What happens if my contract has an arbitration clause in Ontario?

If your contract contains an arbitration clause, disputes covered by it are generally resolved through private arbitration rather than the courts. Ontario's Arbitration Act, 1991 governs domestic arbitrations, and courts will usually stay a lawsuit and refer the parties to arbitration if one side invokes a valid arbitration clause.

Arbitration is a private process: parties present evidence and arguments to an arbitrator (or panel), who issues a binding decision called an award. It can be faster and more confidential than court, and parties often have more flexibility to choose an arbitrator with specific expertise in their industry.

However, arbitration is not without downsides. Arbitrator fees can be significant, and the right to appeal an arbitration award to the courts is very limited — courts generally will not review the merits of the award, only whether proper process was followed or there was a serious error.

Consumer contracts sometimes contain arbitration clauses, but Ontario's Consumer Protection Act, 2002 renders mandatory arbitration clauses in consumer agreements unenforceable, allowing consumers to pursue court claims or class actions instead. Commercial parties generally do not have this protection.