Québec – court outlines and upholds confidentiality of what is “said, written or done during” arbitration – #102

In SNC-Lavalin Inc. v. ArcelorMittal Exploitation minière Canada, 2018 QCCS 3024, Mr. Justice Jean-François Michaud maintained the confidentiality of materials prepared for use in an arbitration limited to two parties and prevented communication of those materials to other parties involved in litigation involving related, overlapping disputes. By maintaining the arbitral parties’ objections based on the confidentiality of arbitration as established by legislation and the arbitral parties’ agreement, Michaud J. held that third parties seeking access to those materials must demonstrate necessity and not merely relevance and convenience of obtaining access. The legislated protection applied only to what is “said, written or done during” arbitration and did not shield access to relevant, admissible documents which existed independent of the arbitration.

Several parties were involved in one or more of three (3) separate, complex commercial dispute resolutions: one (1) arbitration and two (2) Superior Court files.

(i) In the arbitration, ArcelorMittal Exploitation Minière Canada, ArcelorMittal Mines Canada Inc. and ArcelorMittal Canada Inc. (“Arcelor”) claimed against Metso Minerals Canada Inc. (“Metso”) payment of damages allegedly stemming from the design and manufacture of grinding equipment sold to Arcelor for use in one of its iron ore concentrate production lines. The disputes arose over the equipment’s capacity.

(ii) In 500-17-083593-148 (“File 148”), SNC-Lavalin Inc. (“SNC”) sued Arcelor for $12,000,000.00 in unpaid fees and Arcelor counterclaimed for $533,000,000.00 as cost overruns, deficiencies and lost profits (“Counterclaim”). Their litigation related to adding a production line to the same Arcelor production line involving Metso’s equipment. The Counterclaim also included BBA Inc. and Continental Conveyor and Machine Works Ltd. (“Continental”) as defendants. That Counterclaim alleged performance issues with machinery delivered by Metso. Metso was not a party to Arcelor’s Counterclaim due to its arbitration clause contained in its contract with Arcelor.

(iii) In 500-17-093641-168 (“File 168”), Arcelor sued SNC and BBA for $204,340,849.00 stemming from alleged defects in an autogenous grinding mill delivered to the same production line and mine. Arcelor also sued Continental for alleged defects in a conveyor and related equipment, again for the same production line and mine. BBA had earlier obtained the Superior Court’s authorization to sue Metso in warranty in File 168. See the December 1, 2017 note posted to The Lawyers Daily on Metso Minerals Canada Inc. v. BBA Inc., 2017 QCCA 1544. “Quebec Appeal Court offers reminder that arbitration agreements only bind parties”. That appeal decision upheld the decision in ArcelorMittal Exploitation minière Canada v. SNC-Lavalin Inc., 2017 QCCS 574.

Having reviewed the allegations in each of the three disputes, Michaud J. determined that the allegations were virtually identical. He inserted a comparative table at paragraph 5 of his reasons to reflect the broad correspondence of allegations between the three.

In the arbitration, Arcelor and Metso had agreed that the applicable law would be Québec’s and that the arbitral proceeding would be subject to the International Chamber of Commerce’s Arbitration Rules, 2012.  (Those rules have since been updated, effective March 1, 2017).  The parties agreed that their arbitration would be confidential and the ICC arbitral tribunal issued an order which provided as follows (the “Consent Procedural Order”):

This Procedural Order No. 2 (this « Procedural Order ») is entered on the basis of an agreement of the Parties to address the private and confidential nature of the Arbitration Proceedings and to establish a protocol to maintain the confidentiality of documents exchanged by the Parties in the context of the current Arbitration that contain commercially sensitive, confidential information.

1. Confidentiality. Unless disclosure is required by statute or ordinance or court order, the Parties and the arbitrators undertake to preserve the private and confidential nature of this Arbitration, in particular the procedure followed, documents exchanged, evidence produced, and all procedural formalities, including the award.

The foregoing notwithstanding, the Parties and/or the Arbitral Tribunal may disclose, for the specific and sole purpose of assisting counsel or the arbitrators in this Arbitration, such information to any person bound by an obligation of confidentiality, as provided in this clause 1. Before making a disclosure to a third party, the person making the disclosure shall make this clause known to that third party and secure that person’s agreement to abide by the terms of this Procedural Order. The confidentiality mandate contained in this Procedural Order shall not apply (i) to advising the Superior Court in the Province of Quebec, where proceedings involving ArcelorMittal’s Line 7 are pending, that these arbitral proceedings are pending and supplying that Court with copies of the Demand for Arbitration and the Answer to the Demand or (ii) to disclosing such information as may be necessary for a Party to seek recognition, vacation, and/or enforcement of the Award.

During SNC’s examination out-of-court of Arcelor’s representative in the court litigation File 148, SNC sought a copy of the arbitration file with the following four (4) undertakings:

– produce the Statement of Claim, the Statement of Defence, the Answer, the Rebuttal and the Rejoinder filed in the arbitration;

– produce a copy of the witness statements filed in the arbitration regarding the “AG Mill”;

– produce the exhibits filed in support of the claim regarding the “AG Mill”; and,

– produce a copy of all the expert reports filed by the parties in the claim regarding the “AG Mill”.

(The mention of “AG Mill” is drawn from the reasons but no definition appears to identify if “AG Mill” is a party, a location, a component production line of the same mine as that in File 148 and File 168 or another but relevant one of the preceding which raises similar issues.)

For the expert reports, Arcleor was prepared to share them but Metso objected, claiming that they contained elements of proof which Metso had filed solely for the purpose of the arbitration. BBA and Continental supported SNC’s request for the undertakings.

Michaud J. agreed with SNC that there was a distinction between a document’s confidentiality and its privileged nature. He referred to the Court of Appeal in Tate & Lyle North American Sugars v. Somavrac Inc., 2005 QCCA 458 para. 2 which held that confidentiality in and of itself did not shelter a relevant document from communication in a civil matter.

Reflecting Québec’s civilian approach for authoritative reasoning, as opposed to mere authority (‘by authority of reason, not by reason of authority’), Michaud J. cast beyond Québec’s own authorities for added persuasive reasoning. He began by citing Ontario’s Adesa Corp. v. Bob Dickenson Auction Services Ltd., 2004 CanLII 45491 which drew the same distinction.

[56] I am satisfied that there was an expectation of confidentiality in the Arbitration. The arbitration relationship generally benefits greatly from the element of confidentiality. The confidentiality of arbitration proceedings should be fostered to maintain the integrity of the arbitration process. I do not regard confidentiality as essential to the arbitration process. In my view, “sedulously” is perhaps a somewhat strong adverb for these circumstances. In balancing the interests served by confidentiality against the interests served in determining the truth and disposing correctly of the litigation, I do not think the confidentiality of arbitration proceedings should be elevated to the status of a privilege such as solicitor-client or spousal privilege or, on occasion, doctor-patient or spiritual adviser-penitent. I am not persuaded that the confidentiality of the arbitration process, including the need to encourage the truth of the evidence therein, is so important as to outweigh the need in this court for justice if that requires the disclosure. The principle to be protected by such a privilege does not go to the heart of our adversarial system of justice or to Canadian Charter of Rights and Freedoms or other societal values. The recognized privileges are based on the need for frank disclosure of potentially prejudicial information for the purpose of obtaining proper advice or the need to preserve a socially important relationship. Even these privileges are limited in scope and subject to exception where the party entitled to the privilege puts the advice or the contents of the disclosure in issue or where other paramount considerations based on justice prevail.

Michaud J. also pointed to Hassneh Insurance co of Israel v. Mew, [1993] 2 Lloyd’s Rep. 243, page 250 which also affirmed that, in English law, there was no principle which protected documents from discovery by reason of confidentiality alone.

In support of their objections, Arcelor and Metso argued that Québec’s Code of Civil Procedure, CQLR c C-25.01 (“C.C.P.”) intended to make the arbitration process entirely confidential, referring to article 4 C.C.P.:

4. Parties who opt for a private dispute prevention and resolution process and the third person assisting them undertake to preserve the confidentiality of anything said, written or done during the process, subject to any agreement between them on the matter or to any special provisions of the law.

Michaud J. found the argument ‘interesting’ but declined to decide that point as the same article allowed the parties to renounce to the confidentiality. First, he interpreted the parties’ Consent Procedural Order as providing that confidentiality was subject to disclosure by statute or court order. He saw this mention as the parties’ acknowledgement that their confidentiality was not ‘watertight’. Second, Michaud J. noted that the Consent Procedural Order did not identify those circumstances in which a court could override the parties’ confidentiality. Third, he agreed that third parties were not bound by Arcelor’s and Metso’s contractual agreement of confidentiality. Based on these observations, he determined that it was up to him to decide whether to uphold the parties’ confidentiality or to order disclosure sought by the others.

Michaud J. disagreed that Metso had waived confidentiality when it filed the Request for Arbitration (“RFA”) and Respondents’ Answer to Claimants’ Request for Arbitration when Metos opposed the forced intervention of BBA in Metso Minerals Canada Inc. v. BBA Inc., 2017 QCCA 1544.  Given the serious issue raised the forced opposition, Michaud J. held that Metso was ‘forced’ to reveal a part of the arbitration process in order to demonstrate that it was party to an arbitration process. Michaud J. further accepted that issuing the Consent Procedural Order a few months after the filing of the RFA did not did not alter the parties’ stated intent to keep their arbitration confidential. He concluded that the parties had undertaken a confidential process and the court had to take that into consideration.

Michaud J. next turned to Québec’s Minister of Justice’s comments, published as an article-by-article annotated guide to the C.C.P., for article 4 C.C.P. The Minister’s comments for that article mention that confidentiality is an essential element of the arbitration process and that any exceptions to it have to be ‘very limited’. The Minister of Justice commented that it was ‘primordial’ that all be held to preserve the confidentiality.

Parties to a an arbitration had a legitimate expectation that the process be confidential as held by the Ontario Superior Court in Telesat v. Boeing, 2010 ONSC 22, para. 20. The parties’ autonomy to exclude or reduce judicial intervention before and during their arbitration was also supported in the doctrine, referring to an excerpt of then-Prof. Frédéric Bachand, now-Mr. Justice Bachand, text L’intervention du juge canadien avant et durant un arbitrage commercial international, (Cowansville, Éditions Yvon Blais, 2005), no 485, pages 335-36.

Echoing the earlier Ontario Superior Court in Auction Finance Group Ltd. v. Bob Dickenson Auction Service Ltd. [2000] O.J. No. 3384 (Ont. C.S.), Michaud J. noted that relevance is insufficient to override confidentiality. The information has to also be necessary.

8 The second ground advanced by counsel for Dickenson parties is that the material sought is relevant to the argument that will be made. I was not referred to any authority that supports the proposition that anything that might be relevant to an argument on an application should be ordered to be produced. Even if conceivably relevant, I conclude that the documentation sought is not necessary to enable the Dickerson parties to make a full and complete argument.

Michaud J. held that breaching the confidentiality required more than just convenience or an economy of time and expense and cited Brian Casey who articulated the key question in his Arbitration Law of Canada : Practice and Procedure, 2e éd., New-York, JurisNet LLC, 2011, at page 223:

The determination as to whether or not to order the production of documents from a previous arbitration turns on the question as to whether or not the parties seeking production will be under a curial disadvantage if the documents are not produced. The question to be asked is whether justice can be done without the necessity of ordering the production of documents that are otherwise confidential.

Michaud J.’s review of the case law and doctrine led him to frame his approach as follows: the Québec legislator had established in principle the confidentiality of arbitration by adopting article 4 C.C.P. subject to the parties’ agreement to choose otherwise. The courts must there respect the confidentiality of arbitration unless the information sought is necessary to dispose of the matter and avoid a denial of justice. If the information must be communicated, an order preventing it from becoming public can issue.

Applying that approach to the facts before him, Michaud J. held that SNC had not provided grounds sufficient to override the confidentiality of the process expressly adopted by the parties to the arbitration.

SNC was not deprived of an opportunity to access the information it sought. The provisions of the C.C.P. enabled SNC to obtain communication of documents and examine representatives of the parties to the arbitration.

The evidence being exchanged in the arbitration was contemporaneous to that available to SNC in the court litigation. Michaud J. distinguished the situation before him from that in Adesa Corp. v. Bob Dickenson Auction Service Ltd. In the latter, the testimony sought from the arbitration was taken in 1998, soon after the facts in dispute. Preserved in sworn stenographer’s notes, that testimony promised a higher probative value than the potential for oral testimony taken at a trial scheduled only for 2007.

The arbitration materials would not facilitate or permit a more proportional management of the dispute. SNC did not renounce to examining the representatives of the arbitration parties if SNC obtained the sworn statements. While Michaud J. understood why SNC would not renounce to the examinations, he also concluded that ordering the communication of the statements offered no procedural interest. The only advantage to communicating the statements was a procedural one for SNC, allowing it to have the testimony of the others’ representatives before examining them.

Michaud J. held that only Arcelor and Metso as parties to the arbitration would be adversely affected by not ordering the communication of the materials sought. Those two parties would have to incur twice the work by being involved in two forms of dispute resolution.

Michaud J. noted that the search for truth was not affected and the court would trivialize both the principle of confidentiality and the parties’ agreement if it granted SNC’s request in the circumstances. He remarked that just because the information exists does not mean others can access it.

In closing, Michaud J. held that SNC could not know which documents were filed in the arbitration or obtain a copy.  He observed that upholding Arcelor’s and Metso’s objections did not block access to relevant, admissible documents which existed independent of the arbitration.  Article 4 C.C.P. addressed expressly what was “anything said, written or done during the process

Note: see the Ontario Superior Court’s contemporaneous handling of Adesa Corp. v. Bob Dickenson Auction Services Ltd., 2004 CanLII 45491 in its decision on a motion for production of arbitration materials in ABCO One Corporation v. Pomerleau Inc., 2018 ONSC 4480 as well as the ArbitrationMatters note “Ontario court awards costs for late, ‘cavalier’, speculative motion for disclosure of arbitration documents”.