Arbitration Bill 2008: Report Stage.

Amendment No. 1 requires recommittal. Amendments Nos. 2 to 4, inclusive, 6, 15, 17 and 18 are related and may be discussed together.

Bill recommitted in respect of amendments Nos. 1 to 4, inclusive.

I move amendment No. 1:

In page 6, to delete line 1 and substitute the following:

"(b) an arbitration which is not an international commercial arbitration;”.

The central amendment in this group is amendment No. 15 which proposes the deletion of sections 33 to 37, inclusive. All of the other amendments in the group arise in consequence of that one step.

When the Arbitration Bill was first published, provision was made for a distinction to be drawn between arbitrations which were commercial and international in character and 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 type of arbitration an additional measure of court oversight might be appropriate. Hence, the High Court was to retain the power it has at present to set aside or remit an arbitral award where there was a fundamental error of law on its face. In addition, a special oversight mechanism was put in place which automatically applied to consumer arbitrations and which could be applied by agreement to other standard arbitrations.

The essence of the oversight mechanism was the retention of the case stated procedure and of the possibility to remit an award where new evidence became available which could materially alter the decision on that award. It quickly became apparent that generally these sections were not viewed in a positive light; they were criticised as being unwieldy and unnecessary and as having the potential to impact negatively on our ability to market Ireland as a centre for international arbitration. Furthermore, they were seen as having the potential to prolong the arbitration process unduly and to add considerably to the cost of that process.

As a result of the remarks made on Committee Stage and representations, I gave careful consideration to the arguments advanced. I have decided that the appropriate course of action is to proceed with the deletion of sections 33 to 37, inclusive. I am satisfied that this will not give rise to legal or practical difficulties. The ability to offer a streamlined arbitration regime which does not distinguish between arbitrations on the basis of geographic residence of parties could be seen as an appropriate modernising development consistent with the aim of the Bill to promote the wider use of arbitration in the jurisdiction.

I welcome the Minister's removal of these sections. It was an issue that arose time and again when the matter was being analysed. It is a step in the right direction. There is certainly an appetite for Ireland becoming a base for international arbitration. We are non-American and non-British and could be seen as a safe port for arbitration to be considered. The sections in question were a huge negative and I welcome the Minister taking the opportunity to delete them.

I thank the Deputy for his acceptance of this. There would have been an anomaly in that we would have been treating parties to arbitration differently depending perhaps on their geographic basis. For example, a different regime could apply depending on whether both parties were resident in Donegal or whether one party was resident in Donegal and the other in Belfast. We also believe there was unnecessary duplication between Article 24 of the Model Law and section 33 of the Bill. Taking everything into account, it is better to have as streamline an arbitration process as possible.

Amendment agreed to.

I move amendment No. 2:

In page 6, to delete lines 8 and 9.

Amendment agreed to.

I move amendment No. 3:

In page 7, lines 4 and 5, to delete all words from and including "international" in line 4 down to and including "standard" in line 5.

Amendment agreed to.

I move amendment No. 4:

In page 7, to delete line 30 and substitute the following:

"(b) arbitrations which are not international commercial arbitrations.”.

Amendment agreed to.
Bill reported with amendments.

I move amendment No. 5:

In page 9, line 7, to delete "subsection (1),” and substitute “subsection (1), or”.

This amendment is purely textual in nature.

Amendment agreed to.
Bill recommitted in respect of amendment No. 6.

I move amendment No. 6:

In page 9, line 30, to delete "or section 33”.

Amendment agreed to.
Bill reported with amendment.

I move amendment No. 7:

In page 9, lines 41 and 42, to delete all words from and including ", unless" in line 41 down to and including "agree," in line 42.

This relates to section 12 of the Bill. As now drafted, a party has, unless otherwise agreed, a period of 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. That period runs from the date on which the circumstances giving rise to the application becomes known or ought reasonably to have become known to the party concerned.

On Committee State, Deputy Rabbitte suggested that the inclusion of the phrase "unless the parties otherwise agree" might be the subject of abuse especially where there was an inequality of bargaining power. I undertook to examine this point and on foot of that examination I tabled this amendment which I believe will take care of the remark made by Deputy Rabbitte.

Amendment agreed to.

I move amendment No. 8:

In page 13, between lines 8 and 9, to insert the following:

"(6)Subsections (1) to (5) shall not apply where the arbitrator or other institution or person sought to be made liable is shown to have acted in bad faith.”.

The Acting Chairman is not providing any opportunity to comment on the sections as we go through the Bill.

We are on Report Stage so we only discuss amendments.

Amendment No. 8 seeks to insert a new subsection to provide for situations where subsections (1) to (5) of section 22 would not apply where the arbitrator sought to be made liable is shown to have acted in bad faith. This allows for liability of the arbitrator if he or she acts in bad faith. It is very much along the lines of the law in the United Kingdom. I tabled this amendment at the behest of the Chartered Institute of Arbitrators Irish branch who feel it is appropriate. I have reworded the amendment since I introduced it on Committee Stage. It is necessary to make an express provision on somebody acting in bad faith. I would like to hear what the Minister has to say on this issue.

Deputies may recall that we had quite an extensive discussion on this matter on Committee Stage. I understand some of the reservations that Deputies have but I do not think they are well placed. I am on record as stating that in my view to attract international arbitration business to this jurisdiction it is critical to have a clear statutory statement on the position of the arbitrator. We all agree that this should be the objective. It is quite clear where the arbitrator stands in his or her position as arbitrator. The only difference between us concerns the way in which the objective of having a clear statutory position is achieved. We examined a number of possibilities and the choice we made was to follow the model adopted by the International Court of Arbitration, which is the arbitration body attached to the International Chamber of Commerce.

Its rules of arbitration provide for a general exclusion of liability whereby the arbitrators, the court and its members or the ICC and its employees shall not be liable to any person for any act or omission in connection with the arbitration. This rule has been readily accepted by all who chose to have their arbitrations dealt with by the ICC and I do not think we will be disadvantaged by adopting a similar rule in this jurisdiction. On the contrary, benefits can be gained from aligning our statutory regime with that of a body such as the ICC. It may, for example, enhance our ability to attract arbitrations which are administered by the ICC to this country. In 2008 alone, more than 650 requests for arbitration were filed with that court. Furthermore, the model we are following is prevalent in the United States and its adoption by us may be helpful in attracting arbitration business connected to that country. For these reasons, I am not prepared to accept the amendment.

I am a little surprised by the Minister's response given that the Irish branch of the Chartered Institute of Arbitrators is of the opinion that safeguards are necessary.

I wish to raise a separate but related point. The Minister is probably aware of the publicationArbitration and ADR Review, which is edited by two senior counsel. Apropos his comments about developing Ireland as a centre for arbitration excellence and attracting business here, the editorial of that publication states:

The Model Law is an excellent international framework. Is there a need for this International Model Law to be converted fully into our domestic Arbitration Law? Was there a demand for it? I do not think there was any demand or outcry for this new legislation, and clearly there has been no public, or even business, demand for same. I think more debate is needed.

I was surprised to read such an opinion from professionals involved in arbitration. I understand the institute considers it desirable to introduce this Bill. I do not recall discussing the issue on Committee Stage. Would the Minister outline to the House the motivation behind the Bill?

The motivation is to bring together the elements of previous arbitration legislation and developments that have taken place internationally to bring them into line with the model law. From a purely strategic point of view, the motive for having on our Statute Books the most up to date and streamlined arbitration legislation possible is to allow Ireland to be used as a location for international arbitration. The various bodies involved in arbitration in this country would share the view that Ireland's English speaking and well educated workforce, location within Europe and availability of technology and telecommunications might allow it to become a centre of excellence in arbitration.

In regard to the specific problem of an arbitrator acting in bad faith, such a person is in effect put into a position similar to that of a judge and must operate on that basis. The law requires an arbitrator to disclose any circumstances which would give rise to justifiable doubts as to his or her impartiality or independence before being appointed to a case and on an ongoing basis after appointment. A failure to disclose can result in an appointment being challenged and the removal of the arbitrator. The idea of arbitration is to allow parties to come together on an equal footing and if one party feels deprived of that opportunity it can of course apply to have the award set aside.

Immunity is required if the arbitral process is to function properly and if arbitrators are not to be intimidated by threats of personal liability. Arbitration is intended to provide a final decision in relation to disputes and claims against arbitrators should not be used as a pretext for rehearing a dispute. The Bill contains safeguards designed to provide remedies for parties where serious irregularities attach to the arbitral process. The Bill as currently drafted adheres to the best international practice laid down by the ICC. By aligning ourselves to that body, we are making Ireland more attractive as a location for international arbitration.

The objective of the Bill is to create a centre of excellence. I concur with Deputy Rabbitte that if Irish arbitrators are eager to include this amendment, the Minister should consider it. One of the ways we can demonstrate that Ireland is a centre of excellence is by ensuring that an arbitrator who acts in bad faith faces a substantial sanction. The Minister referred to sanctions in other areas but we should be explicit in this regard.

As I noted in my initial response, we are aligning ourselves to the practice adopted by the International Court of Arbitrators, the rules of which allow for a general exclusion of liability whereby the arbitrators, the court and its members or the ICC and its employees shall not be liable to any person for any act or omission in connection with the arbitration.

Even if they act in bad faith.

This includes any issue that would be dealt with in bad faith because remedies are available elsewhere in the legislation. If we were to proceed in a different manner to the International Court of Arbitrators, we would be out on a limb and would limit the possibility of developing Ireland as a centre of international arbitration. If one were to lay down rules on personal liability and suchlike, I hazard a guess that arbitrators would not necessarily want to come to this country in that they would have to carry all of that when they could decide to go somewhere else where the rules and procedures laid down by the International Court of Arbitrators would be applicable.

The Minister has clearly focused on this and has made up his mind. He has explained why he is going the way he is. I wish to put on record some advice in order to explain my puzzlement as to why the proviso on bad faith is omitted. I will quote from the document to which I previously referred. It states:

An amendment proposed at Committee Stage would have granted such immunity to arbitrators and arbitral institutions, specifically in the absence of bad faith. As the Bill enters Report Stage, the immunity provision has been retained, although, curiously, it has been divested of the proviso as to bad faith. Section 22(1) of the 2008 Bill now declares baldly that an arbitrator "shall not be liable in any proceedings for anything done or omitted in the discharge or purported discharge of his or her functions". Section 22(2) applies the same immunity from suit to "an employee, agent or advisor of an arbitrator and to an expert appointed under Article 26". This is a curious provision. Why are these parties granted immunity or exclusion of liability? Section 22(3) covers those responsible for appointing an arbitrator, who are granted immunity from liability for anything done or not done in connection with the performance of that role. It is not clear why the proviso as to bad faith has been lost. The reasons for immunity from liability for arbitrators may be obvious: above all, immunity incentivises an honest and forthright arbitral process and avoids an awkwardly defensive approach on the part of the arbitrator. However, where an arbitrator has deliberately actedmala fides he or she should be responsible for the consequences.

The document continues. As the Acting Chairman has asked us to speak to amendments rather than to sections I hope it makes the basic point. I take the opportunity on this amendment to make that general point about the exclusion of the bad faith proviso.

It is not strictly within the regulations but I will ask the Minister to comment.

It is basically a different approach. That is a view that has been expressed by a minority of people who are interested in this area. The majority view that we have received is that aligning ourselves to the procedures laid down by the International Court of Arbitrators is the best way to proceed. Provision is made in the legislation for setting aside awards made for a number of reasons, including bad faith.

The whole focus of why we want to raise the arbitrator to a similar level of that of a judge — obviously a judge under the Constitution is not liable for any decisions he or she makes — is that we want the arbitrator to be regarded as the last bite of the cherry in terms of making decisions or trying to get agreement between parties who are in dispute. If one party feels aggrieved and he or she has a possibility of claiming bad faith on behalf of the arbitrator or some other infringement of the legislation that I hope we will pass, then the remedies under the legislation will be open to him or her. It depends on what way one looks at it; one could have gone the other way, but from the point of view of putting ourselves out to the international arbitration community as a place where business can be done, it is better that we align ourselves with the norm rather than the exception.

Is amendment No. 8 agreed? Agreed.

The Acting Chairman has changed the direction of arbitration internationally.

I am sorry, it is Deputy Rabbitte's amendment.

I am happy that the Acting Chairman's decision should stand.

Is Deputy Rabbitte pressing the amendment?

Not in view of what the Minister has said.

Amendment, by leave, withdrawn.
Bill recommitted in respect of amendment No. 9.

I move amendment No. 9:

In page 13, to delete lines 9 to 11.

I move to recommit this amendment, which arises as a consequence of the enactment of the Defamation Act 2009. As currently drafted, section 22(6) provides that witnesses giving evidence before an arbitral tribunal are to have the same privileges and immunities as witnesses have in proceedings before the High Court. Essentially, what we are talking about here is privilege in the context of defamation proceedings. The matter contemplated here is now dealt with by the Defamation Act 2009 which entered into force on 1 January of this year. That Act deals comprehensively with all of the occasions when absolute privilege can be pleaded as a defence. Specifically, in regard to arbitration, it provides that absolute privilege will attach to statements made in the course of proceedings before an arbitral tribunal where the statement is connected with those proceedings. Accordingly, the section 22 provision is no longer necessary and I am proposing that it be deleted.

Do I understand the Minister to say that this subsection is not needed since the enactment of the Defamation Act?

Is the Minister saying that we expressly provided in the Defamation Act for proceedings before arbitration?

I must say I had forgotten that.

The Deputy is not infallible.

In regard to arbitration, the Defamation Act provides that absolute privilege will attach to statements made in the course of proceedings before an arbitral tribunal where the statement is connected with those proceedings.

Amendment agreed to.
Bill reported with amendment.

Amendments Nos. 10 and 11 are related and may be discussed together by agreement.

I move amendment No. 10:

In page 16, to delete lines 13 to 25 and substitute the following:

"31.—(1) Subject tosubsection (2), a party to an arbitration agreement who is a consumer shall not be bound (unless he or she otherwise agrees at any time after the dispute has arisen) by an arbitration agreement where—

(a) the agreement between the parties contains a term which has not been individually negotiated concerning the requirement to submit to arbitration disputes which may arise, and

(b) the dispute which has arisen between the parties to the agreement involves a claim for an amount not exceeding €5,000.

(2) For the avoidance of doubt, a reference in this section to a consumer shall not include an amateur sportsperson who, in his or her capacity as such, is a party to an arbitration agreement that contains a term concerning the requirement to submit to arbitration.".

The substitute section I am proposing does not differ significantly from that which was inserted on Committee Stage. While there are some minor changes of a drafting nature, I think that there are only two issues which need to be drawn to the Deputies' attention. First, it is now proposed that, as a general principle, a consumer will not be bound by an arbitration agreement where the disputed claim does not exceed €5,000. The threshold originally proposed was linked with the current limit in the Small Claims Court which stands at €2,000. There was some discussion about the appropriateness of the €2,000 amount on Committee Stage. I indicated that I was willing to consider a somewhat higher threshold in order to provide further protection for consumer interests. This amendment carries through on that undertaking.

Second, there is a new avoidance of doubt provision which makes it clear that the section will not impact in any way on well-established arrangements whereby amateur sportspersons agree to submit to arbitration in the event of a dispute arising out of their participation in a particular sport. Since the proposed amendment no longer refers explicitly to Order 53A of the District Court rules, I hope that the Deputy is willing to withdraw his amendment.

I welcome the provision in respect of better consumer protection, which the Minister signalled on Committee Stage. We all agree with the exclusion in respect of amateur sportspersons. I am not entirely sure and the impediment is probably on my side about how that meets my amendment, in so much as my advice was that the purpose of the amendment was to correct a technical error. I explained on Committee Stage that my advice was that there would otherwise be a technical error in the section, which does not state that order 53(a) of the District Court rules was inserted in 2007. Perhaps the Minister has provided for that in his replacement amendment but it eludes me for the moment.

The Deputy's amendment is no longer necessary because amendment No. 10 does not refer to the rules of the court.

Amendment agreed to.
Amendment No. 11 not moved.

Amendments Nos. 12 to 14, inclusive, are related and may be discussed together.

I move amendment No. 12:

In page 16, to delete lines 27 to 46 and in page 17, to delete lines 1 to 16 and substitute the following:

"REFERENCE TO ARBITRATION WHERE PROCEEDINGS PENDING BEFORE COURT

32.—(1) Without prejudice to any provision of any other enactment or rule of law, the High Court or the Circuit Court may at any time whether before or during the trial of any civil proceedings before it—

(a) if it thinks it appropriate to do so, and

(b) the parties to the proceedings so consent,

by order adjourn the proceedings to enable the parties to consider whether any or all of the matters in dispute might be determined by arbitration.

(2) Where a court makes an order undersubsection (1), the adjournment shall be for such period as the court thinks fit.

(3) The parties to the proceedings shall, on or before the expiry of the period referred to insubsection (2), inform the court hearing the civil proceedings concerned whether or not agreement has been reached between the parties that any or all of the matters in dispute should be dealt with by arbitration.

(4) Where such agreement has been reached, the agreement shall be treated as an arbitration agreement for the purposes of this Act.

(5) The court, in respect of an agreement referred to insubsection (4)

(a) where the agreement relates to all of the matters in dispute, shall by order provide for the discontinuance of the proceedings and may make such order as to the costs of the proceedings as it thinks fit, or

(b) where the agreement relates to part but not all of the matters in dispute, may make such order as to the discontinuance of the proceedings as it thinks fit.

(6) Where no agreement has been reached the court may make such order as it thinks fit in relation to the continuance of the proceedings.

(7) This section is in addition to and not in substitution for any power of a court to adjourn civil proceedings before it.".

I propose to take amendments Nos. 12 to 14, inclusive, together. During our Committee Stage deliberations, I indicated that I was willing to consider either the refurbishment of section 32 or its deletion. This was against a background where there was a general consensus among practitioners that the section, which duplicated provisions in the 1954 Arbitration Act, added nothing to the Bill and could well be deleted. In addition, it was not possible to point to any evidence that suggested recourse had been had to the section in the past.

Having considered the matter, I propose that the section be deleted in its entirety and replaced by a more 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. The proposed new section 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.

Deputy Rabbitte's amendments also emphasise the civil nature of the proceedings and the need for the consent of the parties. While my amendment is more far reaching, it reflects the genuine concerns adverted to on Committee Stage and I hope the Deputy will acknowledge that the new provision improves significantly on what it replaces. Provision is made for the parties to agree that all the matters in dispute should be determined by arbitration. In an appropriate case, it will also be possible for them to agree that part only of the matters in dispute should be so determined. Where there is agreement that any or all of the matters should go to arbitration, that agreement will be treated as an arbitration agreement for the purposes of the legislation. The effect of this will be that the court will no longer have any remit regarding the agreed matters. Where there is no agreement, the court proceedings will continue as normal.

The new section also deals with certain procedural matters relating to the continuance or discontinuance of proceedings and to costs. I hope this new section will 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, it 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.

The proposed new section empowers the High Court or the Circuit Court to adjourn civil proceedings with the consent of the parties to facilitate arbitration and the Minister explained why this replacement is being inserted. I am asked to agree it is a superior provision and, in so far as I am competent, I so do.

Will the Minister address my amendment No. 13? I advanced it on the basis that it was necessary to ensure the section was constitutional. I explained previously that my advice is that Article 37 of the Constitution only allows the determination of matters in criminal proceedings to be made by juridical bodies and, thus, it would not be open to the court to allow for arbitration in any criminal matter. Is that provided for in the Minister's revamp? If not, is the Minister arguing it is unnecessary to make that clarification in the legislation?

I tabled amendment No. 14 to insert the wording "with the consent of the parties" and what the Minister has done probably addresses that. Unless the consent of the parties was required, the difficulty was that the section could give rise to fundamental alteration of the legal system and that was not intended. I would be obliged if the Minister would address the reason I wanted to insert the word "civil" in line 28 to make clear that the reference was not just to any proceedings.

The Deputy raised a pertinent point on Committee Stage and that is the reason we are deleting section 32, as drafted, and replacing it with a new section, which refers only to civil proceedings. Criminal proceedings cannot be dealt with on an arbitration basis under our Constitution. This valid point was made and accepted and my amendment deals with that.

Amendment agreed to.
Amendments Nos. 13 and 14 not moved.
Bill recommitted in respect of amendments Nos. 15 to 18, inclusive.

I move amendment No. 15:

In page 17, to delete lines 17 to 41, to delete page 18 and in page 19, to delete lines 1 to 13

This involves a major deletion. Will the Minister put his briefing note on the record?

The amendment was taken with amendment No. 1 and I put my note on the record at the beginning of proceedings. The Deputy was not present. The amendments propose the deletion of sections 33 to 37, inclusive, and I outlined the rationale behind why I am doing that.

I accept that and I apologise.

Amendment agreed to.

I move amendment No. 16:

In page 61, between lines 15 and 16, to insert the following:

"

No. 6 of 1957

Statute of Limitations 1957

Section 77

To delete “or orders, after the commencement of an arbitration, that the arbitration shall cease to have effect with respect to the dispute referred”.

"

The purpose of the amendment is to correct an oversight in the Bill, as published. This is a necessary amendment to section 77 of the Statute of Limitations 1957, which gives power to a court to extend the time for the commencement of proceedings where there is a court order to the effect that an arbitration shall cease to have effect. Section 77 relates to section 39(2) of the Arbitration Act 1954, which provides that, where there is an agreement between the parties that any disputes arising in the future should be referred to arbitration, the court may, in certain circumstances, order that the arbitration agreement shall cease to have effect in order that it may determine the matter at issue. The amendment arises from the fact that the proposed new legislation does not contain a provision equivalent to that contained in section 39(2) of the 1954 Act. The power given to the court by virtue of section 39(2) is only available where the dispute involves an accusation of fraud against one of the parties. It allows the court to intervene to direct that the arbitration agreement shall cease to have effect so that the matter can proceed to a full hearing. However, this power is discretionary and the court is not obliged to intervene when asked to exercise the power it has. If both parties are content that the matter be determined by the arbitrator, court intervention on this point will never arise. The proposal in the amendment is in keeping with the guiding rationale behind the Bill, which is to ensure court involvement in the arbitration process is kept to a minimum, consistent with best international practice.

Amendment agreed to.

I move amendment No. 17: In page 61, lines 17 and 18, to delete ", 23 and 37" and substitute "and 23".

In page 61, lines 17 and 18, to delete ", 23 and 37" and substitute "and 23".

Amendment agreed to.

I move amendment No. 18:

In page 61, to delete lines 28 to 36 and substitute the following:

"

No. 1 of 1992

Patents Act 1992

Section 74

In subsection (3) delete: “section 35 of the Arbitration Act, 1954 (which relates to thestatement of cases by arbitrators for the decision of the Court), shall not apply to the arbitration; but”.

".

Amendment agreed to.
Bill reported with amendments.
Bill, as amended, received for final consideration.
Question proposed: "That the Bill do now pass."

I thank the Deputies on the other side for their assistance on this Bill and for their contributions.

Question put and agreed to.