Summary

[1] Arbitration is an important, statutorily sanctioned, mode of dispute resolution. Undergirding its acceptability is the core principle that an arbitrator must be impartial. An arbitrator must not actually be biased, nor can there be a reasonable apprehension that the arbitrator is biased.

[2] An international commercial arbitration seated in Ontario is governed by the UNCITRAL Model Law on International Arbitration (the "Model Law"), adopted in the International Commercial Arbitration Act, 2017, S.O. 2017, c. 2, Sched. 5. The Model Law contains provisions that promote the core principle of arbitral impartiality. Article 12(1) imposes a duty on an arbitrator to disclose - before appointment and as the arbitration proceeds - any circumstance likely to give rise to justifiable doubts about the arbitrator's impartiality. Article 12(2) permits a challenge to the arbitrator or the award that was made if circumstances exist that give rise to justifiable doubts about the arbitrator's impartiality, as long as the person making the challenge was unaware of the circumstances when they participated in the arbitrator's appointment. Justifiable doubts about impartiality is an equivalent phrase to reasonable apprehension of bias.

[3] Although the duty to disclose and the test for a successful challenge are easy to articulate, their interaction and application in differently nuanced cases can be more challenging.

[4] High stakes arbitrations often involve arbitrators who are in high demand, sophisticated parties, and experienced lawyers. This gives rise to the prospect that an arbitrator might have had prior engagements or be asked to undertake future ones, in which the parties or lawyers have some involvement. How the duty to disclose, and the right to successfully challenge an arbitral outcome, apply based on different versions of this potential scenario have recently been extensively canvassed by courts in the United Kingdom: Halliburton Company v. Chubb Bermuda Insurance Ltd., [2020] UKSC 48, [2021] 2 All E.R. 1175, and Aiteo Eastern E & P Company Ltd. v. Shell Western Supply and Trading Ltd. & Ors, [2024] EWHC 1993 (Comm). This case requires those issues to be considered in yet another variation of this potential scenario.

[5] The appellants and respondents engaged in a lengthy international commercial arbitration (the "MFA Arbitration") before P. David McCutcheon (the "Arbitrator") addressing disputes that arose under a Master Franchise Agreement (the "MFA"). The MFA Arbitration was initiated by a request to arbitrate in May 2019. It culminated in a Final Award made in January 2022. In the Final Award, the Arbitrator found that the respondents had wrongfully terminated the MFA, under which the appellant, Aroma Espresso Bar Canada Inc. ("Aroma Canada"), served as the master Canadian franchisee for Aroma cafes in Canada. He awarded substantial damages to Aroma Canada.

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Toronto Commercial Arbitration Society and ADR Institute of Canada