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Arbitration - Bias in Arbitrator. Aroma Franchise Company, Inc. v. Aroma Espresso Bar Canada Inc.
In Aroma Franchise Company, Inc. v. Aroma Espresso Bar Canada Inc. (Ont CA, 2024) the Ontario Court of Appeal allowed an appeal, here in an international arbitration bias context.
Here the court considers the Canadian objective standard for reasonable apprehension of bias, concluding that the presumption of impartiality applies to arbitrators:(6) The Test for Reasonable Apprehension of Bias is Objective
[127] Unlike the situation with disclosure, where some regimes use a subjective standard while others (including the Model Law) use an objective standard, reasonable apprehension of bias in Canadian law is determined on an objective standard: Wewaykum Indian Band v. Canada, 2003 SCC 45, [2003] 2 S.C.R. 259, at para. 67. It is that standard that is to be used in the context of arbitrations.
[128] In Committee for Justice and Liberty et al. v. National Energy Board et al., 1976 CanLII 2 (SCC), [1978] 1 S.C.R. 369, at p. 394, the test was described in objective terms:The proper test to be applied in a matter of this type was correctly expressed [as follows:]…. [T]he apprehension of bias must be a reasonable one, held by reasonable and right minded persons, applying themselves to the question and obtaining thereon the required information…. [The] test is “what would an informed person, viewing the matter realistically and practically—and having thought the matter through—conclude. Would he think that it is more likely than not that [the decision-maker], whether consciously or unconsciously, would not decide fairly.” [Emphasis added.] [129] In Jacob Securities, Mew J. reached the conclusion that the same test applies in a case governed by the Model Law, even though the Model Law does not expressly use the phrase reasonable apprehension of bias: at paras. 25-26, 33, 35-37.[9]
[130] The English common law test for a reasonable apprehension of bias is also objective: “the question is whether the fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased”: Porter v. Magill, [2001] UKHL 67, [2002] 2 A.C. 357, at para. 103; see also Halliburton, at para. 52; Aiteo, at para. 45. As the court pointed out in Halliburton, at para. 54, that (English) “objective test of the appearance of bias is similar to the test of ‘justifiable doubts’ which is adopted in [Article 12(2) of the Model Law]”.[10]
[131] Even the IBA Guidelines on when an arbitrator must decline an appointment or refuse to continue to act, use an objective standard. They refer to the existence or emergence of “facts or circumstances ... which, from the point of view of a reasonable third person having knowledge of the relevant facts and circumstances, would give rise to justifiable doubts as to the arbitrator’s impartiality or independence”, and refer to doubts being justifiable “if a reasonable third person, having knowledge of the relevant facts and circumstances, would reach the conclusion that there is a likelihood that the arbitrator may be influenced by factors other than the merits of the case as presented by the parties in reaching [his or her decision]”: General Standard 2.
[132] There are several consequences that flow from or are related to this test and its objective nature.
(i) The Presumption of Impartiality Applies to Arbitrators
[133] The first consequence is that the objective test is to be applied against the backdrop of a strong presumption of impartiality: Wewaykum, at para. 76. In the case of a judge, a reasonable person, before concluding that a reasonable apprehension of bias existed, would require clear evidence that the judge was not approaching the matter with an open mind fair to all parties: R. v. S. (R.D.), 1997 CanLII 324 (SCC), [1997] 3 S.C.R. 484, at para. 49. The “presumption of impartiality carries considerable weight” because a judge’s “authority depends upon that presumption”: Wewaykum, at para. 59.
[134] This court has held that the strong presumption applies beyond judges to adjudicators whose mandate comes from a statute: Ontario Provincial Police v. MacDonald, 2009 ONCA 805, 255 O.A.C. 376, at para. 44 (adjudicator under the Police Services Act, R.S.O. 1990, c. P.15); Terceira v. Labourers International Union of North America, 2014 ONCA 839, 122 O.R. (3d) 521, at para. 27 (member of the Ontario Labour Relations Board serving as adjudicator).
[135] In Jacob Securities, a case dealing with a privately appointed arbitrator, Mew J., citing Terceira, stated that the strong presumption of impartiality “is equally applicable to arbitrators whose function is in the nature of judicial determination”: at para. 40. The application judge also referred to the presumption. I agree with Mew J.’s conclusion.
[136] In oral argument, counsel for the respondents asserted that privately appointed arbitrators do not benefit from the presumption. I do not accept that argument.
[137] The legislature allows parties to entrust their disputes to arbitration and restricts recourse to court when they have done so. It would undermine the integrity of this legislatively endorsed system of dispute resolution, as well as confidence in the finality of the results coming out of it, to hold there to be no presumption that those results were reached by an impartial decision-maker. This would place the entire arbitral scheme under an unwarranted cloud. At paras 138-144 the court considers the objective standard for reasonable apprehension of bias and the application judge's treatment of it.
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