Arbitration
Arran Dowling Hussey Dip. Arb. Law, Dip. Int. Com. Arb., F.C.I.Arb, Barrister-at-Law
[email protected]; www.arrandowlinghussey.com
Co-author with Derek Dunne B.L; [email protected] Of Arbitration (Thomson Roundhall, 2008)
Arbitration- Increasingly Important?
• The McCarthy Report, otherwise known as An Bord Snip Nua, was published in July 2009- recommended state bodies use ADR.
• Chief Justice John. L. Murray: “ Arbitration will be increasingly important in the years to come.” 30th November 2007
• Growth in Arbitration/ ADR in Ireland:• Adjudication and Mediation used by Private Residential Tenancies Board.• GAA has set up Dispute Resolution Authority; Just Sport Ireland launched in 2007.• Bar Council Small Claims Arbitration Scheme. • Mediation of Pat Kenny (RTE) dispute in April, 2008.
• Recent Dispute Resolution conference in Dublin; launched by Ian Paisley: November, 2007.• Larger conference followed in 2008.
Arbitration- What is it?
• As Dunne and Dowling-Hussey note in Irish Law Times, Volume 25, Number 9 at 138:
• “ In Arenson v Arenson, the House of Lords summarised the essential indica of arbitration in the following terms: (a) there is a dispute or difference between the parties which has been formulated in some way or another; (b) the dispute or difference has been remitted by the parties to the person to resolve in such a manner that he is called upon to exercise a judicial function; (c) Where appropriate, the parties must have been provided with an opportunity to present evidence and/or submissions in support of their respective claims in the dispute; and the parties have agreed to accept his decision.”
• [1977] AC 405.
• “ It is possible that a clause purporting to create an obligation upon the parties to refer a dispute between them to arbitration, is not in fact an arbitration procedure……Whether a procedure provided for by a contract for the resolution of disputes is arbitration or another form of dispute resolution (such as e.g conciliation mediation, negotiation or expert determination) will, in the first instance depend on the objective meaning of the clause and the intentions of the parties. The express terminology will not be decisive; as in all areas of contract law, the substance and not the form of the agreement will prevail.”
Arbitration- What is it/ A Dispute?• A distinction needs to be made between arbitration and expert determination; which are different
forms of dispute resolution.
• As Forde notes: “ the test of whether a person selected to make a valuation is an arbitrator or simply a valuer, it would seem, is whether under the contract, he is automatically part of a process for completing the substantive agreement…[or whether ]he only becomes involved where the parties are in dispute about the proper valuation, he is an arbitrator.” See Sutcliffe v Thackrah 1974 A.C
• The word ‘dispute’ should be given its ordinary meaning and encompasses any claim of one party to the agreement which the other party will not admit.
• In addition the subject matter of the dispute must fall within the scope of the arbitration clause; and• The subject matter of the dispute must be capable of being the subject of arbitration.
• It would appear that the question of whether a dispute has in fact arisen within the meaning of the arbitration agreement is a matter for the Arbitrator to decide.
• The courts do not have jurisdiction to grant an injunction in respect of a controversy as to whether a dispute has arisen: see inter alia Bremer Vulken Schiffbau v South India Shipping Corp [1982] A.C 909.
•
Why you might use arbitration
• Guarantee of expertise.• Speed• Privacy• Expense.• As enforceable as a court award.• • Above are best case examples like any process
arbitration can and does go wrong.
Matters capable of being arbitrated • Non exhaustive list of matters capable of being arbitrated:
• Insurance contracts and policies; Maritime contracts;• Contracts for the sale of goods and the supply of services; Holiday contracts;• Building/ engineering contracts; Partnership agreements .
• Matters incapable of being arbitrated.
• Disputes involving questions of fraud- s.39(2) of the Arbitration Acts allows courts to intervene to hold that a dispute involving fraud is more appropriately dealt with by them than an Arbitrator.
• See: See inter alia Greyridge Developments Ltd v McGuigan trading as McGuigan Construction [2006] IEHC 441; wherein Mr Justice Gilligan declined to set aside an arbitration agreement even though he had no doubt that a contractor involved in the dispute had forged invoices that they sought to rely on in the course of the dipsute. The court stated ‘ It may well be that the defendant did not conduct his business in an orthodox manner, that he was prepared to rely on forged invoices, that other invoices produced by him.. are open to serious question and that he purchased goods for cash. But these, in my view, are all matters which the arbitrator will be well able to deal with.’
Matters incapable of being arbitrated
• Crime- for constitutional reasons.• Divorce.• Bankruptcy/ Winding up of companies.
• Disputes within the jurisdiction of the following:• Personal Injuries Assessment Board.• Residential Tenancies Act 2004.
• Where award would seem to give effect to an illegal contract/ contract contrary to public policy.
Arbitration agreements falling outside the 1954-1998 Acts
• Section (2) (1) of the Acts requires that an arbitration agreement falling under the auspices of the Acts must be in writing.
• An unwritten agreement to arbitrate may still be valid it will just fall outside the scope of the Acts.
• Section 5(a) not not invalidate arbitration agreements ‘ relating to the terms or conditions of employment or the remuneration of any employees’ it simply acts to disapply the statutes.
• Section 5(b) of the 1954 Act excludes the application of the Arbitration Acts to Trade Dispute Arbitration under Section 70 of the Industrial Relations Act 1946.
• There are a myriad of Acts in force which provide for arbitration, or a form of arbitration, and the Arbitration Acts will normally apply save that the Credit Union Act 1997 or whatever the case may be may exclude the application of the Acts.
The Arbitrator• Anyone can describe themselves as an arbitrator.
• There is no manual available listing arbitrators working in the Republic of Ireland.
• An arbitrator is nearly always someone who practices in another profession or trade.
• Biographical details of the arbitrator will be available in any directory published by whichever other professional or trade body they belong to.
• But such an entry will be catered to those looking for an engineer, solicitor or which ever other profession is applicable.
• A handful of individual arbitrators maintain websites: www.maddenmediation.com; http://ercus.com
• • Many but not all arbitrator are members of the Chartered Institute of Arbitrator’s Irish
Branch.
The Arbitrator• The only obligation that is placed on someone who holds themselves out as an arbitrator
is that they possess elementary skill.
• See Inter alia Pratt v Swanmore [1980] 2 Lloyd’s Reports 504; where the court set out that it was misconduct to act in a reference without same.
• Arbitrator’s increasingly hold qualifications in the area; it is possible to take a Diploma in Arbitration at University College, Dublin
• The Chartered Institute of Arbitrator’s run various qualifications/ interviews so as to designate its members at Associate’s, Members , Fellows or Chartered Arbitrators as the case may be. See www.arbitration.ie and www.ciarb.org
• Barristers’ between c1991-2006 studied Arbitration at King’s Inns prior to the course there being reorganised.
The Arbitrator
• Appointment- A letter asking one side to appoint an arbitrator, or concur in the
appointment of an arbitrator, is deemed to commence the arbitration; s.74 Statute of Limitations Act 1957.
• Tradax Export SA v Volkswagen [1970] 1 Lloyd’s Rep 62:
• Above sets outs that an appointment is when the other side is notified, the appointee is notified and there is acceptance by appointee.
• The arbitration must be commenced within the normal limitation periods set down in the 1957 Act.
• It is possible to apply to the Court to extend the time to appoint an Arbitrator; s.45 of the 1954 Arbitration Act: considered in inter alia Walsh v Shield Insurance [1976] ILRM 218
• The court considers whether it would create a hardship if time was not extended.
Appointment By The Court
• Dealt with by s.18 of the 1954 Act:
• To cover default of agreement• To fill a vacancy• • S40: Fill a vacancy following removal under
S.24 for failure to use due dispatch; s.37 misconduct say State (Hegarty) v Winters
s.5 1980 Arbitration Act• In some instances there will be a difference of opinion over whether there is a valid arbitration
agreement and one of the parties will commence litigation.
• In such a situation the side that believes there is an arbitration agreement will bring a motion before the court to stay the litigation under s.5 of the 1980 Act.
• There was historically a concern that such a motion had to be brought in the High Court regardless of where the litigation had been initiated. This is not the case; the motion should be brought in the same court in which the proceedings have been initiated.
• See Mitchell v Budget Travel Ltd [1990] ILRM 739
• Whereas there is stated to be an obligation to bring an application to stay litigation as soon as is possible in the United Kingdom; it seems that there is no such onus placed on a party who seeks such a relief in the Republic of Ireland. The position in the former jurisdiction is said to be that-
• • ‘Where the other party wishes to have the dispute referred to arbitration he must apply without delay
to the court for a stay of the proceedings brought in breach of the agreement to arbitrate.’• See St. John Sutton and Gill at 269.
s.5 1980 Arbitration Act• The general issue of delay in bringing such proceedings has been ventilated in the
Supreme Court but seemingly in only one reported case, not in an exhaustive fashion and also not for some time.
• It would be of benefit if the matter was dealt with by this court again so as to give guidance in this area. In the only case on this point to date that of O’Mahony v Lysaght [1988] IR 29 the court noted that there had been delay in the conduct of the reference and stated that if such delays were to continue it could be the case that they would later lift the stay that has been granted.
• Lower courts have considered the point in balder terms; and responded to the suggestion that as in the United Kingdom a party should ‘apply without delay to the court for a stay’ by rejecting the said submissions in at least one unreported case.
• Grounds for granting a stay, will be set out next:
Grounds for refusing a stay• Amendment to Arbitration Act, 1980.•
18.-Section 5 of the Arbitration Act, 1980, is hereby amended by the insertion of the following subsection after subsection (2):
• "(3) Nothing in this section shall prevent any party to an arbitration agreement from invoking the alternative method, provided by the Rules of Court (as amended from time to time), of commencing and dealing with a civil proceeding in respect of a small claim.".
• i.e if you have a small claim connected to a holiday or a car where the value of the claim is less than €2000 you can not be compelled to go to arbitration.
• This is a sound rule on public policy grounds; the small claims court does not tend to award legal costs; it encourages consumers to attends without lawyers and the cost of lodging a claim is very small.
Grounds for granting/ refusing a stay
• 5 (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 an 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-
• (i) null and void.• (ii) Inoperative or• (iii) Incapable of being performed or• (iiii) 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.
Grounds for granting/ refusing a stay
• Null and void: An arbitration agreement that dealt with gaming would be null and void.
• Inoperative: In McCarthy v JWT [1991] ILRM 3(scheme capped holiday companies liability and Carroll J held same to be inoperative; not explicitly drawn to holiday maker attention)
• Incapable of performance.
• The nature of what constitutes a dispute has already been discussed.• • Step in proceedings-
• As Forde notes, at 27: ‘What is required is conduct which shows that the party has decided to use the courts to advance his case against the other party.’
• Applying for a stay; filing an appearance or consenting to an adjournment do not constitute a step in the proceedings.
Grounds for refusing/ granting a stay
• In O'Flynn -v- An Bord Gais Eireann 1982 ILRM 324 Finlay P. considered the question of what was or was not a step in the proceedings and stated that the guidelines to be used was determining whether the step taken involved costs which would be lost were the stay to be granted and the matter referred to arbitration. In the instant case, the Defendant's Solicitor wrote to the Plaintiff's Solicitor seeking an extension of time to file the Defence. The Court held that that was not a step in the proceedings.
• More recently, Finlay Geoghegan J. ruled, in Gleeson -v- Grimes and McQuillan [2002] that two requirements must be satisfied for conduct to constitute a step in the proceedings:-
(i) the conduct of the applicant 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 learned judge held was not the case in these proceedings, and
(ii) the act in question must have the effect of invoking the jurisdiction of the Court.
Grounds for refusing/ granting a stay
• In Brenton Dewick (a Minor) v Falcon Group Overseas Limited (High Court, 2001 ) the then Mr Justice Johnson held that Section 5 cannot be used to oust the jurisdiction conferred on the Court by Order 22 Rule 10 of the Rules of the Superior Courts in relation to cases involving children.
• In Administratia Asigurarilor de Stat and Ors -v- Insurance Corporation of Ireland Plc 1990 ILRM 159 the High Court held that it has an overriding jurisdiction to refuse a stay where there are bona fide allegations of fraud.
• Other intervention by the court.
• As Forde notes-
• “ The whole point of arbitration is to have disputes resolved outside the ordinary court system.”
Intervention by the courts• S.9 of the 1954 Act allows a party to apply to court to revoke their own
arbitrator’s authority.
• S.14 Presumption that only 1 arbitrator
• S.24 Removal for unreasonable delay.
• S. 36 Remit An Award To Arbitrator- New Award Must Be Made.
• S.37 Removal Having Misconducted Himself Or The Proceedings.
• Re Enoch Zaretsy Bock & Co [1910] 327 inter alia
• S.38 Set Aside The Award If Misconduct.
Intervention By Court
• An error of fact or law or confusion in reasoning do not fall under this heading.
• Inter alia Church & General Insurance Co v Costello [1981]
• Scope and implications of 2008 Bill- see separate handout.
• Arran Dowling Hussey F.C.I.Arb.• 28th November, 2009.
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