The ‘An Bord Snip Nua’ Report which was published last week has significantly endorsed the use of alternative dispute resolution (ADR). The Report referred to the use of Arbitration and Mediation. It states that “any State body wishing to resolve a legal dispute with another State body would be required to inform the relevant Minister who would then be responsible for mediating a solution or arranging for other forms of independent mediation”. The Report proposes that legislation should be enacted to implement this if necessary.

The events of the past week represent a step forward for alternative methods of dispute resolution (ADR). Along with the favourable comments on ADR by ‘An Bord Snip Nua’, the Irish High Court came out strongly in favour of ADR in general and Expert Determination in particular in a recent injunction application which was before it.

A recent Seanad debate on the Multi-Unit Developments Bill 2009 is also illustrative of the increasingly positive attitude towards Mediation emanating for the government. The Bill contains a provision which provides that the Court may direct the parties to an application under the Bill to participate in a Mediation. It further provides that where a Mediation is directed by the Court, all parties must comply with the direction. Where the Court is satisfied that a party did not comply with a direction to engage in the Mediation process, it may make an order as to costs.

In comments made to the Seanad following a reading of the Bill the Minister for Justice, Equality and Law Reform, Dermot Ahern, stated that “Mediation should be used wherever possible to resolve disputes”.

The Minister of State at the Department of Justice, Equality and Law Reform, Barry Andrews, also stated that “there is an enormous appetite now for alternative dispute resolution methods to be employed. That is stitched into this Bill and requires parties to engage to the greatest extent possible”.

Mediation, Arbitration and Expert Determination are all methods of ADR which are acquiring increasing popularity and usage as they are all confidential processes which are conducted in private.

Mediation

Mediation involves a neutral third party assisting parties to reach an agreed resolution to a dispute. In essence Mediation is assisted negotiation and the Mediator does not decide what the solution should be.

Arbitration

Arbitration is supported by a statutory framework and is commonly used in construction disputes. The Arbitrator is effectively the judge and his decision can only be contested before the Courts in very limited circumstances.

Expert Determination

Expert Determination differs from Arbitration in that there is no statutory framework governing Expert Determination. The parties agree to, or the contract might provide for, the appointment of an independent expert who will give a decision within a finite period of time on the issues in dispute. Once the expert has rendered his decision, the matter is virtually at an end as there are very few grounds on which you can appeal an expert’s decision to a Court. By and large, if parties opt for Expert Determination as a method of dispute resolution, they are stuck with the expert’s decision.

High Court Decision on Expert Determination

On 15 July 2009, Ms Justice Laffoy delivered her decision in a case before the High Court, Health Service Executive –v- Eamon Keogh trading as Keogh Software.

Facts

In this case there were two interlocutory applications before the court, one brought by the Plaintiff and the other brought by the Defendant. The Defendant had a contract with the Plaintiff to support and maintain software and systems supplied by the Defendant to the Plaintiff, which were in use in approximately 180 sites around the country in connection with radiology, accident and emergency, hospital billing and environment health and parliamentary affairs.

Expert Determination Clause

There was an expert determination clause in the relevant contract between the Plaintiff and the Defendant which provided that the Independent Expert’s decision would be final and binding on all parties to the agreement and would not be subject to appeal to a court in legal proceedings except in the case of manifest error.

The appointment of the expert was to be by mutual agreement between the parties or failing mutual agreement, the expert was to be appointed by the president of the Law Society.

Applying Supreme Court principles from Via Networks case

Judge Laffoy applied the principles recognised in the Supreme Court case of re Via Networks (Ireland) Limited [2002] 2I/R/47 which involved an arbitration clause. The Court stated in that case that when parties enter into an arbitration agreement, they are expressly waiving the right to have issues that arise between them, resolved in any forum other than the arbitral tribunal. The Supreme Court also stated that the High Court enjoyed an inherent jurisdiction to stay proceedings having regard to the existence of the arbitration clause.

In last week’s case, the High Court held that the Plaintiff’s application concerned a matter which was reserved exclusively to the determination of the independent expert. Judge Laffoy stated that in applying the principles recognised in the Via Networks case there was no reason for the parties to depart from the dispute resolution mechanism provided for in the agreement.

Distinguishing Shelbourne Hotel case

Judge Laffoy stated that Shelbourne Hotel Holdings Limited v Torriam Hotel Operating Company Limited [2008] IEHC 376, did not support the Plaintiff’s contention that notwithstanding the existence of a binding dispute resolution mechanism, the Court should intervene and order interlocutory relief.

In the Shelbourne Hotel case, the plaintiff (the owner of the hotel) brought proceedings to force the defendant (the company managing and operating the hotel), to comply with the provisions of the Management Agreement which regulated their contractual relationship. The plaintiff sought permanent injunctive relief to compel the defendant to grant access to the plaintiff to the books and records and the business and the staff of the hotel in accordance with its rights under the Management Agreement.

The Management Agreement contained an arbitration clause. In the proceedings, the defendant issued a motion seeking to stay the proceedings pursuant to Section 5 of the Arbitration Act 1980 pending arbitration.

Kelly J held that there was a valid arbitration agreement which could be performed and could address the dispute between the parties, but there was no arbitration agreement which covered the interlocutory application before him. Accordingly, he stayed the action but not the motion and granted the interlocutory injunction.

The Management Agreement contained a provision to the effect that either party may seek injunctive or equitable relief (including restraining orders and preliminary injunctions) in any court of competent jurisdiction. It further provided that referral to arbitration would be without prejudice “to preliminary or interim injunctions or enjoining orders granted by such court”. Kelly J concluded that interlocutory applications were not captured by the arbitration clause.

Court Rulings

The Court did not accept the plaintiff’s argument that there would be undue delay in obtaining a decision from the independent expert. Judge Laffoy stated that “In all probability, bringing that process [expert determination] to conclusion is more expeditious than procuring a determination on a contested interlocutory application in this Court”.

The Court dismissed the respective applications for interlocutory relief. Judge Laffoy made an order staying the issues arising, pending the completion of the dispute resolution procedure as provided for in the agreements.

Commentary

Companies should actively consider providing for a method of ADR in their agreements. Mediation and Expert Determination in particular, can be cost effective methods of resolving disputes outside of the Courts. The Irish Courts are increasingly in favour of ADR and if parties have provided for a dispute resolution process in their agreements, outside of litigation, the Irish Courts will generally enforce the ADR clause