Top arbitration cases of 2022: Aroma Franchise v. Aroma Espresso Bar

4 minute read
25 January 2023


Ontario Court confirms that once an arbitrator issues a Final Award, even a Partial Final Award, allegations of arbitrator bias under Article 34 of the Model Law are properly before the Court


The parties were involved in an arbitration over the termination of the Applicant's Aroma Franchise Company Inc. ("Aroma Franchise") master franchise agreement with the Respondent, Aroma Espresso Bar Canada Inc. ("Aroma Canada"). The dispute was arbitrated under the Ontario International Commercial Arbitration Act, 2017, which adopts the UNCITRAL Model Law (with its 2006 amendments) in Ontario.

The arbitrator delivered a Partial Final Award requiring the Applicant to pay the Respondent $10.2 million in damages. The arbitrator reserved the issues of interest and costs for a further award. In delivering the Partial Final Award by email, the arbitrator inadvertently copied another lawyer at the Respondent's law firm. This prompted the Applicant to ask the arbitrator a series of questions by email, revealing the arbitrator was appointed on an unrelated matter by another counsel at the Respondent's firm.

The Applicant brought an application to set aside the award, inter alia, on the basis of "a reasonable apprehension of bias." The Respondent brought a motion to stay or dismiss the application. The Respondent argued that the Court lacked jurisdiction to set aside an award for bias since the arbitration was not terminated under Article 32 of the Model Law (because issues in respect of interest and costs remained to be decided). The Respondent contend that, because the arbitration was ongoing, this required the Applicant to proceed under Article 13(2) of the Model Law and submit the bias allegation to the arbitrator for his determination in the first instance.


The Court dismissed the Respondent's motion and held that the Applicant was not required to challenge the arbitrator's impartiality under Article 13 of the Model Law before bringing an application to set aside an award under Article 34. Specifically, the Court held that Articles 12 and 13 of the Model Law do not apply to a challenge of an award after a final award on the substantive issues has been released and the arbitrator is "functus officio" (that is, having performed his or her office).


The court affirmed that challenges to an award based on reasonable apprehension of bias amount to claims of unequal treatment, which violates Article 18 of the Model Law. Accordingly, the Applicant was correct to proceed under Article 34 in applying to set aside the Partial Final Award. Once a final award is rendered on the substantive issues in the proceeding, a party to an arbitration can bring a court application to set aside that award on the grounds of bias, before the arbitration is terminated, notwithstanding the fact that the party has not challenged the arbitrator's impartiality in the first instance under Articles 12 and 13 of the Model Law. 

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