Insight

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 legislation which previously governed arbitration in Ireland, namely the Arbitration Act 1954, the Arbitration Act 1980 and the Arbitration (International Commercial) Act 1998. Prior to the introduction of the 2010 Act, Ireland had two different arbitration regimes. Domestic arbitrations were governed for the most part by the Arbitration Act 1954, with small elements drawn from both the Arbitration Act 1980 and the Arbitration (International Commercial) Act 1998. The latter Act also governed arbitration which was both international and commercial in character.  Consequently, when viewed from an international perspective, arbitration in Ireland could be perceived as being quite fractured, in that separate regimes existed for domestic and international arbitrations.

One of the principal objectives behind the new legislation was to provide a uniform regime for arbitrations in Ireland, whether domestic or international in nature, which would have the effect of promoting Ireland as a modern venue for international arbitration. The new legislation also recognised that the primary legislation governing domestic arbitrations in Ireland was over 50 years old and required some significant modernisation. After a number of years in the melting pot, and following prolonged debate, the 2010 Act was finally enacted by the Oireachtas earlier this year.
 
Rather than set out to examine the 2010 Act on a section by section basis, or look at specific issues, we believe it is more effective for us to consider and answer various questions which clients may have in respect of the implications and effects of the new legislation, particularly by reference to headline themes. We recognise, as with any summary, that we cannot expect to be comprehensive and cover every question that may arise, but to the extent to which any other questions arise, please feel free to raise them with any of the contacts identified below.

ARBITRABILITY

Are certain disputes not subject to the 2010 Act?

Any disputes in respect of which there is no written arbitration agreement as defined in Article 7, Option 1 of the Model Law are not subject to the Act. Employment disputes, or disputes under Section 70 of the Industrial Relations Act 1946, also do not fall within the scope of the 2010 Act. 

What is the status of consumers under the 2010 Act?

Section 31 of the 2010 Act provides that a consumer is not bound by an arbitration agreement where the arbitration agreement has not been individually negotiated and where the claim is for less than €5,000. Moreover, the parties’ general entitlement to pre-agree the allocation of costs, such that each would bear their own irrespective of the outcome, does not apply in respect of consumers. Any such provision in an agreement with a consumer will be deemed to be an unfair contract term for the purposes of the Unfair Contract Terms Regulations. Pursuant to Section 31(2), the definition of consumer does not include amateur sportspersons.

THE ARBITRATION AGREEMENT

What is required for there to be an arbitration agreement under the new legislation?
The 2010 Act applies Option 1 of Article 7 of the Model Law, which involves a broader conception of what constitutes an arbitration agreement than was traditionally the case. It remains the position that any arbitration agreement shall be in writing, whether in the form of an arbitration clause in a contract or in the form of a separate agreement. However, if its content is recorded in any form, notwithstanding that the arbitration agreement or contract may have been concluded orally or by conduct, it will still be deemed to be in writing. In addition, if useable for subsequent reference, electronic communications can also satisfy the requirement that the arbitration agreement be in writing. Finally, and somewhat unusually, an arbitration agreement will also be considered to be in writing if it is contained in an exchange of a statement of claim and defence in which the existence of an agreement is alleged and not denied.

Why is it important to take care in drafting arbitration clauses?

Arbitration agreements or clauses are often tucked away at the back of commercial agreements and little thought is given to them, in the hope that no dispute will arise.  However, they become very important when a dispute does arise and, if one frames the arbitration agreement properly at the outset, this can, in the long run, yield both significant savings and, potentially, tactical advantages.

What should be taken into account when drafting arbitration clauses, particularly as a result of the new legislation?

If one is dealing with an agreement involving international parties, it goes without saying that the agreement should clarify the venue or seat for the arbitration, the relevant language and the law which shall govern the substance of the dispute. One should also consider whether to make provision for the application of any institutional rules for the conduct of the arbitration, which can assist in the conduct and timetabling of an arbitration, which is otherwise left for the tribunal  to decide upon if the parties cannot agree on the procedure to be adopted. There are, however, some particular provisions under the 2010 Act, which, although they do not all necessarily change what applied previously, should still be considered and taken into account, as appropriate, in drafting arbitration clauses or agreements. Some of the principal ones are dealt with below.

• Under the 2010 Act, the default number of arbitrators is one. If the parties want more than one arbitrator to constitute the tribunal, they need to make express provision in this regard.
• If the parties fail to agree upon an arbitrator, the default mechanism is that the High Court will appoint one, which will likely result in a legally qualified arbitrator being appointed. Depending on the dispute, an arbitrator with a different (e.g. technical) background may be more appropriate and, to ensure such person would be appointed if the parties cannot agree on an individual, it may be appropriate to choose an appropriate industry body to act as the default appointing authority at the outset. 
• In addition, depending on the nature of the contract, and the possible issues that might arise, the parties can specify that their arbitrators might have specific qualifications, eg. an engineer, a lawyer, etc. So, for example, if there is a contractual interpretation issue, they may make provision that the arbitrator shall be a Senior Counsel or a Partner in a solicitors’ firm. Similarly, if the dispute is technical in nature, there might be another specific provision for an engineer to be appointed as the arbitrator. In this way, the parties can pre-agree the qualifications required for the most appropriate arbitrators, depending on the disputes that may arise. This can also be reflected in the default appointment mechanism, such that, for disputes in respect of legal interpretation of the contract or relationship, the President of the Law Society or Chairman of the Bar Council might be an appropriate appointing body, or for technical disputes, the President of Engineers Ireland.
• Under the 2010 Act, unless the parties agree otherwise, awards issued by an arbitrator shall be reasoned awards. If the parties do not want a reasoned award, they will need to make that clear. One reason for not seeking a reasoned award is that the 2010 Act makes it extremely difficult to set aside an arbitral tribunal’s awards and as such, knowing the reasons may just be adding to the costs of the process.
• As before, the tribunal can determine the question of costs and interest as it sees fit, unless the parties have agreed to the contrary. A significant difference now is that the parties can agree, at the outset, upon the allocation of costs, such that, for example, they can agree to bear their own costs, irrespective of the outcome of the arbitration, where one would usually expect costs to follow the event. The only exception to this is in respect of consumers.
• The 2010 Act has two significant new provisions with regard to security for costs.  In the first instance, it specifically excludes the High Court’s power to award security for costs, unless the parties agree otherwise.  In the second instance, the new legislation provides as a default that the tribunal may order the provision of security for costs (although it outlines bases on which the tribunal may not order security).  In circumstances where an order of security for costs can be draconian and, effectively, stifle a claim, security for costs are infrequently ordered by courts and permitting this jurisdiction to the tribunal, and not the High Court, is something which should be carefully considered.
• In addition, the 2010 Act also provides that, unless agreed otherwise, the High Court has no jurisdiction with regard to discovery.  This should be carefully considered because it would necessarily exclude the possibility of obtaining any third party discovery (which the Court could order), unless it were to be voluntarily provided, as a tribunal has no jurisdiction over third parties.
• The tribunal may also, unless the parties agree otherwise, grant interim measures, which could, for example, include interim injunctions and securing monies or goods in dispute, as well as securing evidence.  Such powers are significant and whether or not to exclude them should be carefully considered.
• The arbitrator, unless otherwise agreed, has a default jurisdiction to grant specific performance as a remedy (except regarding land).  If a party wishes to exclude specific performance as a remedy against itself, and therefore only permit damages, it will have to exclude it expressly.

COURT PROCEEDINGS AND ARBITRATION

Can any court proceedings issued be stayed if there is an arbitration agreement?

Yes. Article 8 of the Model Law sets out that, if an action is brought before the court in a matter which is the subject of an arbitration agreement, the court is obliged to refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed. The court should therefore have less scope not to stay proceedings in favour of arbitration, which should add to the certainty of choosing arbitration as the dispute resolution mechanism.

By when must such a stay application be brought?

A party seeking a stay of Court proceedings brought in breach of an arbitration agreement must act with haste and, in any event, must act not later than when submitting his first statement on the substance of the dispute.

THE ARBITRATOR(S)

Must an arbitrator be impartial or independent?

Yes. Article 12 of the Model Law provides that where a person is approached in connection with an appointment as an arbitrator, they are obliged to disclose any circumstances that are likely to give rise to justifiable doubts as to their impartiality or independence. The duty to make such disclosure is ongoing and an arbitrator is obliged to disclose any such circumstances throughout the arbitral proceedings.  Article 18 of the Model Law also sets out in express terms the obligation upon the arbitrator to treat both parties equally and to give each side the opportunity to put forward their case. 

Can the tribunal determine its own jurisdiction?

Article 16 of the Model Law provides that the arbitral tribunal may rule on its own jurisdiction, which includes any questions regarding the existence or validity of the arbitration agreement. The position is now clear that the tribunal can determine whether it has jurisdiction to hear the dispute. 

By when must a challenge to the tribunal’s jurisdiction be brought?

Any assertion that the tribunal does not have jurisdiction must be raised no later than the submission of the statement of defence, and a plea that the tribunal is exceeding the scope of its authority must be raised as soon as possible as the matter arises in the proceedings. A party cannot simply say nothing, store the matter up and seek to challenge the award later. The tribunal may rule on a plea either as a preliminary question or in an award on the merits.

Does the Court have any role with regard to a jurisdictional challenge?

Yes. If a party is dissatisfied with the tribunal’s determination on its own jurisdiction, it can bring a subsequent challenge to a tribunal’s preliminary ruling on jurisdiction before the High Court. Any request that the High Court decide the matter shall be made within 30 days of having received notice of the tribunal’s ruling and the High Court’s decision is not subject to appeal.

If the tribunal finds the overall contract to be null and void, does that impact on the tribunal’s jurisdiction to make such a finding?

No. A tribunal may determine that the contract is null and void, but it does not follow that the arbitrator has no jurisdiction to reach such a determination, nor does such a determination entail the invalidity of the arbitration clause.
 
Can an arbitrator be challenged during the conduct of the arbitration and on what bases?

Yes. An arbitrator may be challenged if circumstances exist that give rise to doubts as to his impartiality or independence, or if he does not possess qualifications agreed to by the parties. The tribunal will determine such challenge in the first instance and, if unsatisfied, a party may seek a decision of the High Court.  In addition, if an arbitrator becomes de jure or de facto unable to perform his functions or for any other reason fails to act without undue delay, his mandate terminates if he withdraws from office or if the parties agree on termination. If there is controversy concerning any of those grounds, the High Court may determine the issue.

How is a substitute or replacement arbitrator to be appointed?

Where an arbitrator’s mandate terminates, any substitute or replacement arbitrator shall be appointed according to the same rules applicable to the arbitrator being replaced.

What immunity from suit does the arbitrator enjoy?

The arbitrator is immune from suit and there is no scope for an arbitrator to be liable in any proceedings for anything done or omitted in discharge of his duties. Such immunity also extends to employees, agents or advisors of arbitrators, and to any appointing or nominating bodies. Importantly, there is no exception to this immunity where the arbitrator has acted in bad faith.

CONDUCT OF ARBITRAL PROCEEDINGS

What procedure will apply to the arbitration proceedings?

There is nothing in the 2010 Act which directs a particular procedure to be adopted.  If the parties do not agree upon a procedure to be followed by the tribunal, or if they do not choose institutional rules which provide a procedure, the tribunal may conduct the arbitration in such manner as it considers appropriate. In this regard, the tribunal is entitled to determine the admissibility, relevance, materiality and weight of any evidence.

Can interim measures be obtained?

Yes. Unless agreed otherwise, the tribunal may, if requested, order interim measures which are of temporary effect pending the delivery of the award by which the dispute is finally decided. Such interim measures can include an order in the nature of an injunction to maintain or restore the status quo pending determination of the dispute. The tribunal can also order the preservation of evidence or the preservation of assets from which any award might be satisfied. In addition, a party may seek and obtain an interim measure of protection from the court.

Can the Court assist in taking evidence?

Yes. Article 27 of the Model Law provides that the tribunal, or a party with the approval of the tribunal, may request the assistance of the High Court in taking evidence, so that, for example, the attendance of Irish-based witnesses might be compelled through a subpoena or evidence from witnesses overseas might be sought by way of the issue of a commission or request for examination.

What happens if a party is not co-operative in the proceedings?

Unless agreed otherwise, if either party fails to attend the hearing or to produce documentary evidence, the tribunal may continue the proceedings and make the award on the evidence before it. If the respondent fails to communicate a statement of defence, the tribunal shall also continue the proceedings, although without treating the failure as an admission of the claims alleged. However, if a claimant fails to communicate the statement of claim, the tribunal shall terminate the proceedings.

Can separate arbitrations be consolidated or heard concurrently?

The 2010 Act provides that, where the parties agree, arbitrations may be consolidated and concurrent hearings held. In practice, such agreement will be unlikely where disputes have arisen and, it is prudent, in drafting a suite of contracts with different parties, which may involve related claims, to make express provision in the arbitration clauses of each agreement or contract to facilitate consolidation of, and concurrent, hearings.

ARBITRAL AWARDS

What are the specific requirements of awards?

The default position under the 2010 Act is that the award must be reasoned, although the parties can agree to the contrary. The award must be in writing and be signed by the arbitrator(s) (or the majority thereof), stating the date and place of arbitration, with copies to be delivered to the parties. Where a tribunal has been permitted a discretion to deal with costs, and determines costs on that basis in any award, it is obliged to specify the grounds on which it has acted, identify the items of recoverable costs, fees and expenses and indicate by whom and to whom they shall be paid.

Can the parties request the correction or interpretation of an award?

Yes. It is open to either of the parties (on notice to the other) to request the tribunal to correct any clerical or typographical or similar errors in the award, or to request the tribunal to give an interpretation of a specific point or part of an award. Unless the parties agree otherwise, such request must be made within thirty days of receipt of the award.

If a claim is omitted from an award, can the issuance of an additional award be sought?

A party may also request (on notice to the other) the tribunal to make an additional award on claims presented in the proceedings, but omitted from the award, within thirty days of receipt of the award.

Can arbitral awards be challenged under the new legislation?

They can, although the bases upon which one could previously seek to set aside or remit an award under the 1954 Act no longer exist. However, there are limited grounds upon which recourse may be had against an award such that it might be challenged which are set out at Article 34 of the Model Law (which mirror the grounds on which recognition and enforcement might be refused as per Article 36). These require that:

(a) the party making the application furnishes proof that:

(i) the party to the arbitration agreement referred to in Article 7 was under some incapacity; or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of this State; or

(ii) the party making application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

(iii) the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside; or

(iv) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Law from which the parties cannot derogate, or, failing such agreement, was not in accordance with this law; or

(b) the court finds that:

(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law of this State; or

(ii) the award is in conflict with the public policy of this State.

If satisfied that any of the above grounds are made out, the High Court can set aside the arbitral award. 

By when must any application to challenge be made?

An application to set aside the award must be made within three months of the receipt of the award by the applying party. However, where a challenge is to be made on public policy grounds, Section 12 of the 2010 Act provides that a party has 56 days from the date on which the circumstances giving rise to the application became known or ought reasonably have become known to the party concerned.

Is there scope for remitting issues to the tribunal?

Yes. Article 34(4) of the Model Law provides that, when asked to set aside an award, where appropriate and where requested to do so by a party, the High Court may suspend the setting aside proceedings in order to give the tribunal the opportunity to resume the arbitral proceedings or take such other action as in the tribunal’s opinion will eliminate the grounds for setting side.

COURT INVOLVEMENT

Who will hear applications to court under the 2010 Act?

Section 9 of the 2010 Act makes provision that the functions of the High Court in respect of the 2010 Act shall be performed by the President of the High Court or such other judge as may be nominated by the President. The rationale is that, in having one judge, whether the President or a specific nominee dealing with arbitration matters, there will be consistency in how the Irish Courts deal with arbitration matters. This will be important if Ireland is to promote itself as an international arbitration venue, bearing in mind that there is already a substantial body of international jurisprudence in the Model Law, to which we would hope that the Irish Courts can add constructively.

Why is there a limited right of appeal to the Supreme Court?

Although the High Court is the designated court for the purposes of the 2010 Act, the Act also makes it the court of last resort in relation to specific matters. There is no appeal to the Supreme Court in respect of decisions of the High Court on stay applications under Article 8, setting aside awards under Article 34 or applications for the recognition and enforcement of arbitral awards, whether under the Model Law or any of the Geneva, New York or Washington Conventions. 

The Model Law also clarifies that there is no appeal from a decision of the designated court in respect of the challenge to an arbitrator under Articles 13 and 14 or in respect of a High Court determination on jurisdiction under Article 16. The rationale for restricting appeals is that it gives finality to the arbitral process and reflects the wishes of the parties to contract out of Court-based dispute resolution and opt for private arbitration. 

There is, however, still the possibility of an appeal to the Supreme Court in respect of any decision of the High Court in respect of interim measures, the taking of evidence, discovery or the ordering of security for costs.
 
Can a court propose arbitration?

Yes. Interestingly, the 2010 Act does permit both the High Court and Circuit Court to adjourn proceedings before it, if it considers it appropriate to do so and the parties agree, to enable the parties to consider whether any or all matters might be determined by way of arbitration. Whilst it remains to be seen whether this provision will be exercised frequently, a suggestion from a judge that issues might be resolved by arbitration may be compelling to the parties, particularly in technical or engineering disputes.

IRELAND AND THE WORLD

Does the 2010 Act make Ireland a more attractive venue for international arbitrations?

Yes. There are many reasons why Ireland is an attractive venue for international arbitrations, not least because of its neutrality, the fact it is English speaking, physically located in western Europe, has good transport and communications infrastructure, and has the necessary facilities and services for the conduct of hearings. Through the 2010 Act, it has increased its attractiveness because of the regime it now offers to potential disputants. It will have a standard legal regime applicable to domestic and international arbitration, which means local practitioners and arbitrators, who are already highly skilled and professional, will have experience in dealing with the Model Law across a range of disputes. There will also now be reduced scope for intervention by the Courts, with a reduced right of appeal in respect of any decisions made, which is consistent with the view that arbitration, once chosen by the parties as their dispute resolution mechanism, be as final as possible. This is consistent with international norms and it is hoped that, as a consequence, Ireland will become more attractive as a venue for international arbitrations.