Why this Decision Matters
In the recent decision of Vento Motorcycles Inc. v. Mexico, 2025 ONCA 82, the Court of Appeal for Ontario overturned a decision by a lower court (our analysis on that lower court decision here) that an award rendered by a three member arbitral panel should not be set aside where there was a finding of a reasonable apprehension of bias of one of the three panelists.
The Court of Appeal determined that a finding of bias renders the integrity and legitimacy of the adjudicative process irreparably compromised. It would be impossible to know whether, and to what extent, the participation of a biased member affected the panel's decision. As the "well was poisoned", the award must be annulled.
The Underlying Facts
Vento, a US-based motorcycle manufacturer, entered into a joint venture with a Mexican company aiming to expand its reach into the Mexican market. Ultimately, the joint venture failed. Vento alleged that Mexico's refusal to grant it a preferential ad valorem import tariff on its motorcycles, which were assembled in the US, and sold in Mexico, caused that failure and the loss of its business.
Vento initiated an arbitral claim under Chapter 11 of NAFTA, seeking redress for what it alleged to be a breach of NAFTA by Mexico. A three member arbitral panel dismissed Vento's claim.
Application Judge's Decision
Vento brought an application in the Ontario Superior Court to have the arbitral award set aside after learning that Mexico's nominee to the panel had communicated with Mexican officials on several occasions during the arbitration. On one of these occasions, the nominee was invited to submit his CV for possible inclusion on the arbitrator roster list for CUSMA-related matters in Mexico.1 He was eventually nominated to this list and received the news on the same day the tribunal award was signed. None of these communications were disclosed to Vento during the course of the arbitration.
The Application Judge found that the nominee's interactions with Mexico gave rise to a reasonable apprehension of bias. The Application Judge noted that although these communications did not result in immediate financial gain, they presented a "valuable professional opportunity" that from the perspective of an informed person could have influenced the nominee's impartiality.
Despite the court's conclusion on the reasonable apprehension of bias, the Application Judge held that the reasonable apprehension of bias pertaining to a single arbitrator did not extend to the other members of the three-person panel, who were presumed to act impartially and independently. She noted that each of the arbitrators had a responsibility to decide the issues independently, and that there was no evidence to support a presumption that the arbitrators reached the decision by conferring with each other. She also observed that the substantial costs, both in terms of time and money, that would be involved in redoing the arbitration, along with the fact that the undisclosed communications were unrelated to the arbitration, supported the use of her discretion to uphold the award.
The Court of Appeal's Decision
Vento appealed to the Court of Appeal for Ontario, raising two grounds of appeal:
- The Application Judge erred in finding that Vento was able to fully present its case; and
- The finding of a reasonable apprehension of bias required the Application Judge to set aside the award.
The Court of Appeal decided only the second issue, finding that the Application Judge erred in failing to set aside the award after finding a reasonable apprehension of bias.
On the appeal, Mexico did not challenge the finding that the nominee was subject to a reasonable apprehension of bias. It maintained, however, that the Application Judge appropriately exercised her discretion to not to set aside the award as the bias did not necessarily impact the ultimate decision, and because of the time and costs incurred by the parties to date in the proceedings.
The Court of Appeal began its analysis by underlying that one of the fundamental principles of natural justice is that a party cannot be an adjudicator in its own proceeding. The decision makers must be independent and unbiased. A finding of bias undermines the integrity of the adjudicative process and is necessarily a major violation of procedural fairness.
The analysis proceeded to recognize that the damage created by apprehension of bias cannot be remedied. The hearing and any decision or award from that tainted hearing is void. This is the case in both private arbitrations and in public authorities. A reasonable apprehension of bias is binary: it either arises or it does not. When it does arise, it is so detrimental to the appearance of fairness that it cannot be mitigated. Circumstantial factors, to which the Application Judge alluded to (such as the arbitrator not receiving a financial reward), cannot mitigate a reasonable apprehension of bias to the extent that the decision can be saved. In short, the common law does not establish a discretion by the court to remedy a reasonable apprehension of bias.
This is so even where bias is found for only one member of a multi-member panel. As the Court of Appeal noted, "The parties to an arbitration are entitled to an independent and impartial tribunal, not simply the decision of a quorum of panel members who are unbiased."
The Court of Appeal addressed Mexico's reliance on the obiter from the Supreme Court decision in Wewaykum Indian Band v. Canada, 2003 SCC 45. In that decision, the Supreme Court commented that a reasonable apprehension of bias relating to one member of the Supreme Court would not necessarily taint the entire Court. In addition to being obiter, Wewaykum concerned the distinct decision-making process of the Supreme Court.
Concluding Thoughts
The Court of Appeal's decision is clear and definitive. A finding of reasonable apprehension of bias will result in an award being rendered void, regardless of whether it is a single member panel or a multi-member panel. A finding of bias is distinct from other arguments of a lack of procedural fairness. There is no room to justify that the conduct was not significant or that it likely did not impact the outcome. The only remedy is to set aside the award.
This determination was made recognizing the courts' role in overseeing commercial arbitration, and Ontario's responsibility as a venue for international arbitration. The Court of Appeal stated that its decision reinforces the integrity of the Canadian legal system and, relatedly, the integrity of the arbitration process. Importantly, the court recognized that while finality and efficiency are important goals in any adjudicative process, including arbitration, those goals cannot and should not be achieved at the cost of an impartial hearing.
Footnote
1 CUSMA is the name for NAFTA's successor in Canada.
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