Executive Summary: Key Legal and Evidentiary Issues

• Dispute centers on whether a clause in a commercial contract imposes mandatory arbitration or permits court litigation.

• The applicant argued the arbitration clause required the case to be heard outside Quebec and sought to stay proceedings.

• Superior Court rejected the motion, finding the clause permissive rather than obligatory, and upheld its jurisdiction.

• The clause’s use of discretionary language (“may”) failed to compel arbitration under Quebec civil law standards.

• The alleged damages occurred largely in Quebec, supporting the Superior Court’s jurisdiction under article 3148(3) C.c.Q.

• The Court of Appeal granted leave to appeal and suspended trial proceedings to resolve the jurisdictional question definitively.

Facts of the case

Avalin Group FZE is a company incorporated in Dubai that imports products, including wood flooring, from China. In 2021, it entered into a commercial agreement with Lauzon – Planchers de bois exclusifs inc., a Quebec-based company specializing in the distribution of wood flooring in Quebec and Ontario. Under the contract, Avalin was to supply wood flooring for Lauzon's clients. The contract included a dispute resolution clause providing that parties may resort to mediation or, if unsuccessful, arbitration under the most simplified procedure available in one of several Commonwealth countries. The clause did not state that arbitration was mandatory, using permissive language (“may”).

A dispute arose regarding the performance of the contract, and Lauzon brought proceedings in the Quebec Superior Court. Avalin Group responded by filing a motion to stay the proceedings and refer the matter to arbitration, invoking the clause as well as a declinatory exception contesting Quebec’s jurisdiction.

Procedural history

On January 22, 2025, the Quebec Superior Court (Justice Jonathan Coulombe) denied Avalin’s motion. The judge ruled that the clause was not a “perfect” arbitration agreement since it did not obligate the parties to arbitrate but merely offered it as a possibility. The court also rejected the jurisdictional challenge, holding that significant harm had been sustained in Quebec and that the requirements of article 3148(3) of the Civil Code of Québec were met, thereby affirming its jurisdiction to hear the case.

Avalin sought leave to appeal this interlocutory judgment to the Quebec Court of Appeal under article 31 of the Code of Civil Procedure. It argued that the Superior Court erred in both its interpretation of the arbitration clause and its finding of jurisdiction.

Legal issues on appeal

The central question was whether the arbitration clause in the 2021 contract constituted a binding agreement that ousted the jurisdiction of Quebec’s courts. Relatedly, the appeal concerned whether a stay of proceedings should be granted to allow arbitration to proceed in accordance with the international commercial dispute resolution terms of the agreement. Also at issue was whether the Quebec Superior Court was correct in asserting jurisdiction based on the location of the alleged damages.

Court’s analysis and reasoning

Justice Christine Baudouin of the Court of Appeal granted leave to appeal. While not expressing a definitive view on the trial judge’s interpretation of the arbitration clause, the Court found that the issue was of sufficient importance and ambiguity to warrant appellate review. Specifically, it noted that Quebec jurisprudence has grappled with the legal weight of clauses using discretionary terms like “may,” and that judicial clarity on whether such wording creates a binding obligation is necessary for consistency and procedural economy.

The Court also acknowledged the potential for irreparable harm to Avalin if litigation proceeded in a jurisdiction it contends is not proper, particularly since Avalin has no domicile in Quebec. The Court observed that resolving jurisdictional questions early in the process serves the interest of justice and avoids potentially invalid proceedings.

Disposition and outcome

The Quebec Court of Appeal granted Avalin Group FZE leave to appeal the Superior Court’s decision and ordered that the trial proceedings be suspended until the appeal is resolved. It directed the matter to proceed by written memoranda and imposed a $5,000 security for costs on Avalin, given its foreign status. The outcome of the forthcoming appeal will determine whether the dispute proceeds in Quebec or is referred to arbitration under the terms of the international agreement.