this Court, the parties have reiterated the arguments raised in the Superior Court and the Court of Appeal. More specifically, Dell submits that the arbitration clause is not prohibited by any provision of Quebec legislation. It therefore is not contrary to public order, is not prohibited by art. 3149 C.C.Q., and is neither external nor abusive. Dell also contends that the courts are limited to conducting a prima facie analysis of the validity of an arbitration clause and must leave it to the arbitrator to consider the clause on the merits. According to Dell, this approach, which is based on the “competence‑competence” principle, was implicitly adopted by this Court in Desputeaux v. Éditions Chouette (1987) inc., [2003] 1 S.C.R. 178, 2003 SCC 17, and the Superior Court should have applied it in the case at bar and referred the matter to an arbitrator to assess the validity of the clause based on the Union’s submissions. The Union did not express an opinion on the degree of scrutiny to which the validity of the arbitration clause should be subject but did take a position, contrary to Dell’s, on every other issue.

10After Bill 48 came into force, the Court asked the parties to make written submissions regarding its applicability to the instant case. Dell raised three arguments in support of its position that Bill 48 does not affect the case: that the Bill does not have retroactive effect; that the new legislation cannot apply to disputes already before the courts; and that Dell had a vested right to the arbitration procedure provided for in the contract with Mr. Dumoulin. The Union advanced only one argument: that the provision on arbitration clauses merely confirms an existing prohibition.

11The parties have raised many issues. In my view, the most significant one in the context of this case concerns the application of art. 3149 C.C.Q. This question is not only a potentially decisive one for the parties, but also one that involves the ordering of the rules in the Civil Code of Québec; the answer to it will have repercussions on the interpretation of the other provisions of the title in which this article appears and on the interpretation of the Code in general. The analysis of this issue will lead me to consider the influence of international rules on Quebec law. These rules are also relevant to another issue: whether the competence‑competence principle applies to the review of the application to refer the dispute to arbitration. The conclusion I will reach is that an arbitrator has jurisdiction to assess the validity and applicability of an arbitration clause and that, although there are exceptions, the decision regarding jurisdiction should initially be left to the arbitrator. However, in light of the state of the case, I will discuss all the issues that have been raised.

4. Application of Art. 3149 C.C.Q.

12It will be helpful to reproduce the provision in issue and discuss its context. It reads as follows:

3149. A Québec authority also has jurisdiction to hear an action involving a consumer contract or a contract of employment if the consumer or worker has his domicile or residence in Québec; the waiver of such jurisdiction by the consumer or worker may not be set up against him.

This provision appears in Title Three, entitled “International Jurisdiction of Québec Authorities”, which is found in Book Ten of the Civil Code of Québec, entitled “Private International Law”. The Court must decide whether it applies in the case at bar. In my view, it is applicable only where there is a relevant foreign element that justifies resorting to the rules of Quebec private international law. I will explain why.

4.1 Context of Application of the Rules on the International Jurisdiction of Quebec Authorities

4.1.1 Purpose and Consequences of the Codification of Private International Law in the Civil Code of Québec

13When the Quebec legislature began the reform of the civil law in the mid‑twentieth century, it did so in a way that was consistent with the civil law tradition in its purest form. As Professor Crépeau writes:

[translation] The Civil Code is an organic, ordered, structured, harmonious and cohesive whole that contains the substantive subject matters of private law, governing, in the civil law tradition, the legal status of persons and property, relationships between persons, and relationships between persons and property.

(P.‑A. Crépeau, “Une certaine conception de la recodification”, in Du Code civil du Québec: Contribution à l’histoire immédiate d’une recodification réussie (2005), 23, at p. 40)

14The codification process therefore entailed a reflection on all the principles and on how to organize them in one central document with a view to simplifying and clarifying the rules, and thus making them more accessible. The organization of rules is an essential feature of codification. Professors Brierley and Macdonald describe the impact of this feature on the mode of presentation and the interpretation of the Civil Code as follows:

A number of assumptions as to form underpin a Civil Code. Their common character is linked to notions of rationality and systematization, nicely captured by Weber’s expression — formal rationality. To say that a Civil Code is, and must be understood as, systematic and rationally organized implies that it reflects a consciously chosen, integrated design for presenting the law that has been consistently followed. . . .

The rational and systematic character of the Code also bears on its mode of presentation. One of the central features of the Code is its taxonomic structure. This affects both its organization and its drafting style. Just as the very existence of a Code labelled “Civil Code” presupposes a larger legal universe that can be divided and subdivided — public law, private law; and, within private law, procedure and substance; and, within substantive private law, commercial law and civil law — the same taxonomic approach is carried through into the Code itself. Its primary division is into large books — for example, persons, property, modes of acquisition of property, commercial law — each of which is subdivided into titles. Within these titles the Code is subdivided into chapters that, in turn, are divided into sections and sometimes into subsections. All the concepts relating to a given area of the law are thus logically derived from first principles, meticulously developed, and systematically ordered. . . .

In this architectonic mode of presentation, the inventory of subjects selected for inclusion and the manner of their placement serve to define the range of meaning that each of the subjects so included may have. The initial organizational choices bear directly on the manner in which the Code adapts to changing circumstances. . . .

(J. E. C. Brierley and R. A. Macdonald, Quebec Civil Law: An Introduction to Quebec Private Law (1993), at pp. 102‑4)

15In his commentaries on the Civil Code of Québec, Quebec’s Minister of Justice confirmed that the Code [translation] “is a structured and hierarchical statutory scheme”: Commentaires du ministre de la Justice (1993), vol. I, at p. VII. For this reason, it cannot be assumed that the jurists who took part in the reform placed the provisions of the Civil Code of Québec in one title or another indiscriminately or without a concern for coherence. A codification process presupposes an ordering of rules, and the provisions of the title on the international jurisdiction of Quebec authorities reflect this general philosophy of codification.

4.1.2 Private International Law

16Private international law is the branch of a state’s domestic law that governs private relationships that [translation] “exten[d] beyond the scope of a single national legal system”: É. Wyler and A. Papaux, “Extranéité de valeurs et de systèmes en droit international privé et en droit international public”, in É. Wyler and A. Papaux, eds., L’extranéité ou le dépassement de l’ordre juridique étatique (1999), 239, at p. 241. Since every state has the power to adopt its own system of rules, the result is a variety of conceptions of private international law. Thus, in some countries, this branch of law is limited to the conflict of laws, whereas in France, private international law has a broader scope, extending also to questions concerning the status of foreign nationals and the nationality of persons. In English private international law, an intermediate approach has been adopted that generally concerns three types of questions: (i) conflict of laws, (ii) conflict of jurisdictions and (iii) the recognition and enforcement of foreign judgments: Dicey, Morris and Collins on the Conflict of Laws (14th ed. 2006), vol. 1, at p. 4; P. North and J. J. Fawcett, Cheshire and North’s Private International Law (13th ed. 1999), at p. 7. What is the situation in Quebec law?

4.1.3 Legislative History of Quebec Private International Law

17The drafters of the original rules of Quebec private international law naturally drew on French law. Like the Code Napoléon, the Civil Code of Lower Canada contained only a few articles on this subject, and until the Civil Code of Québec was enacted in 1991, they and a few provisions of the Code of Civil Procedure, R.S.Q., c. C‑25 (“C.C.P.”), and from specific statutes constituted the private international law of Quebec.

18While Quebec’s private international law was going through a period of relative stagnation in the nineteenth and early twentieth centuries, a growing number of states had recourse to codification, adopting increasingly comprehensive and systematic rules: B. Audit, Droit international privé (4th ed. 2006), at para. 37; A. N. Makarov, “Sources”, in International Association of Legal Science, International Encyclopedia of Comparative Law, vol. III, Private International Law (1972), c. 2, at pp. 4‑5. The subsequent project to codify Quebec’s private international law was part of that trend; it was included in the mandate for the proposed general reform of the Civil Code that was assigned to the Civil Code Revision Office (“Office”) in 1965.

19In 1975, an initial draft codification of the rules of Quebec private international law was submitted to the Office by its private international law committee, which was chaired by Professor J.‑G. Castel. The content of this report was amended slightly and was incorporated two years later into Book Nine of the Draft Civil Code (Civil Code Revision Office, Report on the Québec Civil Code (1978), vol. I, Draft Civil Code, at pp. 593 et seq.). The preliminary chapter and Chapter I of Book Nine contained general provisions. Chapter II concerned conflicts of laws, while Chapter III dealt with conflicts of jurisdictions. Chapters IV and V dealt with the recognition and enforcement of foreign decisions and arbitration awards. Finally, Chapter VI codified the immunity from civil jurisdiction and execution enjoyed by foreign states and certain other international actors.

20The structure of Book Nine attests to the Quebec legislature’s adoption of the intermediate approach of English private international law described by Dicey, Morris and Collins and North and Fawcett (mentioned above). The Office’s decision was the result of a process that stretched over many years.

21The Office explained that Chapter III on conflicts of jurisdictions was adopted to make up for a lack of specific rules on private international law that had obliged courts to resort to the Code of Civil Procedure’s provisions on the judicial districts in Quebec where proceedings could be instituted:

To remedy this state of affairs and to distinguish between international and domestic jurisdiction, it seemed necessary to provide rules applicable exclusively to situations containing a foreign element. [Emphasis added.]

(Civil Code Revision Office, Report on the Québec Civil Code (1978), vol. II, t. 2, Commentaries, at p. 965)

22In the commentaries that accompanied the final text of the Civil Code of Québec, the Minister of Justice mentioned a number of times that the various sections of Book Ten of the Civil Code apply to legal situations [translation] “with a foreign element”. He expressly repeated this in the introduction to Title Three on the international jurisdiction of Quebec authorities (Commentaires du ministre de la Justice, vol. II, at p. 1998). The Minister also reiterated the Office’s comments on the need for a set of jurisdictional rules for private international law distinct from the rules of the Code of Civil Procedure upon which the courts had relied until then:

[translation] Since there were no rules for determining whether Quebec authorities had jurisdiction over disputes with a foreign element, the courts had extended the domestic law rules of jurisdiction provided for in the Code of Civil Procedure to such situations.

The general objective of Title Three is to remedy this deficiency by establishing specific rules for determining the international jurisdiction of Quebec authorities . . . .

(Commentaires du ministre de la Justice, vol. II, at p. 1998)

23These commentaries shed light on the distinction between rules of jurisdiction governing purely domestic disputes and those that, because of a foreign element, form part of private international law. Where domestic disputes are concerned, the question of adjudicative jurisdiction is governed by the Code of Civil Procedure. In the case at bar, arts. 31 and 1000 C.C.P. are the provisions that confer jurisdiction over class actions on the Quebec Superior Court.

24Given that domestic disputes are governed by the general provisions of Quebec domestic law, there is no reason to apply the rules relating to the international jurisdiction of Quebec authorities to a dispute that involves no foreign element.

4.2 Foreign Element Concept

25What is this foreign element that is omnipresent in the literature on private international law? Very little has been written about it. Of course, disputes in which rules of private international law are relied on usually have an international aspect and, as a result, the courts have not needed to elaborate on the parameters of the foreign element concept. One reference to this concept can be found in Quebecor Printing Memphis Inc. v. Regenair Inc., 2001 27960 (QC CA), [2001] R.J.Q. 966 (C.A.), at para. 17, in which Philippon J. (ad hoc), dissenting on another issue, described the initial step of the analytical approach in private international law:

[translation] First, it had to be determined whether the dispute related to an international situation or a transnational event or had a foreign element. [Emphasis deleted.]

26This foreign element can be defined, however. It must be “[a] point of contact which is legally relevant to a foreign country”, which means that the contact must be sufficient to play a role in determining whether a court has jurisdiction: J. A. Talpis and J.‑G. Castel, “Interpreting the rules of private international law”, in Reform of the Civil Code (1993), vol. 5B, at p. 38 (emphasis added); Castel & Walker: Canadian Conflict of Laws (loose‑leaf), vol. 1, at p. 1‑1; see also Wyler and Papaux, at p. 256.

27Since our private international law is based on English law, it will be helpful to review the state of English law on this question. North and Fawcett define private international law as follows:

Private international law, then, is that part of law which comes into play when the issue before the court affects some fact, event or transaction that is so closely connected with a foreign system of law as to necessitate recourse to that system. [Emphasis added; p. 5.]

This definition is similar to the one adopted by Canadian authors, and it includes a notion common to many systems of private international law: the factor connecting a matter with a particular system. It follows that the foreign element and the connecting factor are overlapping notions. One author describes the connecting factor concept as follows:

The connecting factor is the element forming one of the facts of the case which is selected in order to attach a question of law to a legal system. The connecting factor determines the applicable law or the jurisdiction of a court. For instance, if the facts of a case present a question of intestate succession to movables, the element among those facts selected for the designation of the applicable law may be the last domicile, the last habitual residence, the nationality of the deceased or the situs of the movables. Likewise, one of these connecting factors may be employed to establish the jurisdiction of the courts to deal with intestate succession to movables.

(F. Vischer, “Connecting Factors”, in International Association of Legal Science, International Encyclopedia of Comparative Law, vol. III, Private International Law (1999), c. 4, at p. 3)

See also Y. Loussouarn, P. Bourel and P. de Vareilles‑Sommières, Droit international privé (8th ed. 2004), at p. 2. The connecting factor and foreign element concepts are recognized in Quebec private international law, too: Talpis and Castel, at p. 38; C. Emanuelli, Droit international privé québécois (2nd ed. 2006), at pp. 11‑12.

28These two concepts can, therefore, overlap. A connecting factor is a tie to either the domestic or a foreign legal system, whereas the foreign element concept refers to a possible tie to a foreign legal system. Thus, in a personal action brought in Quebec, the fact that a defendant is domiciled in Quebec is a connecting factor with respect to the Quebec legal system but not a foreign element, whereas the fact that a defendant is domiciled in England will be considered both a connecting factor with respect to English jurisdiction and a foreign element with respect to the Quebec legal system. Certain of the connecting factors enumerated in Professor Vischer’s definition above are common to most systems of private international law (see on this point the enumerations in Loussouarn, Bourel and de Vareilles‑Sommières, at p. 2; North and Fawcett, at p. 5).

29A state is free to determine what connecting factors or foreign elements it considers to be relevant. In Quebec, the legislature adopted a number of factors already found in the main Western private international law systems. In the title of the Civil Code of Québec on the conflict of laws, these factors are divided into four main categories, each of which is addressed in a separate chapter: (1) personal factors, with the main one being the place of domicile; (2) property‑related factors; (3) factors related to obligations, such as the place where a contract is entered into; and (4) factors related to procedure, which is usually governed by the law of the court hearing the case (arts. 3083 to 3133 C.C.Q.).

30The legislature also provided for certain connecting factors in respect of the international jurisdiction of Quebec authorities, which is the subject of a separate title. The place where one of the parties is domiciled heads the list of these factors, too. Article 3148 C.C.Q. shows this clearly:

3148. In personal actions of a patrimonial nature, a Québec authority has jurisdiction where

(1) the defendant has his domicile or residence in Québec;

(2) the defendant is a legal person, is not domiciled in Québec but has an establishment in Québec, and the dispute relates to its activities in Québec;

(3) a fault was committed in Québec, damage was suffered in Québec, an injurious act occurred in Québec or one of the obligations arising from a contract was to be performed in Québec;

(4) the parties have by agreement submitted to it all existing or future disputes between themselves arising out of a specified legal relationship;

(5) the defendant submits to its jurisdiction.

However, a Québec authority has no jurisdiction where the parties, by agreement, have chosen to submit all existing or future disputes between themselves relating to a specified legal relationship to a foreign authority or to an arbitrator, unless the defendant submits to the jurisdiction of the Québec authority.

See also arts. 3134, 3141 to 3147, 3149, 3150, and 3154, para. 2 C.C.Q. Other factors that are considered include the place where damage was suffered or an injurious act occurred (art. 3148, para. 1(3) C.C.Q.), and the place where the property in dispute is located (arts. 3152 to 3154, para. 1 C.C.Q.).

31It can be seen that what these traditional factors have in common is a concrete connection with Quebec; if private international law is invoked, it can be assumed that there is an equally concrete foreign element that can serve as a basis for applying a foreign legal system. Despite the developments I have just mentioned, we should question the postulate that the rules of Quebec private international law apply only where there is a foreign element.

32In the Office’s Draft Civil Code, it was clear that a foreign element was necessary. In its commentary on the provision on the law applicable to juridical acts, the Office stated the following:

It should be noted that the text applies to juridical acts of an international character. The parties are not free to refer to a law not related to their act unless that act contains a foreign element.

(Civil Code Revision Office, Report on the Québec Civil Code, vol. II, t. 2, Commentaries, at p. 977 (commentary on art. 21 of Book Nine of the Draft Civil Code))

In discussing art. 48 of Book Nine of the Draft Civil Code, the predecessor of art. 3148 C.C.Q. on the international jurisdiction of Quebec authorities, the Office stated that the jurisdictional rules set out in this article “are intended to apply to situations involving a foreign element” (Civil Code Revision Office, vol. II, t. 2, at p. 988).

33The 1988 draft bill did not substantively alter the traditional foreign element requirement (An Act to add the reformed law of evidence and of prescription and the reformed private international law to the Civil Code of Québec). The wording of art. 3477 of the draft bill on the designation of the applicable law was substantially similar to that of the final version of the provision in the Civil Code of Québec (art. 3111). It read as follows:

3477. A juridical act containing a foreign element is governed by the law expressly designated in the instrument or the designation of which may be inferred with certainty from the terms of the act.

A system of law may be expressly designated as applicable to the whole or a part only of a juridical act.

34The reference in this article to the foreign element led professors Talpis and Goldstein to ask whether such a reference was necessary, since they considered the foreign element requirement to be essential:

[translation] It might first be asked whether it was necessary to specify that the parties may choose the applicable law only for a contract “containing a foreign element”. It is obvious that the existence of a foreign element is the sine qua non of recourse to all the rules in Book Ten of the future Civil Code. However, since the Draft Bill does not include a specific provision on evasion of the law, this reference may have been intended to indicate that the will of the parties is not sufficient to turn a contract connected entirely with Quebec into an international one. [Underlining added.]

(J. A. Talpis and G. Goldstein, “Analyse critique de l’avant‑projet de loi du Québec en droit international privé” (1989), 91 R. du N. 456, at p. 476)

As for art. 3511 of the 1988 draft bill, which concerned the international jurisdiction of Quebec authorities, it already contained all the substantive elements of the future art. 3148 C.C.Q.

35In Bill 125 of 1990, the Civil Code of Québec, however, the foreign element requirement was not retained with respect to the designation of the applicable law. The legislature incorporated a special rule into the provision. The final version of art. 3111 includes an addition to the text that was initially proposed:

3111. A juridical act, whether or not it contains any foreign element, is governed by the law expressly designated in the act or the designation of which may be inferred with certainty from the terms of the act.

A juridical act containing no foreign element remains, nevertheless, subject to the mandatory provisions of the law of the country which would apply if none were designated.

The law of a country may be expressly designated as applicable to the whole or a part only of a juridical act.

What this addition brings to the title on the conflict of laws is to make it possible for the parties to provide that a purely domestic juridical act will be governed by the law of a foreign jurisdiction. However, immediately after recognizing the autonomy of the will of the parties where the designation of the applicable law is concerned, the legislature hastened to limit it in the second paragraph of the provision. Thus, in the absence of a foreign element, a juridical act remains subject to the mandatory rules that would apply if no law were designated. As a result, the designation of the law of a foreign jurisdiction in an act that contains no foreign element is a special circumstance that was cautiously introduced into Quebec private international law and is confined to the rules applicable to the conflict of laws.

36I should add that the wording of art. 3111 C.C.Q. is based on that of art. 3 of the Convention on the Law Applicable to Contractual Obligations (Rome Convention of 1980), which authorizes the “[choice of] a foreign law” where there is no foreign element. It is also conceivable that the determination of the law applicable to a juridical act will at times require a more complex analysis than the one to be made where adjudicative jurisdiction is in issue. Thus, a juridical act, such as a giving of security, that appears to have only domestic connections may in reality be part of an international transaction whose ramifications are not in issue in a given dispute. So there are several possible explanations for the exception provided for in Title Two on the conflict of laws.

37In the title on the international jurisdiction of Quebec authorities, on the other hand, there is no exception to the foreign element requirement, and it is clear that a court asked to apply the rules of private international law must first determine whether the situation involves a foreign element. This position is consistent with the traditional definition of private international law and with the Office’s intention. It must now be asked whether, in the case at bar, the choice of arbitration procedure gives rise to a foreign element warranting the application of art. 3149 C.C.Q. To answer this question, it will be necessary to consider how arbitration has been incorporated into Quebec law.

4.3 Arbitration in Quebec

4.3.1 International Sources

38International arbitration law is strongly influenced by two texts drafted under the auspices of the United Nations: the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 330 U.N.T.S. 3 (“New York Convention”), and the UNCITRAL Model Law on International Commercial Arbitration, U.N. Doc. A/40/17 (1985), Annex I (“Model Law”).

39The New York Convention entered into force in 1959. Article II of the Convention provides that a court of a contracting state that is seized of an action in a matter covered by an arbitration clause must refer the parties to arbitration. At present, 142 countries are parties to the Convention. The accession of this many countries is evidence of a broad consensus in favour of the institution of arbitration. Lord Mustill wrote the following about the Convention:

This Convention has been the most successful international instrument in the field of arbitration, and perhaps could lay claim to be the most effective instance of international legislation in the entire history of commercial law.

(M. J. Mustill, “Arbitration: History and Background” (1989), 6 J. Int’l Arb. 43, at p. 49)

Canada acceded to the New York Convention on May 12, 1986.

40The Model Law is another fundamental text in the area of international commercial arbitration. It is a model for legislation that the UN recommends that states take into consideration in order to standardize the rules of international commercial arbitration. The Model Law was drafted in a manner that ensured consistency with the New York Convention: F. Bachand, “Does Article 8 of the Model Law Call for Full or Prima Facie Review of the Arbitral Tribunal’s Jurisdiction?” (2006), 22 Arb. Int’l 463, at p. 470; S. Kierstead, “Referral to Arbitration under Article 8 of the UNCITRAL Model Law: The Canadian Approach” (1999), 31 Can. Bus. L.J. 98, at pp. 100‑101.

41The final text of the Model Law was adopted on June 21, 1985 by the United Nations Commission on International Trade Law (“UNCITRAL”). In its explanatory note on the Model Law, the UNCITRAL Secretariat states that it:

reflects a worldwide consensus on the principles and important issues of international arbitration practice. It is acceptable to States of all regions and the different legal or economic systems of the world.

(“Explanatory Note by the UNCITRAL Secretariat on the Model Law on International Commercial Arbitration”, U.N. Doc. A/40/17, Annex I, at para. 2)

In 1986, Parliament enacted the Commercial Arbitration Act, R.S.C. 1985, c. 17 (2nd Supp.), which was based on the Model Law. The Quebec legislature followed suit that same year and incorporated the Model Law into its legislation. Quebec’s Minister of Justice at the time, Herbert Marx, reiterated the above‑quoted comment by the UNCITRAL Secretariat: National Assembly, Journal des débats, vol. 29, No. 46, 1st Sess., 33rd Leg., June 16, 1986, at p. 2975, and vol. 29, No. 55, October 30, 1986, at p. 3672.

4.3.2 Nature and Scope of the 1986 Legislative Amendments to the Civil Code of Lower Canada and the Code of Civil Procedure

42In 1986, the Act to amend the Civil Code and the Code of Civil Procedure in respect of arbitration, S.Q. 1986, c. 73 (“Bill 91”), which established a scheme for promoting arbitration in Quebec, was tabled in the legislature. Bill 91 added a new title on arbitration agreements to the Civil Code of Lower Canada. This title consisted of only six provisions setting out a few general principles relating to the validity and applicability of such agreements. The legislature’s decision to place arbitration agreements among the nominate contracts in the Civil Code of Lower Canada is significant. After that, there was no longer any reason to regard arbitration agreements as being outside the sphere of the general law; on the contrary, they were now an integral part of it: Condominiums Mont St‑Sauveur inc. v. Constructions Serge Sauvé ltée, 1990 2867 (QC CA), [1990] R.J.Q. 2783 (C.A.), at p. 2785; J. E. C. Brierley, “Arbitration Agreements: Articles 2638‑2643”, in Reform of the Civil Code (1993), vol. 3B, at p. 1. The provisions added by Bill 91 would be restated without any major changes in the chapter of the Civil Code of Québec on arbitration agreements.

43Bill 91 also had a considerable impact on the Code of Civil Procedure. Substantial additions were made to Book VII on arbitrations, which was divided into two titles. Title I is a veritable code of arbitral procedure that regulates every step of an arbitration proceeding subject to Quebec law, from the appointment of the arbitrator to the order of the proceeding to the award and homologation. Most of these rules apply only “where the parties have not made stipulations to the contrary” (art. 940) C.C.P.). Title II sets out a system of rules applicable to the recognition and execution of arbitration awards made outside Quebec.

44Although Bill 91 was the Quebec legislature’s response to Canada’s accession to the New York Convention and to UNCITRAL’s adoption of the Model Law, it is not identical to those two instruments. As the Quebec Minister of Justice noted, Bill 91 was [translation] “inspired” by the Model Law and [translation] “implement[ed]” the New York Convention: Journal des débats, October 30, 1986, at p. 3672. For this reason, it is important to consider the interplay between Quebec’s domestic law and private international law before interpreting the provisions of Bill 91.

45This Court analysed the interplay between the New York Convention and Bill 91 in GreCon Dimter inc. v. J.R. Normand inc., [2005] 2 S.C.R. 401, 2005 SCC 46, at paras. 39 et seq. After noting that there is a recognized presumption of conformity with international law, the Court mentioned that Bill 91 “incorporate[s] the principles of the New York Convention” and concluded that the Convention is a formal source for interpreting the provisions of Quebec law governing the enforcement of arbitration agreements: para. 41. This conclusion is confirmed by art. 948, para. 2 C.C.P., which provides that the interpretation of Title II on the recognition and execution of arbitration awards made outside Quebec (arts. 948 to 951.2 C.C.P.) “shall take into account, where applicable, the [New York] Convention”.

46The same is not true of the Model Law. Unlike an instrument of conventional international law, the Model Law is a non‑binding document that the United Nations General Assembly has recommended that states take into consideration. Thus, Canada has made no commitment to the international community to implement the Model Law as it did in the case of the New York Convention. Nevertheless, art. 940.6 C.C.P. attaches considerable interpretive weight to the Model Law in international arbitration cases:

940.6 Where matters of extraprovincial or international trade are at issue in an arbitration, the interpretation of this Title, where applicable, shall take into consideration:

(1) the Model Law on International Commercial Arbitration as adopted by the United Nations Commission on International Trade Law on 21 June 1985;

(2) the Report of the United Nations Commission on International Trade Law on the work of its eighteenth session held in Vienna from the third to the twenty‑first day of June 1985;

(3) the Analytical Commentary on the draft text of a model law on international commercial arbitration contained in the report of the Secretary‑General to the eighteenth session of the United Nations Commission on International Trade Law.

47In short, to quote Professor Brierley, Bill 91 opened Quebec arbitration law to “international thinking” in this area; this international thinking “has become a formal source of Quebec positive law”: J. E. C. Brierley, “Quebec’s New (1986) Arbitration Law” (1987‑88), 13 Can. Bus. L.J. 58, at pp. 63 and 68‑69.

4.3.3 Status of Arbitration in Quebec Private International Law

48Bill 91 established the legal framework applicable to arbitration. Not all arbitration proceedings are subject to the same rules. First, Title I on arbitration proceedings applies only if the parties have not stipulated that they intend to opt out of it. In addition, the facts of the case must call for application of the Code of Civil Procedure either because the foreign parties have chosen it in accordance with a provision authorizing them to do so in a law that would otherwise govern this proceeding or because the circumstances of the proceeding necessitate the application of Quebec law. Second, Title II of Book VII of the Code of Civil Procedure contains special provisions on the recognition and execution of arbitration awards made outside Quebec. Third, art. 940.6 C.C.P. provides that Title I on arbitration proceedings is to be interpreted in light, where applicable, of the Model Law and certain documents related to it “[w]here matters of extraprovincial or international trade are at issue in an arbitration”. As Professor Marquis notes, the words “mettant en cause des intérêts du commerce” in the French version of art. 940.6 have an [translation] “unfamiliar sound in Quebec law”: L. Marquis, “Le droit français et le droit québécois de l’arbitrage conventionnel”, in H. P. Glenn, ed., Droit québécois et droit français: communauté, autonomie, concordance (1993), 447, at p. 483. In fact, they were taken straight from the French Code de procédure civile:

[translation] 1492. Arbitration is international where matters of international trade are at issue.

Because the same words are used, Quebec authors agree that art. 940.6 C.C.P. has imported the concept of international arbitration from French law: S. Guillemard, Le droit international privé face au contrat de vente cyberspatial (2006), at pp. 73‑74; S. Thuilleaux, L’arbitrage commercial au Québec: Droit interne — Droit international privé (1991), at p. 129; L. Marquis, “La notion d’arbitrage commercial international en droit québécois” (1991‑1992), 37 McGill L.J. 448, at pp. 465 and 469.

49 The matter of international trade test is different from connecting factors such as the parties’ place of residence or the place where the obligations are performed. Thus, a contractual legal situation may have foreign elements without involving any matters of extraprovincial or international trade; in such a case, although the resulting arbitration will not be considered an international arbitration, it will nonetheless be subject to the rules of private international law. Since the case at bar does not involve international commercial arbitration, this explanation is intended merely to highlight the fact that the test under art. 940.6 C.C.P. is clearly distinct from the foreign element requirement. Where the Quebec legislature intended different rules to apply, it has made this clear.

50 The rules on arbitration proceedings set out in Title I of Book VII of the Code of Civil Procedure apply, to the extent provided for, to any arbitration proceeding subject to Quebec law. The parties are free to attribute foreign connections to an arbitration process, in which case the rules of private international law may be applicable. However, an arbitration clause is not in itself a foreign element warranting the application of the rules of Quebec private international law. The commentators are unanimous on this point:

[translation] It is clear that if an arbitration process is considered to be purely internal to Quebec, the law of Quebec will be applied to it. The rules of private international law will not be applicable. It is Quebec’s Code of Civil Procedure (rules on arbitration) that will be applied.

(J. Béguin, L’arbitrage commercial international (1987), at p. 67)

See also to the same effect, in respect of comparative law, E. Gaillard and J. Savage, Fouchard, Gaillard, Goldman on International Commercial Arbitration (1999), at p. 47.

51 The neutrality of arbitration as an institution is one of the fundamental characteristics of this alternative dispute resolution mechanism. Unlike the foreign element, which suggests a possible connection with a foreign state, arbitration is an institution without a forum and without a geographic basis: Guillemard, at p. 77; Thuilleaux, at p. 145. Arbitration is part of no state’s judicial system: Desputeaux, at para. 41. The arbitrator has no allegiance or connection to any single country: M. Lehmann, “A Plea for a Transnational Approach to Arbitrability in Arbitral Practice” (2003‑2004), 42 Colum. J. Transnat’l L. 753, at p. 755. In short, arbitration is a creature that owes its existence to the will of the parties alone: Laurentienne‑vie, compagnie d’assurance inc. v. Empire, compagnie d’assurance‑vie, 2000 9001 (QC CA), [2000] R.J.Q. 1708 (C.A.), at paras. 13 and 16.

52 To say that the choice of arbitration as a dispute resolution mechanism gives rise to a foreign element would be tantamount to saying that arbitration itself establishes a connection to a given territory, and this would be in outright contradiction to the very essence of the institution of arbitration: its neutrality. This institution is territorially neutral; it contains no foreign element. Furthermore, the parties to an arbitration agreement are free, subject to any mandatory provisions by which they are bound, to choose any place, form and procedures they consider appropriate. They can choose cyberspace and establish their own rules. It was open to the parties in the instant case to refer to the Code of Civil Procedure, to base their procedure on a Quebec or U.S. arbitration guide or to choose rules drawn up by a recognized organization, such as the International Chamber of Commerce, the Canadian Commercial Arbitration Centre or the NAF. The choice of procedure does not alter the institution of arbitration in any of these cases. The rules become those of the parties, regardless of where they are taken from.

53 I cannot therefore see how the parties’ choice of arbitration can in itself create a foreign element. Such an interpretation would empty the foreign element concept of all meaning. An arbitration that contains no foreign element in the true sense of the word is a domestic arbitration. The rules on the international jurisdiction of Quebec authorities will apply only to an arbitration containing a foreign element, such as where a defendant in a case involving a personal claim is domiciled in another country.

54 It must now be determined whether the facts of the present case contain a foreign element.

4.4 Seeking to Identify a Foreign Element in the Facts of the Case at Bar

55 The trial judge saw a foreign element in the fact that [translation] “[t]he NAF is located in the United States” (para. 32). The Court of Appeal rejected this conclusion, and the Union has abandoned this argument. Like other organizations, such as the International Chamber of Commerce and the Canadian Commercial Arbitration Centre, the NAF offers arbitration services. The place where decisions concerning arbitration services are made or where the employees of these organizations work has no impact on the disputes in which their rules are used.

56 Thus, the location of the NAF’s head office is not a relevant foreign element for purposes of the application of Quebec private international law. Moreover, Dell having conceded that the arbitration proceeding will take place in Quebec should put an end to the debate regarding the place of arbitration.

57 Another potential foreign element is found in the NAF’s Code of Procedure (National Arbitration Forum Code of Procedure). Rules 5O and 48B of the NAF Code provide that, unless the parties agree otherwise, arbitrations and arbitration procedures are governed by the U.S. Federal Arbitration Act. In Quebec, designation of the applicable law is governed by Title Two of Book Ten of the Civil Code of Québec on the conflict of laws. The parties’ designation of the applicable law under this title is not ordinarily recognized as a foreign element in the subsequent title on the international jurisdiction of Quebec authorities. In any event, since art. 3111 C.C.Q., which I discussed above, refers to designation of the law applicable to a juridical act containing no foreign element, the designation itself does not produce such an element.

58 The Union raised a final element: the language of the proceedings. According to the NAF Code, English is the language used in NAF proceedings, although the parties may choose another language, in which case the NAF or the arbitrator may order the parties to provide any necessary translation and interpretation services at their own cost (rules 11D and 35G of the NAF Code).

59 In my view, the language argument must fail. Although I agree that the use of a language with which the consumer is not familiar may cause difficulties, neither the French nor the English language can be characterized as a foreign element in Canada.

60 My colleagues Bastarache and LeBel JJ. nonetheless consider it logical to accept that an arbitration clause in itself constitutes a foreign element that can result in application of the provisions on the international jurisdiction of Quebec authorities. Their interpretation has consequences for agreements other than consumer contracts. Thus, it would also be impossible to set up against a Quebec worker any undertaking to submit to an arbitrator any future disputes with his or her Quebec employer relating to an individual contract of employment. Furthermore, any arbitration agreement concerning damage suffered as a result of exposure to raw materials originating in Quebec would be null (see arts. 3151 and 3129 C.C.Q.), even an agreement between a Quebec supplier and a Quebec producer. This interpretation is hard to accept. It implies that the codifiers failed to achieve their objective of ordering the rules in both Book Ten on private international law and Chapter XVIII on arbitration agreements in Book Five. This is an important point, and it is not strictly confined to the foreign element argument. I will therefore consider it separately.

4.5 Ordering of the Rules on Arbitration

61 The chapter on arbitration is found in the important Book Five of the Civil Code of Québec on obligations. Book Five is divided into two titles, the first of which concerns obligations in general, while the second concerns nominate contracts. Chapter XVIII is the final chapter of the title on nominate contracts. It incorporates the provisions of Bill 91 enacted in 1986, which I have already discussed. It contains a general provision, art. 2638 C.C.Q., which is based on the recognition that an arbitration agreement is valid and can be set up against a party:

2638. An arbitration agreement is a contract by which the parties undertake to submit a present or future dispute to the decision of one or more arbitrators, to the exclusion of the courts.

In his commentary on this provision, the Minister of Justice stated that the essential purpose of the arbitration agreement is [translation] “to displace judicial intervention” and that “by conferring jurisdiction on arbitrators, [one] ousts the usual jurisdiction of the judiciary”: Commentaires du ministre de la Justice, vol. II, at p. 1649.

62 Chapter XVIII also contains a provision that enumerates the cases in which the jurisdiction of the Quebec courts cannot be ousted by the parties. This provision reads as follows:

2639. Disputes over the status and capacity of persons, family matters or other matters of public order may not be submitted to arbitration.

An arbitration agreement may not be opposed on the ground that the rules applicable to settlement of the dispute are in the nature of rules of public order.

63 Thus, the codifiers laid down, for disputes containing no foreign element, specific rules dealing, on the one hand, with the effect of the arbitration agreement and, on the other, with cases in which arbitration is not available under domestic law. They therefore considered what matters should be arbitrable. Where disputes not involving private international law issues are concerned, these matters are set out in the provisions governing arbitration. Article 3148, para. 2 C.C.Q. does not simply restate the text of art. 2638 C.C.Q. Rather, it lays down the same rule as it applies to an arbitration agreement containing a foreign element. To give arts. 3149 and 3151 C.C.Q. general application, it would be necessary to infer that the codifiers were inconsistent in not including, in the chapter on arbitration, the exceptions relating to consumer contracts, contracts of employment and claims regarding exposure to raw materials.

64 Furthermore, to view art. 3149 C.C.Q. as being limited to private international law is consistent with the legislature’s objective. This provision is one of the new measures the legislature inserted into the title on the international jurisdiction of Quebec authorities to protect certain more vulnerable groups: Commentaires du ministre de la Justice, vol. II, at p. 2011. Article 3149 C.C.Q. refers to two of these groups, Quebec consumers and workers, who cannot waive the jurisdiction of a Quebec authority. I agree with the following comment by Beauregard J.A. of the Quebec Court of Appeal in Dominion Bridge with regard to the legislature’s general objective in enacting art. 3149 C.C.Q.:

[translation] In my view, it is clear that the legislature intended to ensure that employees could not be required to go abroad to assert rights under a contract of employment. [p. 325]

Thus, the reason why an arbitration clause cannot be set up against a consumer under the title on the international jurisdiction of Quebec authorities is clearly to protect a consumer in a situation with a foreign element.

65 In enacting art. 3149 C.C.Q., the legislature could not have intended to take an obscure approach requiring a decontextualized reading of the title on the international jurisdiction of Quebec authorities. The interpretation of art. 3149 C.C.Q. must be consistent with the legislature’s objective of protecting vulnerable groups and must be harmonized not only with the title on the international jurisdiction of Quebec authorities, but also with the entire book of the C.C.Q. on private international law and Chapter XVIII on arbitration (in Title Two of Book Five), and with Book VII of the Code of Civil Procedure on arbitration. This brings out the internal consistency of these rules, which interact harmoniously and without redundancy. The general provisions on arbitration are grouped together in the books, titles and chapters of the Civil Code of Québec and the Code of Civil Procedure, and specific exceptions are set out in these provisions. It would not be appropriate to shatter the consistency of the rules on arbitration and those on the international jurisdiction of Quebec authorities by placing all disputes concerning an arbitrator’s jurisdiction within the scope of the rules on the jurisdiction of Quebec authorities regardless of whether there is a foreign element.

4.6 Conclusion on the Application of Art. 3149 C.C.Q.

66 The legal experts who worked on the reform of the Civil Code, the Minister of Justice who was in office at the time of the enactment of the Civil Code of Québec, and many Canadian and foreign authors recognized that a foreign element was a prerequisite for applying the rules on the international jurisdiction of Quebec authorities. The ordering effected in a codification process and the rule that a provision must be interpreted in light of its context require an interpretation of art. 3149 C.C.Q. that limits it to cases with a foreign element.

67 I will now discuss the other issues before this Court. They concern the degree of scrutiny of an arbitration clause by the Superior Court, and the validity and applicability of the arbitration clause.

5. Degree of Scrutiny of an Arbitration Clause by the Superior Court in Considering a Referral Application

68 The objective of this part is to determine whether it is the arbitrator or a court that should rule first on the parties’ arguments on the validity or applicability of an arbitration agreement. I will accordingly consider the limits of intervention by the courts in cases involving arbitration agreements.

5.1 Competence of Arbitrators to Rule on Their Own Jurisdiction in International Law

69 There are two opposing schools of thought in the debate over the degree of judicial scrutiny of an arbitrator’s jurisdiction under an arbitration agreement. Under one, it is the court that must rule first on the arbitrator’s jurisdiction; this view is based on a concern to avoid a duplication of proceedings. Since the court has the power to review the arbitrator’s decision regarding his or her jurisdiction, why should the arbitrator be allowed to make an initial ruling on this issue? According to this view, it would be preferable to have the court settle any challenge to the arbitrator’s jurisdiction immediately. This first school of thought thus favours an interventionist judicial approach to questions relating to the jurisdiction of arbitrators.

70 The other school of thought gives precedence to the arbitration process. It is concerned with preventing delaying tactics and is associated with the principle commonly known as the “competence‑competence” principle. According to it, arbitrators should be allowed to exercise their power to rule first on their own jurisdiction (Gaillard and Savage, at p. 401).

71 The New York Convention does not expressly require the adoption of either of these schools of thought. Article II(3) reads as follows:

The court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed.

72 According to some authors, this provision means that referral is the general rule: Gaillard and Savage, at pp. 402‑4; F. Bachand, L’intervention du juge canadien avant et durant un arbitrage commercial international (2005), at pp. 178‑79 and 183. Its wording indicates that the court must not rule on the arbitrator’s jurisdiction unless the clause is clearly null and void, inoperative or incapable of being performed.

73 The fact that art. II(3) of the New York Convention provides that the court can rule on whether an agreement is null and void, inoperative or incapable of being performed does not mean that it is required to do so before the arbitrator does, however.

74 The Model Law, which, as I mentioned above, was drafted consistently with the New York Convention, is clearer. First of all, the wording of art. 8(1) of the Model Law is almost identical to that of art. II(3) of the New York Convention. What is more, art. 16 of the Model Law expressly recognizes the competence‑competence principle. It reads as follows:

Article 16. Competence of arbitral tribunal to rule on its jurisdiction

(1) The arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement. For that purpose, an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract. A decision by the arbitral tribunal that the contract is null and void shall not entail ispo jure the invalidity of the arbitration clause.

(2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence. A party is not precluded from raising such a plea by the fact that he has appointed, or participated in the appointment of, an arbitrator. A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings. The arbitral tribunal may, in either case, admit a later plea if it considers the delay justified.

(3) The arbitral tribunal may rule on a plea referred to in paragraph (2) of this article either as a preliminary question or in an award on the merits. If the arbitral tribunal rules as a preliminary question that it has jurisdiction, any party may request, within thirty days after having received notice of that ruling, the court specified in article 6 to decide the matter, which decision shall be subject to no appeal; while such a request is pending, the arbitral tribunal may continue the arbitral proceedings and make an award.

75 Some authors argue that the competence‑competence principle requires the court to limit itself to a prima facie analysis of the application and to refer the parties to arbitration unless the arbitration agreement is manifestly tainted by a defect rendering it invalid or inapplicable: F. Bachand, “Does Article 8 of the Model Law Call for Full or Prima Facie Review of the Arbitral Tribunal’s Jurisdiction?” According to Professor Bachand, this interpretation is confirmed by the legislative history of the Model Law. This approach has also been adopted in a number of countries; France has formally incorporated the approach in art. 1458 of its Code de procédure civile. The prima facie test has also been adopted in Switzerland by way of judicial interpretation: decision of the 1st Civil Court dated April 29, 1996 in Fondation M. v. Banque X., BGE 122 III 139 (1996), cited by Gaillard and Savage, at p. 409.

76 The manifest nullity test is a fairly strict one:

[translation] The nullity of an arbitration agreement will be manifest if it is incontestable. . . . As soon as a serious debate arises about the validity of the arbitration agreement, only the arbitrator can validly conduct the review. . . . An apparently valid arbitration clause will never be considered to be manifestly null.

(É. Loquin, “Compétence arbitrale”, Juris‑classeur Procédure civile, fasc. 1034 (1994), No. 105)

77 Despite the lack of consensus in the international community, the prima facie analysis test is gaining acceptance and has the support of many authors: Gaillard and Savage, at pp. 407‑13; Bachand, “Does Article 8 of the Model Law Call for Full or Prima Facie Review of the Arbitral Tribunal’s Jurisdiction?” This test is indicative of a deferential approach to the jurisdiction of arbitrators.

78 Having completed this review of international law, I will now consider the state of Quebec law on this issue.

5.2 Quebec Test for Judicial Intervention in a Case Involving an Arbitration Agreement

79 The legal framework governing referral to arbitration is set out in the Code of Civil Procedure. The relevant provisions read as follows:

940.1 Where an action is brought regarding a dispute in a matter on which the parties have an arbitration agreement, the court shall refer them to arbitration on the application of either of them unless the case has been inscribed on the roll or it finds the agreement null.

The arbitration proceedings may nevertheless be commenced or pursued and an award made at any time while the case is pending before the court.

943. The arbitrators may decide the matter of their own competence.

943.1 If the arbitrators declare themselves competent during the arbitration proceedings, a party may within thirty days of being notified thereof apply to the court for a decision on that matter.

While such a case is pending, the arbitrators may pursue the arbitration proceedings and make their award.

943.2 A decision of the court during the arbitration proceedings recognizing the competence of the arbitrators is final and without appeal.

80 It should be noted from the outset that art. 940.1 C.C.P. incorporates the essence of art. II(3) of the New York Convention and of its counterpart in the Model Law, art. 8. Furthermore, art. 943 C.C.P. confers on arbitrators the competence to rule on their own jurisdiction. This article clearly indicates acceptance of the competence‑competence principle incorporated into art. 16 of the Model Law.

81 A review of the case law on arbitration reveals that Quebec courts have often accepted or refused to give effect to arbitration clauses without reflecting on the degree of scrutiny required of them: C.C.I.C. Consultech International v. Silverman, 1991 2868 (QC CA), [1991] R.D.J. 500 (C.A.); Banque Nationale du Canada v. Premdev inc., [1997] Q.J. No. 689 (QL) (C.A.); Acier Leroux inc. v. Tremblay, 2004 76436 (QC CA), [2004] R.J.Q. 839 (C.A.); Robertson Building Systems Ltd. v. Constructions de la Source inc., 2006 QCCA 461, [2006] Q.J. No. 3118 (QL),

2006 QCCA 461; Compagnie nationale algérienne de navigation v. Pegasus Lines Ltd. S.A., [1994] Q.J. No. 329 (QL) (C.A.). However, it can be seen that where the analysis of a clause requires an assessment of contradictory factual evidence, Quebec courts can be reluctant to engage in a review on the merits. For example, in Kingsway Financial Services Inc. v. 118997 Canada inc., [1999] Q.J. No. 5922 (QL) (C.A.), the buyer sued the seller on the basis of error induced by fraud. The court hearing the case had to decide whether the seller had made false representations to the buyer. The Court of Appeal simply referred the case to arbitration.

82 One author suggests that Quebec courts are more deferential as regards the jurisdiction of arbitrators when hearing cases that simply concern the applicability of an arbitration clause, whereas if it is the validity of the same clause that is an issue, the rule they seem to observe is to dispose of the issue immediately: F. Bachand, L’intervention du juge canadien avant et durant un arbitrage commercial international, at pp. 190‑91. Although I agree that a distinction can be made between a case concerning validity and one concerning applicability, it cannot be said that the Quebec courts have uniformly used or identified this distinction as a criterion for intervening. Nor has it been adopted in the rest of Canada, where the prima facie analysis has also been extended to cases concerning the applicability of an arbitration clause: Gulf Canada Resources Ltd. v. Arochem International Ltd. (1992), 1992 4033 (BC CA), 66 B.C.L.R. (2d) 113 (C.A.); Dalimpex Ltd. v. Janicki (2003), 2003 34234 (ON CA), 228 D.L.R. (4th) 179 (Ont. C.A.). I therefore consider it necessary to pursue the analysis beyond this distinction.

83 Article 940.1 C.C.P. refers only to cases where the arbitration agreement is null. However, since this provision was adopted in the context of the implementation of the New York Convention (the words of which, in art. II(3), are “null and void, inoperative or incapable of being performed”), I do not consider a literal interpretation to be appropriate. It is possible to develop, in a manner consistent with the empirical data from the Quebec case law, a test for reviewing an application to refer a dispute to arbitration that is faithful to art. 943 C.C.P. and to the prima facie analysis test that is increasingly gaining acceptance around the world.

84 First of all, I would lay down a general rule that in any case involving an arbitration clause, a challenge to the arbitrator’s jurisdiction must be resolved first by the arbitrator. A court should depart from the rule of systematic referral to arbitration only if the challenge to the arbitrator’s jurisdiction is based solely on a question of law. This exception is justified by the courts’ expertise in resolving such questions, by the fact that the court is the forum to which the parties apply first when requesting referral and by the rule that an arbitrator’s decision regarding his or her jurisdiction can be reviewed by a court. It allows a legal argument relating to the arbitrator’s jurisdiction to be resolved once and for all, and also allows the parties to avoid duplication of a strictly legal debate. In addition, the danger that a party will obstruct the process by manipulating procedural rules will be reduced, since the court must not, in ruling on the arbitrator’s jurisdiction, consider the facts leading to the application of the arbitration clause.

85 If the challenge requires the production and review of factual evidence, the court should normally refer the case to arbitration, as arbitrators have, for this purpose, the same resources and expertise as courts. Where questions of mixed law and fact are concerned, the court hearing the referral application must refer the case to arbitration unless the questions of fact require only superficial consideration of the documentary evidence in the record.

86 Before departing from the general rule of referral, the court must be satisfied that the challenge to the arbitrator’s jurisdiction is not a delaying tactic and that it will not unduly impair the conduct of the arbitration proceeding. This means that even when considering one of the exceptions, the court might decide that to allow the arbitrator to rule first on his or her competence would be best for the arbitration process.

87 Thus, the general rule of the Quebec test is consistent with the competence- competence principle set out in art. 16 of the Model Law, which has been incorporated into art. 943 C.C.P. As for the exception under which a court may rule first on questions of law relating to the arbitrator’s jurisdiction, this power is provided for in art. 940.1 C.C.P., which in fact recognizes that a court can itself find that the agreement is null rather than referring this issue to arbitration.

88 In the case at bar, the parties have raised questions of law relating to the application of the provisions on Quebec private international law and to whether the class action is of public order. There are a number of other arguments, however, that require an analysis of the facts in order to apply the law to this case. This is true of the attempt to identify a foreign element in the circumstances of the case. Likewise, the external nature of the arbitration clause requires not only an interpretation of the law, but also a review of the documentary and testimonial evidence introduced by the parties. According to the test discussed above, the matter should have been referred to arbitration.

89 Considering the status of the case, it would be counterproductive for this Court to refer it to arbitration, thereby exposing the parties to a new round of proceedings. It would therefore be preferable to deal with all the questions here. I have already discussed the application of art. 3149 C.C.Q. and the question of the foreign element. I will now consider the external clause issue.

6. External Nature of the Arbitration Clause

90 In 1994, the legislature introduced arts. 1435 to 1437 C.C.Q. — which lay down special rules on the validity of certain clauses typically found in contracts of adhesion or consumer contracts — into the law of contractual obligations. Although all these rules share a general purpose of protecting the weakest and most vulnerable contracting parties, they concern different types of clauses (external, illegible, incomprehensible and abusive) and are accordingly aimed at different types of abuse. For example, whereas the notion of the external clause (art. 1435 C.C.Q.) traditionally concerns contract clauses that are physically separate from the main document, that of the illegible clause (art. 1436 C.C.Q.) concerns clauses that are not separate from the main document but are, owing to their physical presentation, illegible for a reasonable person. Thus, a clause that is [translation] “buried among a large number of other clauses” because of its location in the contract is characterized as illegible: D. Lluelles and B. Moore, Droit des obligations (2006), at p. 897; B. Lefebvre, “Le contrat d’adhésion” (2003), 105 R. du N. 439, at p. 479. An incomprehensible clause (art. 1436 C.C.Q.) is one that is drafted so poorly that its content is unintelligible or excessively ambiguous.

91 In the case at bar, the Union argues that, pursuant to art. 1435 C.C.Q., the arbitration clause is null because it is an external clause and because it has not been proven that Mr. Dumoulin knew of its existence. Article 1435 reads as follows:

1435. An external clause referred to in a contract is binding on the parties.

In a consumer contract or a contract of adhesion, however, an external clause is null if, at the time of formation of the contract, it was not expressly brought to the attention of the consumer or adhering party, unless the other party proves that the consumer or adhering party otherwise knew of it.

92 This provision begins with a recognition that an external clause referred to in a contract is valid. However, its purpose is to remedy abuses resulting from the inclusion by reference of clauses that one of the parties is unaware of: Civil Code Revision Office, vol. II, t. 2, at pp. 601‑2; Commentaires du ministre de la Justice, vol. I, at pp. 870‑71. A party wishing to apply a clause that is external to a consumer contract or a contract of adhesion must prove that it was expressly brought to the attention of the consumer or adhering party, or that the consumer or adhering party otherwise knew of it.

93 In the absence of a statutory definition, the authors have undertaken to define the external clause concept. An external clause is a contractual stipulation [translation] “set out in a document that is separate from the agreement or instrument but that, according to a clause of this agreement, is deemed to be an integral part of it”: Baudouin et Jobin: Les obligations (6th ed. 2005), at p. 267. A clause is external if it is physically separate from the contract: Lluelles and Moore, at p. 748. A clause found on the back of a contract or in a schedule at the end of it is not an external clause, because it is an integral part of the contract; art. 1435 C.C.Q. does not apply to such a clause.

94 The case at bar is the first in which the Quebec Court of Appeal has had to consider whether a contract clause that can be accessed by means of a hyperlink in a contract entered into via the Internet can be considered to be an external clause. Previous disputes concerning the external nature of contractual stipulations have concerned paper documents.

95 Some aspects of electronic documents are covered by the law. In light of the growing number of juridical acts entered into via the Internet, the Quebec legislature has intervened and laid down rules relating to this new environment. Thus, the Act to establish a legal framework for information technology, R.S.Q., c. C‑1.1, provides that documents have the same legal value whether they are paper or technology‑based documents (s. 5). A contract may therefore be entered into using either an electronic medium — by, for example, filling out a form on a Web page — or paper: V. Gautrais, Know your law: Guide respecting the management of technology‑based documents (2005), at p. 23.

96 Despite the efforts to harmonize the rules via legislation, there are legal rules that are not always easy to apply in the context of the Internet. This is true, for example, in the case of external clauses, since the traditional test of physical separation cannot be transposed without qualification to the context of electronic commerce.

97 A Web page may contain many links, each of which leads in turn to a new Web page that may itself contain many more links, and so on. Obviously, it cannot be argued that all these different but interlinked pages constitute a single document, or that the entire Web, as it scrolls down a user’s screen, is just one document. However, it is difficult to accept that the need for a single command by the user would be sufficient for a finding that the provision governing external clauses is applicable. Such an interpretation would be inconsistent with the reality of the Internet environment, where no real distinction is made between scrolling through a document and using a hyperlink. Analogously to paper documents, some Web documents contain several pages that can be accessed only by means of hyperlinks, whereas others can be viewed by scrolling down them on the computer’s screen. There is no reason to favour one configuration over the other. To determine whether clauses on the Internet are external clauses, therefore, it is necessary to consider another rule that, although not expressly mentioned in art. 1435 C.C.Q., is implied by it.

98 Thus, a number of authors have stressed that, for an external clause to be binding on the parties, it must be reasonably accessible: Lluelles and Moore, at p. 753; Baudouin et Jobin: Les obligations, at p. 268. A contracting party cannot argue that a contract clause is binding unless the other party had a reasonable opportunity to read it. For this, the other party must have had access to it. Where a contract has been negotiated and all its terms and conditions are set out in the contract itself, the problem of accessibility does not arise, since all the clauses are part of a single document. Where the contract refers to an external document, however, accessibility is an implied precondition for setting up the clause against the other party.

99 The implied precondition of accessibility is a useful tool for the analysis of an electronic document. Thus, a clause that requires operations of such complexity that its text is not reasonably accessible cannot be regarded as an integral part of the contract. Likewise, a clause contained in a document on the Internet to which a contract on the Internet refers, but for which no hyperlink is provided, will be an external clause. Access to the clause in electronic format should be no more difficult than access to its equivalent on paper. This proposition flows both from the interpretation of art. 1435 C.C.Q. and from the principle of functional equivalence that underlies the Act to establish a legal framework for information technology.

100 The evidence in the record shows that the consumer could access the page of Dell’s Web site containing the arbitration clause directly by clicking on the highlighted hyperlink entitled “Terms and Conditions of Sale”. This link reappeared on every page the consumer accessed. When the consumer clicked on the link, a page containing the terms and conditions of sale, including the arbitration clause, appeared on the screen. From this point of view, the clause was no more difficult for the consumer to access than would have been the case had he or she been given a paper copy of the entire contract on which the terms and conditions of sale appeared on the back of the first page.

101 In my view, the consumer’s access to the arbitration clause was not impeded by the configuration of the clause; to read it, he or she needed only to click once on the hyperlink to the terms and conditions of sale. The clause is therefore not an external one within the meaning of the Civil Code of Québec.

102 The Union submits that the NAF Code, too, is an external document and cannot be set up against Mr. Dumoulin, the consumer in the instant case. According to the Union, the hyperlink merely led to the home page of the NAF’s Web site, and to access the NAF Code, consumers had to pursue their searches beyond the home page. At first glance, the need to pursue a search beyond the home page seems to me to be insufficient to support a finding that the NAF Code is an external document. Without further evidence regarding access problems, I find that the argument must be rejected. Furthermore, even if the NAF Code were an external document, this argument would not be sufficient to decide the issue of the arbitrator’s jurisdiction. If the NAF Code were in fact an external clause and therefore null pursuant to art. 1435 C.C.Q., that would not affect the validity of the arbitration clause. The arbitration procedure would then simply be governed by the C.C.P.

103 In concluding, I would like to point out, relying only on the facts in the record and having heard no specific arguments on the issue of an illegible or incomprehensible arbitration clause, that I would have reached the same conclusion even if the Union had also argued that the clause was illegible or incomprehensible within the meaning of art. 1436 C.C.Q. As was mentioned above, the highlighted hyperlink appeared on every page the consumer accessed, and no evidence was adduced that could lead to the conclusion that the text was difficult to find in the document, or that it was hard to read or to understand.

104 I would also note that in this Court, the Union argued generally that the arbitration clause was abusive. This argument is based on the prohibition under art. 1437 C.C.Q. However, since no submissions were made in support of this allegation, I will simply find that the Union has not demonstrated its merits.

7. Availability of the Class Action Where There is an Arbitration Clause

105 As a separate ground in support of the argument that the arbitration clause cannot be set up against Mr. Dumoulin’s motion, the Union relies on art. 2639 C.C.Q. and submits that because this is a class action, the dispute is of public order and therefore cannot be submitted to arbitration. Thus, Dell is not entitled to request that the dispute be referred to arbitration, and the class action must be heard on the merits. In my opinion, the Union’s argument must be rejected. The class action is a procedure, and its purpose is not to create a new right.

106 The procedural framework for the class action was added to the Code of Civil Procedure in 1979. It is accepted that the class action has a social dimension: “Its purpose is to facilitate access to justice for citizens who share common problems and would otherwise have little incentive to apply to the courts on an individual basis to assert their rights” (Bisaillon v. Concordia University, [2006] 1 S.C.R. 666, 2006 SCC 19, at para. 16) or might lack the financial means to do so. From this perspective, the class action is clearly of public interest. However, the first introductory provision of Book IX of the Code of Civil Procedure — Class Action — reminds us that, as important as it may be, the class action is only a legal procedure:

999. . . .

(d) “class action” means the procedure which enables one member to sue without a mandate on behalf of all the members.

107 This position was already accepted at the time Book IX was enacted:

[translation] The class action is not a right (jus); it is a procedure. It is not, in itself, even a means to exercise a right, a remedy in the sense of the maxim ubi jus, ibi remedium. It is merely a special mechanism that is applied to an existing means to exercise an existing right in order to “collectivize” it.

(M. Bouchard, “L’autorisation d’exercer le recours collectif” (1980), 21 C. de D. 855, at p. 864)

The notion that the class action procedure does not create new rights has been reiterated on numerous occasions, including recently by this Court in Bisaillon, at paras. 17 and 22.

108 In the case at bar, the parties agreed to submit their disputes to binding arbitration. The effect of an arbitration agreement is recognized in Quebec law: art. 2638 C.C.Q. Obviously, if Mr. Dumoulin had brought the same action solely as an individual, the Union’s argument based on the class action being of public order could not have been advanced to prevent the court hearing the action from referring the parties to arbitration. Does the mere fact that Mr. Dumoulin instead decided to bring the matter before the courts by instituting a class action affect the admissibility of his action? In light of the reasons of LeBel J., writing for the majority in Bisaillon, at para. 17, the answer is no: “[the class action] cannot serve as a basis for legal proceedings if the various claims it covers, taken individually, would not do so”.

109 Moreover, the Union’s argument that the class action is a matter of public order that may not be submitted to arbitration has lost its force as a result of this Court’s decision in Desputeaux. In that case, one of the parties had invoked the same provision, art. 2639 C.C.Q., to argue that the dispute over ownership of the copyright in a fictitious character, Caillou, was a question of public order that could not be submitted to arbitration. The Court held that the concept of public order referred to in art. 2639 C.C.Q. must be interpreted narrowly and is limited to matters analogous to those enumerated in that provision: paras. 53‑55. In the case at bar, neither Mr. Dumoulin’s hypothetical individual action nor the class action is a dispute over the status and capacity of persons, family law matters or analogous matters.

110 Consequently, the Union’s argument relating to the public order nature of the class action must fail. I must now rule on the application of Bill 48, which came into force after this appeal was heard.

8. Application of the Act to amend the Consumer Protection Act and the Act respecting the collection of certain debts

111 Bill 48 was enacted on December 14, 2006 (S.Q. 2006, c. 56). It introduces a number of measures, only one of which is relevant to the case at bar: the addition to the Consumer Protection Act of a provision on arbitration clauses. This provision reads as follows:

2. The Act is amended by inserting the following section after section 11:

“11.1. Any stipulation that obliges the consumer to refer a dispute to arbitration, that restricts the consumer’s right to go before a court, in particular by prohibiting the consumer from bringing a class action, or that deprives the consumer of the right to be a member of a group bringing a class action is prohibited.

If a dispute arises after a contract has been entered into, the consumer may then agree to refer the dispute to arbitration.”

The question that arises is whether this new provision applies to the facts of the instant case.

112 Pursuant to s. 18 of Bill 48, s. 2 came into force on December 14, 2006. Section 18 reads as follows:

18. The provisions of this Act come into force on 14 December 2006, except section 1, which comes into force on 1 April 2007, and sections 3, 5, 9 and 10, which come into force on the date or dates to be set by the Government, but not later than 15 December 2007.

Bill 48 has only one transitional provision, s. 17, which provides that the new ss. 54.8 to 54.16 of the Consumer Protection Act do not apply to contracts entered into before the coming into force of the Bill. The instant case is not one in which s. 17 is applicable. However, if ss. 17 and 18 are read together, it would seem at first glance that, aside from the provisions referred to in s. 17, Bill 48 applies to contracts entered into before its coming into force. Is this true? And is Bill 48 applicable in the case at bar?

113 Professor P.‑A. Côté writes in The Interpretation of Legislation in Canada (3rd ed. 2000), at p. 169, that “retroactive operation of a statute is highly exceptional, whereas prospective operation is the rule”. He adds that “[a] statute has immediate effect when it applies to a legal situation that is ongoing at the moment of its commencement: the new statute governs the future developments of this situation” (p. 152). A legal situation is ongoing if the facts or effects are occurring at the time the law is being modified (p. 153). A statute of immediate effect can therefore modify the future effects of a fact that occurred before the statute came into force without affecting the prior legal situation of that fact.

114 To make it clear what is meant by an ongoing situation and one whose facts and effects have occurred in their entirety, it will be helpful to consider the example of the obligation to warrant against latent defects cited by professors P.‑A. Côté and D. Jutras in Le droit transitoire civil: Sources annotées (loose‑leaf), at p. 2‑36. This obligation comes into existence upon the conclusion of the sale, but the warranty clause does not produce tangible effects unless a problem arises with the property sold. The warranty comes into play either when the vendor is put in default or when a claim is made. Once all the effects of the warranty have occurred, the situation is no longer ongoing and the new legislation will not apply to the situation unless it is retroactive.

115 Can the facts of the case at bar be characterized as those of an ongoing legal situation? If they can, the new legislation applies. If all the effects of the situation have occurred, the new legislation will not apply to the facts.

116 The only condition for application of Dell’s arbitration clause is that a claim against Dell, or a dispute or controversy between the customer and Dell, must arise (clause 13C of the Terms and Conditions of Sale). All the facts of the legal situation had therefore occurred once Mr. Dumoulin notified Dell of his claim. Thus, all the facts giving rise to the application of the binding arbitration clause had occurred in their entirety before Bill 48 came into force.

117 Since there is nothing in Bill 48 that might lead to the conclusion that it applies retroactively, there is no reason to give it such a scope.

118 Moreover, to interpret Bill 48 as having retroactive effect would be problematic. First, retroactive operation is exceptional: Côté, at pp. 114‑15; R. Sullivan, Sullivan and Driedger on the Construction of Statutes (4th ed. 2002), at pp. 553‑54. Where a law is ambiguous and admits of two possible interpretations, an interpretation according to which it does not have retroactive effect will be preferred: Ford v. Quebec (Attorney General), 1988 19 (SCC), [1988] 2 S.C.R. 712, at pp. 742‑45.

119 Second, I find it highly unlikely that the legislature intended that s. 2 should apply to all arbitration clauses in force before December 14, 2006. For example, neither a consumer who is a party to an arbitration that is under way nor a consumer whose claims have already been rejected by an arbitrator should be able to rely on s. 2 and argue that the arbitration clause binding him or her and the merchant is invalid in order to request a stay of proceedings or to have the unfavourable arbitration award set aside. Failing a clear indication to the contrary, when a dispute is submitted for a decision, the decision maker must apply the law as it stands at the time the facts giving rise to the right occurred.

120 I accordingly conclude that since the facts triggering the application of the arbitration clause had already occurred before s. 2 of Bill 48 came into force, this provision does not apply to the facts of the case at bar.

9. Disposition

121 For these reasons, I would allow the appeal, reverse the Court of Appeal’s judgment, refer Mr. Dumoulin’s claim to arbitration and dismiss the motion for authorization to institute a class action, with costs.

The reasons of Bastarache, LeBel and Fish JJ. were delivered by

Bastarache and LeBel JJ. (dissenting) —

I. Introduction

122 In this appeal, our Court must decide whether an arbitration clause in an Internet consumer contract bars access to a class action procedure in the province of Quebec. For the reasons which follow, we hold that the clause at issue is of no effect and cannot be set up against the consumer who seeks the authorization to initiate a class action. As a result, we would dismiss the appeal.

II. Background

123 Over the weekend between April 4, 2003 and April 7, 2003, Dell showed some erroneous prices on one page of its Web site, the “shopping page” for its Axim X5 line of handheld computers. On this specific page, the Axim X5 300 MHz and 400 MHz were announced at a price of $89 and $118 respectively. It appears that the actual pricing should have read $379 and $549 respectively and that the error was due to a technical problem with one of Dell’s database systems.

124 The error was discovered by Dell on Saturday, April 5th. Dell immediately tried to correct it by erecting an electronic barrier to block access to the faulty page through the generally publicized homepage www.Dell.ca. However, Dell overlooked the fact that it was still possible to access the blocked page through a “deep-link”, a direct hyperlink that permits Web users to have access to a particular page without having to go through the Web site’s homepage. It appears that many people were able to access the faulty page through this means and that an unusually high number of Axim X5 handheld computers were ordered at the erroneous prices over the weekend. The respondent Dumoulin is one of the persons who placed an order in this way, having ordered, on April 7th, an Axim X5 300 MHz at the erroneous price of $89 after having accessed the shopping page of the Axim X5 handheld computers through its deep-link.

125 On Monday, April 7th, at 9:30 a.m., the technical problem with the shopping page was fixed and access through the homepage was re-established at 2:30 p.m. Later that day, Dell published a correction notice on its Web site informing customers of the pricing error and of the fact that all orders for the Axim X5 handheld computers with incorrect pricing would not be processed.

126 The following day, Dumoulin received an e-mail informing him of the pricing error and also that his order would not be processed. He answered by putting Dell on notice to honour its advertised sale price. His request having been denied, Union des consommateurs, on behalf of Dumoulin, decided to file a motion in the Superior Court to be authorized to institute a class action.

127 Dell contested the motion by raising a declinatory exception to the Quebec Superior Court’s jurisdiction based on the fact that the terms and conditions of the sale contained the following arbitration agreement:

Arbitration. ANY CLAIM, DISPUTE, OR CONTROVERSY (WHETHER IN CONTRACT, TORT, OR OTHERWISE, WHETHER PREEXISTING, PRESENT OR FUTURE, AND INCLUDING STATUTORY, COMMON LAW, INTENTIONAL TORT AND EQUITABLE CLAIMS CAPABLE IN LAW OF BEING SUBMITTED TO BINDING ARBITRATION) AGAINST DELL, its agents, employees, officers, directors, successors, assigns or affiliates (collectively for purposes of this paragraph, “Dell”) arising from or relating to this Agreement, its interpretation, or the breach, termination or validity thereof, the relationships between the parties, whether pre‑existing, present or future, (including, to the full extent permitted by applicable law, relationships with third parties who are not signatories to this Agreement), Dell’s advertising, or any related purchase SHALL BE RESOLVED EXCLUSIVELY AND FINALLY BY BINDING ARBITRATION ADMINISTERED BY THE NATIONAL ARBITRATION FORUM (“NAF”) under its Code of Procedure and any specific procedures for the resolution of small claims and/or consumer disputes then in effect (available via the Internet at http://www.arb‑forum.com/, or via telephone at 1‑800‑474‑2371). The arbitration will be limited solely to the dispute or controversy between Customer and Dell. Any award of the arbitrator(s) shall be final and binding on each of the parties, and may be entered as a judgment in any court of competent jurisdiction. Information may be obtained and claims may be filed with the NAF at P.O. Box 50191, Minneapolis, MN 55405, or by e‑mail at file@arb‑forum.com, or by online filing at http://www.arb‑forum.com/.

(Appellant’s Record, vol. III, at p. 384, Dell’s Online Policies, Terms and Conditions of Sale (Canada), clause 13C)

Dell argued that on account of this clause, Dumoulin’s dispute had to be submitted to compulsory arbitration.

III. Judicial History

128 The Superior Court dismissed the declinatory exception (J.E. 2004-457, [2004] Q.J. No. 155 (QL)). Langlois J. found that the arbitration agreement provided for an arbitration administered by the National Arbitration Forum (“NAF”), a U.S. based institute governed by American law, and that the agreement purported to derogate from art. 3149 of the Civil Code of Québec, S.Q. 1991, c. 64 (“C.C.Q.”), which provides that the waiver of the jurisdiction of Quebec authorities cannot be set up against a consumer. In reaching this decision, Langlois J. followed an earlier decision of the Court of Appeal in Dominion Bridge Corp. v. Knai, 1997 10221 (QC CA), [1998] R.J.Q. 321, where it was held that an agreement to arbitrate an employment dispute in a foreign jurisdiction could not be set up against the worker under art. 3149 C.C.Q.

129 The Quebec Court of Appeal dismissed the appeal, but on different grounds ([2005] R.J.Q. 1448, 2005 QCCA 570). Writing for a unanimous bench, Lemelin J. (ad hoc) overturned Langlois J. on the basis that, pursuant to Rule 32A of the National Arbitration Forum Code of Procedure (“NAF Code”), the seat of the arbitration could have been located in Quebec and that the factual situation was on that basis distinguishable from the one in Dominion Bridge. However, Lemelin J. did conclude that the arbitration agreement was null on another basis. Having found that the “Terms and Conditions of Sale” in which the agreement was included was itself an external clause pursuant to art. 1435 C.C.Q., she further found that the arbitration agreement and its rules of procedure were not expressly brought to the attention of Dumoulin and that Dell had not established that the consumer had otherwise gained knowledge of it. She thus concluded that the arbitration agreement was null and that the Superior Court had not lost its jurisdiction over the class action proceedings.

IV. Analysis

A. Introduction

130 In this case, we are dealing with an arbitration clause inserted into a consumer contract of adhesion. The primary question raised by this appeal can be stated in the following terms: did the courts below err in law by refusing to refer the parties to arbitration? Before analysing this question, however, it is helpful to first discuss the nature of exclusive contractual arbitration clauses, the history of their recognition in Quebec law, and the principles that inform the interpretation of the rules relating to arbitration.

(1) The Nature of Exclusive Contractual Arbitration Clauses: a Jurisdiction Clause

131 There are two types of contractual arbitration clauses. A complete undertaking to arbitrate, or an “exclusive arbitration clause”, is that by which the parties undertake in advance to submit to arbitration any dispute which may arise regarding their contract, and which specifies that the award made will be final and binding on the parties. This may be contrasted with an arbitration clause that is purely optional (see Zodiak International Productions Inc. v. Polish People’s Republic, 1983 24 (SCC), [1983] 1 S.C.R. 529, at p. 533).

132 Exclusive arbitration clauses operate to create a “private jurisdiction” that implicates the loss of jurisdiction of state-appointed forums for dispute resolution, such as ordinary courts and administrative tribunals, rendering contractual arbitration both different and exclusive of the later entities (see J. E. C. Brierley, “Arbitration Agreements Articles 2638-2643”, in Reform of the Civil Code (1993), vol. 3B, at pp. 1-3 and 10). Contractual arbitration has also been described as creating a “private justice system” for the parties: [translation] “From a theoretical standpoint, arbitration is a private justice system that ordinarily arises out of an agreement. Thus, it has a contractual source and an adjudicative function” (see S. Thuilleaux in L’arbitrage commercial au Québec: Droit interne — Droit international privé (1991), at p. 5 (footnotes omitted)).

133 What makes contractual arbitration a “private jurisdiction” or “private justice system” is the degree of freedom the parties have in choosing the manner in which their dispute will be resolved:

Arbitration is therefore the settling of disputes between parties who agree not to go before the courts, but to accept as final the decision of experts of their choice, in a place of their choice, usually subject to laws agreed upon in advance and usually under rules which avoid much of the formality, niceties, proof and procedure required by the courts.

(W. Tetley, International Conflict of Laws: Common, Civil and Maritime (1994), at p. 390)

Parties to contractual arbitration are free to choose the laws governing their agreement to arbitrate, the law of the arbitral proceedings, the law of the subject matter under dispute, as well as the rules of conflict applicable to all of the above. In addition, the above four laws need not be the same and may differ from the law of the place of arbitration. Thus, contractual arbitration proceedings can be seen to be delocalized from the jurisdiction where the arbitration is held (see Tetley, at pp. 391-92).

134 One of the major differences between courts and arbitration is that contractual arbitrators are not representatives of the state, but, rather, are privately appointed. On account of this, whether an arbitration is situated in Quebec or not, in order for an arbitral award to be legally enforceable, the laws of Quebec require the decision to first be recognized by Quebec courts. There is no difference here with how judgments from foreign courts must first be recognized before having force of law in the province. This is noted by R. Tremblay in “La nature du différend et la fonction de l’arbitre consensuel” (1988), 91 R. du N. 246, at p. 252:

[translation] However, care must be taken not to confuse the judicial function with the arbitration function. Judges derive their jurisdiction from a state’s foundational institutions. Arbitrators, on the other hand, derive their jurisdiction from the mutual agreement of the parties. The difference is an important one. An arbitrator is chosen and appointed by the parties and is not a representative of the state. Arbitrators may rule on disputes, but their decisions are not enforceable unless they are homologated; unlike a judgment, an arbitrator’s decision is not enforceable on its own.

135 Exclusive arbitration and forum selection clauses operate very similarly. The effect of both is to derogate from the jurisdiction of ordinary courts, who would otherwise have jurisdiction to hear the matter. Many authors of conflict of laws’ textbooks simply refer to these clauses, without distinguishing between them, as “jurisdiction clauses”: see for example J. G. Collier, Conflict of Laws (3rd ed. 2001), at p. 96. In the common law provinces, courts will stay their jurisdiction in the presence of either a valid forum selection or arbitration clause. The power to do so stems from the courts’ inherent jurisdiction; however, different statutes provide for certain factors that should be taken into account in determining whether to grant the stay depending on whether the court is faced with a forum selection or a domestic or international arbitration clause. Quebec has also tended to treat exclusive arbitration and forum selection clauses analogously, the history of which we will now turn to.

(2) Recognition of Jurisdiction Clauses in Quebec Law

136 Prior to the coming into force of the C.C.Q., the rules on jurisdiction of Quebec courts were not codified. Quebec courts relied on art. 27 of the Civil Code of Lower Canada (“C.C.L.C.”) and art. 68 of the Quebec Code of Civil Procedure, R.S.Q., c. C-25 (“C.C.P.”), to delineate their jurisdiction in cases where it was challenged: see Masson v. Thompson, 1994 3781 (QC CS), [1994] R.J.Q. 1032 (Sup. Ct.). Article 27 C.C.L.C. provided that aliens although not resident in Lower Canada could be sued in Quebec courts “for the fulfilment of obligations contracted by them in foreign countries”. Article 68 C.C.P., which is still in force today, provides the domestic rules for determining in which judicial district of Quebec a personal action can be started. Relying on the general principles set out in this section, and art. 27 C.C.L.C., Quebec courts have delineated a body of jurisprudential rules deciding when Quebec courts have jurisdiction to hear an action.

137 Prior to its amendment in 1992, the opening phrase of art. 68 C.C.P. stated: “Subject to the provisions of articles 70, 71, 74 and 75, and notwithstanding any agreement to the contrary, a purely personal action may be instituted . . .”. This was interpreted by Quebec courts to be a prohibition against intentional derogation through contract from the jurisdiction of Quebec courts through forum selection and arbitration clauses: see S. Thuilleaux and D. M. Proctor, “L’application des conventions d’arbitrage au Canada: une difficile coexistence entre les compétences judiciaire et arbitrale” (1992), 37 McGill L.J. 470, at pp. 477‑78.

138 Then came the 1983 decision of this Court in Zodiak International Productions, where a party to a contract submitted to arbitration in Warsaw, but having lost, commenced a fresh action in the Quebec Superior Court against his co‑contractor. Noting the tension between art. 68 C.C.P. and contractual arbitration clauses, the Court held that the Quebec legislator had nonetheless clearly intended to permit such clauses by introducing art. 951 C.C.P., which states: “An undertaking to arbitrate must be set out in writing.” Faced with this provision, Chouinard J., for the Court, cited with approval the words of Pratte J. in Syndicat de Normandin Lumber Ltd. v. The “Angelic Power”, [1971] F.C. 263 (T.D.), who stated: “. . . I do not see how the Quebec legislator could have regulated the form and effect of an agreement whose validity he does not admit” (p. 539). Shortly after this decision, in 1986, the Quebec legislator introduced amendments to the C.C.L.C. and the C.C.P. providing detailed rules on the validity, form and procedure governing contractual arbitration. (Today, these rules can be found in the specific chapter on arbitration in the Book of Obligations of the C.C.Q., these being arts. 2638 to 2643, and in Book VII (on Arbitrations) of the C.C.P.)

139 Following these changes, an inconsistency could be noted in the Quebec legislator’s approach to forum selection clauses and arbitration clauses. By operation of art. 68 C.C.P., the former were still held to be invalid: see Thuilleaux and Proctor, at pp. 477‑78. It would seem that this difference was accidental rather than intentional. Draft bills from as early as 1977 assimilated forum selection and arbitration clauses. For example, art. 67 of Book Nine of the Draft Civil Code of 1977 provided the following situations where Quebec authorities could refuse to recognize foreign decisions:

67 On application by the defendant, the jurisdiction of the court of origin is not recognized by the courts of Québec when:

1. the law of Québec, either because of the subject matter or by virtue of an agreement between the parties, gives exclusive jurisdiction to its courts to hear the claim which gave rise to the foreign decision;

2. the law of Québec, either because of the subject matter or by virtue of an agreement between the parties, recognizes the exclusive jurisdiction of another court; or

3. the law of Québec recognizes an agreement by which exclusive jurisdiction is conferred upon arbitrators.

This oversight was corrected, however, through the introduction of art. 3148 in Book Ten of the new C.C.Q. The second paragraph of this provision clarifies the intention of the Quebec legislator to assimilate the effect of forum selection and arbitration clauses. It provides that “a Québec authority has no jurisdiction where the parties, by agreement, have chosen to submit all existing or future disputes between themselves relating to a specific legal relationship to a foreign authority or to an arbitrator . . .”. Simultaneously to this provision being passed, the opening phrase of art. 68 C.C.P. was amended to remove the prohibition on contractual derogation from the jurisdiction of Quebec courts and to direct matters concerning the international jurisdiction of Quebec authorities to Book Ten of the C.C.Q. It now reads: “Subject to the provisions of this Chapter and the provisions of Book Ten of the Civil Code of Québec . . .”.

140 Perhaps owing more to inadvertence than intention, some minor differences remain in the treatment of these two types of jurisdiction clauses in Quebec law. For example, there is no parallel provision to art. 940.1 C.C.P. for forum selection clauses, as there is for arbitration clauses, which permits parties to contest the validity of such clauses. This provision was introduced in the 1986 amendments to the C.C.P. and it provides that Quebec courts shall refer the parties to arbitration unless the case has been inscribed on the roll or it finds the agreement null, of which more will be said further below. Article 3148, para. 2 alone does not provide for challenging the validity of jurisdiction clauses. This has led to some criticism of the current set up of the rules on jurisdiction in the doctrine. For example, G. Saumier, in “Les objections à la compétence internationale des tribunaux québécois: nature et procédure” (1998), 58 R. du B. 145, criticizes the discrepancies between the rules applicable to forum selection clauses and arbitration clauses: [translation] “there is no justification, where the parties have agreed in advance on the appropriate forum for settling their disputes, for making a distinction between an arbitral tribunal and a state court” (p. 161). Saumier advocates uniform rules between the two, and in this respect, urges an overhaul of the rules on international competence of Quebec authorities in one comprehensive set of rules:

[translation] The fundamental reform of the rules of private international law brought about by the adoption of the Civil Code of Québec did not include a revision of the procedural rules applicable in matters of international jurisdiction. Thus, a party wanting to object to the international jurisdiction of a Quebec court must deal with a multitude of statutory schemes relating to time limits and waiver and with precedents that are not easily reconciled. . . . It is therefore imperative to adopt rules tailored to the international context that reflect the interests both of the parties and of the state judicial system and the arbitration