Ireland: Arbitration Act 2010 - The End Of Arbitration As We Know It?

The Arbitration Act 2010 ("the 2010 Act") was signed into law by the President of Ireland on 8 March 2010 and came into operation on 8 June 2010. It repeals all previous arbitration legislation in Ireland (including the Arbitration Act 1954, the Arbitration Act 1980 and the Arbitration (International Commercial) Act 1998). The 2010 Act applies to all arbitrations commenced in Ireland after 8 June 2010, thereby being retrospectively applicable to arbitration agreements in existence prior to this date but pursuant to which an arbitration may not have commenced.

So what are the changes made by the 2010 Act to Irish Arbitration Law?

UNCITRAL Model Law

The United Nations Convention on International Trade Law Model Law on International Commercial Arbitration ("the Model Law") is incorporated into the 2010 Act and now applies to all arbitrations held in Ireland. There is no longer a distinction between domestic and international arbitrations under the 2010 Act. The most significant changes introduced by the Model Law relate to an increased jurisdiction afforded to arbitrators, including the power to review challenges to their appointment and determine their own jurisdiction. The Model Law also confers increased procedural powers on arbitrators including the power to terminate proceedings for want of prosecution and order injunctive relief. A further significant departure from previous legislation is the new requirement for arbitrators to provide reasoned awards unless the parties have agreed otherwise, which will impose an additional burden on the arbitrator.

Case Stated Procedure

The case stated procedure, which allowed an arbitrator to refer a question of law to the High Court for determination during the course of an arbitration (which often occurred at the request of the parties), has been abolished by the 2010 Act. The rationale for the removal of this procedure is to strengthen the integrity of the arbitration process and deter delays. There was a perception, not entirely reflected in reality, that the case stated procedure was being used by parties to slow down the arbitration process. It is a significant amendment in the new legislation and the opportunities for parties to seek judicial intervention in arbitration proceedings will now be severely curtailed. This will lead to parties placing a greater focus on the choice of arbitrators and their appointment mechanisms together with a greater focus on the specific rules to be applied to the arbitration, all matters which need to be considered before entering into an arbitration agreement.

Expert Assistance

The Model Law provides an avenue to soften the blow of the removal of the case stated procedure. Article 26 affords arbitrators the opportunity to seek expert assistance during the course of the arbitration on a specific issue (including a point of law) and confers a right on the parties to require that the expert participate in a hearing during which they can put questions and present their own expert evidence on the points at issue.

Challenging an Award

The 2010 Act makes it more difficult to challenge an arbitral award. The 1954 Act provided an express statutory ground of challenge for misconduct, which had been interpreted by the Courts to include "error of law on the face of the award". This ground of challenge no longer exists in the 2010 Act and the only grounds for challenging an arbitral award are set out in Article 34 of the Model Law. These grounds are limited to public policy reasons or procedural unfairness. The Model Law grounds of challenge have been interpreted narrowly in other Model Law jurisdictions and it is anticipated that Irish Courts will follow suit.

A common law ground of challenge for "error of law on the face of the award", however, may still exist and this has been upheld by the Supreme Court in Keenan v Shield Insurance Company Limited [1988] IR 89 and more recently in Galway City Council v Samuel Kingston Construction Ltd & anor [2010] IESC 18. This latter case involved a dispute arising from the re-development of Eyre Square and a deduction of sums previously certified to the contractor. The Supreme Court set aside the arbitrator's award on the basis that he had misconducted himself (under the 1954 Act) but also because there was an error of law on the face of the award "so fundamental that the award could not be allowed to stand".

Conclusion

Arbitration as we know it will continue under the new legislation. However, the 2010 Act reinforces the autonomy of the arbitral process and judicial intervention has been significantly curtailed by the Act. This is in line with the Model Law's philosophy that a system of appeals and a lack of finality can undermine the very essence of arbitration. Given the limited opportunity of challenging an arbitrator's award under the 2010 Act, parties should consider carefully their choice of arbitrator, the appointment mechanisms contained in arbitration agreements (if they are unable to reach agreement on the same) and the rules, often emanating from industry or arbitral institutions, which are to govern the arbitration process, to ensure that procedural aspects of the arbitration are agreed by the parties and built into their agreement at the outset.

This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.