The Alberta Court of Appeal has upheld a ruling that rejected the association's request to send the fee dispute to binding arbitration.
Justice Myra Bielby says the association failed to prove that the old deal which expired last year allowed for a new deal to be reached through arbitration.
The association and the government are expected to resume formal contract talks with the help of a mediator early in the new year.
In November, the government imposed a four-year, $463-million wage package on physicians after months of talks.
Health Minister Fred Horne has said the association needs to understand that there is a limit to what the government can afford to spend on physicians.