In Dhaliwal v Richter International Ltd., 2024 ONSC 5103, the Court dismissed an application to remove an arbitrator for reasonable apprehension of bias. This was a multiple appointments case. The application arose from the non-disclosure of a concurrent mandate, in which counsel for the Respondents also was counsel in another arbitration before the same arbitrator. The Applicants’ challenge for bias was not brought in a timely manner, as required by s. 13(3) of the Arbitration Act, 1991, SO 1991, c 17. In any event, overlapping counsel alone was not a sufficient ground for claiming bias, and no contextual circumstances necessitated disclosure of the concurrent mandate. Also, the arbitrator’s rejection of the Applicants’ evidence of what had been disclosed about the concurrent mandate did not give rise to actual bias.
Background to the application – In May and June 2020, the parties explored submitting their ongoing commercial dispute, which was then in litigation, to arbitration. On June 11, 2020, the parties had a phone call during which they discussed potential arbitrators, one of whom they agreed to appoint in September 2020.
There was conflicting evidence about what was disclosed during the June 11, 2020 phone call about Respondents’ counsel’s experience with the arbitrator. The Applicants stated that they understood counsel had used the arbitrator in the past. The Respondents stated that they conveyed that their counsel was using the arbitrator currently in another ongoing arbitration (the “Other Arbitration”).
In December 2022, the arbitrator issued an award in the Other Arbitration in favour of the party represented by the Respondents’ counsel in this arbitration. The losing party in the Other Arbitration subsequently learned about this arbitration, and the arbitrator’s role in it, and brought a court application to set aside the award in the Other Arbitration on the basis of a reasonable apprehension of bias due to the arbitrator’s failure to disclose the concurrent mandate involving the Respondents’ counsel. That application was successful (and the ruling currently is under appeal).
The Applicants learned about the court ruling setting aside the award in the Other Arbitration, prior to a hearing on the merits in this arbittration.
The Challenge – On January 9, 2023, the Applicants brought a challenge for bias against the arbitrator under s. 13(1) of the Arbitration Act, 1991, SO 1991, c 17, on the basis that the arbitrator had not disclosed he was acting as arbitrator in the Other Arbitration.
The arbitrator dismissed the challenge on the bases that (a) the challenge was not brought in a timely manner, and (b) there was no reasonable apprehension of bias.
The arbitrator subsequently issued a costs award in relation to the challenge for bias. In his reasons, he held that the Applicant had made “false statements” about what had been disclosed about the Other Arbitration in June 2020. The arbitrator also held that the Applicants were responsible for “persistent delay” in the arbitration. The arbitrator awarded costs to the Respondents on a substantial indemnity scale.
The Application – The Applicants brought a court application pursuant to s. 13(6) of the Arbitration Act, 1991, SO 1991, c 17, seeking a declaration that the arbitrator’s mandate was at an end and orders setting aside the denial of their challenge for bias, removing the arbitrator, and requiring that the parties litigate their dispute in court.
(a) Timing – The Court held that the Applicants did not bring their challenge for bias within 15 days of becoming aware of the grounds for the challenge, as required by s. 13(3) of the Arbitration Act, 1991, SO 1991, c 17. The Court stated at paragraph 20: “It was incumbent on the Applicants to tender evidence that was specific enough to enable me to determine that they issued their January 9, 202[3] challenge in a timely way.” The Applicants’ evidence was that they learned of the Other Arbitration, and its ongoing nature, in “late 2022”. Absent a specific date or date range, the Court was unable to determine whether the 15-day deadline was satisfied. The application therefore failed.
(b) Reasonable Apprehension of Bias – The Court found that there was no substantive basis to the allegation of a reasonable apprehension of bias due to the arbitrator’s non-disclosure of his concurrent appointment in the Other Arbitration.
Reviewing the legal principles applicable to such allegations, the Court set out the test for establishing a reasonable apprehension of bias, quoting Committee for Justice and Liberty et al. v National Energy Board et al., [1978] 1 SCR 369 at p. 394:
“What would an informed person, viewing the matter realistically and practically – and having thought the matter through – conclude. Would [they] think that it is more likely than not that [the decision maker], whether consciously or unconsciously, would not decide fairly.”
The Court stated that this analysis is objective and contextual, and involves a high presumption of the adjudicator’s impartiality. In context, the Court viewed the circumstances underlying this application as distinguishable from the circumstances in other cases where courts have found a reasonable apprehension of bias on the part of an arbitrator, which generally involved “significant and perhaps even egregious financial, professional, and/or personal relationships between the parties or their counsel or their experts, on the one hand, and the arbitrator, on the other.”
For example, in Halliburton Company v Chubb Bermuda Insurance Ltd., [2020] UKSC 48 (one of the cases on which the Applicants relied), the arbitrator had taken on three separate mandates arising from insurance issues relating to the same drilling disaster. The second mandate involved one of the same insurers as the first, and the third mandate involved the other party to the second mandate. The Court discussed the concern that a common party to overlapping arbitrations potentially could obtain an unfair advantage by having advance access to the arbitrator’s responses to evidence or arguments (although, in the specific circumstances of Halliburton, the Court found that there was no likelihood of the common party gaining such advantage by reason of the overlapping mandates). The arbitration at issue in the case that is the subject of this case note had no meaningful overlap with the Other Arbitration. The two arbitrations involved different parties, different underlying events, different industries, and different jurisdictional frameworks (the Other Arbitration was international, while this matter was domestic).
The set-aside decision in the Other Arbitration also did not support the Applicants’ claim of a reasonable apprehension of bias. The outcome of the application arising from the Other Arbitration largely turned on the parties’ expectations in selecting an arbitrator; namely, their repeated emphasis on appointing an arbitrator that had no prior relationship with counsel to the parties. There was no evidence of such expectations in the present matter.
The Court’s determination was supported further by the IBA Guidelines on Conflicts of Interest in International Arbitration (the “IBA Guidelines”). The Court summarized the general standards and practical applications set out in the IBA Guidelines, including the four categories of potential conflict scenarios ranging from the “non-waivable red list” (containing scenarios where a stated conflict raises justifiable doubts as to an arbitrator’s impartiality and independence) to the “green list” (containing scenarios that generally do not create a conflict of interest or an appearance thereof). None of these lists include a scenario in which one counsel appears in two ongoing, but unrelated, arbitrations before the same arbitrator.
The Court emphasized at paragraph 58:
“The IBA Guidelines acknowledge that an arbitrator may be engaged more than once by the same counsel. They impose no prohibition against contemporaneous retainers by the same counsel. And, in considering whether and when repeat retainers may give rise to potential bias, they establish a threshold of three retainers by the same counsel in the past three years.”
Because the factual circumstances did not appear on any list in the IBA Guidelines, an individual assessment was required. Given the relatively benign nature of the facts at issue in this case, there was no presumptive obligation for the arbitrator to disclose his appointment in the Other Arbitration. The overlap of counsel with the Other Arbitration alone was not sufficient to dislodge the high presumption of the arbitrator’s impartiality.
(c) Actual Bias – Lastly, the Court considered the Applicants’ submission that actual bias arose from the arbitrator’s costs decision in relation to the challenge for bias, and specifically from his finding that the Applicants’ evidence contained “false statements” about the content of the parties’ June 11, 2020 phone call. The Court held that this credibility finding did not reflect bias: the arbitrator did no more than decide which evidence he preferred and why, which was open to him like it is to all adjudicators. Likewise, this finding did not preclude the arbitrator from being able to hear the Applicants’ evidence with an open mind going forward, as adjudicators routinely make findings of credibility in preliminary motions. The claim of actual bias was rejected.
Contributor’s Notes:
If the factual circumstances underlying this decision sound familiar, there’s good reason for that: the “Other Arbitration” referred to in this decision is the arbitral proceeding that gave rise to Aroma Franchise Company Inc. et al. v Aroma Espresso Bar Canada Inc. et al., 2023 ONSC 1827, one of the most talked about Canadian arbitration cases in 2023. As covered in Arbitration Matters earlier this year (Lisa Reflects (2023): Aroma – the blockbuster case of 2023? – #804 – Arbitration Matters), the Aroma decision was (and continues to be) one of the few Canadian cases to address the issue of disclosure obligations where an arbitrator has taken on multiple appointments concurrently. The issue has not received significant judicial attention since then, making the Dhaliwal decision useful for its contribution and guidance with respect to this somewhat underdeveloped context – at least while we wait for the Ontario Court of Appeal to release its decision on the pending appeal of Aroma, that is. For further discussion of Aroma, see the following previous blog posts: Ontario – Arbitrator no jurisdiction to hear challenge for bias after partial final award – #691 – Arbitration Matters; Lisa’s 2022 Hot Topic #2: Challenging the arbitrator – #700 – Arbitration Matters; Ontario – Multiple arbitral appointments give rise to reasonable apprehension of bias – #734 – Arbitration Matters; and Lisa Reflects (2023): Aroma – the blockbuster case of 2023? – #804 – Arbitration Matters.
In the meantime, this decision should be of some comfort to arbitrators who may have been concerned about courts broadening their approach to when removal of an arbitrator is warranted due to lack of disclosure. In Dhaliwal, the Court explicitly acknowledged that the outcome in Aroma turned on specific contextual circumstances, and did not treat it as creating some general rule or principle relating to an obligation to disclose multiple appointments. If Dhaliwal is any indication, it appears that courts will continue to follow the core, established principles relating to reasonable apprehension of bias, and will engage in a critical analysis of the specific factual context to determine if disclosure is required in a given circumstance – particularly if that circumstance is not addressed in the IBA Guidelines.
Speaking of the IBA Guidelines, it’s interesting to note that, while this application was heard approximately two months after the IBA Council approved the new 2024 IBA Guidelines on Conflicts of Interest in International Arbitration, the Court appears to have conducted its analysis based on the 2014 IBA Guidelines. The 2024 version does not materially change the principles on which the Court relied here; namely, that the “Orange List” generally requires disclosure of more than three appointments in a three-year period, and that situations not appearing on a list require a case-by-case assessment to determine whether the circumstances warrant disclosure. However, the Court did not meaningfully address that even situations on the “Orange List” do not necessarily require disclosure: rather, disclosure may be required, depending on the facts of a given case. The Court in Aroma likewise did not mention this.
Finally, this decision is an important reminder of the timing requirement for bringing an arbitrator challenge. As noted by the Court, section 13(3) of the Arbitration Act, SO 1991, c 17, requires a party to deliver a statement of the grounds for an arbitrator challenge within fifteen days of becoming aware of them. Dhaliwal highlights that the challenging party has a positive onus to tender evidence establishing that they have satisfied this requirement. Failure to provide specific enough evidence to establish this – such as where the evidence only indicates that the requirement may or may not have been met, as was the case in Dhaliwal – will be fatal to a party’s arbitrator challenge, regardless of substantive merit, unless the parties have contracted out of s. 13(3).