In Mayo County Council v Joe Reilly Plant Hire Limited [2015] IEHC 544, the Irish High Court considered whether the arbitrator was correct in law in holding that he had jurisdiction to commence the arbitration hearing and rule on his own jurisdiction.

Speedread

The Irish High Court has refused an application for a declaration pursuant to O.56, r.1 (3)(f) of the Rules of the Superior Courts 1986 and Article 16(3) of the UNCITRAL Model Law, that an arbitrator had no jurisdiction over a dispute in respect of the costs of works carried out by the respondent on behalf of the applicant. The arbitration clause gave the arbitrator a broad power to hear a dispute of any kind between the parties, whether arising during or after the completion of the works or after the determination of the contract.

The decision demonstrates that, where the existence of an arbitration clause is not in dispute, the courts are reluctant to interfere with an arbitrator's ruling on his own jurisdiction, having regard to the kompetenz-kompetenz principle.

Background

The kompetenz-kompetenz principle in Article 16(1) of the UNCITRAL Model Law empowers an arbitrator to rule on his own jurisdiction. It is supported by the separability principle, also found in Article 16(1), which treats an arbitration clause as independent from other terms of the contract, allowing the clause to survive invalidity or termination of the contract. These principles are aimed at giving the arbitrator primary responsibility for determining whether he has jurisdiction.

However, the arbitrator's power to determine his own jurisdiction is not final as an appeal can be made to the Irish High Court from a determination of the arbitrator under Article 16(3).

Facts

The parties entered into a contract in November 2003, which was revised in February 2004, regarding the remediation of a landfill site. The works in question were executed between 2004 and 2009. The contract contained an arbitration clause that gave the arbitrator the power to hear "a dispute of any kind whatsoever [arising] between the Employer and the Contractor in connection with or arising out of the Contract or the carrying out of the Works including any dispute as to any decision opinion instruction direction certification or evaluation of the Engineer (whether during the process of the works or after their completion and whether before or after the determination abandonment or breach of the contract)."

The respondent concluded work on the landfill site in 2009 and a dispute arose over the final sum due. On 16 February 2011, the engineer under the contract issued a final determination directing that the balance of approximately EUR127,000 be paid to the respondent. Payment was subsequently made on 24 February 2011, which the respondent cashed without qualification.

However, two and a half years later, on 26 August 2013, the respondent issued a notice of dispute on the applicant, and on 26 February 2014, served a notice of referral to arbitration. The applicant argued that, as the respondent accepted payment without qualification, there was accord and satisfaction, which brought into being a further agreement which superseded the earlier contract.

However, this was not the view of the respondent as it had sought further sums under the contract and the parties entered into a conciliation process, as provided for in the terms of the agreement. As this did not resolve the dispute, the respondent referred the matter to arbitration.

The applicant challenged the arbitrator's jurisdiction, and a preliminary hearing on jurisdiction took place before the arbitrator. The applicant did not dispute the existence of the arbitration clause in the contract, nor did it argue that the dispute was outside the scope of the arbitration clause. Rather, it argued that the clause was no longer operative. On 11 May 2015, the arbitrator ruled that he had jurisdiction to arbitrate the dispute between the parties. The applicant challenged the arbitrator's jurisdiction pursuant to Article 16(3) of the Model Law before the Irish High Court.

Decision

McGovern J held that the arbitrator was entitled to hold a preliminary hearing as to whether or not he had jurisdiction over the dispute. The arbitration clause gave the arbitrator a broad power to hear a dispute of any kind between the parties, whether arising during or after the completion of the works or after the determination of the contract.

The court ruled that the question whether the respondent is precluded from receiving any further payments on the grounds of the applicant's claim that there is accord and satisfaction is a matter for the arbitrator to determine. The issue of accord and satisfaction is not a basis for a challenge to the arbitrator's jurisdiction under Article 16(3) of the Model Law rather it may constitute a defence to the claim made by the respondent in the arbitration. Accordingly, the court refused to grant the declaration sought by the applicant.

Comment

This decision shows that where there is a valid arbitration clause the courts will be slow to interfere with the arbitrator's ruling on his own jurisdiction, having regard to the kompetenz-kompetenz principle. It also emphasises that a challenge under Article 16(3) is a challenge to the arbitrator's decision on jurisdiction, rather than an appeal against his construction of an agreement. If he has jurisdiction, then it is a matter for him as to how he construes the agreement.

Case Mayo County Council v Joe Reilly Plant Hire Limited [2015] IEHC 544

This update was originally published by Practical Law Arbitration.