Vento Motorcycles, Inc. v Mexico: Strict Approach Followed For Findings Of Reasonable Apprehension Of Bias In Adjudicative Processes

The dispute

The Plaintiff, Vento Motorcycles Inc. ("Vento"), brought a claim against the United Mexican States ("Mexico") under Chapter 11 of the North American Free Trade Agreement ("NAFTA") valued between $658 million and $2.748 billion USD. Vento had a joint venture agreement with MotorBike, S.A. for the sale and marketing of motorcycles in Mexico. Vento alleged that Mexico attempted to force it from the Mexican motorcycle market by denying preferential import tariffs, which deleteriously impacted Vento's sales. The parties initiated an arbitration process pursuant to the agreement and established a tribunal to hear the matter in Ontario.

Three arbitrators were appointed to the tribunal after declaring their independence and impartiality. Following the arbitration hearing in November 2019, the tribunal released its decision finding unanimously that Mexico did not breach its NAFTA obligations and dismissing Vento's claim. Following the release of the tribunal's award, Vento learned that one of the tribunal members communicated often with Mexican officials during the arbitration process. Vento sought to set aside the arbitration award in the Ontario courts due to the alleged bias.

The lower court on bias

In the lower court decision, the Ontario Superior Court did conclude that the conduct of Perezcano caused a reasonable apprehension of bias, but described the apprehension of bias as a "procedural error" and noted that it did not taint the tribunal as the two other arbitrators remained impartial and independent. Set aside of the award was denied.

The Court of Appeal on bias

Vento appealed the lower court's decision to the Ontario Court of Appeal. On appeal, Mexico did not challenge the finding of a reasonable apprehension of bias. Instead, it argued that the lower court exercised proper discretion in deciding not to set aside the arbitration award despite that finding of bias.

The Ontario Court of Appeal allowed the appeal and found that the lower court erred in failing to set aside the arbitration award. The Court of Appeal noted that review of procedural errors in arbitration awards requires a balancing exercise between the extent of breach and the effect on the award. The Court of Appeal also confirmed that not every type of breach can be resolved through a balance consideration and that a finding of reasonable apprehension of bias is a major violation of procedural fairness.

Given the panel in Vento v Mexico was constituted by three arbitrators and given the finding of the lower court that bias on the part of one panel member did not taint the decision where the remaining members had no such bias, the Court of Appeal examined the impact of a finding bias in one of a number of decision makers. The Court of Appeal confirmed that the reasonable apprehension of bias in one adjudicator was sufficient to compromise the adjudicative process. Furthermore, the Court of Appeal found the lower court erred in assuming that the seriousness of the breach by Perezcano was mitigated by the lack of financial compensation and the public nature of the panel appointments. Instead, the issue in determining a procedural breach due to bias was its presence and not its degree or nature. Since the lower court found that there was reasonable apprehension of bias, that should have rendered other considerations of the nature and quality of the bias irrelevant.

The Court of Appeal went on to note that it was impossible to know whether the other two adjudicators were impacted by the bias and the courts should act to avoid the appearance of "poisoning the well" that can result from the bias of a single decision maker. Given the significant breach of procedural fairness constituted by bias, speculation should not be afforded to reduce the seriousness of the breach.

When a procedural rights breach includes a reasonable apprehension of bias, it requires a stricter application of the quash remedy because that breach cannot be remedied — it irreparably compromises the adjudicative process. At the root of procedural fairness, the Court of Appeal aptly noted that the parties are entitled to an independent and impartial tribunal, not just the decision of a majority of arbitrators who are unbiased. The Court of Appeal noted that it is unfortunate in this circumstance "given the importance of finality and economic efficiency in commercial arbitration... [but] [i]t is the only result that guarantees the integrity of the commercial arbitration process."

What does this mean?

The decision in Vento Motorcycles, Inc. v Mexico affirms a strict consideration of a remedy for breach of procedural rights in the case of a finding of reasonable apprehension of bias for not only single decision makers but also in panels with multiple decision makers. The reasonable apprehension of bias of one of the decision makers cannot be remedied by the existence of others on the panel who were not so affected.

Where a reasonable apprehension of bias can be shown, either the adjudicator is disqualified or if the decision has already been reached, the award should be set aside. This means that bias remains a significant consideration when identifying available options for setting aside an arbitration award. While the courts in Canada consistently uphold arbitration awards and rights of set aside are not broad, reasonable apprehension of bias, where proven, remains a serious enough procedural breach to give rise to a remedy from the courts.

Vento Motorcycles, Inc. v Mexico, 2025 ONCA 82