This is an extract from the sixth edition of GAR’s The Guide to Construction Arbitration. The whole publication is available here.
This is an Insight article, written by a selected contributor as part of GAR’s co-published content. Read more on Insight
Use of arbitration in construction disputes
The construction industry is a significant contributor to the Canadian economy. There are four main categories within the construction industry in Canada: residential, institutional and commercial, industrial and infrastructure. The industry employs approximately 1.6 million people, which is the fifth largest employment industry in Canada, and it is expected to grow in the upcoming years.
With so much construction occurring year after year in Canada, it is perhaps not surprising that disputes are prevalent. Arbitration is widely used in Canada to resolve construction disputes as an alternative to court litigation.
The demand for construction arbitration was accelerated by the covid-19 pandemic. This is because arbitration proceedings occurred without interruption during the pandemic, while many courts across Canada had various limits or closures that made them less accessible to litigants. Since then, the courts in many provinces have also become significantly backlogged, making access to an efficient determination on the merits of a dispute less frequent. As a result, the attractiveness and use of arbitration to resolve construction disputes has increased.
This chapter addresses the background, setting and context for the use of arbitration in Canada to resolve construction disputes, including important recent developments in this area. As explained in this chapter, there are many standard form construction contracts in use in Canada, many of which require arbitration as the primary dispute resolution process as opposed to litigating in court.
Canada’s pro-arbitration stance
Canadian governments and courts have traditionally supported dispute resolution through arbitration, aligning themselves with modern international standards. In 1986, Canada became the first country to implement the UNCITRAL Model Law on International Commercial Arbitration (the Model Law).
All provinces and territories, except Quebec, have enacted separate legislation governing domestic and international arbitration. In contrast, Quebec regulates arbitration through the Civil Code of Quebec and the Code of Civil Procedure, both of which are broadly in line with the Model Law.
To the extent court intervention in construction arbitration proceedings is permitted under the relevant legislation, such matters are typically heard by the provincial superior courts, in accordance with the governing arbitration legislation.
Arbitration institutions and rules in Canada
There are many arbitration institutions in Canada that deal with construction disputes, including the International Centre for Dispute Resolution of Canada (ICDR), the ADR Institute of Canada and the Vancouver International Arbitration Centre (VanIAC).
Although many construction arbitrations in Canada proceed on an ad hoc basis without the assistance of an arbitration institution, it is not uncommon for parties to agree, by incorporation by reference, to the rules of an arbitration institution such as VanIAC or ICDR, with various modifications as may be agreed or directed by the tribunal.
Legal framework for domestic and international arbitrations
Every Canadian province and territory, except Quebec, has enacted an International Commercial Arbitration Act based on the Model Law.
Alberta, Saskatchewan, Manitoba, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland, Yukon, Nunavut and Northwest Territories (pursuant to Nunavut’s legislation) have implemented the 1985 version of the Model Law. British Columbia and Ontario have adopted the Model Law as amended in 2006.
British Columbia has enacted a revised version of the Model Law directly into its legislation, while the other provinces and territories append the Model Law as a schedule to their International Commercial Arbitration Act, typically with only minor modifications.
In Quebec, the Model Law has not formally been incorporated; instead, arbitration in Quebec is governed by the Civil Code of Quebec and the Code of Civil Procedure, which, although distinct in form, are broadly consistent with the principles of the Model Law.
At the federal level, the Commercial Arbitration Act is based on the 1985 version of the Model Law. This statute applies only in two specific scenarios: (1) where at least one of the parties to the arbitration is the Crown, a federal departmental corporation or a Crown corporation; or (2) where the arbitration relates to a maritime or admiralty matter.
With the exception of Quebec, domestic arbitration involving Canadian entities only, including in construction matters, is governed by separate legislation in each province and territory.
Enforcement of arbitration agreements
All international arbitration statutes across Canada require that an arbitration agreement be in writing.
In Uber Technologies v. Heller, the Supreme Court of Canada (SCC) affirmed that Canadian courts will generally enforce arbitration agreements unless they are found to be void, inoperative or incapable of being performed.
The SCC clarified in Peace River Hydro Partners v. Petrowest Corp that an arbitration agreement, even in construction-related matters, can be set aside in the context of a court-ordered receivership under the Bankruptcy and Insolvency Act.
Tribunal duties and powers
There are no statutory restrictions on who may act as an arbitrator in Canadian construction arbitrations, and, there are no legal qualification requirements for arbitrators.
The parties have autonomy to determine the number of arbitrators, the selection process and the requirements regarding qualifications or expertise (e.g., a construction law background).
Arbitrators must be impartial and independent and have the qualifications agreed by the parties. These duties are contemplated in Article 12 of the Model Law and in the international commercial arbitration statutes. Similar provisions are present in domestic arbitral legislation.
Arbitrators have a continuing obligation to disclose any circumstances that may give rise to justifiable doubts regarding their independence or impartiality. This duty persists throughout the arbitration proceedings.
In the absence of an agreement on procedure, the arbitral tribunal may conduct the arbitration in a manner it deems appropriate. Under certain domestic arbitral legislation, if an arbitral tribunal comprises more than one arbitrator, the tribunal may delegate the authority to decide procedural questions to the chair.
Court intervention and jurisdictional challenges
The principle of competence-competence is widely recognised in Canada. An arbitral tribunal has the authority to rule on its own jurisdiction, either as a preliminary matter or in a final award. A party can seek a superior court’s review of the tribunal’s jurisdictional decision, regardless of whether the arbitration proceedings have concluded.
Canadian courts may intervene in jurisdictional matters concerning arbitration under specific conditions.
A party may bring an application before the court to stay a proceeding and refer the matter to arbitration. Generally, courts defer jurisdictional issues to the arbitral tribunal in accordance with the competence-competence principle; however, a court may consider a challenge to jurisdiction in the first instance if:
After an arbitral award is issued, a party may apply to set the award aside under Article 34 of the Model Law. Under domestic legislation, except in Nova Scotia or Quebec, if the arbitration agreement does not address the right to appeal, a party may appeal the award to the court on a question of law, but only with leave of the court.
The court may also consider jurisdiction when a party applies for recognition and enforcement of an arbitral award.
Canadian courts typically adopt a deferential approach when reviewing arbitral awards; however, there has been a divergence in Canada regarding the standard of review that should apply to an arbitral tribunal’s jurisdictional decision. Courts have considered whether the ‘reasonableness’ standard, which allows for deference to the tribunal’s decision, or the ‘correctness’ standard, which affords no deference, is appropriate. Specialist advice is recommended when considering a review of an arbitral decision in Canada.
Third parties and non-signatories
The general rule is that only parties to an arbitration agreement are bound by its terms. In the construction context, a subcontractor may not be bound by an arbitration agreement entered between the owner and a general contractor.
Non-signatories may be subject to an arbitration agreement in the following circumstances:
Evidentiary issues
Parties to construction arbitration in Canada have the freedom to agree on the procedure for collecting and submitting evidence. Failing that, the arbitral tribunal has authority to determine the procedure.
In cases where no procedure has been agreed regarding evidence, this issue will usually be addressed during a pre-hearing conference. Increasingly, the IBA Rules on the Taking of Evidence are referenced or considered when establishing the specific procedures to be followed.
Consistent with international practice, documents are often attached to submissions, with parties exchanging requests for the relevant documents using a Redfern schedule. This is especially prevalent in construction arbitration where documentation is often voluminous. Witnesses typically submit detailed written statements of their evidence, with cross-examination by opposing counsel only at the hearing stage.
Expert evidence is typically exchanged before any hearing on the merits. In cases where delay claims are raised by either party to a construction arbitration, expert evidence will be required (see Toronto Transit, which is discussed in more detail below).
A pre-hearing oral discovery (a common feature of court litigation in Canada) is generally not used in construction arbitration.
Assessment of evidence
An arbitral tribunal may determine the admissibility, relevance, materiality and weight of any evidence.
Under domestic arbitration laws, the Alberta, Manitoba and Nova Scotia Acts explicitly state that the rules of evidence applicable in local courts do not govern arbitral proceedings. The New Brunswick Act also contains similar provisions. In British Columbia, an arbitral tribunal has the authority to determine admissibility, relevance, materiality and weight of any evidence presented. In Ontario, Sections 15 and 16 of the Statutory Powers Procedure Act apply to the evidence presented at arbitral hearings.
Non-parties and production of evidence
Under the Model Law and domestic arbitration legislation, an arbitral tribunal, or a party with the tribunal’s consent, may seek the court’s assistance to compel the production of evidence. The courts have the power to compel witnesses to attend for questioning or to produce documents.
With respect to non-parties, the court may issue a summons for witnesses located in Canada or request the assistance of foreign courts for witnesses outside Canada.
Courts typically assist in evidence-taking for construction arbitration proceedings, provided that the request is consistent with local evidentiary rules.
Confidentiality requirements
Parties are free to establish confidentiality requirements in their arbitration agreement. Confidentiality provisions may be incorporated through the choice of arbitral rules.
While the Model Law does not address confidentiality, international arbitration legislation may provide default confidentiality provisions where the parties have not agreed otherwise.
Domestic legislation in British Columbia, Nova Scotia and Quebec explicitly provides for both privacy and confidentiality in arbitration proceedings, while other pieces of domestic legislation do not include such provisions.
Challenges to awards: set aside and appeals
Under Canada’s international and domestic commercial arbitration statutes, a party may apply to the courts to have an arbitral award set aside on specific grounds.
Under domestic arbitration statutes, the grounds for setting aside an arbitral award fall under three general classifications: lack of jurisdiction, excess of jurisdiction, and lack of proper conduct or procedure. When an arbitral award is set aside under these statutes, the court may also remove the arbitral tribunal and issue directions on how the arbitration should proceed thereafter.
An arbitral award may be set aside on the following grounds:
Article 34(2)(b) also allows the court to set aside an arbitral award if the court finds that the subject matter of the dispute is not capable of settlement by arbitration under the applicable law, or if the arbitral award is in conflict with public policy.
Under domestic arbitration statutes, parties may also appeal an award on a question of law, in addition to applying to set the award aside.
Recognition and enforcement
Canada is a signatory to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention).
The procedures for recognising and enforcing foreign arbitral awards are outlined in Articles 35 and 36 of the Model Law, which generally serve as the framework for enforcement in Canada.
Courts have the discretion to refuse recognition or enforcement of an international arbitral award if the opposing party proves that a ground under Article 36(1)(a) exists.
Under domestic legislation, if a party does not voluntarily comply with an arbitral award, a court judgment enforcing the award can be sought.
Recent developments
There are three relatively recent developments in Canada that will impact construction arbitrations:
Need for expert evidence to prove delay claim
In the Toronto Transit decision from Ontario, the Ontario Superior Court of Justice concluded that in complex construction disputes, expert evidence is required to prove a delay was caused by a particular contractor. It concluded it was in no position to determine the amount of compensable delay on its own as it does not have the expertise to do so.
Expert evidence is required to prove any delay damages that a party wishes to pursue in a construction arbitration. Absent such expert evidence, a tribunal will likely not be able to award delay damages. Given the prevalence of delay claims that are asserted in construction disputes, expert evidence will invariably have to be factored into construction arbitrations, including how that evidence will be presented at the hearing as well as possible cross-examination on the same.
Prompt payment legislation
In 2019, Ontario became the first province in Canada to introduce prompt payment legislation. The legislation is meant to ensure that contractors, subcontractors and material suppliers that provide work or materials to a construction project are paid in a timely manner. It does so by having mandatory timelines for the payment of a ‘proper invoice’. It also provides for interim adjudication if any dispute arises in connection with the prompt payment regime. Any such determinations from an interim adjudication are binding in the interim but not binding in any overall future dispute that may be submitted to arbitration.
Subsequently, the Federal Prompt Payment for Construction Work Act came into force in 2023 and applies to construction projects on federal lands. Other provinces have also enacted their own prompt payment legislation, including Alberta, Saskatchewan, Manitoba and Nova Scotia. It is expected that other provinces will follow suit in the near future.
Revised standard form construction contracts
In response to the introduction of prompt payment legislation, on 30 June 2025, the Canadian Construction Documents Committee (CCDC) issued a slate of revised standard form construction contracts to, in part, address and incorporate the language and procedures contained in the prompt payment legislation. The CCDC contracts, as well as the standard form contracts issued by the Canadian Construction Association, are in widespread use in the construction industry in Canada. In so far as the standard form contracts all contain a form of arbitration agreement, construction arbitrations in Canada will be impacted by the revised and updated CCDC contracts.
Conclusion
Construction arbitration in Canada, both domestic and international, is becoming increasingly prevalent and the primary venue in which to resolve construction disputes. It is typically faster and therefore more efficient than litigation in Canadian courts. Given the importance of the construction industry to the Canadian economy, the difficulty in having matters heard in a congested court system and the ability to have a specialised tribunal, it is likely that construction arbitration will continue to expand and become even more heavily used in Canada in the foreseeable future.
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