This post aims to report the Quebec Court of Appeal judgment on Hydro-Québec c. Terrassement St-Louis inc., 2025 QCCA 900 rendered on July 17, 2025.
Background
Terrassement entered into a contract with Hydro for the environmental rehabilitation of a contaminated site (“the Contract”). The Contract includes an arbitration clause ( the “Arbitration Clause”) requiring any disputes to be resolved exclusively by arbitration before three arbitrators in Montreal, in French, and in accordance with Quebec law. It also includes a venue clause stating that the contract was formed in Montreal.
Terrassement later filed a lawsuit in front of the Superior Court of Québec at Chicoutimi, claiming $253,128. Hydro responded by asking the court to refer the matter to arbitration in Montreal, alternatively, transfer the case to the Superior Court in Montreal, citing both the arbitration and venue clauses.
The Trial Judge refused, finding the Arbitration Clause in this contract of adhesion abusive, especially given the cost and burden it imposed on a small regional company. The Trial Judge ruled that Terrassement could pursue its claim in Chicoutimi.
Hydro appealed this decision (Terrassement St-Louis inc. c. Hydro-Québec, 2024 QCCS 3819).
Question in Dispute
Is the Arbitration Clause enforceable in this contract of adhesion, or is it abusive and thus invalid under article 1437 of the Civil Code of Québec?
Court’s Analysis
1. The Court of Appeal agreed with the Trial Judge that the Contract was a contract of adhesion, meaning Terrassement had no real ability to negotiate key terms like the Arbitration Clause. Hydro did not contest this point on appeal (see paras. 13 to 14 of the Judgment).
2. Hydro argued that the court should have referred the case to arbitration so the arbitrators could decide on their own jurisdiction. The Court of Appeal disagreed, finding that the Trial Judge was entitled to rule on the validity of the clause herself under article 622 C.p.c.
The Trial Judge’s reasoning was upheld: requiring arbitration in Montreal before three arbitrators for a relatively modest claim placed Terrassement at such a disadvantage that it effectively deprives Terrassement’s right to access to justice. This was a reasonable conclusion, particularly in a context where the costs of arbitration might outweigh the potential recovery (see paras. 15 to 18 of the Judgment).
3. The Court of Appeal confirmed the importance of arbitration in Québec but emphasized that its terms must not be a barrier to justice. The Arbitration Clause in dispute failed to account for the amount in dispute and offered no flexibility, such as the option for a single arbitrator or simplified procedures.
In the present file, the Arbitration Clause was written as though it applied to large-scale, complex disputes, with no accommodation for smaller claims. Its default requirement of three arbitrators, lack of a simplified process, and absence of cost-sensitive procedures rendered it excessively one-sided in favor of Hydro. This was especially problematic given Terrassement’s limited resources and regional position.
Even though Terrassement’s claim wasn’t trivial, the burden of arbitration costs remained excessive. The Arbitration Clause failed to provide reasonable alternatives that could have mitigated this burden (see paras. 19 to 26 of the Judgment).
That being said, the Court of Appeal confirms that the file should be transferred to Montreal based on the venue clause of the Contract.
Reflection
- This Judgment conveys a clear message: arbitration clauses must be thoughtfully drafted, especially in contracts of adhesion where one party has little negotiating power. And a well-drafted arbitration clause must balance efficiency with fairness. If it results in denying access to justice for one party—especially the economically weaker one—it risks being struck down as abusive under Quebec law.
- This Judgment reminds me of the Supreme Court of Canada’s reasoning on the enforceability and validity of the arbitration clause of the Uber’s Services Agreement. Curious readers are very welcome to click this link to access my notes on that well-known Supreme Court judgment. (Reminder: The purpose of this article is to provide general legal information. It does not contain a full analysis of the law nor does it constitute a legal advice on the points of law discussed. To minimize the legal risk for your business, you must take specific legal advice from a lawyer on any particular matter which concerns you. Thanks for your attention.)