Was the Arbitration Act 2010 necessary?
Date: April 1st, 2011 | Filed under: Mediation & Company Law Articles | Tags: arbitration, mediationThe Arbitration Act 2010 which came into effect on the 8th June, 2010 was necessary to fill the gaps which existed under the previous legislation in Ireland. The uncertainty which resulted from these gaps undermined the very essence of arbitration.
Arbitration provides a cost effective, time efficient process with the finality of the outcome as one of the major goals of the process. The uncertainty and shortcomings caused as a result of the previous legislation meant that these benefits were not recognised to their full potential. This may be seen in relation to the issue of arbitrators and the immunity (or lack of immunity) which they enjoyed. The old legislation also provided for case stated procedures which by their very existence belittled the process to a greater extent. The 2010 Act has remedied the deficiencies which existed under the previous regime and has brought us into line with international best practice ensuring that we have one of the best processes in the world.
Prior to the enactment of the Arbitration Act 2010, Commercial arbitrations and domestic arbitrations in Ireland were dealt with under two separate legislative codes. The Arbitration (International Commercial) Act was enacted in Ireland in 1998 to implement and adopt the UNCITRAL Model Law and to legislate for International Commercial arbitrations in Ireland. The Arbitration Acts 1954 and 1980 were in place to deal with domestic arbitration in Ireland. Section 12(1) of the Arbitration (International Commercial) Act 1998 made provision for the immunity of arbitrators; the Arbitration Acts 1954 and 1980 were silent on the issue of immunity for arbitrators in domestic arbitrations. [1] Therefore, there was uncertainty regarding the position of domestic arbitrators in Ireland and this prevented the arbitral process in Ireland from achieving its maximum potential.
The issue arose in the case of Redahan v Minister for Education.[2] The Arbitration in question was governed under the Arbitration Acts 1954-1980 and as a result the immunity of the arbitrator in question was doubtful. Mr. Justice Gilligan held that the Arbitration (International Commercial) Act 1998 only applied to international arbitration and did not confer arbitral immunity to domestic arbitrators. He looked at the case law from other jurisdictions. He agreed that the function performed by the arbitrator was quasi- judicial in nature and he also looked at the law in England on the immunity of arbitrators under the Arbitration Act 1996, as well as the case law from the United States and Australia. Therefore, he concluded that absent bad faith, the arbitrator enjoyed immunity from suit at common law. [3]
The Arbitration Act 2010 has now conferred immunity on arbitrators for anything done or omitted to be done in the discharge of their functions. Immunity is also conferred on institutions designated or requested by the parties to appoint an arbitrator.[4] This is a progressive move for arbitration in Ireland. The ‘bad faith’ requirement no longer exists and as a result this development has resulted in giving full jurisdiction to arbitration. Prior to this, Redahan had been a welcome development to the arbitral process in Ireland. However, the Arbitration Act 2010 has strengthened the position of Arbitrators in Ireland, ensuring that they can carry out their quasi –judicial functions as described in Manning v Shackleton.[5]Arbitrators will now be able to do their work in complete independence and free from fear. They shall not have to turn the pages of his books with trembling fingers, asking themselves: ‘If I do this, shall I be liable in damages?’[6]
The Arbitration Act 2010 was essential to clear up the uncertainty which existed regarding arbitral immunity in Ireland and to prevent opportunities for the process to be undermined. It has provided the process with an opportunity to be successful in our jurisdiction.
The Arbitration Act 2010 respects the autonomy of arbitrators and judicial intervention has been curtailed by the Act in line with the model law. Under section 35 of the Arbitration Act 1954, an arbitrator could state a case to the court, usually if it involved a point of law of real and substantial importance. If a party applied, but the arbitrator refuses to state a case, that party could apply to the High Court to compel the arbitrator to state a case. This facility was not provided for in the 1998 Arbitration (International Commercial) Act. The Arbitration Act 2010 has abolished the ‘case stated’ procedure and reduced the scope for judicial intervention which had the effect of undermining the process.
The UK abolished the case stated procedure in 1979 as it was thought that the procedure was being abused as a delaying tactic. Brian Hutchison notes that while the Irish courts might not have been open to acceding to requests for case to be stated, the mere possibility of such court intervention, however remote, may be enough to deter parties from arbitrating in Ireland.[7] Parties could not exclude the case stated procedure either through an agreement, as such an agreement was void and contrary to public policy in ousting the jurisdiction of the courts.[8] Stewart was of the opinion that criticism of the case stated procedures has proven to be unjust as the courts were reluctant to trespass on the jurisdiction of the arbitrator.[9] It was noted that ‘the courts should be slow to usurp the function of the chosen arbitrator by intervening whether by way of setting aside an award, remitting an award, or directing a case to be stated.’ However, the mere possibility that case stated procedures could be invoked meant that the benefits of arbitration as an alternative mechanism for the resolution of disputes in Ireland could not be recognised.
Case Stated procedures had the potential to rank up costs which meant the arbitration could end up been more expensive than litigation. Arbitration is designed to provide a speedy mechanism for the resolution of disputes. However, the existence of the case- stated procedures had the effect of slowing down the process. It led to the control of arbitration being lost to the courts. This had the effect of defeating the purpose of Arbitration again.
The Arbitration Act 2010 has proven to be far-reaching. It has remedied the deficiencies which had existed under the old regime. It has incorporated the best practice provisions which exist under the Model Law and has ensured that we are progressive and are keeping up with modern jurisprudence in the area. The new Act has provided us with a more coherent legislative code which has the potential to bring many benefits for out country. It has put us in the ‘shop window’ internationally as a possible destination for the resolution of international disputes and this is a welcome development at a time when the country is suffering economically. The limitation on the scope of judicial intervention has given the process a better prospect of being successful in our jurisdiction. It is essential that at this time of economic crisis that we are open to any measures which will save us time, costs and resolve our differences in a way which respects the autonomy of both sides to a dispute. The Arbitration Act 2010 has provided the certainty and clarity which were lacking in the previous legislation.
Catherine Nugent
[1] Stewart, S.C., Ercus ‘Developments in Arbitration in Ireland’ P 2.
[2] Unreported, High Court, Gilligan J., 29th July 2005.
[3] ibid.
[4] The Arbitration Act 2010.
[5] [1996] 31.R. 88, at 94.
[6] [1975] QB 118, [1974] 3 All ER 776, [1974} 3 WLR 459, 139 JP 2
[7] Hutchinson Brian, ‘Arbitration – A Viable Alternative?’ a paper delivered at the Society of Young Solicitors Ireland Spring Conference 1997.
[8] Czarnikow v Roth Schmidt and Co (1922) 2 KB 478.
[9] Stewart, p 6.
