Executive Summary: Key Legal and Evidentiary Issues

• Bombardier sued Alstom Rail Sweden for a tax loss price adjustment under a 2017 share purchase agreement.

• Alstom sought a stay of the court proceedings, citing an arbitration clause in a 2020 global acquisition agreement.

• The court had to decide whether Alstom Sweden was bound by the arbitration clause despite not being a named party.

• A key issue was whether the 2017 agreement's obligations were incorporated into the 2020 agreement.

• The court applied the Peace River Hydro framework, emphasizing arbitration’s primacy under the UNCITRAL Model Law.

• The action was stayed to allow an arbitral tribunal to decide jurisdiction over the tax loss claim.

Background and transaction history

Bombardier Inc. (BI) brought a claim in Ontario against Alstom Rail Sweden AB (Alstom Sweden) for $24.5 million, arising from a post-closing tax loss adjustment provision in a 2017 share purchase agreement (BAHS SPA). At that time, Alstom Sweden—then Bombardier Transportation Sweden AB—was part of the Bombardier corporate group. In 2020, Bombardier sold its global rail business, including Alstom Sweden, to Alstom Holdings through a separate agreement known as the Blizzard SPA. After a series of favorable Swedish tax rulings in 2021 and 2023, Bombardier issued a price adjustment notice. When Alstom Sweden declined to pay, Bombardier sued in Ontario court.

The stay motion and competing agreements

Alstom Sweden moved to stay the Ontario action under Ontario’s International Commercial Arbitration Act, citing an arbitration clause in the Blizzard SPA. It argued that Bombardier’s tax adjustment claim was now governed by the Blizzard SPA and must be referred to arbitration before the International Chamber of Commerce (ICC). Bombardier responded that Alstom Sweden was not a party to the Blizzard SPA and that the earlier 2017 BAHS SPA specifically designated Ontario courts as having exclusive jurisdiction over disputes. Bombardier argued that the arbitration clause was “inoperative” for this claim and that the action should proceed in court.

Court’s application of the Peace River framework

The court applied the Supreme Court’s decision in Peace River Hydro Partners v. Petrowest Corp., which outlines a two-stage analysis: first, determining if the technical prerequisites for a stay are met, and second, considering whether a statutory exception applies. The judge held that Alstom Sweden had made an “arguable case” that the tax loss adjustment was captured under the Blizzard SPA. Even though Alstom Sweden was not a named party, it could be considered an “Affiliate” under the agreement, and the arbitration clause could apply. The judge concluded that section 17.1 of the Blizzard SPA preserved obligations related to pre-closing tax matters and potentially absorbed the prior 2017 agreement.

Arguments about jurisdiction and arbitrability

Bombardier’s attempt to rely on the “inoperative” exception under the Model Law failed. The court found that the issues raised were not clearly outside the arbitration clause’s reach and therefore must be resolved by the arbitral tribunal in accordance with the “competence-competence” principle. The court noted that if the arbitral tribunal later finds it lacks jurisdiction, the Ontario action can be revived. But at this stage, the panel must be given the first opportunity to rule.

Outcome and next steps

Justice Akazaki granted Alstom Sweden’s motion and stayed the Ontario proceedings. He held that the arbitral tribunal was best positioned to assess whether the tax loss adjustment falls under its jurisdiction. The court did not decide whether a separate arbitration must be started or whether the issue could be folded into an existing ICC arbitration. The court also sealed the file temporarily to protect confidential commercial terms and allowed the parties to address costs later if necessary.