The Supreme Court of Canada released the judgement on Uber Technologies Inc. v. Heller, 2020 SCC 16 on June 26, 2020. In an 8-1 ruling, the Supreme Court found that the Court has jurisdiction on determining the issue of the arbitrator’s jurisdiction in this case and that the Arbitration Clause between Uber and Heller is invalid. This decision has raised arbitration lawyers’ concerns and discussions these days. The Canadian Journal of Commercial Arbitration and Arbitration Place has organized a Webinar entitled “Uber v. Heller: First Impression” on July 3 at 12PM to discuss on this judgement. Mr. Daniel Urbas has also published a case comment on this judgement (See Supreme Court – courts should not refer jurisdiction challenge to arbitrator if real prospect that challenge might never be resolved)
This article discusses the Supreme Court of Canada’s majority reasoning on whether the Court can decide the challenge of arbitrator’s jurisdiction on the validity of the Arbitration Clause.
Key Facts Related to the Appeal
Since 2012, Uber has been operating in Ontario. It operates a global business in over 600 cities and 77 countries, with a customer base of millions of people and businesses. Customers and drivers can download Ubers’ Apps onto their smartphones. The customers use the UberEats App to place orders for food delivery. The drivers use the Uber Driver App to view and respond to the customers’ requests. The payment of the service is facilitated by Uber’ Apps and thus Uber takes a share of the drivers’ payments.
The drivers must accept the standard form services agreement of around 14 pages in order to log on to the Uber App. To accept this agreement, the driver must click “I agree” twice. Once the driver does so, the Uber App is activated and the services agreement is uploaded to a “Driver Portal”, accessible to the drivers through their online accounts. The parties to the services agreement are the drivers and Uber subsidiaries incorporated in the Netherlands with offices in Amsterdam.
The services agreement between Uber and the drivers contained the following arbitration clause:
“Governing Law; Arbitration. Except as otherwise set forth in this Agreement, this Agreement shall be exclusively governed by and construed in accordance with the laws of The Netherlands, excluding its rules on conflicts of laws. … Any dispute, conflict or controversy howsoever arising out of or broadly in connection with or relating to this Agreement, including those relating to its validity, its construction or its enforceability, shall be first mandatorily submitted to mediation proceedings under the International Chamber of Commerce Mediation Rules (“ICC Mediation Rules”). If such dispute has not been settled within sixty (60) days after a request for mediation has been submitted under such ICC Mediation Rules, such dispute can be referred to and shall be exclusively and finally resolved by arbitration under the Rules of Arbitration of the International Chamber of Commerce (“ICC Arbitration Rules”). … The dispute shall be resolved by one (1) arbitrator appointed in accordance with the ICC Rules. The place of arbitration shall be Amsterdam, The Netherlands….” (emphasis added)
Since February 2016, David Heller has been licensed to use the Uber Driver App to provide food delivery services to people in Toronto. He is 35 years old and has a high school education. He earns approximately $400 to $600 per week based on 40 to 50 hours of work delivering food for UberEats driving his own vehicle.
In 2017, Mr. Heller started the proposed class action against Uber. Mr. Heller’s position is that he is an employee of Uber according to the Employment Standard Act, 2000, SO 2000, c 41 (“ESA”). Mr. Heller’s claim seeks declarations that Uber has violated the provisions of ESAand that the Arbitration Clause of the services agreements entered into between the parties are invalid and unenforceable. The action also claims damages of $400 million.
According to the Arbitration Clause between the parties as well as the ICC Arbitration Rules, the up-front administrative/filing-related costs for a driver to participate in the mediation-arbitration process was USD $14 500. This did not include the costs of travel to Amsterdam, accommodation and retaining counsel to participate in the arbitration.
On January 30, 2018, the Superior Court of Justice for Ontario held that the court did not have the jurisdiction to decide whether the Arbitration Clause was valid and stayed Mr. Heller’s proceeding (Heller v. Uber Technologies Inc., 2018 ONSC 718)
On January 2, 2019, the Court of Appeal for Ontario reversed this order and determined that the Arbitration Clause was unconscionable based on the inequality of bargaining power between the parties and the improvident cost of arbitration (Heller v. Uber Technologies Inc., 2019 ONCA 1)
Applicable Laws and Regulations (non-exhaustive list)
Art. 37 of the ICC Arbitration Rules requires the claimant to pay an advance on costs “in an amount likely to cover the fees and expenses of the arbitrators and the ICC administrative expenses for the claims which have been referred to it by the parties”.
Section 7 (1) of the Ontario Arbitration Act, 1991 (“AA”) requires that in principle, the court shall stay the proceeding if there is an arbitration agreement between the parties.
Section 7 (2) of the Ontario Arbitration Act, 1991(“AA”) stipulates that the court may refuse to stay the proceeding if the arbitration agreement is invalid.
Section 9 of the International Commercial Arbitration Act, 2017 (“ICAA”) stipulates that where a court refers the parties to arbitration, the proceedings of the court are stayed with respect to the matters to which the arbitration relates.
The Supreme Court of Canada’s decisions on Dell Computer Corp. v. Union des consommateurs, 2007 SCC 34 and Seidel v. TELUS Communications Inc., 2011 SCC 15 provide the framework for the jurisdictional challenge on arbitration: Where pure questions of law are in dispute, the court is free to resolve the issue of jurisdiction. Where questions of fact alone are in dispute, the court must “normally” refer the case to arbitration. Where questions of mixed fact and law are in dispute, the court must refer the case to arbitration unless the relevant factual questions require “only superficial consideration of the documentary evidence in the record” (See paras. 84 to 85 of Dell)
Analysis of the Court
Can the Court decide the challenge of arbitral jurisdiction on the validity of the Arbitration Clause between Uber and Heller?
Yes.
First, the parties’ dispute is fundamentally about labour and employment. The applicable legislation is the Ontario Arbitration Act (“AA”) because the employment disputes, in sum, are not covered by the ICAA. (See paras 19 to 29 of Uber v. Heller, 2020 SCC 16).
Second, s. 7(2) of the AA gives a court discretion to refuse to grant a stay if the court determines that the arbitration clause is invalid. The Supreme Court of Canada’s decisions on Dell and Seidel set out two exceptions to arbitral referral (Competence-Competence Principle). The dispute between Uber and Heller fell in one of the exceptions: only superficial review of the documentary evidence is sufficient for the Court to resolve the issue of arbitrator’s jurisdiction. Although neither Dell nor Seidel fully and clearly defined “superficial review”, the Court held that it can decide the challenge of arbitrator’s jurisdiction on the validity of the Arbitration Clause if the Court can draw the legal conclusion from facts that are either evident on the face of the record or undisputed by the parties (See para. 36 of Uber v. Heller, 2020 SCC 16 and para. 23 of Trainor v. Fundstream Inc., 2019 ABQB 800).
Third, it seems to me that the Court held that it can decide the jurisdictional issue of this case by simply reviewing the available documentary evidence in the record, especially the disproportionality between the large amount of upfront fees that Heller should pay for the arbitration and Heller’s modest annual income.
Fourth, furthermore, the Court held that this case raised an issue of access to justice that was not raised on the facts in Dell: if the court does not decide the jurisdictional issue in this case, there is a real prospect that this genuine challenge of arbitral jurisdiction might never be resolved by the arbitration because (a) the arbitration is fundamentally too costly for Heller and thus inaccessible; (b) the Arbitration Clause chose the laws of Netherlands to be the governing law, which circumvents mandatory local policy stipulated in Ontario employment law. In such situations, staying the proceeding in favour of arbitration would be equivalent to denying relief for the claim i.e. access to justice (See paras. 37 to 39 of Uber v. Heller, 2020 SCC 16). The Court also wrote in order to determine whether there is a real prospect that challenge might never be resolved, the Court has to conduct limited assessment of the evidence. This assessment must not devolve into a mini-trial, rather a single affidavit will suffice (See paras. 44 to 45 of Uber v. Heller, 2020 SCC 16).
Conclusion
En raison de l’exigence du paiement de frais importants pour que l’arbitrage puisse être intenté, la Cour suprême du Canada décide qu’il existe une réelle possibilité que, si l’affaire est renvoyée devant un arbitre, la contestation de Heller en ce qui a trait à la validité de la convention d’arbitrage ne soit jamais résolue. La Cour doit donc régler la question de la validité de la convention d’arbitrage. Selon les arrêts Dell et Seidel, la Cour a compétence à l’égard de la différence entre Uber et Heller parce que son litige soulève une question de mixtes de fait et de droit qui requièrent simplement un examen superficiel de la preuve au dossier. La Cour souligne que le tribunal ne devrait pas renvoyer une contestation de la compétence de l’arbitre à ce dernier « s’il existe une réelle possibilité que, s’il le faisait, il ne soit jamais statué sur la contestation ».
(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. ?)