Law360 Canada (June 15, 2026, 11:16 AM EDT) --

Heidi J. T. Exner

Arbitration clauses gained sharper edges in Alberta, thanks to the recent Arsopi v. ARVOS GmbH, 2026 ABCA 49 decision, in which the Court of Appeal treated a Tort‑Feasors Act (TFA) contribution claim as squarely within a foreign arbitration clause and sent the entire third‑party claim to Frankfurt.

In doing so, Alberta has refined how contribution works, how far “arising out of or in connection with” language reaches, and how firmly courts will hold sophisticated parties to an international arbitration bargain.

From Carseland shutdown to Frankfurt arbitration

The dispute arose out of a global construction‑style project with a familiar structure. In May 2012, Orica Australia Pty Ltd. engaged ARVOS to design and manufacture a waste heat exchanger and superheater for an ammonium nitrate plant in Carseland, Alberta, and ARVOS subcontracted the manufacturing to Portuguese‑based Arsopi under a subcontract that incorporated ARVOS’s general purchasing terms and conditions.

Those conditions provided that the subcontract would be governed by German law and that all disputes “arising out of or in connection with” the contract would be finally resolved under International Commercial Arbitration Act (ICAA) arbitration in Frankfurt. The equipment was delivered to Orica Australia and then sold to Orica Canada Inc., which operated the Carseland plant producing ammonium nitrate and related products for Orica International Pte Ltd.

In late 2014, the plant was shut down, allegedly due to problems with the equipment. In March 2017, Orica sued ARVOS in Alberta, alleging defective equipment, negligent performance of manufacturing duties and negligent misrepresentation, with claimed losses including repair costs, lost carbon credits, lost business opportunities, lost revenue and incremental supply and freight costs; Arsopi was mentioned in the pleading but was not named as a defendant.

ARVOS denied liability and issued a third‑party claim against Arsopi, asserting common law and contractual obligations and a statutory contribution right under section 3(1)(c) of the TFA, which permits a defendant tortfeasor to recover contribution from another tortfeasor who would have been liable to the plaintiff if sued. Arsopi applied to strike or stay the third‑party claim, relying on the governing‑law and arbitration clauses in the subcontract.

The chambers judge’s split and the appeal

In the King's Bench ruling, Orica Canada Inc. v. ARVOS GmbH, 2024 ABKB 97, the chambers judge had accepted that German law governed the arbitration clause and heard expert evidence on that law. The trial judge stayed ARVOS’s tort and contract claims in favour of arbitration, but he declined to stay what he described as the “Orica‑Arsopi” TFA claim, treating it as a statutory claim whose “genesis” lay in Canadian law and which, in his view, was not addressed by the German‑law expert report.

The chambers judge emphasized that Orica was not a party to the arbitration clause and characterized the TFA claim as an indemnity claim between Orica and Arsopi arising under statute and common law, concluding that it fell outside the arbitration agreement and would proceed in Alberta. Because he regarded the expert report as not covering that claim, he applied Alberta law to it and held that the TFA component of the third‑party claim was “not subject to” the ICAA and would therefore be heard and determined in Alberta.

On appeal, Arsopi argued that the King's Bench misapplied Kaverit Steel and Crane Ltd. v. Kone Corp (Alta. C.A.), [1992] A.J. No. 40, erred in treating the TFA claim as outside the clause, wrongly applied Canadian law instead of uncontradicted German law, failed to treat the claim as time‑barred under German limitation periods, and misinterpreted the expert evidence in a way that affected the outcome. The Court of Appeal focused on two core issues: 1) who really owns a TFA contribution claim, and 2) how broadly “arising out of or in connection with” should be read in this context.

TFA claims as defendant‑owned rights

The Court of Appeal began by revisiting why the TFA’s section 3(1)(c) exists. As a refresher, prior to this statutory mechanism, under the common law, a plaintiff could recover its entire loss from one tortfeasor even if another was equally responsible, and the paying tortfeasor typically had no recourse against the other wrongdoer; section 3(1)(c) and analogous provisions were enacted to remove that unfairness.

The Court held that read in its plain and ordinary sense, section 3(1)(c) “clearly provides a substantive right and remedy belonging to a defendant tortfeasor,” not a derivative add‑on to the plaintiff’s cause of action. Put another way, it creates a substantive right for Tortfeasor A against Tortfeasor B, to which the plaintiff will often be indifferent, as illustrated by Orica’s decision to sue only ARVOS and not participate in the third‑party proceedings.

The court then noted several features of this statutory right. As claimant in a TFA proceeding, the defendant tortfeasor bears the burden of proving that the third‑party tortfeasor is liable for the same damage, while the plaintiff’s claim remains solely against the defendant and does not require proof of liability against the third party. The right to contribution arises only once a tortfeasor pays more than its fair share of the plaintiff’s damages, and a TFA claim is only procedurally joined with the main action for reasons of convenience; it can proceed as an independent action and it may continue after the principal action has been resolved.

On that analysis, the Alberta Court of Appeal concluded that the chambers judge erred in characterizing the TFA claim as between Orica and Arsopi. Properly understood, it was a claim between ARVOS and Arsopi, both of whom were parties to and bound by the arbitration clause, and the mischaracterization led to a misapplication of Kaverit’s rule that non‑parties cannot be bound by arbitration agreements absent consent, submission or governing law.

‘In connection with’ and the reach of the clause: Kaverit, Babcock, and Autoweld do the heavy doctrinal lifting

With the ownership question resolved, the court turned to scope. Because the chambers judge found that the expert’s report did not address the TFA claim, foreign law on that specific point was “not proven,” triggering the default that the law of the forum, namely, Alberta law, must be applied to interpret the arbitration clause. Under Alberta law, Kaverit and later decisions were therefore directly engaged.

In Kaverit, the court had interpreted a clause referring to “[a]ny dispute arising out of or in connection with this Agreement” and held that such language extends to claims where the existence of the contract is germane to the claim or defence, in the sense that the contract is a necessary element, and expressly confirmed that such clauses can capture tort claims. Subsequent decisions, including Babcock and Wilcock Canada Ltd. v. Agrium Inc., [2005] A.J. No. 171 and Autoweld Systems Ltd. v. CRC-Evans Pipeline International, Inc., [2009] A.J. No. 1214, reiterated that limitation‑period issues do not open a path around an arbitration agreement and that parallel tort or equity claims may still be “connected” where they turn on the existence of contractual obligations.

In Arsopi, the appellate court described the clause covering “[a]ll disputes arising out of or in connection with the Contract” as broadly drafted and not limited to disputes about rights and obligations created strictly within the subcontract itself. If the parties had intended to confine arbitration to a narrower set of disputes, they could have used “under the contract” language instead. The clause appeared in a subcontract between two sophisticated European corporations working together on the design and manufacture of equipment for the Alberta plant, and the broader commercial context showed the parties expected that issues might arise and had agreed detailed procedures, rights, and obligations to address them.

The Court of Appeal also highlighted several provisions of the subcontract: a representation that Arsopi had the necessary expertise, ARVOS’s inspection rights, a defined defects period, and a third‑party indemnity clause. It cited these as examples of terms that might be relevant to advancing or defending a TFA contribution or indemnity claim. Because the existence of the subcontract was germane to both the contribution claim and any defence to it, and the parties relied on that contract as a necessary element in resolving the TFA claim, the court held that the contribution proceeding was “connected” to the subcontract in the sense used in Kaverit.

On that basis, Alberta’s highest court concluded that the TFA claim fell within the scope of the arbitration clause as a dispute “arising out of or in connection with” the subcontract. Having reached that conclusion, it was unnecessary to address the remaining grounds of appeal relating to German law, limitation periods, and the chambers judge’s interpretation of the expert evidence, though the court did observe that properly characterizing the TFA claim might well have yielded a different view of that evidence.

On remedy, the Arsopi appellants invited the court to strike the TFA claim outright pursuant to the Alberta Rules of Court, Rule 3.68, relying on Babcock. The court declined that invitation; instead, it held that, consistent with the chambers judge’s treatment of the other third‑party claims, the appropriate response was to stay the TFA claim under section 10 of the ICAA.

The entirety of the third‑party claim was stayed — in favour of arbitration.

Practical implications

For commercial and arbitration practitioners, Arsopi is a significant signal on both contribution and arbitration scope in Alberta. By confirming that section 3(1)(c) of the TFA creates a substantive right in favour of the defendant tortfeasor, and that a statutory contribution claim between parties to an arbitration clause can be a dispute “arising out of or in connection with” their subcontract, the court strengthened the link between local statutory remedies and contractual commitments to arbitrate abroad.

In my view, the most noteworthy aspect of this decision is Alberta has now made it more difficult to treat contribution proceedings as plaintiff‑centric add‑ons that sit conveniently outside an arbitration clause, simply because they invoke a domestic statute. Parties drafting cross‑border contracts may be wise to assume that “arising out of or in connection with” wording will be read in a broad, contextual manner and litigators should anticipate focused stay applications when TFA (and potentially other statutory claims) are pursued between signatories to such clauses.

Ultimately, Arsopi underscores that when sophisticated parties select international arbitration and foreign governing law, Alberta courts will generally hold them to that choice, even when Alberta’s own contribution regime is the vehicle for the claim.

Heidi J. T. Exner is an award-winning white-collar crime fighter, and she is passionate about making the world a better place. She is the founding partner of Ethical Edge Advisors, the founder and chair of the Exner Foundation, and is advancing licensure to practise law in New York State and Alberta. She welcomes you to find her on LinkedIn or check out her biography page on Ethical Edge’s website.

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