Dermot Ahern (Louth, Fianna Fail)

I move: "That the Bill be now read a Second Time."

A major impetus for this new legislation was a strong sense that the time was right to ascertain what could be done to enhance Ireland's ability to deliver on its potential as a venue for arbitration excellence. There also was recognition that our primary governing statute in the domestic area is more than 50 years old and that some modernisation in this area might not go amiss.

The key objective of the Bill is to create the legislative framework that will enable Ireland to capitalise upon the growing demand for non-judicial solutions for disputes arising within numerous spheres of activity, including commercial. International arbitration in particular has developed as a multi-million euro business and countries throughout the world are competing to attract this business to their capital cities.

Within Europe, the key players are Geneva, London and Paris. Research has demonstrated that important concerns for parties when it comes to deciding on where to arbitrate their disputes are legal considerations, convenience of location, the availability of expertise and neutrality. Ireland is well placed to build on the advantages which we have in all of these areas. In addition, we also have the benefit of being an English-speaking location and this is a positive factor of considerable importance in the international commercial sphere.

Ireland has three arbitration Acts and two different arbitration regimes. One regime applies to arbitrations which are purely domestic in character and is governed for the most part by the Arbitration Act 1954, with small elements drawn from the Arbitration Act 1980 and the Arbitration (International Commercial) Act 1998. As its name suggests, the latter Act governs arbitration which is both international and commercial in character. In addition, certain international obligations with regard to the recognition and enforcement of arbitration awards are governed by the 1980 Act. In summary, therefore, the legislative picture, viewed from the outside, could be perceived as being somewhat fractured and may hinder our goal of presenting ourselves as a modern venue that is suited to the business of arbitration with particular emphasis on the international dimension of this aspect of the law.

It is widely acknowledged that the gold standard for arbitration legislation, particularly in the commercial arena, is the model law on arbitration that was adopted by the United Nations Commission on International Trade Law, UNCITRAL, in 1985 and subsequently amended in 2006. To date, it has been adopted by more than 50 countries. While the model law was drawn up mainly with international commercial arbitration in mind, some countries, such as Scotland and New Zealand, have taken the decision to apply the it in the domestic arena as well. Ireland adopted the model law in 1998 for international commercial arbitrations only and, with a decade of experience behind us in respect of its operation, it seemed appropriate to take the next step to move to a single arbitration code that would be based almost exclusively on the provisions of that law.

In general, even a cursory glance through the newspapers demonstrates that the profile attached to arbitration, and to some extent to mediation, has grown considerably of late. This suggests the introduction of this legislation is timely and that we have an opportunity to take advantage of what appears to be a growing trend.

Arbitration comes within the ambit of what is commonly referred to as alternative dispute resolution. In the past, there may have been a tendency to view the growing interest in such alternatives as suggestive of an implied criticism of the way in which the judicial system operates. However, there now is an increasing recognition that access to justice has a number of facets and that the differing elements which facilitate such access have the ability to complement and enhance each other in a mutually supportive way.

One obvious example of such support is to be found in the rules that were introduced in 2004 to facilitate the operation of the commercial list in the High Court. By virtue of these rules, proceedings now can be adjourned to allow the parties to consider whether recourse to a process of mediation, conciliation or arbitration might be appropriate to the issue in dispute. I understand that an increasing number of cases are being settled in this way, which has obvious benefits both for the parties themselves and for the State.

There also is an appreciation that not every dispute necessarily requires a judicial solution. In the commercial sphere in particular, the parties to a dispute may well have a long-standing business relationship they do not wish to jeopardise by engaging in traditional litigation or may wish, for reasons of business efficiency, to resolve their dispute outside the glare of unwelcome publicity. Again, recourse to a process such as arbitration carries with it certain inherent advantages, such as confidentiality, speed of resolution and finality, which may well commend themselves in the circumstances I have outlined.

I propose to go briefly through the various sections of the Bill and to dwell mainly on those aspects that introduce an element of change into our existing arbitration regime. I am conscious that some technical amendments may be required on Committee Stage and I already have asked my Department to begin the work necessary to identify the extent of those amendments. Against that background, Members may be assured I will listen carefully to any suggestions for improvement that can be made.

Part 1 of the Bill deals with a range of preliminary matters, including the important matter of definitions. I draw Members' attention to the definition of "standard arbitration". Essentially, this covers arbitrations which are not international and commercial in character. This is of significance in the context of those provisions of the Bill which apply exclusively to this kind of arbitration and I will deal with them in due course. Another important definition is that of "arbitration agreement". This definition reflects changes introduced into the Model Law in 2006 which include clear provisions concerning the recognition of agreements in electronic form. Part 1 also contains the transitional provisions and provides for the repeal of the existing Arbitration Acts.

Part 2 of the Bill is its central core. Section 6 applies the model law to all arbitration proceedings that take place within the State. Hitherto, the law has only applied in respect of international commercial arbitration by virtue of the 1998 Act. Section 7 provides for a rule regarding the commencement of arbitration proceedings that would be relevant in, for example, a Statute of Limitations context. This is one of the areas where further technical modification may be required. Section 8 will allow the courts to make use of the preparatory work of the UN commission when interpreting any provision of the model law brought before it and should be a valuable tool in ensuring consistency of approach in the application of the law across a range of cases.

Section 9 deals with the functions of the High Court which, as was the case in the 1998 Act, is designated as the court of competent jurisdiction for certain matters that arise under the model law. That law is predicated upon the idea that minimal court intervention is facilitative of the arbitration process. However, it also recognises that there are certain aspects of arbitration where a court role is both appropriate and necessary, for example, where the parties are unable to agree on the arbitrator to be appointed or where there is a need to make an application to set aside an award. Among the amendments made to the model law in 2006 was the inclusion of a number of new provisions dealing with interim measures and preliminary orders. The High Court will also have a role in the recognition and enforcement of such orders.

The High Court, by virtue of section 10, is also given the power to carry out the necessary obligations that may arise under Articles 9 and 27 of the model law. Article 9 allows a court to grant interim measures of protection before or during arbitral proceedings. Such measures would include the granting of interim injunctions and orders directed to the preservation of any goods that may be the subject of the dispute. Article 27 allows the court to assist in the taking of evidence. Under section 15 of the Bill, it is specified that such assistance may extend to arbitral proceedings occurring outside the State.

An important new provision in section 10 is that the court will no longer have the power to order security for costs in the context of arbitration. This will be a matter solely within the remit of the arbitral tribunal. Section 19 specifies the role of the tribunal in this area. In a similar vein, the court will no longer have the power to order discovery of documents in the context of arbitration. The vesting of these powers solely in the arbitral tribunal is generally seen as beneficial in developing Ireland as a centre of arbitration excellence, although it will be open to the parties, should they so agree, to specify that the court can intervene. Given that arbitration provides an alternative path to litigation, there is considerable evidence to suggest parties are anxious to avoid excessive court intervention. This is especially evident when it comes to enforcing an award.

Section 11 provides that there is to be finality in the court's determination in respect of a number of applications. These include an application to stay a court action in a matter that is the subject of an arbitration agreement, to set aside an arbitral award and to recognise and enforce an arbitral award. In a new departure for our law, all of these applications will no longer be subject to appeal in a higher court.

Section 13 specifies that the default number of arbitrators, in the event that the parties do not agree otherwise, shall be one. This is a departure from the model law which specifies the default number as being three. The choice made is consistent with our existing arbitration practice and should assist in keeping the costs of arbitration to an acceptable level.

Section 14 deals with the power to administer oaths which, by virtue of the Interpretation Act 2005, also includes the power to allow evidence to be given either by declaration or affirmation. Given the inherent complexity of some arbitration disputes, it may sometimes happen that parallel proceedings involving a variety of parties may come into being. In such cases, it can be advantageous if the various proceedings can be consolidated or run concurrently. Section 16 deals with this area. However, because the authority of the arbitrator essentially derives from the agreement of the parties, consolidation or the holding of concurrent hearings cannot occur unless there is a willingness on the part of all parties.

Sections 18 to 22 supplement the model law in respect of a range of matters. They touch upon the power of the arbitral tribunal to award interest and costs and also deal with the liability of the arbitrator. It is important, particularly in the context of international arbitrations, that arbitrators are protected against unmeritorious litigation by aggrieved parties who might be unhappy with the fact that an award was made against them. A provision restricting liability demonstrates commitment to the arbitral process and is a common feature of arbitration regimes in other jurisdictions. A final element in this mix relates to the enforceability of the arbitration award and its binding effect, critical elements within the overall arbitral process.

Sections 23 and 24 deal with various international agreements to which Ireland is already a party and replicate provisions already provided for in legislation dating back to 1954 and 1980, respectively. Chief among these agreements is the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. This is generally regarded as the foundation of international arbitration and facilitates international trade throughout the world. It has been ratified by more than 140 countries. This broad range of support ensures arbitral awards will be readily enforceable in almost every jurisdiction of note. This year saw the 50th anniversary of the convention and Dublin which hosted the prestigious conference of the International Council for Commercial Arbitration in June was centre stage in demonstrating support for its aims and principles. The other agreements covered by these sections include the Convention on the Settlement of Investment Disputes between States and Nationals of other States, commonly referred to as the Washington Convention. This convention is primarily devoted to investor-state dispute settlement. The remaining agreements — the Geneva Convention and protocol — have largely been overtaken by the New York Convention, but retain their relevance for a limited number of countries.

Sections 27 to 29 deal with the position of State authorities which, as is the case at present, will be bound by arbitration agreements in much the same way as a private entity. They also deal with arbitrations that arise under statute. Further adjustment of these provisions will be required to take account of the broad range of arbitrations that arise under various Acts within the remit of a number of Departments outside the justice framework.

The final element of this central part of the Bill concerns small claims. Section 30, although couched in somewhat different terms, essentially maintains a key provision first introduced into our arbitration legislation in 1998. Broadly, it ensures the integrity of the existing small claims procedure that operates under the aegis of the District Court is retained in order that, regarding claims up to €2,000 in value, the jurisdiction of the court cannot be ousted by an arbitration clause.

I have referred to the concept of standard arbitrations. For the most part, it is desirable to have a single regime that applies, regardless of the nature of the arbitration. Nonetheless, it is appropriate that additional protections are available in cases that might not involve large-scale arbitrations, international and commercial in character. These matters are dealt with in Parts 4 and 5 of the Bill. While a distinction is made between consumer arbitrations and other kinds of arbitration, it is sufficient to say that, in broad terms, additional oversight by the courts can be availed of in these cases. For consumer arbitrations, the oversight is automatically available and can only be disapplied where there is agreement to do so once the dispute has arisen. For other arbitrations, the prior agreement of the parties is necessary for its application. "Oversight" means the retention of the existing case stated procedure and clarification as to when it is open to the court to remit an award for further consideration. In the latter case, the grounds for making an application are that new evidence is available that could materially alter the decision on the award.

A further element in standard arbitrations involves the specification of additional grounds for setting aside or remitting an arbitral award. These reflect existing case law and are additional to the grounds for setting aside laid down in the model law. What we are discussing is a fundamental error of law on the face of an award and evidence of procedural unfairness in the conduct of the arbitral tribunal.

Since one cannot consider the specific sections of the Bill in isolation from the provisions of the model law to which it gives effect, I would like to touch briefly on some key elements of that law. I have mentioned the underlying philosophy of the model law which is that minimal court intervention works to the advantage of the arbitration process and ensures finality and certainty in respect of any award. Another key element enshrined in the model law is the idea of party autonomy. This is evident in the freedom that parties have with regard both to the number of arbitrators and the procedure for appointing the arbitrator or arbitrators. It is also to be found in the fact that the parties are free to agree on the procedure to be followed by the tribunal. This can result in the application of a given set of rules emanating from a recognised arbitration body such as the International Court of Arbitration. However, it also allows parties to agree on particular points of concern to them which will take account of the specific nature of the proceedings in which they are engaged.

By virtue of the model law, there will also be general application of the provision whereby the arbitral tribunal will be given the competence to rule on its own jurisdiction. This is a matter which has particular attraction for practitioners. With regard to the arbitration award itself, it should be noted that, unless otherwise agreed by the parties, that award is to state the reasons upon which it is based. This is somewhat of a new departure within this jurisdiction for arbitrations that are neither commercial nor international in character. However, the new rule is not likely to pose any significant problems in practice. From the point of view of the parties, it should introduce a measure of transparency into the arbitration process and act as a reassurance that proper standards are being adhered to.

While it is a significant modernising measure, the Bill inevitably involves a substantial amount of consolidation. From the brief outline I have given as to its content, it should be obvious there are provisions in the Bill that are equivalent to many of those already contained in the Arbitration Acts 1954 to 1998. However, in considering this Bill, the most important thing to note is that in applying the model law of the United Nations International Commission on Trade Law to all arbitrations, Ireland is putting itself to the forefront in terms of having in place a modern and rigorous arbitration code which is fully in tune with best international practice. By taking this route we are providing ourselves with a single reference point for all arbitrations. I hope this will prove to be an attraction when it comes to doing arbitration business in this jurisdiction.

Alternative dispute resolution in general is clearly a growth industry and the Bill will answer a demand that exists, particularly within the international commercial community, for increased options in this area. Ireland, by virtue of its legal system which is based on the common law, its accessibility and its language regime would seem to be well placed to capitalise upon that demand.

I am confident the new Arbitration Bill will provide the necessary legal underpinning for the future development of Ireland as a leading arbitration centre. It is an undeniable fact of commercial life that where there is investment, particularly of a substantial kind, there are likely to be disputes to which considerable complexity can attach. In this environment, arbitration allows for solutions which maximise privacy, provide the requisite flexibility and enable arbitrators whose skills and experience match the dispute to be chosen. There is also the all-important guarantee of enforceability.

This is a somewhat technical Bill but it is nonetheless an important measure that may help in the delivery of arbitration business to this country. I commend it to the House.

See this speech in context