John Moloney (Laois-Offaly, Fianna Fail)

I am pleased to be here for the Second Stage debate on the Arbitration Bill 2008.

The key objective of the Bill is to create the legislative framework which will enable Ireland to capitalise upon the growing demand for non-judicial solutions for disputes arising within various areas of activity, including commercial. This objective is being achieved by applying the Model Law on International Commercial Arbitration, which was adopted by the United Nations Commission on International Trade Law, UNCITRAL, in 1985 and amended in 2006, to all arbitrations which take place within this State. This will bring our arbitration law into line with best international standards. The Model Law has been adopted in more than 50 countries and has been in force in Ireland for international commercial arbitrations since 1998. It is approximately 12 years since the last Arbitration Bill was enacted. Considerable developments have occurred in this field since and the opportunity is now being taken to move to position Ireland as a centre for arbitration excellence.

By way of background, it should be noted that international arbitration is a multi-million euro business and the competition among countries to attract this business to their capital cities is intense. 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 its advantages in all of these areas. It also has the benefit of being an English speaking location, a considerable plus factor in the international commercial sphere.

The current statutory regime governing arbitration in this jurisdiction is somewhat fragmentary. We have three Arbitration Acts and two arbitration regimes. One regime applies to arbitrations that are purely domestic in character and is governed for the most part by the Arbitration Act 1954 with small elements drawn in from the Arbitration Act 1980 and the Arbitration (International Commercial) Act 1998. The regime for arbitration that is both international and commercial in character is dealt with exclusively under the 1998 Act. In addition, certain international obligations with regard to the recognition and enforcement of arbitration awards are governed by the 1980 Act. The fragmentary nature of our arbitration law is not helpful in presenting Ireland as a modern venue suited to the business of arbitration in the 21st century.

It is fair to say that, increasingly, considerable attention is being focused on the merits of alternative dispute resolution, ADR, which includes arbitration. There is a growing recognition that the objective of ensuring effective access to justice can be achieved in ways that parallel and complement the traditional system of court-based litigation. There is also an appreciation of the fact that not every dispute necessarily requires a judicial solution and that recourse to a process such as arbitration carries with it certain inherent advantages such as confidentiality, speed of resolution and finality that may well commend itself to parties, depending on the nature of their relationship.

Against this background, the introduction of the Bill can be seen as timely and is certainly in tune with a well established and clear trend. Within our court system there are many examples of a willingness to explore how ADR techniques can best be used to advantage in securing optimal outcomes across a wide range of disputes. The most obvious example is to be found in the rules introduced in 2004 to facilitate the operation of the commercial list in the High Court. By virtue of these rules, proceedings 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. The indications are that an increasing number of cases are being settled in this way which has obvious benefits for the parties and also the State. Similar rules were introduced in 2005 to deal with competition proceedings. More recently, the potential for using ADR techniques has been recognised within the context of the case progression system which now operates at Circuit Court level in respect of certain categories of proceedings.

I now propose to go through the various sections of the Bill. I will dwell mainly on those aspects that introduce an element of change into our existing arbitration regime and on those sections that have been amended since the Bill was first published in June 2008.

Part 1 of the Bill deals with a range of preliminary matters, including the important matter of definitions. There are two definitions to which I draw the particular attention of Senators. The first concerns the meaning of the word "arbitration" as used in the Bill. This definition is significant because, taken in tandem with section 6, it makes it clear that a single arbitration regime will now apply, regardless of the character of the arbitration. Senators may be aware that when the Bill was first published, provision was made for a distinction to be drawn between arbitrations that were commercial and international in character and all other arbitrations. The latter were referred to as "standard" arbitrations. The main rationale for this distinction was a sense that, in the case of this kind of arbitration, an additional measure of court oversight might be deemed appropriate. It quickly became apparent, however, that the distinction contained in the Bill was widely viewed as being unwieldy and unnecessary and having the potential to impact negatively on our ability to market Ireland as a centre for international arbitration. Furthermore, the additional proposed measures of court oversight were seen as having the potential to prolong the arbitration process unduly and add considerably to the cost of that process. The conclusion was that the ability to offer a streamlined arbitration regime that did not distinguish between arbitrations on the basis of the geographic residence of the parties would be an appropriate modernising development consistent with the aim of promoting the wider use of arbitration within this jurisdiction.

The second definition is that of "arbitration agreement". This definition reflects changes introduced in the Model Law in 2006, including clear provisions concerning the recognition of agreements in electronic form. This is consistent with the modernising impetus that informs this legislation.

Part 1 also contains transitional provisions, whereby the new legislation will not apply to arbitrations that have commenced prior to it coming into operation. However, it will apply to all arbitrations commenced on or after that date, irrespective of when the arbitration agreement was entered into. This Part also provides for the repeal of the existing Arbitration Acts.

Part 2 of the Bill is essential to its effective operation. As mentioned, section 6 applies the Model Law to all arbitrations within the State.

Section 7 provides for a rule on the commencement of arbitration proceedings and replaces the existing rule in terms of domestic arbitration proceedings which is contained in section 74 of the Statute of Limitations. As Senators will be aware, for the purposes of the various limitation periods, the commencing of arbitral proceedings is equivalent to bringing a court action. Provision is made for the parties to an arbitration agreement to agree on a commencement date for the proceedings. Where there is no such agreement, the arbitral proceedings are deemed to be commenced on the date on which a written communication containing a request for the dispute to be referred to arbitration is received by the respondent. This reflects the language of Article 21 of the Model Law with the additional stipulation that the request be in writing.

Section 8 will allow the courts to make use of the preparatory work of the UNCITRAL when interpreting any provision of the Model Law that appears before them. This work is a valuable tool in ensuring consistency of approach when applying the law across a range of cases.

Section 9 deals with the functions of the High Court. As was the case in the 1998 Act, the High Court is designated as the court of competent jurisdiction for certain matters arising under the Model Law which is predicated upon the idea that minimal court intervention is facilitative of the arbitration process. 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 respect of the recognition and enforcement of such orders. The High Court, by virtue of section 10, is also given the power to carry out any 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 the arbitral proceedings. Such measures would include the granting of interim injunctions and orders directed at 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 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 an arbitration. This will be a matter solely within the remit of the arbitral tribunal. Section 19 specifies the role the arbitral tribunal will now have in this area. In similar vein, by virtue of section 10, 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 to be beneficial in terms of 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 in these matters.

Section 11 introduces a new element into our arbitration law by providing that, in regard to a number of applications, the courts' determination will no longer be subject to appeal in a higher court. These include an application to stay a court action in a matter which is the subject of an arbitration agreement, an application to set aside an arbitral award or an application to recognise and enforce an arbitral award. The rationale for this provision is to minimise the delays which may ensue if the appeal possibilities for arbitration related court applications are not limited in some fashion.

Section 12 provides that a party has 56 days within which to seek to have an arbitration award set aside on the grounds that it is in conflict with the public policy of the State. In the normal course, a party has three months to apply to have an award set aside. This was considered to be inappropriate in public policy cases where the grounds for making the application might not become apparent until sometime after the award had been made.

Section 13 specifies that the default number of arbitrators, in the event that the parties do not agree otherwise, shall be one. This is consistent with our existing arbitration practice and should assist in terms of keeping the costs of arbitration to an acceptable level.

Section 14 allows for the examination of witnesses on oath or on affirmation and section 16 deals with consolidation and the running of concurrent arbitrations. The latter section is relevant because, 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 crises it can be advantageous if the various proceedings can be consolidated or run concurrently. However, because the authority of the arbitrator essentially derives from the agreement of the parties, it is the case that consolidation or the holding of concurrent hearings cannot take place unless there is a willingness on behalf of all the parties to embark upon such a course of action.

The next group of sections, sections 18 to 23, inclusive, supplements the Model Law on a range of matters. These touch upon the power of the arbitral tribunal to award interest and costs and to order specific performance of a contract. They also deal with the liability of the arbitrator. On the last point, it is important, especially 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 is made against them. A provision which restricts liability demonstrates commitment to the arbitral process and is a common feature of arbitration regimes in other jurisdictions.

The attention of Senators is drawn to a particular provision in section 21 which provides for the ease of the consumer. This is the provision whereby any term in an arbitration agreement to which a consumer is a party and which purports to provide that each party shall bear their own costs is deemed to be an unfair term for the purposes of the unfair terms in consumer contracts regulations. In consequence, such a term will not be binding on a consumer. Another element in the section which merits attention is the provision whereby, in the case of arbitrations which are not international or commercial in character, the arbitral tribunal is given the power to make an order for the taxation of costs by a taxing master or a county registrar, depending on what is appropriate. Any such order will only be made if requested by one of the parties to the proceedings. Such request must be made not later than 21 working days after the tribunal's determination of the matter in dispute.

A final element in this group of sections relates to the enforceability of the arbitration award and to its binding effect. These are critical elements within the overall arbitral process and are addressed in section 23. That section also provides that Articles 35 and 36 of the Model Law will not apply in respect of an award in arbitral proceedings which take place in the State. Those two articles deal with the recognition and enforcement of arbitral awards. At present, domestic arbitration awards are not subject to a separate recognition and enforcement regime. Instead, by leave of the High Court, they can be enforced in the same manner as a judgment or order of that court. This procedure will continue to apply in respect of all awards made in this jurisdiction.

Sections 24 and 25 deal with various international agreements to which Ireland is already party. In essence, they replicate provisions already provided for in previous legislation dating back to 1954 and 1980, respectively. The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards is the most important of these agreements. It 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 and this broad range of support ensures arbitral awards will be readily enforceable in almost every jurisdiction of note. The 50th anniversary of the convention was in 2008, the year in which this Bill was published, and Dublin, which hosted the prestigious conference of the International Council for Commercial Arbitration in June of that year, was centre stage in terms of demonstrating support for the convention's aims and principles.

The other agreements covered by these sections include the Convention on the Settlement of Investment Disputes, commonly referred to as the Washington Convention. This convention facilitates the conciliation and arbitration of international investment disputes. The remaining agreements, the Geneva Convention and Protocol, have largely been overtaken by the New York Convention but retain their relevance for a very limited number of countries.

Sections 28 to 30, inclusive, replicate provisions which are largely contained in the Arbitration Act 1954. For example, section 28 makes it clear that State authorities are on the same footing as other entities in terms of having the legislation apply to an arbitration agreement to which they are a party.

A final and important element of this central part of the Bill concerns a further measure aimed at the protection of consumers. Section 31 provides that, as a general principle, a consumer will not be bound by an arbitration agreement where the disputed claim does not exceed €5,000. There is an equivalent provision in force at present which allows a consumer in such circumstances to bring a claim before the Small Claims Court. The jurisdiction for that court is currently set at €2,000.

Part 3, as published, has been replaced by a new section 32. This is a general provision which will enable both the High Court and the Circuit Court to adjourn proceedings where it appears that the matter in dispute might appropriately be determined by arbitration. It will apply solely to civil proceedings and any adjournment by the court will require the consent of the parties to the action. This is in keeping with the consensual nature of the arbitration process and should help to encourage the perception that Ireland offers an environment which is generally supportive of arbitration. It reminds parties that arbitration is an option to be considered as an alternative to court proceedings. However, the provision is not in any way coercive and the wishes of the parties as to how best to deal with their dispute will always be paramount.

I would also like to touch briefly on some key elements of the Model Law to which the Bill gives effect. The underlying philosophy of that law is that minimal court intervention works to the advantage of the arbitration process and ensures finality and certainty in any award eventually made. Another key element which is enshrined in the Model Law is the idea of party autonomy. This is evident in the freedom which parties have in selecting the number of arbitrators and in 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, but 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 a general application of the provision whereby the arbitral tribunal is 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, 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 a new departure within this jurisdiction for arbitrations which 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.

The Bill is a significant modernising measure but it also involves a substantial amount of consolidation, with many of its provisions replicating those which are already contained in the Arbitration Acts 1954 to 1998. The key point to remember is that once this Bill is enacted, Ireland will have a single legislative reference point for all arbitrations. This should be helpful in attracting arbitration business to this jurisdiction, and it indicates that we are putting ourselves to the forefront in terms of having in place a modern and rigorous arbitration code which is fully in tune with best international practice.

As already mentioned, it is clear that alternative dispute resolution has become an increasingly popular way of dealing with a wide range of disputes. This Bill will answer a demand which exists, particularly within the international commercial community, for increased options in this area. Ireland, by virtue of our legal system which is based on common law, our accessibility and our language regime, would seem to be well placed to capitalise upon that demand.

The Bill will provide the necessary legal underpinning for the future development of Ireland as a leading arbitration centre. Particularly in the commercial arena, arbitration allows for solutions which maximise privacy, provide the requisite flexibility and enable arbitrators to be chosen whose skills and experience match the dispute. There is also of course the all-important guarantee of enforceability.

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