Supreme Court Weighs In On Interplay Between Class Actions And Arbitration Clauses In Consumer Contracts

Arbitration clauses have been used in Canada, with mixed results, as a mechanism by which potential defendants have attempted to lessen their exposure to class actions. Arbitration clauses are frequently contained in consumer contracts and, in particular, in service contracts. These clauses typically require consumers to participate in mediation or arbitration and, often, to waive all rights to participate in class action proceedings.

A recent decision from the Supreme Court of Canada has provided guidance on the interplay between these arbitration clauses and consumer-based class actions in Canada's common law jurisdictions. In Seidel v. Telus Communications Inc.,¹ the Supreme Court of Canada overruled, in part, a 2009 British Columbia Court of Appeal decision that granted a stay of proceedings in a proposed class action in favor of arbitration. The narrow 5-4 majority concluded that certain provisions of British Columbia's Business Practices and Consumer Protection