Executive Summary: Key Legal and Evidentiary Issues

• Nihtat Corporation challenged an arbitrator’s jurisdiction under s. 25(1) of the Arbitration Act (NWT).

• The underlying conflict stemmed from disputed share purchase options within a shareholder agreement involving Nihtat Energy Ltd.

• Nihtat argued that overlapping issues in arbitration and litigation should bar the arbitration from proceeding.

• The court upheld the arbitrator’s jurisdiction, interpreting s. 24(1) as non-mandatory and not requiring refusal of jurisdiction.

• Case law from Alberta was distinguished due to differences in statutory language and legislative intent in the NWT.

• The application to set aside the arbitrator’s award was dismissed, affirming arbitration of shareholder agreement disputes.

Facts and outcome of the case

Nihtat Corporation brought an application to set aside a partial arbitral award under section 25(1) of the Arbitration Act (NWT), arguing that the arbitrator lacked jurisdiction due to overlapping issues with a parallel civil court action. The arbitration arose from a dispute concerning share purchase options granted to Grant Sullivan in a shareholder agreement involving Nihtat Energy Ltd. In late 2023 and early 2024, Sullivan attempted to exercise those options, but Nihtat did not complete the transactions. Sullivan then initiated arbitration proceedings as provided for in the shareholder agreement.

While arbitration commenced, Nihtat also initiated a related court action against Sullivan and another party, alleging a range of corporate misconduct. This included claims of unauthorized incorporation of Nihtat Energy Ltd., improper share issuances, unauthorized business transfers, and multiple legal wrongs such as breach of fiduciary duty, conversion, unjust enrichment, and conspiracy. Nihtat asked the arbitrator to terminate the arbitration in favor of resolving all issues in court. When the arbitrator refused and issued a partial award confirming jurisdiction, Nihtat sought to have it set aside.

The central legal issue was whether the arbitrator erred in interpreting section 24(1) of the Arbitration Act, which outlines the grounds upon which an arbitrator may assess their jurisdiction. Nihtat claimed that any overlap between arbitrable and non-arbitrable issues mandated termination of the arbitration under this provision. They relied heavily on Alberta case law interpreting similar provisions in that province’s arbitration legislation.

The court rejected Nihtat’s interpretation and affirmed that section 24(1) of the NWT Act does not impose a mandatory requirement to decline jurisdiction when any listed conditions are met. It found that the provision merely permits, but does not require, the arbitrator to consider those factors. The court also emphasized the modern approach to arbitration law in the Northwest Territories, which aligns with the Uniform Law Conference of Canada’s Model Act and favors respect for arbitration agreements. It distinguished Alberta’s statute and precedent on the grounds that the NWT Act does not include equivalent provisions permitting broader judicial intervention.

The court concluded that none of the jurisdictional bars in section 24(1)(a) to (d) applied and found no legal basis to interfere with the arbitrator’s partial award. The application was dismissed, and the arbitration was permitted to proceed. No damages or costs were awarded in the decision.