{"id":42451,"date":"2025-12-12T12:27:51","date_gmt":"2025-12-12T17:27:51","guid":{"rendered":"https:\/\/www.millerthomson.com\/?p=42451"},"modified":"2025-12-12T12:27:54","modified_gmt":"2025-12-12T17:27:54","slug":"arbitration-or-insolvency-court-a-quebec-ruling-on-resolving-disputes-in-ccaa-proceedings","status":"publish","type":"post","link":"https:\/\/www.millerthomson.com\/en\/insights\/restructuring-and-insolvency\/arbitration-or-insolvency-court-a-quebec-ruling-on-resolving-disputes-in-ccaa-proceedings\/","title":{"rendered":"Arbitration or insolvency court? A Qu\u00e9bec ruling on resolving disputes in CCAA proceedings"},"content":{"rendered":"\n<p>The tension between upholding arbitration agreements and pursuing the efficiency of the single proceeding model remains one of the defining challenges in modern restructuring law. Further to our previous article on the lasting impact of the <a href=\"https:\/\/www.millerthomson.com\/en\/insights\/commercial-litigation\/is-your-arbitration-agreement-enforceable-in-a-crisis-a-post-petrowest-guide-for-business-leaders\/\"><em>Petrowest<\/em><\/a> decision on subsequent case law, including the <em>Mercy Falls<\/em> decision, courts have shown increased willingness to bring arbitration disputes within <em>Bankruptcy and Insolvency Act<\/em> and <em>Companies\u2019 Creditors Arrangement Act<\/em> (the \u201c<strong>CCAA<\/strong>\u201d) insolvency proceedings in pursuit of the single proceeding model. However, just 45 days after the <em>Mercy Falls<\/em> decision was released, the Qu\u00e9bec Superior Court (the \u201c<strong>Court<\/strong>\u201d) issued a decision that appears to provide an outer limit on how <em>Petrowest <\/em>may be applied to override arbitration clauses.<\/p>\n\n\n\n<p>This update examines how the Court applied, and ultimately constrained, the <em>Petrowest<\/em> analysis to uphold a well-advanced arbitration between sophisticated commercial parties.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What happened in <em>Arrangement relatif \u00e0 9550-1714 Qu\u00e9bec inc., 2025 QCCS 3840<\/em>?<\/h2>\n\n\n\n<p>On October 23, 2025, Justice Luc Morin released <a href=\"https:\/\/www.canlii.org\/en\/qc\/qccs\/doc\/2025\/2025qccs3840\/2025qccs3840.html?resultId=23eabbcfc26f4652a73f1a632f4a5c3d&amp;searchId=2025-11-28T10:38:21:344\/b7b421106243401ba9147265bcc5a372&amp;searchUrlHash=AAAAAQA9QXJyYW5nZW1lbnQgcmVsYXRpZiDDoCA5NTUwLTE3MTQgUXXDqWJlYyBpbmMuLCAyMDI1IFFDQ1MgMzg0MAAAAAAB\"><em>Arrangement relatif \u00e0 9550-1714 Qu\u00e9bec inc<\/em>., 2025 QCCS 3840<\/a><em>.<\/em><a href=\"#_ftn1\" id=\"_ftnref1\">[1]<\/a> This case involved a $16.3 million dispute among four partners of the Varennes Cellulosic Ethanol waste-to-biofuel project. Three partners alleged that the fourth partner, Proman Canada (\u201c<strong>Proman<\/strong>\u201d), had failed to provide funding agreed upon under their Limited Partnership Agreement (\u201c<strong>LPA<\/strong>\u201d). The dispute was governed by an arbitration clause and, notably, prior to the commencement of the CCAA proceedings, the parties had made steps towards an arbitration hearing, including submitting motion materials and selecting a panel.<\/p>\n\n\n\n<p>The arbitration was stayed pursuant to an Initial Order of the Court. Subsequently, a Reverse Vesting Order was approved that facilitated the sale of core assets, with the remaining assets, including any proceeds from the litigation against Proman, being transferred to the applicants.<\/p>\n\n\n\n<p>The applicants sought to bring the dispute with Proman into the CCCA proceedings \u201cin the name of efficiency and costs.\u201d Proman, however, argued that for reasons of contractual autonomy and, similarly, efficiency, the CCAA court should defer to the arbitration panel. The Court sided with Proman and upheld the arbitration, despite the active CCAA proceedings.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">When will Qu\u00e9bec courts refuse to override arbitration in insolvency proceedings?<\/h2>\n\n\n\n<p>Justice Morin emphasized that the <em>Petrowest<\/em> analysis is inherently fact-specific.<a href=\"#_ftn2\" id=\"_ftnref2\">[2]<\/a> Several key factual influences appeared to be determinative:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The arbitration was already well-advanced. The Court noted \u201cit makes little sense to disrupt a well-advanced arbitration between sophisticated parties.\u201d<a id=\"_ftnref3\" href=\"#_ftn3\">[3]<\/a><\/li>\n\n\n\n<li>The restructuring process was, \u201cfor all intents and purposes,\u201d complete.<a id=\"_ftnref4\" href=\"#_ftn4\">[4]<\/a> No concerns about going-concern protection were at issue.<\/li>\n<\/ul>\n\n\n\n<p>Justice Morin also noted that <em>Petrowest<\/em> held that valid arbitration agreements should be respected except in clear cases where a statutory exemption applies or where the continuation of arbitration would compromise the orderly and efficient conduct of the proceedings.<a href=\"#_ftn5\" id=\"_ftnref5\">[5]<\/a> This determination is highly factual, and the burden rests on the party attempting to circumvent &nbsp;arbitration to prove that it would jeopardize the restructuring process.<a href=\"#_ftn6\" id=\"_ftnref6\">[6]<\/a><\/p>\n\n\n\n<p>With respect to efficiency, the Court found that both options would take a comparable amount of time and that the applicants had not proven that hearing the dispute within the CCAA proceedings in Qu\u00e9bec would be more cost-efficient than an arbitration in Ontario, the governing jurisdiction of the agreement.<a href=\"#_ftn7\" id=\"_ftnref7\">[7]<\/a><\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Does confidentiality in arbitration conflict with CCAA transparency requirements?<\/h2>\n\n\n\n<p>Justice Morin attempted to reconcile the competing expectations of confidentiality in the arbitration process and transparency, a core tenant of the CCAA regime.<a id=\"_ftnref8\" href=\"#_ftn8\">[8]<\/a> He noted: \u201cIf the confidentiality of arbitration is to be preserved fully &#8211; even under the purview of the CCAA &#8211; this could result in an unacceptable level of opacity in a process that demands transparency.\u201d<a id=\"_ftnref9\" href=\"#_ftn9\">[9]<\/a> The apparent conflict between the two potential dispute resolution forums was left unresolved.<a id=\"_ftnref10\" href=\"#_ftn10\"><sup>[10]<\/sup><\/a> However, Justice Morin made clear the Court\u2019s expectation that the Monitor was to provide regular updates on the arbitration\u2019s progress and \u201censure that the interests of transparency and fairness remain protected throughout.\u201d<a id=\"_ftnref11\" href=\"#_ftn11\"><sup>[11]<\/sup><\/a>  Thus, while the arbitration prevailed, it did so with a \u201cto-be-determined\u201d element of CCAA court oversight.\u00a0\u00a0<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Key takeaways<\/h2>\n\n\n\n<p>In the circumstances, the Court determined that there was no conflict between the principles of contractual autonomy and the single proceeding model.<a href=\"#_ftn12\" id=\"_ftnref12\">[12]<\/a> The decision serves as an example of a court resisting the tendency to bring disputes into ongoing insolvency proceedings, where the party seeking to override the arbitration clause has not proven the benefit of doing so.<\/p>\n\n\n\n<p>For businesses relying on arbitration clauses in partnership, financing, or commercial agreements, this ruling reinforces that advanced arbitration processes remain legally resilient, even in the shadow of CCAA protection. However, the ultimate determination remains context-specific.<\/p>\n\n\n\n<p>When considering arbitration agreements in the context of insolvency, the analysis remains highly factual. Contact Miller Thomson&#8217;s <a href=\"https:\/\/www.millerthomson.com\/en\/expertise\/corporate\/restructuring-insolvency\/\">Restructuring and Insolvency<\/a> Group to discuss the potential impacts of insolvency on your contractual rights.&nbsp;<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<div class=\"schema-faq wp-block-yoast-faq-block\"><div class=\"schema-faq-section\" id=\"faq-question-1765486573236\"><strong class=\"schema-faq-question\">Can an arbitration clause be overridden in a CCAA proceeding?<\/strong> <p class=\"schema-faq-answer\">Yes, but it is not automatic. Courts use a fact-specific test from the <em>Petrowest <\/em>decision. The party seeking to override the clause must prove that continuing the arbitration would compromise the efficiency or integrity of the restructuring.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1765486584586\"><strong class=\"schema-faq-question\">What factors make an arbitration more likely to be upheld?<\/strong> <p class=\"schema-faq-answer\">Courts are more likely to uphold arbitration when proceedings are well-advanced and the restructuring process is substantially complete.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1765486596835\"><strong class=\"schema-faq-question\">Does efficiency justify moving arbitration into CCAA proceedings?<\/strong> <p class=\"schema-faq-answer\">Not necessarily. The party seeking to override arbitration must prove that court proceedings would be more efficient and cost-effective.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1765486604672\"><strong class=\"schema-faq-question\">How does confidentiality affect arbitration under CCAA?<\/strong> <p class=\"schema-faq-answer\">Courts may allow arbitration to proceed but impose oversight requirements to ensure transparency consistent with insolvency-regime principles.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1765486629905\"><strong class=\"schema-faq-question\">What is the practical takeaway for commercial parties?<\/strong> <p class=\"schema-faq-answer\">Well-drafted arbitration clauses remain powerful tools, but their enforceability in insolvency depends on timing, progress, and restructuring impact.<\/p> <\/div> <\/div>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p><a href=\"#_ftnref1\" id=\"_ftn1\">[1]<\/a> <em>Arrangement relatif \u00e0 9550-1714 Qu\u00e9bec inc<\/em>., 2025 QCCS 3840 [\u201c<strong><em>Re 9550-1714<\/em><\/strong>\u201d]<\/p>\n\n\n\n<p><a href=\"#_ftnref2\" id=\"_ftn2\">[2]<\/a> <em>Re 9550-1714<\/em>, at para 37.<\/p>\n\n\n\n<p><a href=\"#_ftnref3\" id=\"_ftn3\">[3]<\/a> <em>Re 9550-1714<\/em>, at para 14.<\/p>\n\n\n\n<p><a href=\"#_ftnref4\" id=\"_ftn4\">[4]<\/a> <em>Re 9550-1714<\/em>, at para 15.<\/p>\n\n\n\n<p><a href=\"#_ftnref5\" id=\"_ftn5\">[5]<\/a> <em>Re 9550-1714<\/em>, at para 37-9.<\/p>\n\n\n\n<p><a href=\"#_ftnref6\" id=\"_ftn6\">[6]<\/a> <em>Re 9550-1714<\/em>, at para 45.<\/p>\n\n\n\n<p><a href=\"#_ftnref7\" id=\"_ftn7\">[7]<\/a> Justice Morin also considered factors such as the risk of contradictory judgments in other jurisdictions and the potential for the Monitor to have a vested interest in the outcome of the decision which warranted a heightened level of caution.<\/p>\n\n\n\n<p><a href=\"#_ftnref8\" id=\"_ftn8\">[8]<\/a> <em>Re 9550-1714<\/em>, at para 87-95.<\/p>\n\n\n\n<p><a href=\"#_ftnref9\" id=\"_ftn9\">[9]<\/a> <em>Re 9550-1714<\/em>, at para 87.<\/p>\n\n\n\n<p><a href=\"#_ftnref10\" id=\"_ftn10\">[10]<\/a> <em>Re 9550-1714<\/em>, at para 95.<\/p>\n\n\n\n<p><a href=\"#_ftnref11\" id=\"_ftn11\">[11]<\/a> <em>Re 9550-1714<\/em>, at para 96.<\/p>\n\n\n\n<p><a href=\"#_ftnref12\" id=\"_ftn12\">[12]<\/a> <em>Re 9550-1714<\/em>, at para 18.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The tension between upholding arbitration agreements and pursuing the efficiency of the single proceeding model remains one of the defining challenges in modern restructuring law. Further to our previous article on the lasting impact of the Petrowest decision on subsequent case law, including the Mercy Falls decision, courts have shown increased willingness to bring arbitration [&hellip;]<\/p>\n","protected":false},"author":122,"featured_media":14385,"parent":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[563],"insight-format":[416],"class_list":["post-42451","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-restructuring-and-insolvency"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.1.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Arbitration or insolvency court? A Qu\u00e9bec ruling on resolving disputes in CCAA proceedings | Miller Thomson<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.millerthomson.com\/en\/insights\/restructuring-and-insolvency\/arbitration-or-insolvency-court-a-quebec-ruling-on-resolving-disputes-in-ccaa-proceedings\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Arbitration or insolvency court? A Qu\u00e9bec ruling on resolving disputes in CCAA proceedings | Miller Thomson\" \/>\n<meta property=\"og:description\" content=\"The tension between upholding arbitration agreements and pursuing the efficiency of the single proceeding model remains one of the defining challenges in modern restructuring law. Further to our previous article on the lasting impact of the Petrowest decision on subsequent case law, including the Mercy Falls decision, courts have shown increased willingness to bring arbitration [&hellip;]\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.millerthomson.com\/en\/insights\/restructuring-and-insolvency\/arbitration-or-insolvency-court-a-quebec-ruling-on-resolving-disputes-in-ccaa-proceedings\/\" \/>\n<meta property=\"og:site_name\" content=\"Miller Thomson\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/MillerThomsonLaw\/\" \/>\n<meta property=\"article:published_time\" content=\"2025-12-12T17:27:51+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2025-12-12T17:27:54+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.millerthomson.com\/wp-content\/uploads\/2024\/10\/Insights_Restructuring-Insolvency_Post-Image.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1776\" \/>\n\t<meta property=\"og:image:height\" content=\"994\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Sebastian Vives\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@millerthomson\" \/>\n<meta name=\"twitter:site\" content=\"@millerthomson\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Sebastian Vives\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.millerthomson.com\/en\/insights\/restructuring-and-insolvency\/arbitration-or-insolvency-court-a-quebec-ruling-on-resolving-disputes-in-ccaa-proceedings\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.millerthomson.com\/en\/insights\/restructuring-and-insolvency\/arbitration-or-insolvency-court-a-quebec-ruling-on-resolving-disputes-in-ccaa-proceedings\/\"},\"author\":{\"name\":\"Sebastian Vives\",\"@id\":\"https:\/\/www.millerthomson.com\/en\/#\/schema\/person\/be05481ca4ee617c24b33993ade4c881\"},\"headline\":\"Arbitration or insolvency court? 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Courts use a fact-specific test from the <em>Petrowest <\/em>decision. 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