Alberta – creature of statute, non-party can initiate arbitration where same legislation imposes its obligations and arbitration

In TransAlta Generation Partnership v. Balancing Pool, 2019 ABCA 318, the Alberta Court of Appeal upheld dismissal of a challenge to arbitration initiated by an entity which was created by legislation but was not party to contracts stemming from the legislation.  The Court determined that the statutory scheme which created the non-party did not limit its right to dispute its significant financial obligations to compensate the contracting parties in certain disputes.  The Court’s handling of the implied exclusion rule lends itself to other legislative schemes created in the public interest.

The court litigation involved an objection made by TransAlta Generation Partnership (“TransAlta”) against arbitration initiated by the Balancing Pool (“BP”) under a power purchase agreement (“PPA”) to which only TransAlta and Enmax Energy Corporation (“Enmax”) were parties.  TransAlta’s objection was dismissed in TransAlta Generation Partnership v. Balancing Pool, 2018 ABQB 932 and it appealed.  Despite the style of cause identifying BP as the lead party in the appeal decision, TransAlta stood as appellant with BP as respondent.

For more background on status of BP as a creature of statute and the nature of the PPA between TransAlta and Enmax, see the earlier Arbitration Matters note: “Alberta – third party to statutory contract can initiate arbitration disputing fact triggering its obligations”.

Paras 11-15 of the Court of Appeal’s reasons summarize the reasons of the applications judge. The Court of Appeal identified three (3) grounds of appeal raised by TransAlta and, in concise reasons, dismissed each of them. The Court of Appeal recorded the parties’ agreement that the appeal raised issues of statutory interpretation and therefore subject to a standard of review of correctness.

(i) application judge’s alleged error to distinguish between BP’s “backstop” and “commercial” roles.

The Court of Appeal held that “[w]e see no merit in this argument.”  While the distinction might be “conceptually helpful”, the Court held that it did not resolve BP’s status as a party to dispute resolution under the PPA.  The Court relied instead on a reading of BP’s duties under the Electric Utilities Act, RSA 2000, c E-5 (erroneously linked to a misidentified “s 85(1)”) to participate in dispute resolution if, in the opinion of BP its is necessary or advisable to do so to protects its interests and the value of its assets.

[20] We are of the view that the chambers judge correctly interpreted the relevant provisions of the PPA in light of the broader statutory scheme, and in a manner consistent with the modern approach to statutory interpretation (Rizzo & Rizzo Shoes Ltd (Re), 1998 CanLII 837 (SCC), [1998] 1 SCR 27 at para 21, 36 OR (3d) 418, quoting EA Driedger, Construction of Statutes, 2nd ed (Toronto: Butterworths, 1983) at 87). He undertook a detailed analysis of the relevant legislation and correctly concluded that when the parties to the PPA are not in dispute about whether a force majeure has occurred, the Balancing Pool has the right to access arbitration under the PPA “as if it were a party to the [PPA].”

(ii) the Court of Appeal’s decision in TransAlta Generation Partnership v Balancing Pool, 2014 ABCA 294 disposed of the issue

TransAlta argued that the 2014 decision should be read as holding that in all PPA disputes BP has only a right to participate in an existing arbitration between an owner and a buy but no independent right to initiate arbitration. The Court of Appeal disagreed that its earlier decision had the scope asserted by TransAlta.   The 2014 decision did not apply to the “unique circumstances” in which the buyer did not dispute the owner’s force majeure claim but BP did.

(iii) express power to initiate certain disputes eliminates right to initiate any others

TransAlta relied on an implied exclusion rule, stating that because the Regulations granted BP express rights to initiate disputes in some matters, in doing so, it must mean that all other matters were thereby excluded.  TransAlta had reliable grounds for raising the rule, sourcing its explanation to Balancing Pool v TransAlta Corporation, 2013 ABCA 409, para. 24.

[24] The statutory instruments that govern electricity markets in Alberta include the EUA, the Alberta Utilities Commission Act, SA 2007, c A-37.2 (AUC Act), the Power Purchase Arrangements Regulation, AR 167/2003 (PPA Regulation), and the Regulation at issue here. The Balancing Pool is not the only regulatory player created by the statutory scheme. The scheme also creates the Alberta Utilities Commission (AUC) and the Market System Administrator (MSA), both established under the AUC Act. A review of the powers granted under these various instruments is instructive. Particularly helpful is the fact that the legislature has seen fit to include express grants of authority to access the premises of market participants under some of these statutory instruments; authority that is noticeably absent from the Regulation. The legislative choice to expressly set out such authority in one part of a statutory scheme and not in another gives rise to the implied exclusion rule of statutory construction: to express one thing is to exclude the other: see Ruth Sullivan, Sullivan on the Construction of Statutes, 5th ed (LexisNexis Canada Inc., 2008) at 243. This rule is based on the presumption that as much as possible, drafters strive for uniform and consistent expression and patterns in legislation are assumed to be intended rather than inadvertent.

The Court of Appeal disagreed.  It endorsed the chambers judge’s application of the implied exclusion rule to the legislation in question, reproducing the judge’s reasons in paras 48-49 of the initial decision at para. 27 of its own reasons.  The chambers judge determined that the express mention in section 2(2) of a right to initiate arbitration was limited to the “narrow factual scenario” mentioned in that section and did not serve to mean that BP’s rights were thereby eliminated in unrelated factual scenarios.

First, the implied exclusion rule is not conclusive of legislative intent: Ruth Sullivan, Sullivan on the Construction of Statutes, 6th ed (Markham: LexisNexis, 2014) at para 8.55. Second, again, subclause 2(2)(b) of the Balancing Pool Regulation accords the right expressly (and “notwithstanding the provisions of an arrangement” including, therefore, Articles 14 and 15), thereby displacing any operation of the implied exclusion rule. Third, the PPA cannot be construed as an exhaustive code of the Balancing Pool’s dispute rights as if it were a contract. The PPA was adopted within the broader framework of an electricity markets statutory scheme that empowered the enactment of regulations setting out the rights and duties of the Balancing Pool as against the parties to the PPAs.

For those reasons, the Court dismissed the appeal.

urbitral note – Because of the legislative ambiguity identified in first instance, the Alberta legislature amended the Balancing Pool Regulation, Alta Reg 158/2003 to clarify/reiterate BP’s standing to initiate arbitration to dispute a force majeure claim under such PPAs. 

Though the amendment resolved matters going forward for parties involved in PPAs in Alberta, the reasoning applied by the Court of Appeal is still applicable to other statutory schemes in which legislation creates an entity similar to BP but does not also make the entity party to the related contracts containing arbitration clauses.  The analysis used to include BP as a party to the arbitration – including the differing roles legislation assigns to such entities – could well lend itself to other statutory schemes.