Supreme Court of Canada Refuses to Enforce Uber Contract Requiring Arbitration in Holland

A Canadian Uber driver, Heller, brought a class action against Uber, actually several Uber entities, alleging violations of Canada’s Employment Standards Act. According to the motion judge in the Ontario Superior Court of Justice, Uber “[d]rivers in Ontario do not enter into contracts with Uber Technologies Inc. [incorporated in Delaware] or Uber Canada Inc. The Drivers rather create an internet account and a contractual relationship with Uber B.V. and with Rasier Operations B.V. and, or Uber Portier B.V.” Each of those Uber entities is incorporated under the laws of the Netherlands. Uber’s form contract for drivers says it shall be governed by the laws of the Netherlands, and that any dispute not resolved in mediation:

“shall be exclusively and finally resolved by arbitration under the Rules of Arbitration of the International Chamber of Commerce (“ICC Arbitration Rules”) …. The Place of the arbitration shall be Amsterdam, The Netherlands.” 

The motion judge granted Uber’s motion to stay the class proceedings in favor of arbitration in the Netherlands, relying on Canada’s International Commercial Arbitration Act, which implements the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention).  

The Court of Appeal of Ontario set aside the lower court’s order, and allowed Heller to litigate, rather than arbitrate, the class action. The Court of Appeal emphasized that the ICC’s “up-front administrative/filing-related costs for a driver to participate in the mediation-arbitration process in the Netherlands prescribed in the Arbitration Clause is US$14,500. As an UberEATS driver, the appellant earns about $20,800-$31,200 per year, before taxes and expenses.” The Court of Appeal held that the arbitration agreement “constitutes a contracting out of the Employment Standards Act “ which permits a driver to make a complaint the Ministry of Labour regarding the actions of Uber and their possible violation of the requirements of the ESA.” The arbitration agreement “deprives [the driver] of the right to have an ESO investigate his complaint.” The Court of Appeal noted that the driver “has not, in fact, chosen to make a complaint under the ESA but rather has commenced this proposed class action”, but held that this did not under the court’s conclusion that the arbitration agreement impermissibly contracted out of the ESA.

As an independent ground for denying enforcement to the arbitration clause, the Court of Appeal held the clause unconscionable.

The Supreme Court of Canada agreed with the Court of Appeal that the arbitration clause is unenforceable: “This is an arbitration agreement that makes it impossible for one party to arbitrate. It is a classic case of unconscionability.” The Supreme Court’s opinion contains a lengthy discussion of the unconscionability doctrine, featuring some differences of opinion among the justices.

Earlier Canadian cases include Dell Computer Corp. v. Union des consommateurs, [2007] 2 S.C.R. 801, and Seidel v. TELUS Communications Inc., [2011] 1 S.C.R. 531.