Orica sued ARVOS GmbH (“ARVOS”) in Alberta for losses allegedly caused by defective industrial equipment supplied for an Alberta plant. The Respondent had subcontracted the manufacture of the equipment to the Appellant, Arsopi, under a contract governed by German law, containing a mandatory arbitration clause requiring disputes to be arbitrated in Germany.

Orica commenced a claim against ARVOS, and ARVOS commenced a third party claim against Arsopi seeking contribution and indemnity, including a claim under Section 3(1)(c) of Alberta’s Tort Feasors Act (the “TFA Claim”). In the lower decision, Arsopi sought to stay or strike the third party claim under the International Commercial Arbitration Act (“ICAA”).

The Chambers Judge stayed the contractual and tort claims but refused to stay the TFA Claim, holding it was effectively a claim between Orica and the Appellant and therefore outside the arbitration agreement. Arsopi appealed.

The Court of Appeal allowed the Appeal. It held that the Chambers Judge mischaracterized the TFA Claim. A contribution claim under Section 3(1)(c) of Alberta’s Tort Feasors Act, the Court held, is a substantive right belonging to the Defendant tortfeasor (ARVOS), not a claim between the Plaintiff (Orica) and the third party (the Appellant).

The Court of Appeal held that, properly characterized, the TFA Claim was a dispute between the Respondent and the Appellant. The Court found the TFA Claim was “arising out of or in connection with” the subcontract because it depended on the contractual relationship and obligations between ARVOS and the Appellant. As a result, Justices Ho, de Wit and Fagnan found that the TFA Claim fell within the scope of the arbitration clause and ordered, further to Section 10 of the ICAA, that the entire third party claim be stayed, not struck.