The dispute began in 2019 when Aroma Franchise Company terminated the MFA, alleging a breach of an exclusive coffee supply arrangement. Aroma Canada denied the breach and initiated arbitration as per the agreement, which required disputes to be resolved by a neutral arbitrator. However, during the arbitration process, concerns arose about the arbitrator’s impartiality due to their involvement in an unrelated arbitration.
The arbitrator had been retained by counsel for one party in a separate, unrelated case. While the arbitrator did not disclose this subsequent engagement to the parties in the Aroma case, the Superior Court of Justice initially found that this omission created a reasonable apprehension of bias. The lower court relied on correspondence between the parties and the International Bar Association’s Guidelines on Conflicts of Interest in International Arbitration (IBA Guidelines) to support its decision.
However, the Ontario Court of Appeal reversed this ruling, emphasizing the importance of applying objective standards for arbitrator impartiality. The Court clarified that the duty to disclose potential conflicts of interest is governed by the rules chosen by the parties, such as the UNCITRAL Model Law on International Arbitration (Model Law). Under Article 12(1) of the Model Law, an arbitrator must disclose circumstances “likely” to give rise to bias—an objective standard. The Court distinguished this from the IBA Guidelines, which use a subjective test based on the parties’ perceptions.
The Court of Appeal concluded that the lower court had incorrectly applied the IBA Guidelines’ subjective test instead of the Model Law’s objective standard. It found no circumstances that could objectively give rise to bias, and thus, the arbitrator had no obligation to disclose the unrelated arbitration under Article 12(1). The Court also reiterated that a failure to disclose is not determinative in assessing bias, as the objective standard presumes impartiality unless proven otherwise.
This landmark decision highlights the importance of understanding the arbitration rules and laws governing the process. It serves as a reminder that parties must carefully consider the implications of their chosen arbitration rules and the jurisdiction where the arbitration is seated. The ruling also reinforces the strong presumption of arbitrator impartiality under the Model Law, emphasizing that subjective concerns of the parties do not override objective assessments of bias.
The burden of proof lies with the party challenging the arbitrator’s impartiality to demonstrate that the circumstances at hand meet the objective standard for bias under Article 12(1) of the Model Law. In this case, the Court of Appeal found that the arbitrator’s involvement in an unrelated arbitration did not constitute a circumstance “likely” to give rise to bias. The Court highlighted that the arbitrator’s failure to disclose the unrelated arbitration was not determinative, as the focus must remain on whether the undisclosed information could objectively create a reasonable apprehension of bias.
The decision also underscores the importance of distinguishing between the Model Law and the International Bar Association’s Guidelines on Conflicts of Interest in International Arbitration (IBA Guidelines). While the Model Law applies an objective standard for assessing bias, the IBA Guidelines adopt a more subjective approach, focusing on how the parties might perceive the arbitrator’s impartiality. The Court of Appeal made it clear that the parties’ choice of arbitration rules governs the analysis, and in this case, the Model Law’s objective standard took precedence.
For practitioners and parties involved in arbitration, the *Aroma* decision reinforces the need to carefully consider the arbitration rules and the law of the seat of arbitration. The ruling also highlights the importance of understanding the distinctions between different arbitration guidelines and rules, as these can significantly impact the outcome of challenges to an arbitrator’s impartiality. By applying the Model Law’s objective standard, the Court of Appeal has provided much-needed clarity on the balance between arbitrator disclosure obligations and the presumption of impartiality.
Conclusion
The Ontario Court of Appeal’s decision in *Aroma Franchise Company, Inc. v. Aroma Espresso Bar Canada Inc.* provides clarity on the objective standards for assessing arbitrator impartiality and disclosure obligations. The ruling reinforces the strong presumption of impartiality under the UNCITRAL Model Law and emphasizes the importance of adhering to the arbitration rules chosen by the parties. This landmark case serves as a reminder to practitioners and parties involved in arbitration to carefully consider the governing laws and rules, as well as the distinctions between different arbitration guidelines, when evaluating potential conflicts of interest and challenges to an arbitrator’s impartiality.
Frequently Asked Questions (FAQ)
What was the outcome of the Ontario Court of Appeal’s decision in the Aroma case?
The Ontario Court of Appeal overturned the lower court’s ruling, finding no reasonable apprehension of bias. The arbitrator’s failure to disclose an unrelated engagement did not meet the objective standard for bias under the UNCITRAL Model Law.
What is the difference between the UNCITRAL Model Law and the IBA Guidelines in arbitration?
The UNCITRAL Model Law applies an objective standard for assessing arbitrator bias, focusing on whether circumstances are “likely” to create bias. In contrast, the IBA Guidelines use a subjective test, considering the parties’ perceptions of impartiality.
What is the burden of proof in challenging an arbitrator’s impartiality?
The party challenging the arbitrator’s impartiality must provide objective evidence of bias under Article 12(1) of the UNCITRAL Model Law. Subjective concerns alone are insufficient to overturn the presumption of impartiality.
How does this ruling impact future arbitration cases?
This ruling emphasizes the importance of understanding the arbitration rules and laws governing the process. It highlights the need for parties to carefully consider the implications of their chosen arbitration rules and jurisdiction when evaluating potential conflicts of interest.
