Québec CCAA Court declines to hear funding dispute

Re 9550-1714 Québec Inc. and 9550-1870 Québec Inc.
How do you determine whether a dispute should be determined in a CCAA proceeding or arbitration?

Summary: In this case, the Québec Superior Court considered whether a dispute should be determined in a CCAA proceeding in Québec or as part of an arbitration proceeding in Ontario. This dispute arose out of the restructuring of a joint venture formerly conducted through several limited partnerships that entered protection under the CCAA. The partnerships—comprising entities indirectly owned by Shell, IQ Equity Holdco, and Suncor—were engaged in developing and operating an energy project in partnership with Proman Canada. When the partnerships became insolvent, the CCAA Court approved an RVO that transferred the going-concern business to a purchaser while leaving behind the “Residual Cos” (Shell, IQ Equity Holdco, and Suncor) to address remaining claims and disputes, including an existing dispute with Proman. The Residual Cos argued the dispute should be determined in the CCAA proceeding, while Proman argued that the arbitration, which was stayed by the commencement of the CCAA proceeding, should now continue. The Court agreed with Proman, finding that the limited partnership agreement—governed by Ontario law and already the subject of a well-advanced Toronto arbitration—should be enforced. Applying the Supreme Court’s two-part Petrowest test, the Court concluded that no statutory exception or practical disruption justified overriding the arbitration clause. Transferring the Ontario-law dispute to the Québec CCAA Court would add cost and complexity. In addition, the restructuring itself was complete, eliminating concerns about delay or prejudice to the CCAA process. As a result, the Court dismissed the motion to transfer the arbitration to the CCAA proceeding.

This dispute arose out of the restructuring of a joint venture formerly conducted through several limited partnerships that entered protection under the Companies’ Creditors Arrangement Act. The partnerships—comprising entities indirectly owned by Shell, IQ Equity Holdco, and Suncor—were engaged in developing and operating an energy project in partnership with Proman Canada. When the partnerships became insolvent, the CCAA Court approved a reverse vesting order (RVO) that transferred the going-concern business to a purchaser while leaving behind the “Residual Cos” to address remaining claims and disputes.

Following completion of the sale in October 2025, the Applicants (Shell, IQ Equity Holdco, and Suncor, as Residual Cos) sought to advance a funding dispute against Proman Canada, alleging that, in failing to answer a capital-call issued by the former CCAA parties, Proman Canada did not fulfill its funding commitments under the parties’ limited partnership agreement (“LPA”). The question before the Court was whether this post-restructuring dispute should proceed before the CCAA Court or be determined through arbitration under the LPA. Prior to the commencement of the CCAA proceedings, the parties had significantly advanced the arbitration, which was stayed pursuant to the Initial Order and the focus shifted toward conducting a sale and investment solicitation process.

There was no dispute among the parties that the core of their conflict related to their respective obligations under the LPA. The Applicants argued, in the name of efficiency and costs, that their dispute with Proman Canada should proceed before the CCAA Court in Québec, while Proman Canada argued that, in the name of contractual autonomy and efficiency, the CCAA Court should defer the matter to the arbitration panel in Ontario.

The burden rests on the party opposing arbitration to convince the Court that the dispute should not proceed through the agreed-upon arbitral process and instead be adjudicated by the CCAA Court. That party bears the burden of convincing the Court, on a balance of probabilities, that allowing the arbitration to proceed would result in a level of disruption sufficient to jeopardize the restructuring process or seriously impair the CCAA parties’ ability to achieve a successful restructuring. Only where a statutory exception applies, or where the continuation of the arbitration would effectively compromise the orderly and efficient conduct of insolvency proceedings should a matter be diverted from arbitration. The refusal to enforce an arbitration clause is the exception, even in the context of CCAA proceedings.

The Court applied the two-part test established by the Supreme Court of Canada in Petrowest, and found that the first component—whether the technical prerequisites for arbitration were met—was clearly satisfied. As for the second component, the Court was of the view that the Applicants had not met their burden to establish the existence of a statutory exception, nor had they demonstrated that allowing the arbitration to proceed would disrupt the CCAA proceedings so as to justify judicial intervention.

Both sides acknowledged that resolving the dispute through either the CCAA Court or the arbitration panel would require a comparable amount of time. Neither forum was materially slower or faster than the other. The timing argument was also less compelling because the restructuring of the former CCAA parties was complete. The RVO was approved on October 6, 2025 and the business transfer closed on October 10^th .

The cost of a three-person arbitration panel was not considerably higher than the dispute proceeding before the CCAA Court, in which case, the Monitor would assume enhanced powers and take on a central and ongoing role. The dispute was governed by Ontario law and proceeding in the Québec-based CCAA forum would introduce a further layer of complexity into the dispute. The parties would be required to adduce expert evidence of Ontario law, resulting in further procedural steps, increased costs and potential delays. Moving the dispute to the CCAA forum was, therefore, unlikely to promote cost-efficiency.

The Court noted that, from a business standpoint, it made little sense to disrupt a well-advanced arbitration between sophisticated parties—each represented by national law firms—proceeding in Toronto before a qualified panel. CCAA proceedings are designed for efficiency. Once the urgent systemic risks are addressed, the CCAA court can step back and allow specialized forums to do their work in the name of efficiency and fairness. The evidence did not suggest that allowing the arbitration to proceed would result in a level of disruption sufficient to jeopardize the restructuring process or seriously impair the CCAA parties’ ability to achieve a successful restructuring.

The Court found that the arbitration proceedings should resume in the arbitration forum established by the LPA.

Judge: The Honourable Luc Morin, J.S.C.

Professionals involved:

• llia Kravtsov, Sandra Abitan and Josy-Ann Therrien of Osler for the Respondent Proman Services Canada Inc.

• Joseph Reynaud and Darien Bahry of Stikeman Elliott for the Applicants 9550-1714 Québec Inc. and 9550-1870 Québec Inc.

• Marc-André Morin and Eliane Dupere-Tremblay of Fasken for the Monitor Ernst & Young Inc.

• François Alexandre Toupin of McCarthy Tétrault for Investissement Québec and IQ Equity Holdco (9429-8114 Québec Inc.)

• Valerie Di Lena of Gowling WLG for the Canada Infrastructure Bank