February 20 2003 Staying Court Proceedings in Case of Arbitration Agreement Eugene F Collins | Arbitration & ADR - Ireland Arbitration & ADR Background Case Law Comment BackgroundUnder Section 12 of the Arbitration Act 1954 (the legislation which governs domestic arbitration), the court had power to stay proceedings in relation to any matter brought before it where the applicant party could show that the matter was the subject of an existing arbitration agreement. However, the court had to be satisfied that (i) there was not sufficient reason why the matter should not be referred to arbitration in accordance with the agreement, and (ii) the applicant was, at the time that the proceedings commenced, and remained ready and willing to do all things necessary for the proper conduct of the arbitration. It was therefore entirely at the court's discretion as to whether it would grant a stay. In exercising its discretion the court would have full regard to all the circumstances of the case, in particular whether all of the issues in dispute fell under the scope of the arbitration agreement and whether the arbitration agreement applied to all the parties in dispute. The court's discretion was removed by Section 5 of the Arbitration Act 1980. The purpose of Section 5 was to give greater standing to the arbitration agreement between the parties and to ensure, subject to certain conditions, that if the parties have agreed to refer disputes between them to arbitration, their disputes will be determined by an arbitrator and not by the courts. Section 5 states as follows: "(1) If any party to an arbitration agreement, or any person claiming through or under him, commences any proceedings in any court against any other party to such agreement, or any person claiming through or under him, in respect of any matter agreed to be referred to arbitration, any party to the proceedings may at any time after an appearance has been entered, and before delivering any pleadings or taking any other steps in the proceedings, apply to the court to stay the proceedings, and the court, 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, shall make an order staying the proceedings. (2) Nothing in this section shall be construed as limiting or otherwise affecting the power conferred on the High Court pursuant to Section 39(3) of the [1954 act] to refuse to stay any action brought in breach of an arbitration agreement."The effect of Section 5 is now to oblige the court, subject to the conditions specified in Section 5, to stay any litigation proceedings where there is an arbitration agreement. Case LawAn application for a stay may only be made after an appearance to the litigation proceedings 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 its part to use the proceedings already commenced to advance its case against the other party. In O'Flynn v An Bord Gais Eireann(1) the court reviewed the question of what was or was not a step in the proceedings, and stated the criterion 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 this 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 Gleeson v Grimes(2) the court had to consider the entitlement of a party to a stay where that party simultaneously seeks, either alternatively or conditionally, some other order from the court. In this case the second-named defendant, in the affidavit grounding his application for a stay, argued among other things that he was not a party to the contract but consented to the court determining that issue if it wished to do so. The plaintiffs opposed the application on the grounds that the submission of this argument to the court constituted a step in the proceedings by the second-named defendant. In granting the stay, Justice Finlay Geoghegan ruled that two requirements must be satisfied for conduct to constitute a step in the proceedings. First, the applicant's conduct must be such as to demonstrate an election to abandon his right to a stay in favour of allowing the litigation to proceed, which the judge held was not the case in these proceedings. Second, the act in question must have the effect of invoking the jurisdiction of the court. In Administratia Asigurarilor de Stat v Insurance Corporation of Ireland Plc(3) the High Court held that it has an overriding jurisdiction to refuse a stay where there are good-faith allegations of fraud. In Brenton Dewick (a Minor) v Falcon Group Overseas Limited(4) the High Court held that Section 5 cannot be availed of to oust the jurisdiction conferred on the High Court by Order 22 Rule 10 of the Rules of the Superior Courts 1986 in relation to cases involving children.Comment The unfortunate effect of Section 5 of the 1980 act is that it may result in postponing, until the arbitration proceedings have been concluded, all other related claims between the parties or involving third parties which are not subject to the provisions of the arbitration agreement.For further information on this topic please contact Michael Carrigan at Eugene F Collins by telephone (+353 1 202 6400) or by fax (+353 1 676 5200) or by email ([email protected]).Endnotes(1) 1982 ILRM 324.(2) High Court 01/11/2002, Record 2001 16198P.(3) 1990 ILRM 159.(4) High Court, Johnson J, October 22 2001 - unwritten and unreported. For further details please see "Arbitration Clauses and Infant Plaintiffs".