Courts' Attitude to Arbitration
Ireland has separate laws for domestic arbitration and international arbitration. Domestic arbitrations are largely governed by the Arbitration Act 1954 and the Arbitration Act 1980, while international arbitrations are governed by the Arbitration (International Commercial) Act 1998.
The Arbitration Act 1954 is essentially a reproduction of the English Arbitration Act of 1950. It is still the principal arbitration act.
The 1980 act is supplemental to the 1954 act, but has three main provisions:
- It makes the staying of court proceedings mandatory if an arbitration agreement is in force;
- It gives legal effect to the New York Convention of 1958 (the Convention on the Recognition and Enforcement of Foreign Arbitral Awards); and
- It gives legal effect to the Washington Convention of 1965 (the Convention on the Settlement of Investment Disputes between States and Nationals of Other States).
The 1998 act adopted the UNCITRAL Model Law (as adopted by the United Nations Commission on International Trade Law on June 21 1985) for international commercial arbitration with a few amendments.
Courts' Attitude to Arbitration
A recognized feature of both the 1954 act and the 1980 act was the involvement of the High Court in the arbitration process. However, Ireland's experience under the 1954 act was rather different from that of England under its 1950 act, in that the Irish courts have always openly supported an independent arbitration system and have consistently refused to interfere in arbitrations unless they have felt that there was good reason to do so.
In the case of Noel Hogan v St Kevin's Company (1986) IR 80, Justice Murphy expressed the law as follows:
"It seems to me that where parties refer disputes between them to the decision of an arbitrator chosen by them, perhaps for his particular qualification in comprehending technical issues involved in the dispute or perhaps for reasons relating to expedition, privacy or costs, it is obviously and manifestly their intention that the issue between them should be decided and decided finally by the person selected by them to adjudicate upon the matter...and it seems to me that at the end of the day both parties were content to have the important point of law determined not by the courts but by the arbitrator and that notwithstanding the fact that he himself possessed no legal qualification. Having adopted that course, it seems to me that it would be unfair and unjust to permit the unsuccessful party to assert a right to have a decision of the High Court substituted for that of the arbitrator."
That view was endorsed unanimously by the five judges of the Supreme Court in Keenan v Shield Insurance Company Limited (1989) IR 89, all of whom subscribed to the views expressed by different High Court judges in many cases that arbitral awards ought to be regarded as final in all respects, and should only be interfered with if there is an error in law so fundamental that it cannot be allowed to stand.
Domestic arbitration is governed primarily by the 1954 act as amended by the 1980 act.
However, certain kinds of dispute may be governed by the provisions of a particular statute which requires the dispute to be resolved in accordance with the provisions of an arbitration system established by the statute.
Two kinds of arbitration are specifically excluded from the application of the 1954 act and the 1980 act. First, the acts do not apply to unwritten arbitration agreements since the term 'arbitration agreement' is defined by Section 2(1) of the 1954 act as meaning "a written agreement to refer present or future differences to arbitration, whether an arbitrator is named therein or not." Second, the legislation is not applicable to arbitrations relating to employment pursuant to Section 5 of the 1954 act, which states that notwithstanding anything contained in the act, it
"does not apply to:
(a) an arbitration under an agreement providing for the reference to, or the settlement by, arbitration of any question relating to the terms or conditions of employment or the remuneration of any employees, including persons employed by or under the state or local authorities, or
(b) an arbitration under Section 70 of the Industrial Relations Act 1946 (No 26 of 1946)."
The purpose of excluding employment arbitrations from the provisions of the arbitration acts was to allow these to be dealt with by specialized tribunals established to deal specifically with employment disputes (eg, the Employment Appeals Tribunal).
Matters which can be referred to arbitration
There is no clear distinction to be drawn between disputes which may be settled by arbitration and those which may not.
The general rule is that any dispute or claim concerning legal rights which can be the subject of an enforceable award is capable of being settled by arbitration. This general principle must be qualified as follows:
- Under Article 34.3.1 of the Constitution, the High Court has original jurisdiction in and power to determine all matters and questions, whether of law or of fact, civil or criminal;
- Certain kinds of arbitration are governed by special statute;
- Public policy requires that certain issues be dealt with by the courts or some other statutory tribunal;
- Illegality may render an arbitration agreement unenforceable; and
- By virtue of Section 26 of the 1954 act an arbitrator does not have power to order specific performance of any contract relating to land or any interest in land.
Staying proceedings in litigation
Section 5(1) of the 1980 act provides that if one party to an arbitration agreement commences legal proceedings against another party to the agreement in respect of any matter agreed to be referred to arbitration, any party to those proceedings may apply to the court for the proceedings to be stayed at any time after an appearance has been entered, but before delivering any pleadings or taking any other steps in the proceedings. The court is bound to grant the stay unless it is satisfied that the arbitration agreement is null and void, inoperative or incapable of being performed, or that there is not in fact any dispute between the parties with regard to the matter agreed to be referred.
The following four points should be noted:
- An application for a stay may only be made after an appearance has been entered. A premature application for a stay will be refused.
- 'Taking any other steps in the proceedings' has been held to mean conduct by the applicant which shows a decision on his part to use the proceedings already commenced to advance his case against the other party. In O'Flynn v An Bord Gais Eireann 1982 ILRM 324 the question of what was or was not a step in the proceedings was reviewed. The decisive criterion was taken to be whether the step taken involved costs which would be lost were the stay to be granted and the matter referred to arbitration. In that case, the defendant's solicitor wrote to the plaintiff's solicitor seeking an extension of time to file the defence. The court held that this was not a step in the proceedings which would preclude a stay.
- In Administratia Asigurarilor de Stat v Insurance Corporation of Ireland Plc 1990 ILRM 159 it was held that the High Court has an overriding jurisdiction to refuse a stay where there are good-faith allegations of fraud.
- Small claims proceedings are excluded from the application of Section 5(1) of the 1980 act by virtue of Section 18 of the 1998 act.
The Statute of Limitations 1957 applies to arbitrations as it applies to actions in the High Court. Accordingly, an arbitration may be time-barred if the arbitration proceedings are not initiated in time.
Section 74 of the statute deems an arbitration to have commenced
"when one party to the arbitration agreement serves on the other party or parties a written notice requiring him or them to appoint or concur in appointing an arbitrator or, where the arbitration agreement provides that the reference shall be to a person named or designated in the agreement, requiring him or them to submit the dispute to the person so named or designated."
Quite apart from the limitation period imposed by the statute, the arbitration agreement may itself impose a limitation period for the commencement of any arbitration proceedings, the conduct of the arbitration or the publication of the arbitrator's award.
However, Section 45 of the 1954 act empowers the court to extend any time limit for such period as it thinks proper if it is of the opinion that in the circumstances of the case undue hardship would otherwise be caused. What matters should be taken into account in determining if there would be undue hardship was considered in Walsh v Shield Insurance Company Limited 1977 ILRM 218, where the court held that although there had been inexcusable delay on the part of the applicant in commencing arbitration proceedings under the terms of an insurance policy, the respondent had not been prejudiced by such delay. Accordingly the court agreed to extend the time limit for appointing the arbitrator beyond that specified in the policy.
Powers of the arbitrator
Apart from any specific powers conferred upon him by the arbitration agreement, an arbitrator has powers conferred upon him by statute. The principal statutory powers are as follows:
- Section 19 of the 1954 act provides that every arbitration agreement (unless a contrary intention is expressed in the agreement and subject to any legal objection) shall be deemed to contain the following provisions: (i) that the parties to the reference and all persons claiming through them shall submit to be examined by the arbitrator on oath or affirmation; (ii) that any witnesses shall, if the arbitrator thinks fit, be examined on oath or affirmation; (iii) that the arbitrator will have power to administer oaths or to take the affirmation of any such person; (iv) that the parties to the reference and all persons claiming through them shall produce before the arbitrator or umpire all documents, within their possession or power respectively, which may be required or called for (other than documents whose production could not be compelled on the trial of an action); and (v) that the parties to the reference and all persons claiming through them shall do all other things which the arbitrator may require during the arbitration proceedings.
- Section 23 of the 1954 act gives the arbitrator power to make an award at any time.
- Section 25 of the 1954 act gives the arbitrator power to make an interim award.
- Section 26 of the 1954 act gives the arbitrator the same power as the High Court to order specific performance of any contract other than a contract relating to land or any interest in land.
- Section 28 of the 1954 act gives the arbitrator power to correct in an award any clerical mistake or error arising from any accidental slip or omission.
- Section 29 of the 1954 act gives the arbitrator power to order to whom and by whom, and in what manner, the costs of the reference and of the award are to be paid, including (with the consent of the parties) power to tax or settle the amount of those costs.
- Section 35 of the 1954 act gives the arbitrator power to state any question of law arising in the course of the reference, or any award or part thereof, in the form of a special case for the decision of the High Court.
- Section 17 of the Arbitration (International Commercial) Act 1998 amends Section 34 of the 1954 act and gives the arbitrator power to award interest at whatever rate he feels meets the justice of the case on all or part of any amount awarded by him, both up to the date of the award and from the date of the award up to the date of actual payment.
Unless the arbitration agreement provides otherwise, an arbitrator does not have the following powers:
- power to order security for the amount claimed;
- power to order security for costs;
- power to grant injunctions; and
- power to strike out arbitration proceedings for want of prosecution.
Section 22 of the 1954 act gives the High Court the same power in relation to arbitration proceedings as it has in relation to court proceedings as regards making orders in respect of the following:
- security for costs;
- discovery and inspection of documents and interrogatories;
- the giving of evidence by affidavit;
- examination on oath of any witness before an officer of the court;
- the preservation, interim custody or sale of any goods which are the subject matter of the arbitration;
- securing the amount in dispute;
- the detention, preservation or inspection of any property or thing which is the subject of the reference; and
- interim injunctions or the appointment of a receiver.
Section 22, however, states that the fact that the High Court is given these specific powers is not to be taken to prejudice any power which may be vested in an arbitrator of making such order.
If an arbitrator is in doubt about the law, he is empowered under Section 35 of the 1954 act to refer any question of law arising in the course of the reference in the form of a special case for the decision of the High Court. Further, if one of the parties requests the arbitrator to state a case to the High Court on a point of law during the proceedings, but before the award has been published, the arbitrator is obliged to do so in the absence of good reason.
Removal of the arbitrator
Section 24 of the 1954 act empowers the High Court to remove an arbitrator who fails to use all reasonable dispatch in entering on and proceeding with the reference in making an award. An arbitrator who is removed by the High Court in such circumstances is not entitled to receive any remuneration for his services.
The High Court may also remove an arbitrator under Section 37 of the 1954 act where the arbitrator has been guilty of misconduct. In the context of arbitration, the word 'misconduct' has been held to mean that the arbitrator exceeded his jurisdiction, or did not act impartially, or has acted in a way which might "reasonably give rise in the mind of an unprejudiced onlooker to the suspicion that justice was not being done". It does not necessarily mean that the arbitrator has acted dishonestly.
In Ireland the vast majority of arbitrations involve an arbitration hearing, but in small, straightforward arbitrations having the dispute determined by written submission may make more economic sense. The general principle is that if all parties to the arbitration wish the arbitrator to proceed by way of written submission, then the arbitrator should accede to this request. However, if any party objects an oral hearing should be held.
Unless the arbitration agreement provides otherwise, an award is not required to be in any particular form. However, if it is to be enforceable it should be in writing, signed by the arbitrator and dated.
As far as the contents of the award are concerned, the High Court will not enforce an award by an arbitrator unless it contains a clear and unambiguous adjudication on all of the matters referred to him. In this regard it is not essential that each and every issue in dispute is dealt with separately, but simply that the arbitrator has not left any issues referred to him, and over which he has jurisdiction, outstanding.
The practice in Ireland is for the arbitrator not to give reasons unless he is specifically required by the parties to do so.
Under Section 34 of the 1954 act, a sum directed to be paid by an award carries interest from the date of the award at the same rate as a judgment debt, unless the award otherwise directs. However, Section 34 did not confer on an arbitrator power to award interest on any sums due up to the date of the arbitrator's award.
Section 17 of the 1998 act amends Section 34 and gives the arbitrator power to award interest at whatever rate he feels meets the justice of the case on all or part of any amount awarded by him, both up to the date of the award and from the date of the award up to the date of actual payment.
Section 17 applies only to arbitration agreements entered into after the day on which the 1998 act came into operation (May 20 1998), unless the parties to the arbitration agreement agree otherwise.
Section 29 of the 1954 act states that unless the arbitration agreement provides otherwise, it shall be deemed to include a provision that the costs of both the reference and the award shall be in the discretion of the arbitrator, who may direct to whom and by whom, and in what manner, those costs or any part thereof shall be paid. The arbitrator is also empowered, with the consent of the parties, to tax and settle the amount of costs to be so paid.
Section 29 goes on to state that where an award directs any costs to be paid, then in default of agreement between the parties the costs shall be taxed and ascertained by a taxing master, unless the arbitrator, with the consent of the parties, taxes or settles the amount to be paid by each party.
Section 33 of the 1954 act provides that if an arbitrator refuses to deliver his award until the fees demanded by him have been paid, the High Court may order that the arbitrator deliver the award to the applicant upon payment into the High Court by the applicant of the fees demanded. The arbitrator's entitlement shall be such as the taxing master may determine on taxation in due course.
In dealing with the issue of costs the arbitrator must observe the provisions of the arbitration agreement. Under Section 30 of the 1954 act a provision in an arbitration agreement to the effect that any party shall pay all or any part of his own costs of the reference or award shall be void. However, this provision does not apply to an agreement to submit a dispute which arose before that agreement was made to arbitration.
As a matter of practice, an arbitrator will not issue his award until he has been paid his fees and expenses in full. The party who believes himself to be the successful party is more likely to take up the award. It is thus frequently the party who is ultimately not liable for the arbitrator's fees and expenses who pays them in the first instance. Accordingly, while it may be self-evident, the award will often provide that if the costs of the award are paid by the party which is not responsible for them, that party is entitled to recover those costs from the other.
Challenging the award
The High Court has power under the 1954 act to remit or to set aside an award. The distinction between remission and setting aside is that in the case of remission, the award is referred back to the arbitrator for his reconsideration, whereas when an award is set aside the whole arbitration is made null and void.
Section 36 of the 1954 act gives the High Court power to refer any issues on which the arbitrator has made an award back to him for reconsideration. It additionally provides that unless the court order directs otherwise, the arbitrator must make this further award within three months of the date of the order.
Section 38 of the 1954 act enables the High Court to set aside the award where (i) the arbitrator has been guilty of misconduct, or (ii) the arbitration or award has been improperly procured.
The High Court also has a general power under Section 39 of the 1954 act to give relief where the arbitrator is not impartial or the dispute referred to arbitration involves a question of fraud.
Overall, the grounds on which an award can be challenged are limited.
An application to the High Court to remit or set aside an award must be made within six weeks of the date on which the award has been made and published to the parties, or within such further time as the High Court may allow.
Enforcing the award
Under Section 41 of the 1954 act an award on an arbitration agreement may, by leave of the High Court, be enforced in the same manner as a judgment or order to the same effect.
While a High Court judgment is directly enforceable, application must be made to the High Court for the enforcement of an arbitration award. This is done by way of special summons pursuant to the provisions of Rule 4 of Order 56 of the Rules of the Superior Courts (Statutory Instrument 15 of 1986).
In the mid-1980s those involved in arbitration in Ireland recognized that Ireland could be an attractive venue for international arbitration. Among other things, it is English speaking, is well located geographically and has a history of international neutrality. However, notwithstanding the unequivocal support of the Irish courts for the arbitration process, it was acknowledged that Irish law did not make Ireland attractive in the context of international arbitration.
As a result, Ireland has recently made some amendments to its arbitration law so that while domestic arbitration continues to be governed by the provisions of the 1954 act as amended by the 1980 act, there is now a separate law for international commercial arbitration.
The new law is the Arbitration (International Commercial) Act 1998. It adopts the UNCITRAL Model Law on International Commercial Arbitration with a few minor amendments. For ease of reference, the act has been drafted in a way whereby the Model Law has been adopted in its entirety, with the amendments being separately detailed. The amendments are therefore clearly identifiable. There are two principal amendments. First, unless otherwise agreed by the parties, the arbitral tribunal has wide powers to award interest on sums due both prior to and subsequent to the date of the award. Second, an arbitrator is not to be liable for anything done or omitted to be done in the discharge or purported discharge of his or her functions as arbitrator, unless the act of omission is shown to have been in bad faith. This immunity also extends to anyone designated or requested by the parties to appoint or nominate an arbitrator.
The act also provides that in ascertaining the meaning or effect of any provision of the Model Law the documents of the working group involved in the drafting of the Model Law may be considered.
For further information on this topic please contact Michael Carrigan at Eugene F Collins by telephone (+353 1 667 5111) or by fax (+353 1 676 5200) or by e-mail ([email protected]).
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