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Look to the Arbitration Agreement: Alberta Court of King’s Bench Stays (Most of) a Third Party Claim

Why this Case Matters

In Orica Canada Inc v. ARVOS GmbH, 2024 ABKB 97, the Alberta Court of King’s Bench stayed a Third Party Claim, in part, referring the claim to arbitration in Germany. The court considered the competence-competence principle and German law, which governed the contract, when considering the stay application.

This case serves as a reminder to parties that only claims governed by the arbitration agreement within a broader proceeding will be referred to arbitration. Causes of action that fall outside the scope of the dispute resolution mechanism will be decided by the court.


Arsopi, Industries Metalurgicas arlindo S. Pinho, S.A. and Arsopi-Industrial Metalurgicas (“Arsopi”), applied to the court to stay the Third Party Claim issued against them by the defendant, ARVOS GMBH (“ARVOS”).

ARVOS engaged Arsopi to fabricate equipment pursuant to a purchase order as part of its contract with Orica Australia Pty Ltd. The governing law of the contract between ARVOS and Arsopi was German law. It also included a dispute resolution provision setting out that all disputes arising out of or in connection with the contract shall be settled by arbitration, placed in Frankfurt am Main, Germany.

The equipment was delivered and sold to Orica Canada and ultimately installed in Alberta.[1]

The dispute arose when Orica Canada and Orica International Pte Ltd. (“Orica”) sued ARVOS in relation to the fitness of the equipment. Orica claimed ARVOS’ negligently designed or manufactured the equipment and negligently misrepresented its capabilities and experience, causing Orica’s loss and damage.

Arvos then commenced a Third Party Claim against Arsopi.The court distilled the Third Party Claim into three categories:

  • A tort claim between ARVOS and Arospi;
  • A breach of contract claim between ARVOS and Arsopi; and
  • A Tort-Feasors Act indemnity claim, as ARVOS asserted that Arsopi owed Orica a duty of care that was breached.[2]

Arsopi argued that ARVOS’ Third Party Claim was subject to the dispute resolution clause in their contract. As such, the Third Party Claim should be stayed and the matter referred to arbitration in Germany.  

The Court’s Reasons

The court was tasked with addressing two main issues when determining whether to stay the Third Party Claim:

  1. Should the court apply the competence-competence principle, directing ARVOS to commence arbitral proceedings in Germany to determine whether the Third Party Claim was subject to arbitration?
  2. Should the Third Party Claim be stayed in whole or in part as per the International Commercial Arbitration Act, RSA 2000, c. I-5 (“ICAA)?

Issue 1: The Competence-Competence Principle

Arospi argued that the proper application of the competence-competence principle required the court to stay the ARVOS Third Party Claim and all matters relating to the scope of the contractual dispute resolution clause to an arbitral panel – relying on Schedule 2, Article 16 of the ICAA.

The court found, however, that deference to arbitration is not absolute where the matter involves pure questions of law, or questions of mixed fact and law requiring only superficial consideration of the evidentiary record.

Relying on Uber Technologies Inc. v. Heller, 2020 SCC 16, the court declined to apply the competence-competence principle and stay the Third Party Claim on the basis that (i) there was no challenge or conflict on the German law evidence, (ii) determining the issues raised by Arsopi would avoid duplication, (iii) there was a genuine challenge to arbitral jurisdiction, and (iv) there would be a “real prospect” that granting the stay may lead the issues before the court to never be resolved by an arbitrator due to the German limitations period.

Issue 2: Staying (most of) the Third Party Claim

The governing law of the contract in issue was German law. The court received evidence from the parties in order to make findings of fact on German law. The court found that the dispute resolution clause was valid, clear and enforceable, and that the clause would be interpreted as being all encompassing with respect to tort and contract law claims between ARVOS and Arsopi. On this basis, the court stayed those claims in favour of arbitration in Germany pursuant to Schedule 2, Article 8, s. 10 of the ICAA.

However, the court held that the Tort-Feasors Act indemnity claim in the Third Party Claim should not be stayed and that it should proceed to trial. The indemnity claim, grounded on an allegation that Arsopi owed Orica a duty of care, could not fall within the scope of the dispute resolution clause as Orica was not a party to that contract. As such, the Tort-Feasors Act claim, being premised on a cause of action with its genesis in Canadian law, should be decided by the Alberta court.[3]

Concluding Thoughts

The decision outlines the court’s approach to staying proceedings post-Uber, and reaffirms in what circumstances it may be appropriate for the court to consider questions of jurisdiction prior to the arbitral tribunal doing so.

In addition, the court decided to stay only those claims that were captured within the scope of the dispute resolution clause. Even where judicial economy may warrant referring an entire dispute to arbitration, if a claim involves a non-party to the agreement or was not intended by the parties to be arbitrated, those claims will likely have to proceed through he courts.




[1] Orica Canada Inc v. ARVOS GmbH, 2024 ABKB 97, at paras. 9-10.

[2] Orica Canada Inc v. ARVOS GmbH, 2024 ABKB 97, at paras. 12.

[3] Orica Canada Inc v. ARVOS GmbH, 2024 ABKB 97, at para. 60, 98.



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