I move: "That the Bill be now read a Second Time."
The Arbitration (International Commercial) Bill, 1997, is intended to provide a framework which will enable Ireland to market itself as an attractive venue for international commercial arbitrations. It achieves this aim by adopting the Model Law of the United Nations Commission on International Trade Law which deals with international commercial arbitration. The Commission is generally referred to as UNCITRAL and, during the late 1970s and early 1980s it devoted a considerable amount of time to drafting the Model Law which was finally adopted by it on 21 June 1985.
The Model Law sets a standard for a modern code of international arbitration practice and it is one which I am glad to propose to this House for adoption by Ireland. Indeed, the law has already been enacted into legislation by a substantial number of countries, including Australia, Canada, New Zealand and Scotland, and by a number of American states. It is worthwhile to point out that, in adopting this law as part of our domestic legislation, Ireland is following a well recognised international trend.
The Bill follows on representations from the International Financial Services Centre, the Law Society, the Bar Council and a number of specialists in the area of arbitration.
Deputies will be aware that arbitration is concerned with the resolution of disputes outside the ordinary court system. It is an example of what is known as Alternate Dispute Resolution or ADR. The use of ADR has expanded considerably in recent years and is recognised as being particularly suited for resolving disputes of a commercial nature which have connections with two or more countries. This is because the parties to such disputes will frequently be involved in long-term commercial relationships and will wish to seek solutions to their problems which will not jeopardise those relationships. Arbitration, by tackling the dispute at a pre-court stage, can help to bring the parties in dispute to just this kind of solution.
In these relationships, the confidentiality of sensitive commercial material may also be an issue and arbitration, with its guarantee of privacy, provides the kind of security which the parties may value. Properly managed, arbitration can be cheaper and speedier than litigation. It offers a flexibility of approach in specialised disputes and parties have the option to appoint as arbitrator someone who is an expert in the area in question. At the end of the day, arbitration, unlike other forms of ADR, is backed up and enforceable by law.
It is important to realise that much of arbitration practice is not regulated by statute and that the parties to an arbitration agreement have considerable autonomy in determining how their arbitration should be conducted. The statutory framework for arbitration which now exists in Ireland is provided primarily by the Arbitration Acts of 1954 and 1980, and these Acts will continue to be important for arbitrations which are not covered by the scope of this Bill. However, for the type of arbitration dealt with by this Bill, the 1954 legislation would seem to be problematic.
Typically, the parties in dispute are likely to be the subsidiaries of large multinational corporations or financial institutions and the 1954 Act, which does have a somewhat domestic focus, does not readily commend itself to these parties. In the 1990s, the world is becoming a more connected place. Business dealings involving two or more commercial entities based in different geographic locations are commonplace and such entities look to familiar rules to resolve commercial disputes rather than to a regime which is geared to more local concerns.
In presenting this Bill I pay tribute to the work of an ad hoc advisory group chaired by Mr. Michael McDowell, SC. The initial draft of the Bill was prepared by that committee and underpinning the work which went into it was a significant degree of consultation with those who were specialists in the field of arbitration. The work of that group, in combination with the work subsequently done within my Department and the Office of the Attorney General, has resulted in a legislative product which has benefited considerably by being exposed to a variety of experiences and views. I am confident that the Bill, in providing for the adoption of the Model Law, is a desirable aid to the development of international arbitration in this country. It will provide a familiar legal environment for those who have decided to resort to arbitration to resolve their disputes and, in this way, should facilitate the conduct of major international arbitration hearings in this country.
Before dealing directly with the provisions of the Bill itself, it might be useful to outline briefly the philosophy which lies behind the Model Law. When it was drafted, the perception was that international trade would benefit greatly from the harmonisation of national legislation relating to the resolution of international disputes. The idea was that this could happen either by countries adopting the Model Law in its totality or by adjusting their existing legislation to bring it into line with the Model Law. Bearing in mind its intended audience, the text of the Model Law is couched in pragmatic terms and is written in relatively plain language.
I now turn to the main elements of the Model Law itself, the text of which is included as a Schedule to the Bill. The Model Law specifies that the term "commercial" should be given a wide interpretation so as to cover matters arising from all relationships of a commercial nature, whether contractual or otherwise. Examples of matters which come within the scope of the law include any trade transaction for the supply or exchange of goods or services, various types of financial services such as investment, financing, banking and insurance, and various forms of industrial or business co-operation.
The Model Law, which as I have already indicated is limited in scope to international commercial arbitration, is divided into a series of chapters dealing with a wide variety of issues which arise in the course of the international arbitration process. Chapter I deals mainly with the issue of scope. Chapter II focuses on the form of the arbitration agreement while Chapter III deals with the composition of the arbitral tribunal — for example, the number of arbitrators, how they are to be appointed and how such appointments may be challenged. Chapter IV deals with certain matters pertinent to the jurisdiction of the arbitral tribunal. Chapter V covers the conduct of the arbitral proceedings including the determination of rules of procedure, the place of arbitration and the right of each party to be given a full opportunity to present his or her case. Chapter VI has rules relating to the making of an award. It must be in writing and, unless the parties otherwise agree, must state the reasons upon which it is based. Chapter VII specifies the grounds upon which an award may be set aside. These include the fact that a party may have been under some incapacity, that the award deals with a matter falling outside the scope of the submission to arbitration, or that the award is in conflict with public policy. Chapter VIII deals with the recognition and enforcement of awards and the grounds upon which such recognition and enforcement can be resisted. Those grounds are substantially the same as those which apply to the setting aside of an award.
I now turn to the specific provisions of the Bill. Part I of the Bill contains standard provisions in relation to short title, commencement and references. The Bill will come into operation three months after its passing. The central elements of the Bill are contained in Part II. Section 4 contains standard interpretation provisions. The key provision in the Bill is section 5 which provides that, subject to Part II of the Bill, the Model Law shall apply in the State. The "subject to" provision is included in this section to make it clear that the application of the Model Law in the State, while generally intended to apply in an unrestricted manner to international commercial arbitration proceedings, is made subject to other provisions in Part II of the Bill which, by and large, supplement the Model Law in a variety of ways. Such supplementary provisions extend to matters such as the award of interest by the arbitral tribunal, the allocation of costs in respect of arbitral proceedings and the liability of arbitrators when undertaking arbitration work.
Section 6 contains certain clarificatory provisions. In particular, subsection (2) provides that the documents of UNCITRAL and its working group relating to the preparation of the Model Law may be considered in ascertaining the meaning or effect of any provision of that law.
Those who opt for arbitration, particularly in the commercial arena, do so because of the need for finality which requires that there be minimal interference from outside bodies, including the courts, in the arbitration process. Accordingly, one of the purposes of incorporating the Model Law into the State's arbitration code is to limit the extent to which a court may intervene in that process. This question of court involvement in the arbitration process is, perhaps, the most significant example of the way in which the Model Law differs from our existing legislative regime and it merits a few words of explanation. Under the 1954 Act, it is open to an arbitrator to state a consultative case on a question of law arising in the course of a reference and he or she can also be directed to do so by the court. The court may also direct that an award — essentially the arbitrator's decision — be stated in the form of a special case for the decision of the court. In practice, the courts use their discretion in this area very sparingly and tend to be conscious of the need to uphold the integrity of the arbitral process. However, for those unfamiliar with the practice of our courts the language of the statutes can appear to be somewhat forbidding and, indeed, could be used to suggest that Ireland has an arbitration regime which has a heavy court involvement.
Article 6 of the Model Law provides for a State, when enacting that Law, to specify the court competent to perform certain functions specified in that Article. Those functions deal with the scope of court intervention in the international commercial arbitration process and include, for example, the power of the court under Article 11(3) to appoint a third arbitrator for arbitration proceedings where three arbitrators are required and where, inter alia, the other two arbitrators fail to agree on such an appointment, and the power to set aside, in accordance with Article 34(2), an arbitral award. On this latter point, the Model Law specifies clearly that the exclusive recourse against an arbitral award is to seek to have it set aside by a court on grounds which are limited in number to six by the Model Law itself.
In addition to specifying the High Court as the court for the purposes of Article 6, section 7 (1) also specifies the High Court as the court for certain other purposes which are provided for in the Model Law. Article 9 allows a party to an arbitration agreement to request interim measures of protection from a court. Article 27 allows for court assistance in taking evidence. Article 35 deals with the recognition and enforcement of arbitral awards and Article 36 sets out the grounds on which a court may refuse recognition and enforcement. Subsections (2) and (3) of the section are mainly concerned with procedural issues governing the bringing of applications to the High Court.
Section 8 (1) provides for arbitral proceedings to be consolidated with other arbitral proceedings with the agreement of the parties to those proceedings or for the holding of concurrent hearings on such terms as may be agreed. Section 9 gives the arbitrator wide-ranging powers in relation to the granting of interest on an award. The Model Law does not deal with the question of interest and this provision is intended to introduce clarity into our arbitration code. In particular, subsections (2) and (3) make it clear that a tribunal may grant interest on any amount awarded by it in respect of the period up to the date of the award. Under our existing law there is some uncertainty as to the ability of an arbitrator to award interest prior to the date of an award.
The cost provisions of the arbitration are dealt with in section 10. Under subsections (1) and (2) the parties to an arbitration agreement are free to agree on how the costs of the arbitration, which include the costs of the arbitrators' fees and expenses, are to be allocated and on the costs that are recoverable. However, where there is no agreement of the parties as to costs, subsection (3) provides that the arbitral tribunal may determine by award the recoverable costs of the arbitration on the basis that it thinks fit and, in that context, also provides for certain matters to be specified by the tribunal such as the items of recoverable costs and by and to whom those costs shall be paid. Under subsection (4) if the arbitral tribunal does not determine such costs any party may apply to the tribunal within 30 days after being notified of the award for an amendment specifying the matters referred to in subsection (3). Under subsection (5) the arbitral tribunal is mandated to amend the award in the appropriate way after notice to the other parties. Subsection (6) provides that the High Court, on application by any party within 30 days after the applicant is notified of the arbitral tribunal's award of costs, may order that the amount of any costs awarded by an arbitral tribunal shall be reviewed and adjusted by the means and on the terms that court may direct.
Section 11 makes it clear that an arbitrator shall not be liable for anything done or omitted in the discharge or purported discharge of his or her functions as arbitrator unless the act or omission is shown to have been in bad faith. These protections are extended to the arbitrator's employee, agent or adviser and to an expert appointed under Article 26 of the Model Law by subsection (2). Subsections (3) to (5) contain similar provisions in respect of institutions or persons by whom an arbitrator is appointed or nominated. Subsection (6) provides that witnesses who give evidence before an arbitral tribunal shall have the same privileges and immunities as are given to witnesses in proceedings before the High Court while subsection (7) provides that a barrister or solicitor or person holding equivalent qualifications who appears in proceedings before an arbitral tribunal shall have the same privileges and immunities as barristers and solicitors have in proceedings before the High Court.
Section 12 contains an exception to Article 34 (3) of the Model Law which specifies a time limit of three months for an application to be made to set aside an arbitral award. The section provides this time limit shall not apply to an application to the High Court to have an arbitral award set aside on the grounds that the award is in conflict with the public policy of the State.
The ability to enforce an award is central to the arbitration process. Section 13 (1) provides for an award made by an arbitral tribunal to be enforceable in the State either by action or by leave of the High Court in the same manner as a judgment or order of that court. This section also allows for interim measures of protection made by an arbitral tribunal under Article 17 of the Model Law to be similarly enforced.
The recognition and enforcement of international arbitration awards is dealt with in a number of international conventions which have already been given the force of law in the State by the Arbitration Acts of 1954 and 1980. Section 14 (4) makes it clear that nothing in section 13 affects the recognition and enforcement of awards under these conventions. Only if the arbitration award is not already covered by one of these conventions will the recognition and enforcement provisions of the Model Law come into play. This provision is fully in keeping with the framework envisaged by the Model Law.
New legislation often requires transitional provisions to clarify the circumstances in which it will or will not apply, particularly in the initial stages of its operation. The arbitration proceedings to which this Bill applies are set out in section 14. In the interests of fairness to those parties who may have commenced arbitration proceedings before the day on which the Act comes into operation, subsection (1) of that section makes it clear that Part II of the Bill shall not apply to such proceedings unless the arbitration is concluded after that day and the parties so agree. Subsection (2) provides that Part II shall apply to relevant arbitrations commenced on or after the day on which the Act comes into operation under an arbitration agreement entered into on or after that day. Where the arbitration agreement has been entered into before that day, it is open to the parties to agree that the Bill's provisions shall apply. Subject to the exception provided for in section 13(4) to which I have already referred, section 15 ensures that the Arbitration Acts 1954 and 1980 shall not apply to international commercial arbitrations.
The main emphasis of this Bill is on international commercial arbitration. However, the opportunity is also being taken to bring the domestic interest provisions contained in section 34 of the Arbitration Act, 1954 into line with those contained in section 9 in respect of international arbitrations. Section 34 of the 1954 Act provides that a sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest as from the date of the award at the same rate as a judgment debt. The more detailed provisions of subsections (1) to (4) of the new section 34 are in general identical to those of sections 9 (1) to 9 (4) of the Bill which I described to the House earlier in my speech.
The new section 34 deliberately excludes property arbitrations from its scope. This is a specialised category of arbitration and one where there is already a body of detailed legislative provisions. Accordingly, it is provided under subsection (6) that section 34 shall not apply to an arbitration conducted by a property arbitrator appointed under section 2 of the Property Values (Arbitration and Appeals) Act, 1960.
Having gone through the provisions of the Bill, l draw Deputies attention to the fact that its introduction coincides with the very welcome development by the Bar Council of a major international arbitration centre in its new Law Library building in Church Street, Dublin. The centre, which will open in January 1998, will provide 10,000 square feet of purpose built facilities for international arbitrations, including large hearing rooms, translation services, video conferencing and state of the art electronic services. I understand the Bar Council will market the centre abroad and a large potential market in international commercial arbitrations has been identified. I wish the Bar Council well in its efforts to attract such business and I am glad to be in a position to put the legislation in place which should make that task easier. The Bill is an example of the way in which the Government and business interests can work together to generate work for specialist services as well as ancillary work for the service industries.
Central to a successful arbitration are the skills the arbitrator brings to bear upon his or her task. Ireland is fortunate in that it can offer a high level of legal and professional services to those who wish to hold their arbitration here. We also have a pool of highly experienced international arbitrators who are well placed to take advantage of the supportive framework which this Bill will create. In addition, education in arbitration matters is a growth area and will ensure that many more individuals are able to develop their careers in this field.
It is important to stress that international arbitration services are now offered in most major capital cities as a result of the desire in the international trading community that disputes be resolved quickly, fairly, cheaply and in accordance with commonly agreed rules. London, Paris, Geneva and Stockholm have capitalised on this growing market. London, a relatively recent entrant to the market, is estimated to generate £100 million annually from its international arbitration business. It is noteworthy that many commercial arbitrations in Europe are conducted under the auspices of the International Court of Arbitration of the International Chamber of Commerce which administers more than 400 requests for arbitration each year. Where the parties agree to abide by ICC rules, which would not be uncommon, the ICC court would often be involved in choosing a venue for the arbitration which it would regard as compatible with its rules. Our new legislation has this compatibility.
I hope Ireland can build upon those factors which, in combination, should make us an attractive venue for international arbitrations. We have the expertise available in this jurisdiction, we have a first class telecommunications infrastructure, we are located on a hub between the US, Europe and the Middle and Far East and there is also the exceptional value and quality we offer in our travel, accommodation and recreational facilities. Furthermore, the English language is, by and large, the language of international commerce and this is something I hope we can exploit. There is now the added element of this legislation which makes our international arbitration regime compatible with that of our trading partners, which should prove a significant attraction for those wishing to arbitrate their dispute in a neutral venue which has legislation which operates to a familiar and valued set of rules.
Since the Dáil resumed on 30 September, the Minister for Justice, Equality and Law Reform has brought three Bills before the House. The Children Bill is designed to update the law on guardianship, custody of and access to children and to deal with the evidence of children in civil proceedings. The Europol Bill will enable Ireland to ratify the EU Convention on the establishment of a European police force. The Bill now before the House, the Arbitration (International Commercial) Bill, 1997, will, I hope, mark the beginning of Ireland's development as a centre of excellence in the business of international commercial arbitration. Taken together, these three Bills testify to the diversity of work which is now taking place within my Department. In broad terms, they span the range of criminal, civil and commercial legislation. The Minister and I look forward to publishing equally wide-ranging proposals in the future and I commend this Bill to the House.
