Ontario Court of Appeal Sets Aside NAFTA Award Owing to Apparent Bias of Party-Appointed Arbitrator │ Canada

In Vento Motorcycles, Inc v Mexico, 2024 ONCA 82, the Ontario Court of Appeal set aside an award on the basis that Mexico offered undisclosed professional opportunities to its party-appointed arbitrator.

In overturning a lower court decision, the Ontario Court of Appeal clarified that an arbitral award must be set aside where there is a reasonable apprehension of bias with regard to one of the tribunal members. A party does not have to prove that bias may have impacted the outcome of the award.

This article highlights the different approaches of the application judge and the Ontario Court of Appeal, as well as the key takeaways for parties and their counsel.

Vento Motorcycles Inc (“Vento”) brought a claim against the United Mexican States (“Mexico”) under Chapter 11 of the North American Free Trade Agreement (NAFTA). After the arbitral panel rendered the final award in favour of Mexico, Vento learned that:

In response, Vento applied to set aside the award based on a reasonable apprehension of bias.

The Ontario Superior Court of Justice found a reasonable apprehension of bias arising from Mexico’s offer of prestigious and valuable professional opportunities to the arbitrator. Although a finding of reasonable apprehension of bias provided the Ontario Superior Court of Justice with a ground to set aside an arbitral award under the UNCITRAL Model Law, it declined to do so. The court cited a number of factors, as follows.

In the court’s view, the potential impact of the breach on the result of the hearings was the most important factor. The arbitrator did not have a deciding vote on the matter. The Ontario Superior Court of Justice held that bias neither undermined the reliability of the result nor produced any real unfairness or real practical injustice.

Vento appealed the decision. In response, Mexico did not challenge the finding that there was a reasonable apprehension of bias, but argued that the lower court properly exercised its discretion to uphold the award.

The Ontario Court of Appeal found that the judge erred in failing to set aside the award. The decision held that, once a finding of reasonable apprehension of bias is made, the adjudicator must be disqualified and the decision is void if it has already been reached. In the words of the court, “nothing less will do”.

The court made the following key points in denying the application judge’s discretion to not set aside the award.

Ultimately, the Ontario Court of Appeal held that that the bias of the arbitrator tainted the decision of the entire panel because “it is impossible to know whether – or to what extent – the participation of a biased member affected a panel’s decision”. The appeal was allowed and the award was set aside.

This decision by the Ontario Court of Appeal clarifies a court’s discretion where bias is found with regard to one tribunal member. The remedy is to set aside the award.

Counsel and arbitrator must carefully monitor and manage any potential bias throughout all stages of an arbitration. The Ontario Court of Appeal decision reinforces a party’s right to an impartial and independent tribunal, even where setting aside a decision may be costly.