20 Mar 2023
Aroma Franchise Company Inc. et al. v. Aroma Espresso Bar Canada Inc. et al.
In the case of Aroma Franchise Company Inc. et al. v. Aroma Espresso Bar Canada Inc. et al., which was dated March 20, 2023, the applicants, Aroma Franchise Company Inc. et al., sought to nullify two international arbitral awards through an application. They asserted reasons including a perceived bias, overstepped jurisdiction, and inadequate rationale by the arbitrator, P. David McCutcheon. The core issue hinged on whether the arbitrator's failure to disclose a subsequent retainer from the same lawyer involved in the ongoing arbitration could create a reasonable suspicion of bias.
The background had revolved around the respondent, Aroma Espresso Bar Canada Inc., which was the master franchisee of Aroma Franchise Company Inc. The Master Franchise Agreement had been made in 2007. A dispute had arisen when AC canceled supply orders from Aroma Israel, leading to arbitration. The arbitrator, McCutcheon, subsequently ruled against AF, ordering them to pay AC $10 million and also compensating AF for unpaid royalties.Unbeknownst to the applicants, during the arbitration, McCutcheon had been retained as an arbitrator in another matter by Allan Dick, counsel for the respondent.
Eventually, the applicants had questioned McCutcheon's impartiality and had filed an application to set aside the final awards. A legal ruling had determined that McCutcheon's failure to disclose the other engagement had given rise to a reasonable apprehension of bias. Consequently, the arbitral awards had been annulled, and a new arbitration had been directed under a different arbitrator.