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The window to disclose doesn’t close: Failure by an arbitrator to disclose new mandates may lead to a finding of reasonable apprehension of bias

Why this Case Matters

In Aroma Franchise Company Inc. et al. v. Aroma Espresso Bar Canada Inc. et al., 2023 ONSC 1827 (“Aroma”) the Ontario Superior Court of Justice set aside two arbitral awards on the basis that there was a reasonable apprehension of bias. The basis for this finding was, primarily, that the arbitrator accepted a second engagement with the same law firm, and the same senior counsel, mid-way through the Aroma arbitration. This fact was not disclosed until after the final award was rendered.

While a determination of bias is driven by the facts of each case and are context specific, this case demonstrates that a failure to disclose past and current engagements, including engagements accepted by an arbitrator while in the midst of an existing arbitration, may, in certain circumstances, lead to a finding of a reasonable apprehension of bias.


A dispute arose between Aroma Espresso Bar Canada Inc. (“AC”), the respondents, and Aroma Franchise Company Inc. (“AF”), the applicants, in relation to, among other things, wrongful termination of a master franchise agreement (the “Agreement”). Pursuant to the Agreement, the parties proceeded to arbitration pursuant to the arbitration agreement contained within the Agreement. Notably, the Agreement had a clause specifying that the chosen arbitrator must have “no prior social, business or professional relationship with either party”. The parties rejected three potential arbitrators before selecting one that had not acted as a mediator or arbitrator previously for either party or their lawyers. 

The arbitration process took place over more than two years. Ultimately, the arbitrator determined that AF had wrongfully terminated the Agreement and ordered damages in excess of $10 million, payable to AC. The arbitrator delivered the final award to counsel by email on January 12, 2022 (the “Final Award”). When the arbitrator sent the email, he copied a junior lawyer from the respondent’s law firm that had not been involved in the Aroma arbitration. After further correspondence, it was determined that the respondent’s firm had engaged the arbitrator as the sole arbitrator for another matter 17 months into the Aroma arbitration (the “Second Engagement”). The junior lawyer that was inadvertently copied was counsel on the Second Engagement. The Second Engagement involved a different party, but the same firm and senior counsel.

The applicants brought an application to set aside the Final Award on the basis that there was a reasonable apprehension of bias.

The Ontario Superior Court’s Determination on the Application

Framework for Analysis

The Court’s analysis of the issue began by considering the UNCITRAL Model Law on International Arbitration (the “Model Law”), which states that an arbitral award may be set aside by the Court in very limited circumstances.

One of the grounds to set aside an arbitral award is if the arbitral procedure was not conducted in accordance with the Model Law (see Article 34(2)(a)(iv)). Pursuant to Article 18, these circumstances include where an arbitrator’s conduct gives rise to a reasonable apprehension of bias.[1]

The Court also considered the IBA Guidelines on Conflicts of Interest in International Arbitration, (the “IBA Guidelines”). While the parties did not expressly adopt the IBA Guidelines, the Court accepted that the guidelines are “widely recognized as an authoritative source of information as to how the international arbitration community may regard particular fact situations in reasonable apprehension of bias cases”.[2]

The IBA Guidelines set out colour-coded lists of specific situations indicating whether they warrant disclosure or disqualification of an arbitrator.[3] This includes potentially disclosing appointments made by the same party or the same counsel appearing before an arbitrator, while the case is ongoing, depending on the circumstances.[4] The applicants argued that the circumstances were such that the arbitrator ought to have disclosed the Second Engagement.

Application to Aroma Case

The test for reasonable apprehension of bias is whether, in the eyes of a neutral third party, there is a reasonable apprehension of bias or justifiable doubt as to a lack of partiality or independence. There is no need to prove it actually exists.[5]

The Court noted, based on the provisions of the arbitration agreement between the parties, that it was very important to both parties that the selected arbitrator be neutral and not have a professional or personal relationship with either party or their counsel. In its decision, the Court concluded that this point would be no less important while the arbitration was extant.[6]

In determining that there was a reasonable apprehension of bias, the Court honed in on the above issue along with the following findings:

  • The Second Engagement was “hidden” from the applicants for about 15 months while the Aroma arbitration was ongoing;
  • The Second Engagement was only discovered due to the inadvertent copying of junior counsel on an email sent by the arbitrator; and 
  • The fact that the same junior later became involved with the Aroma matter following this correspondence begs the question as to whether the arbitrator was already aware of this. 

The Court concluded that, in view of all of the above, the circumstances gave rise to a reasonable apprehension of bias.

Concluding Thoughts

The Aroma decision provides an example of circumstances where a Court may be prepared to set aside an arbitral award on the basis of a reasonable apprehension of bias. The Court reiterated that such a consideration is context specific, and driven by the facts of each case. [7] Of particular note is that the arbitration agreement provided that the arbitrator was to have had no prior involvement with the parties or their counsel. This appears to have been a key consideration by the Court when reaching its decision. 

It is likely safe to say that the fact that an arbitrator accepts an unrelated engagement from the same law firm that co-engaged them does not, in and of itself, give rise to a reasonable apprehension of bias.[8] Nevertheless, arbitrators may consider the extent of their ongoing disclosure obligations to the parties to extant arbitrations when accepting new mandates and may consider amendments to their standard engagement terms.

[1]Aroma, at para. 29.

[2]Aroma, at para. 33 citing Jacob Securities Inc. v. Typhoon Capital B.V.2016 ONSC 604.

[3] Red for no-go (subject to a potential waiver for items on the waivable red list), orange for potentially a problem and green for go: see Aroma at para. 36.

[4]IBA Guidelines on Conflicts of Interest in International Arbitration, (London: International Bar Association, 2014) at p. 19.

[5]Aroma, at para. 70 citing J. Brian Casey on page 412 in Arbitration Law of Canada: Practice and Procedures, 4th ed. (Huntington: JurisNet LLC 2022).

[6]Aroma, at para. 89.

[7]Aroma, at paras. 72, 88.

[8]Aroma, at para. 83.

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