Canada: Wait! What About That Conflict Of Interest?

Last Updated: August 28 2018
Article by David Wotherspoon and Rajit Mittal

The BC Court of Appeal considered the scope of disclosure required from an arbitrator to give rise to a valid waiver of a party's right to object to a reasonable apprehension of bias.

Atlantic Industries Limited v. SNC-Lavalin Constructors (Pacific) Inc., 2017 BCCA 433, offers insight into an arbitrator's disclosure obligations, including the extent of disclosure required to properly inform a party to an arbitration about a possible conflict. It also considers what constitutes a valid waiver, serving as a warning to parties who do not object in a timely manner and who choose to not make further inquiries about the nature of the conflict upon notice that a conflict exists.

Overview of the Case

Atlantic Industries Limited ("AIL") and SNC-Lavalin Constructors (Pacific) Inc. ("SNC"), were adverse in a construction dispute before a single arbitrator, who had been chosen by the parties from a list of three acceptable arbitrators proposed by AIL.

One month before the arbitration was set to begin, the arbitrator informed the parties by way of letter that he had just learned one of the lawyers in his firm had been engaged some months prior to act on behalf of SNC in an unrelated matter (the "Disclosure Letter"). The conflict check procedure at the time failed to catch the apparent conflict because SNC was indicated as a client in the firm's conflict system, which of course it was not. The arbitrator stated that ethical walls could be put in place, or he was prepared to withdraw as arbitrator should one or both of the parties request that he do so. Both AIL and SNC responded that they wished to proceed with the appropriate conflict procedures in place. Neither requested further disclosure about the conflict.

The arbitrator issued his decision on July 15, 2016. He ruled in favour of SNC, dismissing AIL's claim and allowing SNC's counterclaim.

The same day, and upon reviewing the arbitrator's decision, AIL wrote that they had reason to further consider the Disclosure Letter, and requested that the arbitrator provide additional details of the firm's retainer with SNC, including the members of the firm acting for SNC, the nature and duration of the retainer, and an estimate of the fees the firm earned for work performed on that file.

The arbitrator's response letter (the "Second Disclosure Letter") stated that during the time he acted as arbitrator in the dispute between AIL and SNC, his firm acted on behalf of SNC in one matter beginning in March of 2015, and in a second matter on behalf of a Joint Venture in which SNC was a Joint Venturer beginning in July of 2015. Both disputes were resolved by February of 2016, and between the two, four lawyers from the firm billed approximately $365,000 in legal fees. The arbitrator reiterated that he had no involvement with, and was not privy to any aspect of these two matters.

AIL then filed a petition seeking to: (1) remove the arbitrator; (2) vacate the rulings he made in that role; and (3) stay the arbitration. The basis for AIL's petition was that its consent was not properly informed because the arbitrator had not disclosed material facts relating to the conflict, thereby vitiating AIL's consent. 

It was argued that four key differences between the Disclosure Letter and the Second Disclosure Letter showed inadequate disclosure by the arbitrator for the purposes of AIL's consent:

  1. There were two separate retainers as opposed to the one indicated in the Disclosure Letter;
  2. Four lawyers of the arbitrator's firm provided services to SNC as opposed to one lawyer "engaged to act" as indicated in the Disclosure Letter;
  3. The Second Disclosure Letter disclosed substantial legal fees whereas the Disclosure Letter did not; and
  4. While the arbitrator may not have had any involvement with the work on behalf of SNC, he clearly had an interest given the sizeable fees to be paid to the firm.

Gaul J. dismissed the petition, holding that the Second Disclosure Letter did not contain any new material because a reasonable and informed person would understand that large corporate clients may engage firms on a multitude of issues, and would expect more than one lawyer to work on a file. With respect to fees, the judge held that the Disclosure Letter made it apparent that SNC would pay the law firm legal fees, which the arbitrator could profit from as a member of the firm. It was open to AIL to inquire further about any concerns at the time of the Disclosure Letter, though there was no obligation to do so. The judge also noted the timing of AIL's objection, which was made after the arbitrator's decision.

On appeal, the Court of Appeal endorsed Gaul J.'s articulation of the appropriate legal test for waiver, which is whether the party waiving its objection has "all the 'material', 'pertinent', 'salient', or 'essential' facts to support a potential bias allegation1.

The Court of Appeal disagreed with AIL that the judge had failed to consider the nature and scope of the relationship between the arbitrator's firm and SNC, holding that the test articulated by Gaul J. subsumed this inquiry. AIL's waiver was also noted by the Court of Appeal as being "significant" given AIL's admission that the Disclosure Letter disclosed a range of possible relationships, including the actual relationship between SNC and the firm2.

In the circumstances, the Court of Appeal found no error in the judge's analysis, particularly given that the parties were sophisticated, represented by competent counsel, had chosen the arbitrator, and made an informed decision to proceed with the arbitration despite the arbitrator's disclosure of the conflict. 


It is uncontroverted that arbitrators owe a duty of fairness to the parties to an arbitration. Arbitration conducted under the British Columbia International Commercial Arbitration Centre ("BCICAC") Revised Domestic Commercial Arbitration Rules of Procedure requires an arbitrator to be independent and impartial, as one example of this duty being enshrined in procedural rules3.

Arbitrators are obliged to determine if they have a conflict that would keep them from acting as a neutral. This applies at the firm level, and not just the individual level. As was the case here, law firm conflict systems may not effectively characterize the relationship between the arbitrator as neutral and the parties to the arbitration, leading to confusion in the assessment of conflicts.

Arbitrators must promptly disclose any conflict, including conflicts that arise or come to the arbitrator's attention after a proceeding begins. Conflicts may be waived upon full disclosure by the arbitrator and upon the agreement of the parties to have the arbitrator continue. 

Full disclosure means the provision of the material, pertinent, salient, or essential facts, but does not mean every fact which supports a bias allegation. Which facts must be disclosed will depend on the unique circumstances of each case, but arbitrators should err on the side of providing more facts than less. 

If a party feels further facts are necessary before it waives its right to claim a reasonable apprehension of bias, it is free to make further inquiries of the arbitrator. While it is under no obligation to do so, it may be prudent to make further inquiries prior to waiving its right to object, as the objection must be made in a timely way. As this case demonstrates, waiving the right to objection, and objecting after being unsuccessful in the arbitration, will be viewed very skeptically. 

The following article was featured in the July 2018 edition of the Advocate Magazine


1. Atlantic Industries Limited v. SNC-Lavalin Constructors (Pacific) Inc., 2017 BCSC 1263 at para 23; 2017 BCCA 433 at paras 47-48 [AIL Appeal].

2. AIL Appeal at para 66.

3. Section 15 of the BCICAC Revised Domestic Commercial Arbitration Rules of Procedure.

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