Executive Summary: Key Legal and Evidentiary Issues

• Breach of contract action arose from Wärtsilä's overhaul of the fishing vessel Aqviq's engine, with OCI alleging defective parts and negligent workmanship.

• The contract contained a mandatory arbitration clause requiring disputes be submitted to the International Court of Arbitration of the ICC in Paris, France.

• Central legal question was whether the International Commercial Arbitration Act (ICAA) or the Arbitration Act (AA) governed the dispute, determining the court's discretion to refuse a stay.

• OCI argued the AA applied, invoking the proportionality principle and the "strong cause" test to resist arbitration on grounds of cost and inconvenience.

• Wärtsilä relied on the Model Law (Article 8(1)) and the Convention (Article II(3)), both incorporated through the ICAA, which mandate referral to arbitration absent a finding the agreement is null, void, inoperative, or incapable of being performed.

• Uber Technologies Inc. v. Heller was distinguished as involving an employment dispute and unconscionability, neither of which was at issue here.

Background and the engine overhaul dispute

55104 Newfoundland and Labrador Inc. owns the fishing vessel Aqviq, which is operated by a partnership called Ocean Choice International (OCI). In July 2020, OCI entered into an agreement with Wärtsilä Canada Incorporated for the overhaul of the vessel's main engine. Wärtsilä warrantied the engine overhaul for six months. The overhaul was completed on 24 September 2020, and the Aqviq was returned to OCI. The vessel was employed in fishing operations until January 2021, when it began having engine problems. In March 2021, Wärtsilä denied coverage under the warranty on the basis that the engine was operated in an overload condition. OCI maintains that the engine failure was caused by defective parts supplied by Wärtsilä and negligent workmanship. The vessel was repaired at OCI's expense between 23 March 2021 and 13 April 2021, and on 18 October 2021, OCI filed a statement of claim in the Supreme Court of Newfoundland and Labrador seeking damages from Wärtsilä for a breach of the warranty.

The arbitration clause and Wärtsilä's application for a stay

The contract between the parties contained a dispute resolution clause at Section 15.1, which stipulated that any controversy, claim, or dispute arising out of or related to the contract shall be submitted to the International Court of Arbitration of the International Chamber of Commerce for final and binding arbitration in accordance with the Rules of Arbitration of the International Chamber of Commerce by three arbitrators appointed in accordance with the said Rules, with the arbitration process to be conducted in the English language and to take place in Paris, France. On 2 May 2022, Wärtsilä applied to stay OCI's court action on the basis that the contract required disputes be arbitrated before the International Court of Arbitration in Paris, France. Wärtsilä asserted that this is an international commercial dispute to which the ICAA applies. Section 3 of the ICAA incorporates the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, and section 5 makes the Model Law on International Commercial Arbitration applicable. Article 8(1) of the Model Law requires a court to refer parties to arbitration when a valid arbitration agreement exists, unless the agreement is null and void, inoperative, or incapable of being performed. Wärtsilä pointed out that OCI had not made any such claim.

OCI's arguments against referral to arbitration

OCI took the position that the Arbitration Act (AA) applied to this matter. Under section 4(2) of the AA, a court may order a stay of proceedings upon being satisfied that there is no sufficient reason why the matter should not be referred to arbitration. OCI asserted that this provides a court with discretion as to whether to stay a matter, and argued that the exercise of that discretion should be dictated by the proportionality principle, which requires considering factors such as the nature of the issues engaged, the amount of money involved, the time reasonably necessary to resolve the issue, the complexity of the issues, and the overall cost of the litigation that can be reasonably expected, as set out in Szeto v. Dwyer, 2010 NLCA 36. OCI argued that it is both inconvenient and costly to conduct an international arbitration in Paris, France. OCI also relied on the Supreme Court of Canada's decision in Uber Technologies Inc. v. Heller, 2020 SCC 16, in which the court held that the high cost of the arbitration was a barrier to access to justice and that staying the action would be tantamount to denying relief for the claim. Alternatively, OCI argued that even if the ICAA applied, the court should apply the "strong cause" test from Midnight Marine Ltd. v. Lloyd's Underwriters, 2010 NLCA 64, under which a court must grant the stay unless the plaintiff can show sufficiently strong reasons to support the conclusion that it would not be reasonable or just in the circumstances to require the plaintiff to adhere to the terms of the clause.

The court's analysis of the applicable legislation

Justice Mellor determined that the ICAA, not the AA, applied to the contract. The court found that the arbitration clause in the contract is undisputedly commercial and international in nature. While both parties are in Canada, they voluntarily agreed to have disputes arbitrated in Paris before the International Court of Arbitration. Article 1(3)(b)(i) of the Model Law, which is referentially incorporated through the ICAA, provides that a matter is "international" if the arbitration agreement makes the place of arbitration outside the State in which the parties have their places of business. Article 8(1) of the Model Law leaves the Court with no discretion, stating that a court "shall" refer the parties to arbitration, and as section 11(2) of the Interpretation Act, R.S.N.L. 1990, c. I-19 states, the word "shall" shall be construed as imperative. The court applied the well-established principle of statutory interpretation that when statutes conflict, specific legislation prevails over a general statute, as explained in Sullivan and Driedger on the Construction of Statutes and in Diamond Estate v. Robbins, 2006 NLCA 1. The ICAA is special legislation which deals with matters in which there is a right of international commercial arbitration, whereas the AA is general arbitration legislation employed in domestic matters. The court further rejected OCI's reliance on the "strong cause" test, noting that Midnight Marine Ltd. was decided pursuant to section 97(1) of the Judicature Act, R.S.N.L. 1990, c. J-4, which states that a court "may" direct a stay, which is obviously different from the Model Law's requirement that a court "shall" refer the parties to arbitration. While the Court of Appeal referred to the ICAA in its decision, it did so in obiter. The Uber decision was also found to be distinguishable, as the Supreme Court of Canada determined that it was an employment, not a "commercial" dispute, and that the arbitration clause was void because of the doctrine of unconscionability. In the matter before the court, it was not disputed that the matter was commercial nor was the issue of unconscionability raised.

Ruling and outcome

The court concluded that it has no choice in this matter. Under the contract, the parties have endowed an international arbitration panel with the power to determine disputes, and the ICAA is a complete code that requires the court to respect the parties' choice and refer the matter to arbitration. To find otherwise would require not just ignoring the intention of the parties but also overriding the will of the Legislature. The action was stayed and the matter was referred to arbitration in accordance with the terms of the contract. On costs, each party was ordered to bear their own costs, as the parties had filed briefs in 2022, and subsequently Wärtsilä changed counsel and in September 2025 filed an amended application and a new brief that contained a substantively different argument than the one OCI initially responded to. Wärtsilä was the successful party in obtaining the stay and referral to arbitration; however, no specific monetary amount was awarded or determined in this decision, as the underlying breach of contract claim is to be resolved through the international arbitration process in Paris.