The Ontario Court of Appeal decision in Aroma Franchise Co., v Aroma Espresso Canada 2024 ONCA 839 clarifies the standard for arbitrator impartiality and disclosure under Ontario’s International Commercial Arbitration Act, 2017, which incorporates the UNCITRAL Model Law on International Commercial Arbitration.
The dispute arose from a Master Franchise Agreement between Aroma Espresso Bar Canada Inc. (“Aroma Canada”) and Aroma Franchise Company Inc. (“Aroma Franchise”). Arbitration began in 2019. While that arbitration was ongoing, Aroma Canada’s counsel, retained the same arbitrator for a separate and unrelated arbitration involving another client. This second engagement was not disclosed to the opposing party. When the arbitrator later ruled in favor of Aroma Canada, Aroma Franchise applied to the Ontario Superior Court to set aside the award for reasonable apprehension of bias, citing the non-disclosure.
The application judge agreed, finding that the undisclosed appointment created an appearance of bias and that the arbitrator’s failure to disclose breached his duty of impartiality. She relied partly on pre-appointment correspondence between counsel emphasizing a desire for a “neutral” arbitrator.
On appeal, the Court of Appeal reversed that decision and reinstated the award. It held that the application judge had misapplied the objective test for bias by relying on subjective expectations and private correspondence not shared with the arbitrator. The proper standard is whether a reasonable, informed person would conclude that the arbitrator might not act impartially. Since the second arbitration was unrelated, involved different parties and issues, and generated no unfair advantage, there was no objective basis for apprehending bias. A single, unrelated engagement by the same law firm does not, on its own, give rise to justifiable doubts about impartiality. Therefore, the arbitrator had no duty to disclose the second appointment.
In the end, the appeal was allowed, the award reinstated, and the appellants were awarded costs.