The primary purpose of the foil is to help reflect radiant heat back to the room and so improve the insulation value.
However, it will -to an extent- also act as a vapour barrier. A vapour barrier helps prevent moisture vapour from the room from percolating through the insulation and condensing on the cold (original wall) side.
So in your case, you would be better with foil-side to room.
(Who was arguing for which?
)