The Arbitration Act 2010 (the “2010 Act”) which adopted the UNCITRAL Model Law (the “Model Law”) in to Irish Law came into force in Ireland on 8 June 2010, repealing the somewhat fragmented legislation which previously governed arbitration in Ireland. The Model Law is a recognisable and internationally accepted code of international arbitration law, originally devised by the United Nations Commission on International Trade Law, and colloquially known as the 'Model Law'.
The 2010 Act enables Irish businesses to obtain an arbitration award/judgment easily enforced against a company in another country if that country has either adopted the Model Law or has ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
Prior to the introduction of the 2010 Act, arbitration in Ireland could be perceived as being quite fractured when viewed from an international perspective, in that separate regimes existed for domestic and international arbitrations. A principal objective of the new legislation was to provide a uniform regime for arbitrations in Ireland, whether domestic or international in nature, thereby providing us with an opportunity to attract international arbitrations and business to Ireland.
Looking at the 2010 Act from a business perspective, there are a number of interesting points worth noting. The 2010 Act increases arbitrators’ powers and the independence of the arbitral process from court involvement. Some of the increased powers will allow Arbitrators to make orders for security for costs and in respect of discovery. Arbitrators can now also determine their own jurisdiction in circumstances, for example, where the parties are in dispute as to whether there exists a dispute in respect of which they are compelled to arbitrate. Furthermore, a High Court challenge to an arbitrator’s decision can only be mounted in the Supreme Court in extremely limited circumstances, thus giving finality to the arbitral process and reflecting the wishes of the parties to contract out of court-based dispute resolution and opt for private arbitration. The obvious downside to the increased powers of arbitrators and limited recourse against their awards is that if an arbitrator makes a bad decision, the aggrieved party will have significantly limited rights of appeal. In order to avoid such a scenario arising, care must be taken by the parties to nominate a suitably qualified arbitrator when drafting the arbitration clause to ensure a mechanism exists for the appointment of a suitably qualified and experienced arbitrator.
Despite the aforementioned increased powers of arbitrators, it is important to remember that an arbitrator will still need the court’s assistance to undertake certain functions, such as issuing witness subpoena’s, ordering third party discovery, and for the recognition and enforcement of arbitral awards.
A significant development under the 2010 Act is that an agreement between the parties on the allocation of costs made either before or after a dispute has arisen will be enforceable. In other words the parties will be free to agree in the arbitration clause in their agreement that they will bear their own costs in the event of an arbitration ensuing. Hithertofore such a provision was unenforceable. This opens the possibility that a party who has a greater bargaining position when the contract is being negotiated may seek to pre-impose costs allocations which are not consistent with the standard principal that “costs follow the event”. The strongest party in the agreement, and the party who believes that they are most likely to be the responding party to a proceedings, may attempt to make it difficult for the wronged party to take proceedings by insisting on an arbitration clause which provides that the parties bear their own costs in any proceedings. This will have the effect of reducing the avenues of recourse open to the weaker party to an agreement who may be discouraged from pursuing a claim through arbitration by the cost implications of doing so.
Finally, it remains the case that the best way of availing of arbitration as a method of dispute resolution is to ensure there is an arbitration clause included in the commercial contract. For contracts entered into with a company in another country, the preference would be for the clause to provide for Irish law to govern the conduct of the arbitration and Irish law to be the substantive law of the arbitration.