On May 12, 2026, the Court of Appeal of Québec released its judgment in Avalin Group FZE v. Lauzon – Planchers de bois exclusifs inc., 2026 QCCA 651, in which it enforced a dispute resolution clause in an international agreement despite the absence of mandatory language compelling arbitration.
The Parties' Contract
In 2021, the parties to the dispute entered into a contract for the sale and purchase of wood flooring products. The seller was located in the UAE and the purchaser was located in Gatineau, Québec.
The seller sold goods produced in and shipped Free on Board from China, which the purchaser in turn sold into both the Ontario and Québec markets.
The parties' agreement contained the following dispute resolution clause:
Parties shall endeavour to solve disputes through good faith negotiations; if necessary, they may resort to mediation at an accredited Commission of the following Commonwealth countries: Australia, Canada, New Zealand, Singapore, or United Kingdom. If Mediation is not successful, any party may request arbitration at the same Commission where one arbitrator shall, through the most simplified procedure available, issue a binding and final award based on the Convention for the International Sale of Goods. If a party declines to engage in a mediation process suggested by the other party, it shall be liable for any ensuing arbitration costs (cost of arbitrators, costs of arbitration institution and legal coasts [sic]) regardless of the award’s decision on the merits.
In sum, the parties agreed to a three-step dispute resolution process:
- First, they would attempt to resolve any dispute through good faith negotiations.
- Second, they could turn to mediation before an accredited Commission of one of the named countries.
- Third, if mediation was unsuccessful, a party could then request arbitration before the same accredited Commission.
The parties also agreed that if a party elected not to participate in mediation, that party would bear all of the costs of the arbitration, regardless of the outcome of the arbitration.
The Parties' Dispute and the Superior Court's Decision
Manufacturing issues arose during the life of the parties' contract. In spring of 2023, given these issues, the seller made an offer to settle, which the purchaser rejected. The purchaser demanded damages of nearly C$1.5 million for non-conforming goods and for loss of profits and commenced proceedings before the Superior Court of Québec, District of Gatineau in fall of 2024.
The seller delivered and registered a request for mediation before the London Court of International Arbitration and in parallel made a declinatory exception before the Superior Court, asking that the action be dismissed and referred to arbitration.
Justice Coulombe of the Superior Court found that the parties' dispute resolution clause was not "a complete undertaking to arbitrate". He reasoned that the parties had not clearly precluded recourse to courts of law by using the permissive verb "may" instead of compulsory language, such as "shall", with respect to requesting arbitration.
Justice Coulombe noted that the dispute resolution clause provided for a binding and final award (a requirement for a complete undertaking to arbitrate) and for cost sanctions in the event a party refused to participate in a mediation, but nevertheless found that the use of the permissive "may" was unambiguous and did not compel the parties to arbitrate.
The Court of Appeal's Decision
The seller appealed to the Court of Appeal of Québec, arguing that the dispute clause was in fact a complete undertaking to arbitrate. The Court of Appeal agreed, finding that Justice Coulombe had relied exclusively on the use of the term "may" in determining there was no ambiguity in the dispute resolution clause, and had failed to respect the applicable interpretive principles.
The Court of Appeal explained that the Québec legislator had sought to enhance the development of arbitration agreements by including them as a "nominate contract" in the Civil Code of Québec. Given that the essence of an arbitration agreement is to preclude intervention from ordinary courts of law, courts must give arbitration agreements a large and liberal interpretation.
The Court of Appeal stressed that in the context of international commercial arbitration (where parties to the contract are located in different states), these principles are of even greater importance. The undertaking to arbitrate, in such cases, promotes legal certainty and predictability since international arbitration has no connection to a specific state and hinges entirely on the parties' will. The Court of Appeal cited to Supreme Court of Canada jurisprudence in which the Québec courts have been encouraged to embrace "international thinking" (that is, to have regard to international materials) in the area of international arbitration, which has become a formal source of Québec positive law.
Turning to the dispute resolution clause itself, the Court of Appeal pointed to the reference to a binding and final award and the cost sanctions for refusing to participate in a mediation process—both of which Justice Coulombe had taken note of—as sources of ambiguity in the clause, as they were contrary to the permissive language of "may". To resolve the ambiguity, the Court of Appeal stated that the normal principles of contractual interpretation must be applied, which require that the common intention of the parties be discerned. The Court of Appeal recalled that this entails consideration of three factors: (i) the nature of the contract (an arbitration agreement), (ii) the circumstances in which the contract was concluded (the international sale of goods between parties located in the UAE and Québec), and (iii) usage for matters of international arbitration agreements (in other words, preferring an interpretation that allow parties to free themselves from the judicial particularism of the ordinary courts of law).
In this exercise, the Court of Appeal emphasized that an interpretation that gives the clause meaning must be adopted. The interpretation given to the clause by the judge of first instance essentially hollowed out the clause of any meaning.
The Court of Appeal determined that the only reasonable interpretation of the clause was to construe the term "may" as permitting either party to require arbitration without needing the other party's prior consent. The dispute resolution clause thus gave each party the right to demand arbitration. The fact that the parties had the choice not to demand arbitration did not render the clause "optional". The Court of Appeal observed that this aligned with the approach adopted by Québec and international jurists in international commercial arbitration doctrinal texts.
Takeaways
The Court of Appeal's decision highlights that, when interpreting arbitration agreements, we must look beyond the parties' choice of words—particularly where they are imperfectly expressed—to the broader context of the parties and their agreement. The use of non-mandatory language (such as "may") instead of mandatory language (such as "shall") does not necessarily mean that the arbitration agreement is unenforceable. This is especially the case in the context of international agreements, where the parties from different states are relying on the legal certainty and predictability of their dispute resolution clause.
When drafting arbitration agreements—whether in the domestic or international context—parties should:
- Use clear language wherever possible, especially when trying to limit the scope of arbitrable matters.
- Keep in mind that Canadian courts will give a large and liberal interpretation to a dispute resolution clause that contains reference to arbitration, even where the language is imperfect.
- Be aware that the inclusion of preconditions to arbitrate, such as participating in a mediation, and their terms will be considered together with other elements of a dispute resolution clause to reach a coherent interpretation of the clause.
