Aroma Franchise Company Inc v Aroma Espresso Bar Canada Inc

6 minute read
29 January 2024

Ontario Court sets aside award due to reasonable apprehension of bias arising from arbitrator's failure to disclose multiple appointments.


The Applicants, including Aroma Franchise Company Inc., and the Respondents, including Aroma Espresso Bar Canada Inc., were engaged in a dispute concerning the termination of a master franchise agreement (the Agreement). The Agreement contained an arbitration clause and specifically noted that the "arbitrator must be either a retired judge, or a lawyer experienced in the practice of franchise law, who has no prior social, business or professional relationship with either party." An Arbitrator was ultimately selected and, following a lengthy arbitration process, the Applicants were ordered to pay $10 million in damages for wrongful termination.

Prior to releasing their decision, the Arbitrator wrote to the parties to advise that the Final Award was completed. In this note, they inadvertently copied a lawyer from the Respondents' law firm who was not involved in the Aroma arbitration. After repeated inquiries from the Applicants regarding why this lawyer was copied on the matter, the Arbitrator disclosed that, prior to the release of their decision, they were engaged by the Respondents' law firm in an unrelated and ongoing matter (the Other Sotos Arbitration). The Applicants filed an application to set aside the Final Award and Cost Awards based on reasonable apprehension of bias and/or the cumulative effect of the alleged improprieties.


The Ontario Superior Court of Justice found that there was a reasonable apprehension of bias. As a result, it set aside the Arbitrator's awards and directed that a new arbitration be conducted by a new arbitrator.

Pursuant to the UNCITRAL Model Law on International Arbitration (the Model Law), which is adopted as Schedule 2 of Ontario's International Commercial Arbitration Act, 2017, an arbitral award may be set aside where the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the Model Law. Specifically, Article 18 of the Model Law requires parties to be treated with equality and given a full opportunity to present their case.

The Court affirmed the principle that where an arbitrator's conduct gives rise to a reasonable apprehension of bias, Article 18 is violated. Similarly, the Court noted that Article 12 of the Model Law provides that an arbitrator "shall disclose any circumstances likely to give rise to justifiable doubts as to his impartiality or independence." This obligation continues from the time of appointment and throughout the arbitral proceeding. Moreover, this duty must be met "without delay."

The Court also relied on the 2020 UK Supreme Court decision in Halliburton Company v Chubb Bermuda Insurance Ltd [2020] UKSC 48. The UKSC noted that most arbitrations are private (in contrast to public judicial proceedings), such that parties may have no way of knowing whether their arbitrator is appointed on more than one case concerning the same or overlapping subject matter. This puts a premium on frank disclosure.

In addition to Article 12, the Superior Court relied on the 2014 IBA Guidelines on Conflicts of Interest in International Arbitration (the IBA Guidelines), citing them as an authoritative reference for assessing a reasonable apprehension of bias. The IBA Guidelines use a traffic-light framework for determining when doubts regarding an arbitrator's impartiality and independence must be disclosed: a red list for justifiable doubts, an orange list for potential doubts and a green list for no apparent or actual conflicts. In reviewing the IBA Guidelines, the Court noted the determination of whether a reasonable apprehension of bias exists is "extremely fact specific."

With this framework in mind, the Court considered whether the Arbitrator's failure to disclose his role in the other arbitration at issue gave rise to a reasonable apprehension of bias. The Court found that the answer to this question "comes down to context," but that these particular circumstances gave rise to a reasonable apprehension of bias. The Court reviewed initial correspondences between the parties regarding potential arbitrators and concluded that it was very important to the parties (and particularly to the Applicants, who were not based in Canada) that the selected arbitrator not have any professional or personal relationship with either party or their counsel (though there is no suggestion that the Arbitrator knew this). Moreover, the fact that the Arbitrator was the sole arbitrator in both engagements (as opposed to being part of a panel) weighed in favour of disclosure. The Arbitrator's failure to disclose the other arbitration for 15 months while the parties' arbitration was ongoing would give rise to a reasonable apprehension of bias.


An arbitrator's failure to disclose any facts or circumstances that could reasonably raise justifiable doubts about their impartiality may inherently create such doubts about their impartiality. The fact that an arbitrator is appointed to two or more arbitrations by the same lawyer or law firm does not in and of itself give rise to a reasonable apprehension of bias.

However, the failure to disclose these related appointments could give rise to justifiable doubts about the arbitrator's impartiality. The purpose of disclosure is to enable the parties to assure themselves that there is no legitimate concern and to ensure transparency on the part of the arbitrator. The disclosure obligation is ongoing, and while the acceptance of multiple appointments may not constitute justifiable doubts as to an arbitrator's impartiality or independence, the failure to disclose such multiple appointments may do so.

An appeal of this decision was heard before the Ontario Court of Appeal on December 6, 2023. It will likely further clarify the scope of an arbitrator's duty to disclose multiple appointments.

Aroma Franchise Company Inc et al v Aroma Espresso Bar Canada Inc et al, 2023 ONSC 1827

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