Québec – agreement to arbitrate cannot exclude parties from court’s jurisdiction over breach of public order legislation

In Bois Marsoui GDS Inc. v. Directeur des poursuites criminelles et pénales, 2020 QCCS 1327, Mr. Justice Carl Thibault held that an agreement to arbitrate contained in a contract signed with a government entity/agency did not allow merchants to exclude themselves from application of public order environmental legislation. Thibualt J. held that public order provisions aimed at protecting public well-being would lose their utility if parties could derogate from them by contract. Though not stated, the reasons would also support the conclusion that a government entity/agency lacks sufficient authority to contract out of the court’s jurisdiction to resolve disputes involving penal provisions related to laws of public order.

Bois Marsoui G.D.S. Inc. et Promobois G.D.S. Inc. (“Appellants”) submitted an August 13, 2012 bid in response to a call for tenders issued by the Bureau de mise en marché du Québec des bois (“Bureau”).  Appellants and the Bureau entered into a contract for the purchase of cut wood.

Note: the reasons referred to Regulation respecting standards of forest management for forests in the domain of the State, CQLR c A-18.1, r 7, now abrogated and replaced with Regulation respecting the sustainable development of forests in the domain of the State, CQLR c A-18.1, r 0.01 (“Regulation”).

Appellants were charged with a penal offence for violation of section 86 by cutting trees at a height higher than the 60 cm stipulated in that section:

86 – A holder of a management permit shall comply with the following standards:

(1) trees shall be cut at a height not exceeding 30 cm above the highest ground level, except where snow depth on the ground reaches a height equivalent to a column of water at least 20 cm high; in the latter case, the height of the stumps shall not exceed 60 cm; and

(2) inside a forest management sector, the permit holder shall harvest only trees whose diameter is equal to or greater than that authorized in the management permit”.

Following a hearing in Court of Québec on charges brought by the Directeur des poursuites criminelles et pénales (“DPCP”), Appellants were found guilty and ordered to pay the applicable $5.00 fine for each tree cut.  Based on 31,275 trees, Appellants were fined $156,375.00 as well as ordered to pay the costs of the charge in the amount of $3,963.00.

Appellants appealed to the Superior Court on three (3) grounds, the first of which argued that the agreement to arbitrate in the Contract meant that the Court of Québec had no jurisdiction. 

The DPCP argued that the agreement to arbitrate did not and could not remove jurisdiction of the Court of Québec in penal matters granted under article 3 of the Code of Penal Procedure, CQLR c C-25.1.

Article 3 – 3. The powers and duties conferred upon or assigned to a judge under this Code are exercised by the Court of Québec or a municipal court, within the scope of their respective jurisdictions under law, or by a justice of the peace within the limits provided by law and specified in his deed of appointment”.

Appellants could not, by private contract, remove themselves from the application of a law or regulation which provides for penal infractions.

Thibualt J. agreed with the DPCP.

He held that laws having an environmental character, such as the Sustainable Forest Development Act, CQLR c A-18.1, provide for regulatory infractions whose application are of public order.  Such infractions in general aim to protect the public well-being.

At paras 22-23 of his reasons, Thibualt J. determined that the agreement to arbitrate has no priority over public order penal provisions.

[informal translation] [22] In the circumstances, the parties cannot exclude themselves from the application of the Law which is of public order, despite the terms used in the contract.  In fact, public order provisions having the goal to protect the public well-being would lose their utility if parties could derogate from them by contract.

[informal translation] [23] The arbitration clause does not have the vocation of resolving disputes issuing from penal matters. This clause therefore does not have priority over the penal provisions in the Law and the Regulation.  It is clearly in the public interest to ensure that the standards of forestry intervention concerning the attainment of silviculture be obligatory and applicable to all.  Thus, despite the arbitration clause, the judge in first instance had jurisdiction”.

urbitral note – First, the reasons do not reproduce the terms of the agreement to arbitrate though footnote 4 references the unreported reasons in first instance in Court of Québec which might have reproduced it. See Directeur des poursuites publiques v. Bois Marsoui GDS inc. et Promobois GDS inc., C.Q. Gaspé, (130-61-000313-160), 5 May 2017, Justice Benoît, para. 3.

Whatever its terms, the agreement to arbitrate was insufficient to overcome the public order of the applicable Regulation, even though it was contained in the Contract signed by the Bureau, a government entity/agency.  Without stating as much, it appears that the reasons would also support the conclusion that a government entity/agency lacks sufficient authority to contract out of the Court of Québec’s jurisdiction to resolve disputes involving penal provisions related to laws of public order.