Ireland: Staying Proceedings To Arbitration: Full Judicial Consideration Test Confirmed

We have successfully represented The Lisheen Mine and Lisheen Milling Limited in two separate applications to stay High Court proceedings to arbitration in London under the London Maritime Arbitration Association Rules. The applicants were the Dutch shipping interest, Vertom. Our team, led by Rory Kirrane, also represented the Lisheen entities in Vertom's London arbitration references.

The disputes centred on whether Lisheen had entered in to either a charterparty on 'Gencon' terms for successive voyages with Vertom, or else a master contract of affreightment, for shipment of zinc ore to various European ports with associated 'Gencon' voyage charters. The upshot of the case against Lisheen was that it had agreed to the 'Gencon' arbitration clause providing for London arbitration under English law.

A key contention of Vertom was that the Irish Court should look at the question of contract formation and incorporation of an arbitration clause by reference on a prima facie or initial basis only rather than by way of full judicial consideration. The issue, therefore, of contract formation was, Vertom claimed, properly one for the London arbitration tribunals and not the Irish Courts.

Vertom sought to stay the Irish proceedings to arbitration under the Arbitration Act 2010 - which adopts the UNCITRAL Model Law - on the basis of a prima facie test. Article 8.1 of the Model Law requires the Court to "refer the parties to arbitration unless it finds that the agreement [to arbitrate] is null and void, inoperative or incapable of being performed".

In addition to clarifying the appropriate test on an application to stay, the recent decision of Mr Justice Cregan of 12 January 2015 is one of very few judgments of the Irish Courts addressing the question of vessel fixture and charterparty formation.

Dismissing the Vertom applications to stay, Mr Justice Cregan held that the Court was entitled to determine the question of whether the parties had agreed to arbitrate on a full judicial basis, rather than simply a prima facie one. The Judge then proceeded to determine the question of contract formation on the basis of detailed affidavit evidence and decided that Lisheen had not entered in to any contract of affreightment or charterparty with Vertom and was not party to an agreement to arbitrate for the purpose of the Model Law.

The extent of the Court's powers under Article 8.1 of the Model Law on a stay application has been considered in two recent High Court cases¹. The Court had previously considered the alternative approaches to Article 8.1 but had not determined the question, as in neither case did the applicant satisfy a prima facie test. Mr Justice Cregan's decision is the first authority to determine the scope of the Court's powers.

Mr Justice Cregan's recent judgment provides a comprehensive statement of the law and a clear indication that the Irish Courts will look at the question of contract formation, and the existence of an arbitration agreement, on a full judicial basis. In this instance the Judge made findings of fact on affidavit evidence, but in appropriate circumstances oral evidence may be heard.

Footnote

1 Barnmore Demolition and Civil Engineering Ltd and Alandale Logistics Ltd and Others [2010] IEHC 544 and P Elliot and Company Ltd (in receivership and in liquidation) and FCC Elliot Construction Ltd (McEochaidh J. 28^th August 2012) [2012] IEHC 361.

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