Arbitration clauses appear in commercial contracts with remarkable frequency, often buried in standard terms that business owners sign without fully appreciating their consequences. These provisions fundamentally alter how disputes will be resolved, removing them from the public court system and placing them instead before private decision-makers whose rulings carry the force of law. For Canadian business owners, understanding how arbitration clauses function, when they can be enforced, and how to approach them strategically represents essential knowledge for managing legal risk in commercial relationships.
The foundation of arbitration in Canada rests on both federal and provincial legislation that gives effect to agreements between parties to submit disputes to binding private resolution. At the federal level, the Commercial Arbitration Act governs arbitrations involving federal Crown corporations and matters within federal jurisdiction, while the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, as implemented through federal legislation, addresses international commercial arbitration. Each province has enacted its own arbitration legislation to govern domestic commercial disputes. British Columbia operates under the Arbitration Act, as does Alberta with its own statute of the same name. Ontario's Arbitration Act, 1991 establishes the framework for that province, while Saskatchewan's Arbitration Act, 1992 serves a similar function. Quebec's approach differs substantially, as the province's civil law tradition means that arbitration is governed by the Civil Code of Quebec alongside the Code of Civil Procedure, which together establish rules that align with civilian legal principles while still permitting binding arbitration. As of the date of authorship, these statutes share common features while diverging in important particulars that affect how arbitration clauses operate in different parts of the country.