Arbitration clauses are frequently included in a wide variety of standard form contracts. Commonly, standard form arbitration clauses contain broad language requiring contracting parties to submit all future disputes arising out of or in connection to an agreement to arbitration. Such disputes in the context of consumer or commercial transactions, employment relationships, or franchise agreements could conceivably give rise to common issues that could result in class proceedings. However, the inclusion of a standard arbitration clause may foreclose the ability to litigate a class claim and in turn, may lead to an automatic stay of any potential class action in court. Questions as to whether an arbitration clause has the effect of precluding class litigation or, alternatively, whether a counterparty can commence an arbitration on behalf of other counterparties who have entered into similar agreements containing identical arbitration clauses are the subjects of differing legal and policy discussions in North America. Although class arbitration has been used in the United States as a method for addressing common issues that might otherwise be adjudicated in class proceedings, it is a novel concept in Canada. This paper will analyze the business and legal case for class arbitration in Canada based on the current Canadian jurisprudence on the interplay between arbitration clauses and class actions, and will suggest that in some circumstances class arbitration may be an alternative that is more desirable than class litigation.
Leon et al. (Wed,) studied this question.