In Aroma Franchise Company, Inc. et al v. Aroma Espresso Bar Canada Inc. et al, 2026 ONSC 768, the Court dismissed a second application to set aside two arbitral awards in the “Aroma saga”, this time on various grounds pursuant to Article 34 of the Model Law (procedural breach relating to inability to present one’s case on an issue, jurisdiction, and sufficiency of reasons – the ground relating to jurisdiction was straightforward and is not addressed in this case summary). Although the Court found that the Applicants were unable to present their case on one issue (whether one individual was a proper party to the arbitration), such that Article 34(2)(ii) of the Model Law was met, it concluded that this issue was superfluous and accordingly did not exercise its discretion to set aside the award because the issue was not material.
The previous Aroma decisions on reasonable apprehension of bias
This is the latest decision in the “Aroma saga”, which relates to the attempts by Aroma Franchise Company, Inc. and others (“the Applicants”) to set aside a final award and a cost award issued in 2022. The final award was initially set aide by the Court in Aroma Franchise Company, Inc. v Aroma Espresso Bar Canada Inc., 2022 ONSC 6188, on the ground of reasonable apprehension of bias of the arbitrator. This decision was then overturned by the Ontario Court of Appeal in Aroma Franchise Company, Inc. v Aroma Espresso Bar Canada Inc., 2024 ONCA 839. These two decisions led to extensive commentary on the issue of reasonable apprehension of bias, including in four previous Arbitration Matters case notes (see: Ontario – Multiple arbitral appointments give rise to reasonable apprehension of bias – #734 – Arbitration Matters, Lisa Reflects (2023): Aroma – the blockbuster case of 2023? – #804 – Arbitration Matters, Ontario – Arbitrator no jurisdiction to hear challenge for bias after partial final award – #691 – Arbitration Matters, and Colin’s 2024 Hot Topic: ONCA weighs in on Bias in Aroma – #888).
The Applicants initially sought to set aside the two awards on various grounds, but only the reasonable apprehension of bias ground was fully addressed in the previous decisions. The ONCA’s decision on the issue of reasonable apprehension of bias remitted the matter to the Ontario Superior Court of Justice to consider the other grounds for set aside on which the Applicants relied.
The Court’s decision on the other grounds
The Court dismissed the various other grounds the Applicants raised pursuant to Article 34(2) of the Model Law, recalling Consolidated Contractors Group S.A.L. (Offshore) v. Ambatovy Minerals S.A., 2017 ONCA 939. It found that the grounds set in Article 34 are “narrow” and that courts should show a high degree of deference to awards of international arbitral tribunals under the Model Law.
- Applicants’ ability to present their case pursuant to Article 34(2)(a)(ii) of the Model Law
The Court found that the arbitrator had decided one issue without hearing submissions from the Applicants. Specifically, the arbitrator concluded that an individual related to the corporate entities involved in the matter was not a proper party to the arbitration. The Court concluded that it was a breach of Article 34(2)(a)(ii) to make this finding without permitting the parties to make submissions on this point.
However, the Court did not set aside the awards on this basis, declining to exercise its discretion to do so conferred by the “permissive” language of Article 34(2) of the Model Law, which provides “may be set aside by the court (…)”. The Court stated that the breach of procedural fairness in this case was a serious one, but ultimately the issue was “superfluous” and based on comments of the arbitrator that were obiter in that they “did not address a live issue”. This was because the issue of whether the individual was a proper party to the arbitration was not material given the arbitrators’ other findings on the individual’s lack of personal liability in an event.
The Court distinguished a previous ONSC case, Mattamy (Downsview) Limited v KSV Restructuring Inc. (Urbancorp), 2023 ONSC 3013, which held that courts “should not engage in any assessment of whether the outcome would have been different if the procedural unfairness had not occurred”, on the basis that the issue in this case was not material.
- Sufficiency of reasons pursuant to Articles 31 and 34(2)(a)(iv) of the Model Law
The final award was 329 paragraphs and 33 single-spaced pages. The Applicants raised numerous issues challenging the adequacy of reasons, including that one of their central claims was not addressed, and that the award had few citations to the documents in evidence, the contract and the transcript.
The Court relied on previous cases and commentary to frame the test on sufficiency as “whether the Award is responsive to the live issues and provides and analysis of them that is intelligible to the parties and provides a basis for meaningful appellate review” (para. 60).
The Court concluded that it was not appropriate to address each alleged deficiency raised by the Applicants and recalled that it was not necessary for arbitrators to “deal with each point made by a party or refer to all relevant evidence” or to quote from the contract to show that he engaged in an exercise of contractual interpretation.
As to the Applicants’ argument that one of their central claims, relating to the breach of confidentiality, was ignored, the Court found that the arbitrator was alive to this issue but that the focus of the parties was mainly on other issues.
As the to the Applicants’ argument based on various “logical inconsistencies” in the award, the Court found that these did not go to the sufficiency of the reasons but rather challenged the merits of the decision.
On the whole, the Court found that the requirement to provide reasons had been met, and that Article 34(2)(a)(iv) was not intended to be a “back door” to challenge the merits of an arbitrator’s decision by a party that disagrees with a decision (para. 64).
Commentary
The various grounds invoked by the Applicants, who had also raised the apprehension of bias ground dismissed by the ONCA in 2024, amounted to a disparate list of criticisms.
This decision confirms the narrowness of the grounds to set aside awards pursuant to Article 34 of the Model Law and restates established principles on jurisdiction and sufficiency of reasons.
The Court’s conclusion on one issue is significant – that it is not enough to show that one of the grounds of Article 34(2) of the Model Law is met in relation to one of the issues addressed in the arbitral award, but that the ground must be “material to a live issue”. Thus, a breach of procedural fairness relating to the right to be heard on an issue which falls within the ground at Article 34(2)(ii) will not be sufficient to set aside an award if it relates to a superfluous issue or an issue discussed in obiter in the award.
This decision thus arguably raises the bar to set aside awards even further, with a new requirement that the Article 34(2)(ii) breach be “material to the live issue” in the case. This is consistent with the overall framework of the Model Law, which is aimed at recognising and enforcing arbitral awards, as setting aside arbitral awards for non-material procedural breaches would open the door to setting aside arbitral awards for technicalities. The new emphasis on the materiality of the breach will likely spark debates on future cases as to whether a procedural beach is minor or major.