CANADA Trends and Developments Contributed by: Craig A.B. Ferris KC, Michael J. Donaldson KC and Scott Lucyk, Lawson Lundell LLP
that reasonable apprehension of bias undermines the integrity of the adjudicative process and is necessarily a major violation of procedural fairness. A finding of a reasonable apprehension of bias is serious and must be made in the knowledge of the result that follows: the adjudicator is disqualified, and the substantive decision is void. The court confirmed its authority under Article 34 (2) (a)(iv) of the Model Law to set aside an arbitral award on the basis that the composition of the arbitral tribu - nal or the arbitral procedure was not in accordance with the agreement of the parties. This provision gives effect to the requirement in Article 18 of “equal treat - ment” of the parties in the arbitration process: an arbi - tral procedure tainted by bias fails to treat the parties equally and is not in accordance with the agreement. In an earlier decision on assessing the remedy for pro - cedural irregularities in the arbitral context, the court set out a balancing exercise that required the court to consider both the extent that the breach under - mines the fairness or the appearance of fairness of the arbitration and the effect of the breach on the award itself. The court emphasised that the particular type of procedural breach is important to the analysis. While courts may exercise their discretion to uphold an arbi - tral award despite breaches of the fair hearing require - ment, it does not follow that they enjoy the same dis - cretion in respect of more significant breaches, such as the existence of a reasonable apprehension of bias. In the court’s view, it makes no difference that only one tribunal member gave rise to the bias concerns. The bias of one member taints the entire tribunal. It is impossible to know whether the biased member affected the tribunal’s decision. Thus, the arbitral award must be set aside. Clear and Explicit Language Required to Compel a Non-Party to an Arbitration Agreement In Husky Oil , a warranty and a mandatory arbitration provision were contained in an agreement between a general contractor and suppliers. A client of the con - tract was not a party to this agreement, but it was a beneficiary of the warranty. The client sued the suppli - ers on the warranty as well as in negligence. Several years later, after the time to start arbitration expired,
the suppliers moved to strike the claims on the basis that the client had to arbitrate. The Alberta Court of Appeal acknowledged that privity of contract can be relaxed where non-parties seek to rely on contractual provisions made for their benefit. However, in this case, the suppliers argued that the benefit of the warranty had to be taken along with the obligation to arbitrate. The court held “if it was possible” to bind non-con - tracting parties to arbitration, the language must be manifest, expressed in clear and explicit language. No such language was present in this case; therefore the client was not bound to arbitrate. Mandatory Injunction Application Followed Arbitration-Specific Test Under the Model Law In NorthStar , NorthStar sought an interim injunction under the Model Law pending arbitral proceedings. NorthStar had contracted with Spire to manufacture, launch and operate satellites with low light images. Three satellites were in space but not producing images that met the contractual specifications. Spire did not indicate an intention to replace these failed satellites by a date specified in the contract, therefore NorthStar was intending to arbitrate claims regarding breach of contract. NorthStar applied for an interim measure to keep the three satellites in orbit and continue to provide images until replacement satellites were put into commercial operation or the dispute was decided at arbitration. Spire did not dispute that the court had jurisdiction to grant an interim measure, but that NorthStar failed to meet the tripartite test for a mandatory injunction. One of the issues was whether NorthStar had to meet the “strong prima facie case” under Canadian law, or whether the court ought to apply the lower standard that would have applied had NorthStar sought the injunction from the arbitral tribunal. In Canadian law, the test for a mandatory injunction is well-established: (i) there is strong prima facie case; (ii) the moving party would suffer irreparable harm should the injunction not be granted; and (iii) the balance of
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