Was the Arbitration Act 2010 Necessary?
Date: June 28th, 2011 | Filed under: Mediation Scholarship ArticlesTatra Mary Musheshe, Uganda, Winning Participant
Intro
This paper in the first part will address the nature and development of Ireland law on Arbitration, Introduction to Arbitration, definition, the Arbitration Statutes, the legal framework and advantages of arbitration. In the second part, the paper will address the question as to how the Arbitration Act 2010 was necessary and then go on to discuss why it was not. Part 3 will present recommendations and conclusion.
Nature and Development of Ireland law on Arbitration
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. 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.
In keeping with its progressive mandate, Ireland in 2010 passed a new Arbitration Act that removed the distinction between domestic and international 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 Arbitration Act 2010 came into effect on the 8th June, 2010.
The Arbitration Act 2010 came into effect on the 8th June, 2010.
Definition of Arbitration
Arbitration is a process whereby parties agree to refer their disputes to an arbitrator instead of the courts. The arbitrator acts like a judge and his decision is binding upon the parties.
By definition, arbitration is a procedure which may not be availed of except by way of a contractually binding agreement to arbitrate and arbitration clause exists to support an underlying contract of which it forms part. The most common matters referred to in arbitration include but not limited to: Insurance contracts and policies; Maritime contracts; Contracts for the sale of goods and the supply of services; Contracts for the sale of motor vehicles; Holiday contracts; Building/engineering contracts; and Partnership agreements (whether under the Partnership Act 1890 or the Limited Partnership Act 1907)
Advantages of arbitration include the privacy and confidentiality of the process; The informal and flexible procedure; the final and binding nature of the decision and the exclusion of appeals; the fact that the process can be very speedily held with no tribunal lists or backlogs; and the fact that the procedure can be held in an agreed venue and at an agreed time.
Background to the Ireland Arbitration Act of 2010
The 2010 legislation applies to the Model Law to all arbitrations in Ireland and did away with the historical distinction between domestic and international arbitration. Ireland originally adopted the Model Law in the Arbitration (International Commercial) Act 1998, but only for international commercial arbitrations. The Model Law is a recognizable 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 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.
The Legal Framework of International Arbitration in Ireland
In 1998, Ireland adopted a new international arbitration law: the Arbitration (International Commercial) Act, 1998 (the “Act”), based on the UNCITRAL Model Law. The adoption of the Act has enabled Ireland to become an extremely attractive forum for international arbitration. Ireland is also a party to the New York Convention on the Enforcement of International Arbitration awards.
In 1998 the UNCITRAL Model Law was implemented in Irish law, in the Arbitration (International Commercial) Act 1998. This legislation was enacted to give effect to the Model Law, with some modifications designed to strengthen the autonomy of international arbitrations taking place in Ireland.
Section 4 of the Arbitration (International Commercial) Act 1998 provides that the Model Law shall apply within the State, subject to the provisions of Part II of the Act. Part II of the Act contains a number of provisions to assist in interpreting the Model Law and a number of minor amendments. These additions are all designed to enhance the autonomy of the arbitration process.
Arbitration Statutes
• United Nations Commission on International Trade Law (UNCITRAL)
• Arbitration Act of 2010
• Arbitration Act of 1954
• Arbitration Act of 1980
• Arbitration (International Commercial) Act 1998
• The Chartered Institute of Arbitrators and the American Arbitration Association,
• Law Society
• Bar Council
• Rules of Arbitration 1998
• The Arbitration (International Commercial) Act.
Necessity of the Arbitration Act of 2010
The Arbitration Act of 2010 was necessary because it provided a uniform regime for arbitrations in Ireland, whether domestic or international in nature, thereby providing the masses with an opportunity to attract international arbitrations and business to Ireland. 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.
Furthermore, Arbitrators do not need to refer to the courts a question of law arising in the course of the arbitration. The 2010 Act increases arbitrators’ powers and the independence of the arbitral process from court involvement. Under section 35 of the Arbitration Act , 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. 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
There was uncertainty regarding the position of domestic arbitrators in Ireland and this prevented the arbitral process in Ireland from achieving its maximum potential. Section 12(1) of the Arbitration (International Commercial) Act 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
Parties are now able to pre-agree cost allocation. Where not agreed, the arbitrator will have power to determine this. Parties may also agree arbitrators’ powers to award interest.
The Act empowers the High Court or Circuit Court to adjourn court proceedings and, with the agreement of the parties, to refer all or part of a dispute to arbitration. If agreed in such circumstances, proceedings would be discontinued with costs being awarded as the court sees fit. However, where not agreed, the courts may order continuance or otherwise of proceedings.
It is now possible to consolidate an arbitral claim with other related arbitral claims or have them heard concurrently, as can happen with litigation. This party-driven process saves costs and improves efficiency.
Under the Arbitration Acts 1954-1980 as decided in the case of Redahan v Minister for Education 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. However, in Manning v Shackleton it has been held that 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
Why the Arbitration Act of 2010 is not necessary
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. 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.
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.
The Act is not necessary; the only method of challenging an arbitral award will be under Article 34 of the Model Law. The grounds are extremely limited and the 2010 legislation will make it far more difficult to challenge an arbitral award than was the case under the previous legislation.
The Act creates no difference between the legislative provisions relating to domestic arbitrations and international arbitrations. Irish lawyers need to be familiar with the Model Law and this will be particularly useful when advising on contractual arbitration clauses, particularly those which have an international dimension.
More so, the fact that 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, this has 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.
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.
Recommendations
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.
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.
In conclusion therefore, it can be perceived that the Arbitration Act of 2010 was necessary in order for Ireland to reform its international arbitration laws which had become obsolete and had a domestic, rather than an international, focus. At the moment all global lawyers are familiar with the new Act. The Act has created a more streamlined, cost-effective and user-friendly arbitral system and should present a genuine alternative to litigation for domestic and international parties alike. The Arbitration Act 2010 has remedied the deficiencies which had existed under the old regime. The limitation on the scope of judicial intervention has given the process a better prospect of being successful. The Arbitration Act 2010 has provided the certainty and clarity which were lacking in the previous legislation.
