December 21, 2023
One ground to object to the selection of a decision maker- be they judge, be they arbitrator – is “a reasonable apprehension of bias.
When it comes to judges, this is a very high standard to meet, as judicial resources are scarce, and courts hate “judge shopping”. Or maybe they just put their fellow judges on a pedestal.
Is the standard for reasonable apprehension of bias less with selection of an arbitrator?
It may be.
In Aroma Franchise Company Inc. et al. v. Aroma Espresso Bar Canada Inc the arbitration clause in the franchise agreement required selection of an arbitrator who “ 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.”
The arbitrator selected seemed to meet the criteria. Except, before hearing the case, they were hired on additional cases involving the lawyers for the franchisees. They did not disclose this to the franchisor.
On an application to a judge to have the arbitration award set aside, the franchisee argued that there was no PRIOR relationship, and in any event, qualified franchising arbitrators are hard to find.
The judge however agreed with the franchisor and found that there was a reasonable apprehension of bias. Unlike in the court system, where it is hard to disqualify a judge, this establishes a much broader approach to disqualifying arbitrators. It is good that the judge applied the wording of the arbitration clause, but that wording was arguably ambiguous, and labelling the disqualification as arising from a reasonable apprehension of bias is harsh. It is also a sad reality that the cost of that whole initial arbitration plus the court hearing, is wasted.
TAKEAWAYS
- Not all arbitration agreements are the same.
- While the agreement is being drafted, turn your mind to potential problems that the arbitration clause may create.
- The time to fix problems is before they occur.
- Be aware of what your arbitration agreement requires.
- Err on the side of caution when selecting an arbitrator.
- Judges seem to be much more prepared to disqualify an arbitrator than a fellow judge.
- This will depend very much on the terms of the agreement.
- While it is well established that prior involvement of a judge in cases involving the same lawyers, or parties, does not create an apprehension of bias, the effect of an arbitration agreement may be quite different.
WHAT WEILERS LLP CAN DO TO HELP YOU
At Weilers LLP, our corporate commercial and dispute resolution lawyers have experience drafting and interpreting arbitration clauses in agreements and do our best to make sure our clients understand them, but in order for that to work, our clients need to be open with us about their understanding of the terms, and of course, need to read the fine print.
If you are dragged into a complex commercial arbitration, Weilers LLP has lawyers well-suited to represent you at a realistic cost, with realistic advice and strong representation. We work closely with our own commercial drafting colleagues within the firm to provide clear and concise opinions. We are able to share the same cooperation with many outside lawyers who appreciate our commitment to our mutual clients.
And at Weilers LLP, we love it when clients ask, “What does it mean?”