The plaintiff, Vento Motorcycles, Inc. (“Vento”), brought a claim against Mexico under Chapter 11 of the North American Free Trade Agreement (“NAFTA”). A tribunal was constituted to hear the claim. The tribunal held, unanimously, that Mexico did not breach its obligations under NAFTA and dismissed Vento’s claim.[1]
Vento later learned that the Mexico-appointed arbitrator had been communicating with lead counsel for Mexico. Vento brought an application to set aside the arbitral award. The application judge found that the Mexico-appointed arbitrator’s conduct gave rise to a reasonable apprehension of bias but refused to set aside the tribunal’s award. The application judge found that the apprehension of bias did not taint the tribunal, as the two other arbitrators were impartial. The judge also found that the substantial costs and time involved in redoing the arbitration supported the court’s use of discretion to uphold the award.
The Court of Appeal (“CA”) allowed the appeal and found that the application judge erred in failing to set aside the arbitral award. The CA found that a reasonable apprehension of bias is a major procedural defect. Once a reasonable apprehension of bias is found, the court has no discretion to deny the remedy simply because the issue seems not serious enough, or because providing the remedy would cause inconvenience. The CA confirmed that a reasonable apprehension of bias by a single member of the tribunal is sufficient to “poison the well” and taint the entire adjudicative process.[2] This decision has established a stringent benchmark for determining a reasonable apprehension of bias in arbitration. There is no room for judicial discretion once a reasonable apprehension of bias has been found concerning a member of the arbitral tribunal.
[1] Vento Motorcycles, Inc. v. United Mexican States, 2023 ONSC 5964