The European, Middle Eastern And African Arbitration Review 2014 - Arbitration & Dispute Resolution

The Arbitration Act 2010

The Arbitration Act 2010 (the 2010 Act) repealed all previous arbitral legislation and effectively codified the law in this area into one Act of Parliament. It was signed into law on 8 March 2010 and entered into force on 8 June 2010. It applies to all arbitrations held in Ireland after the date of entering into force, both international and domestic.¹

The main purpose of the 2010 Act is to bring Irish law into line with international best practice by adopting the UNCITRAL Model Law on International Commercial Arbitration and applying it to all arbitrations that take place in Ireland.

The 2010 Act provides a default framework to be applied to arbitrations in Ireland in circumstances where the parties themselves have not agreed to an alternative position or procedure. The 2010 Act provides certainty in relation to the arbitral process in Ireland while maintaining the independence of the arbitral process and protecting the autonomy of the parties who have chosen to arbitrate and agreed on the application of certain procedures.

Use of arbitration in Ireland

Arbitration as the preferred method of binding alternative dispute resolution is commonplace in commercial contracts and, in the construction sector, is almost the exclusive method. Insurance disputes in Ireland are also very frequently resolved by arbitration. Traditionally, prior to the complete overhaul and change of Ireland's arbitration law in 2010, arbitration was perceived as being prone to delays. However, the combination of the 2010 Act and the transformation of litigation efficiency in the Commercial List of the Irish High Court over the past few years has completely turned around the culture among practitioners, and now the rapid resolution of cases is the focus among the Irish legal community. One of the principal advantages of arbitration arises from the highly open and international nature of the economy and the almost routine situation whereby a counterparty to a contract is from overseas. The private, independent and internationally enforceable outcome of the arbitral process is particularly appropriate for an economy such as Ireland's.

Most arbitrations conducted in Ireland are domestic in nature, very often ad hoc, and, in the case of construction disputes, routinely conducted under the auspices of the Arbitration Procedure (2011) of Engineers Ireland, the Irish professional body for engineers.

Given the rapid development of Ireland as an open and international economy, international arbitration is now a regular feature of dispute resolution with increasing numbers of cases, particularly under the ICC Rules, involving an Irish party or Dublin as a seat. The Preamble to the 2010 Act gives the force of law in Ireland to the following international treaties:

the UNCITRAL Model Law (as amended by the United Nations Commission on International Trade Law on 7 July 2006);
the Geneva Protocol on Arbitration Clauses (24 September 1923);
the Geneva Convention on the Execution of Foreign Arbitral Awards (26 September 1927);
the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (10 June 1958); and
the Washington Convention on the settlement of investment disputes between states and nationals of other states (18 March 1965).

The UNCITRAL Model Law, as adopted by section 6 of the 2010 Act, provides in its article 28 that the dispute should be decided in accordance with the rules of law chosen by the parties as applicable to the substance of the dispute, and unless otherwise expressed, the designation of a law or legal system by the parties refers to its substantive law not to its conflict of laws rules. Where the parties have failed to designate a chosen rule of law, the arbitral tribunal must apply the law determined by the conflict of laws rules which it considers applicable.

The 2010 Act provides that an arbitration agreement must be in writing. However, it will be held to be in writing if its content is recorded in writing including by electronic means, whether or not the arbitration agreement or contract has been concluded orally, by conduct or by other means.

Furthermore, an arbitration agreement is in writing if it is contained in an exchange of statements of claim and defence in which the existence of an agreement is alleged by one party and not denied by the other.

Finally, the reference in a contract to any document containing an arbitration clause constitutes an arbitration agreement in writing, provided that the reference is such as to make that clause part of the contract under the general principles of contract law. This issue has recently been the subject of a decision of the Irish High Court, which is considered in detail later in this article.

Enforcement of agreements to arbitrate

Article 8 of the UNCITRAL Model, as adopted by the 2010 Act, provides that, where a dispute which is governed by an operative and enforceable arbitration agreement as defined under the 2010 Act comes before a court, the dispute must be referred to arbitration. Where court proceedings have been commenced in the above circumstances, arbitration proceedings can commence and an award can be made pending the outcome of the courts deliberation.

Multi-tier clauses prescribing steps in a dispute resolution process leading up to arbitration are very common, particularly in the construction sector. There is no direct authority on enforceability; however, the practice in Ireland clearly shows a respect for the steps in a tiered clause and parties in Ireland do not usually enter into a dispute about contracted-for steps leading to arbitration.

Arbitrability and jurisdiction

The Act does not apply to an arbitration under an agreement relating to the terms or conditions of employment or the remuneration of any employees, although the parties can always agree under contract or otherwise to refer non-statutory disputes to arbitration. Also, the arbitrator does not have the power to order specific performance for a contract for the sale of lands.

Article 16 of the UNCITRAL Model Law, as adopted by the 2010 Act, applies the principle of competence-competence to the law governing arbitrations in Ireland and provides that the arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement. For that purpose, an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract, and a decision by the arbitral tribunal that the contract is null and void does not automatically invalidate the arbitration clause.

A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence, and a party is not precluded from raising such a plea by the fact that he has appointed, or participated in the appointment of, an arbitrator. A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings. The arbitral tribunal may, in either case, admit a later plea if it considers the delay justified, and can decide such a plea as a preliminary question or in an award on the merits.

If the arbitral tribunal rules as a preliminary question that it has jurisdiction, any party may request, within 30 days of having received notice of that ruling, that the Irish High Court specified in article 6 decide the matter, the decision of which shall be subject to no appeal. While such a request is pending, the arbitral tribunal may continue the arbitral proceedings and make an award. Article 9 of the UNCITRAL Model Law as adopted provides that it is not incompatible with an arbitration agreement to apply to the High Court before or during arbitral proceedings for an interim measure of protection and for a court to grant such measure.

Article 17J of the UNCITRAL Model Law, as adopted under the 2010 Act, provides that the Irish High Court has the same power of issuing an interim measure in relation to arbitration proceedings as it has in relation to proceedings in courts. The court shall exercise such power in accordance with its own procedures in consideration of the specific features of international arbitration.

Whether or not the High Court will grant, for example, an injunction to keep the status quo in place pending the outcome of the arbitration will depend on the normal test for interlocutory injunctions in Ireland by which one, in practice, must show merit, a serious question to be tried and inadequacy of damages.

Awards

Article 31 of the UNCITRAL Model law, as adopted under the 2010 Act, prescribes that an award be made in writing and signed by the arbitrator or the majority of the arbitrators where there is more than one arbitrator, provided that the reason for any omitted signature is stated. An award given in Ireland must state the reasons upon which it is based, unless the parties have agreed that no reasons are to be given or the award is an award on agreed terms under article 30 of the UNCITRAL Model Law. The award must be dated and state the place of arbitration, which shall be deemed to have been the place where the award was made, and a signed copy must be delivered to each party.

There are no restrictions – save for the inability to direct specific performance in respect of a contract for the sale of lands – to the relief which may be granted.

Irish law provides for punitive or exemplary damages; however, the scope for doing so is limited. Doubling or trebling damages, as sometimes seen in the United States of America, is unknown and probably contrary to public policy.

As regards interest, section 18 of the 2010 Act provides that the parties may agree on the arbitral tribunal's powers regarding the award of interest and, unless agreed, the arbitral tribunal may award simple or compound interest from the dates at the rates and with the rests that it considers fair and reasonable on all or part of any amount awarded by the arbitral tribunal and in respect of any periods.

Article 30 of the UNCITRAL Model Law, as adopted under the 2010 Act, provides that if the parties settle the dispute, the arbitral tribunal shall terminate the proceedings and, if requested by the parties and not objected to by the arbitral tribunal, record the settlement in the form of an arbitral award on agreed terms which shall be made and have the same status and effect as any other award on the merits of the case.

The Act prescribes a liberal regime for costs and the parties are free to agree such provisions as to the allocation of costs as they see fit. Costs following the event is the normal practice in Ireland but is not invariably the case. If the parties submit to the rules of an arbitral institution, they shall be deemed to agree to be bound by the rules of that institution as to the costs of the arbitration. Where the parties have no advance agreement on costs, the arbitral tribunal shall determine by award those costs as it sees fit but must state: the grounds on which it acted; the items of recoverable costs, fees or expenses, as appropriate; and the amount referable to each, and by and to whom they shall be paid.

Challenges to awards

Article 34 of the UNCITRAL Model Law, as adopted under the 2010 Act, sets out the provisions relating to the setting aside of an award (and the time limits) as the exclusive recourse against an arbitration award in the following circumstances:

the applicant must prove one of the following:
that a party to the arbitration agreement was under some incapacity; or that the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of this state;
that the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings, or was otherwise unable to present his case;
that the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of
the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside;
the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Law from which the parties cannot derogate or, failing such agreement, was not in accordance with this Law; and
the Irish High Court must find that:
the subject matter of the dispute is not capable of settlement by arbitration under the law of the state; or
the award is in conflict with the public policy of the state.

The time limit for such applications is three months from the date of the Award; however, an application to the Irish High Court to set aside an award on the grounds of public policy must be made within a period of 56 days from the date on which the circumstances giving rise to the application became known or ought reasonably to have become known to the party concerned.

The procedure for challenge is set out in the Rules of the Superior Courts (the civil procedure rules of the High Court). There are clear deadlines for the prompt filing of evidence by way of affidavit, and the High Court deals with these matters in a summary manner (as already noted). Arbitration applications tend to be dealt with in a matter of weeks rather than months.

While there is no express bar on enforcement while a set-aside application is pending, the practical approach of the High Court is to promptly deal with both applications in parallel so that time and effort is not wasted.

The Irish High Court, when asked to set aside an award, may, where appropriate and so requested by a party, suspend the setting aside proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the arbitral tribunal's opinion will eliminate the grounds for setting aside.

Recognition and enforcement of awards

In relation to awards rendered in Ireland, this involves a simple application to the High Court (provided for under section 23 of the 2010 Act). The party seeking enforcement takes an action or applies for leave of the High Court by way of summary procedure on affidavit evidence only, and where leave is given, judgment may be entered in terms of the award. Such an award shall, unless otherwise agreed by the parties, be treated as binding for all purposes on the parties between whom it was made, and may be relied on by any of those parties by way of defence, set-off or otherwise in any legal proceedings in Ireland.

Nothing in section 23 affects the recognition or enforcement of an award under the Geneva Convention, the New York Convention or the Washington Convention.

A key feature to note is section 23(4) of the 2010 Act, which does not permit a losing party to invoke article 35 and 36 of the UNCITRAL Model Law to resist enforcement of an award rendered in Ireland. Thus, this puts the onus on the losing party to move against any such award pursuant to article 34, as it will not have a second opportunity to do so at the recognition or enforcement stage.

The process for the recognition and enforcement of foreign awards is governed by either the New York Convention or the UNCITRAL Model Law.

As regards the New York Convention, article III is applicable in Ireland and provides that each contracting state shall recognise arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon, under the conditions laid down in the Convention. Substantially more onerous conditions or higher fees or charges on the recognition or enforcement of foreign arbitral awards cannot be imposed than are imposed on the recognition or enforcement of domestic arbitral awards.

Article IV provides that the party applying for recognition and enforcement must at the time of the application supply the duly authenticated original award or a duly certified copy of it; or the original agreement to enforce if applicable or a duly certified copy of it; and if the award or agreement is not made in an official language of the enforcing country, the requesting party must produce a translation of these documents certified by an official or sworn translator or by a diplomatic or consular agent.

In addition to the grounds under the New York Convention and the UNCITRAL Model law, enforcement or recognition can also be refused if the Irish High Court finds that the subject-matter of the dispute is not capable of settlement by arbitration under Irish law or if the recognition or enforcement of the award would be contrary to the public policy of Ireland. If an application for setting aside or suspension of an award has been made to the High Court, if it considers it proper, the High Court may adjourn its decision and may also, on the application of the party claiming recognition or enforcement of the award, order the other party to provide appropriate security.

Nevertheless, there is a strong pro-enforcement approach taken by the Irish courts. The issue of enforcing awards set aside at the place of arbitration has not received judicial attention. As with all applications to the High Court under the 2010 Act, enforcement proceedings are dealt with in a matter of weeks rather than months. The limitation period for the enforcement of an award is six years.

Trends and developments

With the passage into law of the 2010 Act on 8 June 2010, arbitration has significantly advanced into all sectors of commercial dispute resolution well beyond the areas already routinely addressed by the process. A further indicator of support is section 32 of the 2010 Act, which provides that, without prejudice to any provision of any other enactment or rule of law, the High Court or the Circuit Court may, if appropriate and the parties consent, adjourn the proceedings to enable the parties to consider arbitration. The Act is still in its early stages, but it is the single most important event in Irish arbitration law since 1954 when the original domestic Irish act was passed and has been the basis for a significant increase in the amount of arbitrations taking place in Ireland, both domestic and international.

Some recent cases are dealt with below.

Mount Juliet Properties Ltd v Melcarne Developments Ltd & Ors [2013] IEHC 286, 19 June 2013

The plaintiff property developer retained the defendants to construct 10 residential houses that were completed in 2008 and sold by the developer.

The developer commenced High Court proceedings seeking an indemnity and damages from each of the defendants (including a building contractor, an architect's firm, a mechanical and electrical engineering firm, and a structural engineering firm) alleging loss, damage and breach of contract, and breach of duty for their failure to carry out their obligations.

It was claimed by the defendants that their engineering services were provided in accordance with the standard conditions in a standard form contract, which contains an arbitration clause. It was agreed that an agreement in the form of the contract was not executed by the plaintiff and the defendant, but it was referred to in correspondence between the parties and in the opinion on compliance with building regulations, issued by the defendant. The Court ruled that arbitration clauses could be incorporated by reference. The defendants in this case had stated that they provided services in accordance with the terms of their respective professional body agreements. These agreements contained arbitration clauses and the Court was satisfied that there was incorporation of the clauses, despite the plaintiff 's claim that a mere reference was not sufficient.

The plaintiff further contended that if a party is to be bound by an arbitration clause, it must know of its existence. The Court did not agree with such an argument and held that the plaintiff could not avoid the agreement terms merely because it was not aware of them. The plaintiff was put on notice and therefore on inquiry that reference had been made in exchanges between the parties to the standard form documents. The plaintiff should then have ensured that it had obtained a copy of the relevant standard documents.

This decision is further support for the position that the requirement, set out in the 2010 Act, that an arbitration agreement must be in writing, will be broadly interpreted. The case shows that a mere reference to an agreement that contains an arbitration clause shall be sufficient to constitute incorporation, and the Court will not entertain a party's claims that it was not aware that the agreement contained an arbitration clause.

Danish Polish Telecommunication Group I/S v Telekomunikacja Polska SA [2011] IEHC 369 (6 October 2011)

In February 2011, Danish Polish Telecommunication Group I/S (the applicant) applied to the Irish High Court to have an arbitration award recognised and enforced in Ireland. The award was actually a partial award – in the amount of approximately €268 million – which has been granted in 2010 by an arbitral tribunal in Vienna against Telekomunikacja Polska SA (the respondent) in the context of a multi-staged and ongoing arbitration.

By proceedings issued in the Commercial Court of Vienna, Austria, on 2 December 2010 (the Austrian Proceedings), the respondent sought to challenge the partial award in accordance with the UNCITRAL Arbitration Rules and applied for it to be set aside. It was on this basis that the respondent resisted an application to have the partial award recognised and enforced in Ireland. On 6 October 2011, upon application made by Arthur Cox acting on behalf of the respondent, Justice Finlay Geoghegan of the High Court granted an adjournment of the application for recognition and enforcement of the partial award, pending the outcome of the Austrian proceedings.

Article 35 on recognition and enforcement and article 36 on grounds for refusing recognition or enforcement of the UNCITRAL Model Law governed the issues determined on this application.

The applicant submitted the following:

that each of the grounds relied upon by the respondent pursuant to article 36(1) were without foundation;
that the Court should refuse the application for adjournment pending the determination of the Austrian proceedings. It submitted that the expert opinions of the respondent's Austrian lawyers, when properly analysed, did not establish reasonable or substantial grounds in favour of the respondent succeeding to set aside the partial award in the Austrian proceedings; and
that if the High Court were to exercise its discretion to adjourn its decision on recognition and enforcement pending a determination of the Austrian proceedings, it should:
- make an order for the recognition and enforcement of part of the partial award; and
- make an order requiring the provision of security for costs.

The respondent contended that the High Court should refuse the recognition and enforcement of the partial award under article 36(i) and (iv) of the UNCITRAL Model Law or, alternatively, that the High Court should exercise its power under article 36(2) to adjourn the decision on recognition and enforcement of the partial award pending the determination the Austrian proceedings.

The respondent submitted that it was neither necessary nor appropriate for the High Court to determine questions of Austrian law in relation to the application for an adjournment under article 36(2), but rather that the court need only be satisfied on the expert opinions adduced that there were reasonable or substantial grounds for contending that the Austrian proceedings may succeed in having the partial award set aside by the Austrian courts.

The Court agreed with these submissions but declared that:

A pro-enforcement construction of Article 36(2) of the UNCITRAL Model Rules suggests that the mere existence of proceedings seeking to set aside an arbitration award would not normally of itself constitute grounds for an adjournment.

Therefore, the Court held that it must engage in a 'brief consideration' of the materials before it and then decide whether the respondent has demonstrated that it had reasonable grounds or a seriously arguable case for the setting aside of the partial award in the Austrian proceedings.

Following consideration, the High Court ordered that the application for recognition and enforcement be adjourned in full pending the outcome of the Austrian Proceedings. The High Court further ordered that the sum of €1.5 million be lodged by the respondent with their solicitors, pending the outcome of the Austrian proceedings.

These proceedings were significant in circumstances where the partial award was being sought to be recognised in various other jurisdictions simultaneously. There is no appeal from a decision of the Irish High Court on recognition and enforcement.

Consequently, both parties were aware that a decision of the Irish High Court to enforce the partial award might have implications on their respective worldwide litigation strategies.

P Elliot & Co Ltd v FCC Elliot Construction Ltd (MacEochaidh J, August 2012)

In this case, a stay to arbitration was refused where the party seeking the stay was not party to the agreement in which the arbitration clause was contained.

Section 6 of the 2010 Act incorporates article 8 of the UNICTRAL Model Law, and requires a court to refer parties to arbitration where they have agreed by contract to deal with disputes by arbitration. The court must refuse jurisdiction unless the arbitration agreement is null and void, inoperative, or incapable of being performed.

The parties in this case were the plaintiff, Irish construction company P Elliott, and the defendant, FCC Elliott, an Irish/ Spanish joint venture company.

The defendant company in this case sought a stay of litigation by the plaintiff in respect of monies due under a consultancy contract, on the basis of an arbitration agreement. Although there was no arbitration clause in the consultancy agreement itself, the defendant argued that the payment dispute should be dealt with pursuant to an arbitration clause in a related joint venture agreement (to which it was not a party).

MacEochaidh J in the High Court accepted that there were circumstances in which a party would be allowed to rely on an arbitration agreement, even one contained in an agreement to which it was not itself a party. He described the relevant circumstance as arising where a third party to a contract had a 'sufficient connection' to a party to the arbitration agreement, in which case it could invoke the arbitration clause by reason of that connection. As to the nature of the connection required between the parties, MacEochaidh J confirmed the approach taken in the 2008 decision of the UK Court of Appeal in City of London v Sancheti, to the effect that a connection beyond a 'bare commercial or legal connection' between the parties was required.

The Court noted that the parties in this case could have chosen to incorporate an arbitration clause into the consultancy contract, but had chosen not to do so, and instead had specifically inserted a clause granting jurisdiction to the Irish courts. The Court held that the defendant could not rely on the arbitration clause in the joint venture agreement, and refusedto grant a stay.

Snoddy v Mavroudis [2013] IEHC 285 (High Court, Laffoy J, 19 June 2013)

In this case, the High Court refused to set aside a finding by an arbitrator that an architect was entitled to claim for over 500 hours of additional work in preparing for planning permission, on grounds that the Court did not have jurisdiction to reinterpret the construction of an agreement by an arbitrator.

This case involved a claim for an order setting aside part of award by an arbitrator pursuant to the Rules of the Superior Courts. The facts involved an agreement between a client and an architect, and an issue arose over the 'time charge rate agreed for abnormal/additional services', which was €100 per hour. There was a claim by the architect that additional design work was required amounting to 524 hours additional work to satisfy requests from the planning authority. The arbitrator found that the client had been aware of the extra work involved and that a written instruction relating to extra work was not a condition precedent to the invocation of the additional works clause. Article 34(2)(a)(iii) of the UNCITRAL Model Law incorporated by reference to section 6 of the 2010 Act was considered, and the issue arose as to whether arbitrator acted outside of jurisdiction.

The Court held that:

In reality, what the Client is asking the Court to do in this case is to second-guess the Arbitrator's construction of the 2007 Agreement. If this Court were to set aside the part of the award dealing with the fees for additional services, the Court would be usurping the Arbitrator's role. Accordingly, I am satisfied that the Client's attempt to have that part of the award set aside on the ground of excess of jurisdiction under Article 34(2)(a)(iii) is wholly misconceived and the application to set aside must be refused.

This judgment upholds the respect for the arbitral process by the Irish courts. Essentially, the applicant was asking the Court to reinterpret the contract because it was dissatisfied with the conclusion that the arbitrator had reached. In the absence of one of the grounds available under the 2010 Act for setting aside an award, the Irish High Court will not interfere in the arbitral process which the parties had agreed to participate in.

Footnotes

1 Unlike some other jurisdictions that have adopted the UNCITRAL Model Law a la carte, Ireland has adopted the UNCITRAL Model Law wholesale into the 2010 Act, with any supplementary provisions unique to Irish law set out in the body of the 2010 Act (a mere 32 provisions).

Published in Global Arbitration Review

This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.

Worldwide: The European, Middle Eastern And African Arbitration Review 2014