Skip to main content
Normal View

Seanad Éireann debate -
Wednesday, 28 May 1980

Vol. 94 No. 5

Arbitration Bill, 1980: Second and Subsequent Stages.

Question proposed: "That the Bill be now read a Second Time."

This Bill contains the legislative provisions necessary to enable two international conventions relating to arbitration to be ratified. It also contains an amendment of the law in relation to the power of a court to stay proceedings in a matter which the parties have agreed to refer to arbitration.

The first convention dealt with in the Bill is the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral awards. This is a United Nations convention which was designed to replace the earlier 1923 Geneva Protocol on Arbitration Clauses and the 1927 Geneva Convention on the Execution of Foreign Arbitral Awards. Both the Geneva Protocol and Convention were given effect to in this country by the Arbitration Act, 1954. The New York Convention grew out of dissatisfaction with the earlier Geneva provisions and to date has been ratified by 56 countries.

Part III of the Bill deals with the New York Convention, and section 9 deals with the grounds on which enforcement of an arbitral award may be refused under the convention. While the grounds of refusal are largely the same as the grounds of refusal permitted under the Geneva Convention which are set out in our 1954 Act, the New York Convention makes a significant change in the burden of proof imposed on the parties. Under the Geneva Convention it is for the party seeking enforcement to prove that the arbitration agreement is valid, that the award was made by the tribunal provided for in the agreement or constituted in the manner agreed by the parties, that the award was made in conformity with the law governing the procedure, that it has become final in the country in which it was made and that it was made in respect of a matter which may lawfully be referred to arbitration. Under the New York Convention, once the party seeking to enforce an award has made his application for enforcement in proper form, the burden passes to the other party to prove the existence of grounds on which enforcement should be refused. The Geneva Convention was regarded as placing too high a burden on the party seeking enforcement and as making obstruction by the party resisting enforcement possible.

Also, the New York Convention applies to a wider range of awards than does the earlier convention. Under the Geneva Convention an award to be enforceable had to have been made between persons subject to the jurisdiction of different contracting states, and this meant that account had to be taken of questions of the nationality or habitual residence of the parties. This type of restriction is not repeated in the New York Convention.

The convention in Article 1 provides that it shall apply to awards made in the territory of a state other than the state in which recognition and enforcement is sought. Paragraph 3 of that Article, however, enables a state to limit enforcement of awards made in the territory of another contracting state. The definition of "award" in section 6 takes advantage of this latter provision on the basis that it is proper that we should undertake to enforce only awards make in a country which, in its turn, has undertaken, by being a party to the convention, to enforce Irish awards.

Before passing from the New York Convention I might mention briefly that ratification has EEC implications. Member states of the community are obliged under Article 220 of the Treaty of Rome to bring about the simplification of formalities governing the reciprocal enforcement of arbitration awards. The member states decided that this obligation could best be met by all members ratifying the New York Convention. Thus, ratification of that convention will enable us to meet the obligation imposed by Article 220. All other EEC states, except Luxembourg, are parties to the New York Convention.

The other international convention which enactment of the Bill will enable us to ratify is the Washington Convention on the Settlement of Investment Disputes between States and Nationals of Other States. Part IV of the Bill deals with this convention. The purpose of the convention, which was sponsored by the World Bank, is to encourage the flow of private investment into underdeveloped countries by providing an acceptable facility for the resoultion of disputes that might arise between the private investor and the state with whom the investor has made an investment agreement. The facility provided is the International Centre for the Settlement of Investment Disputes in Washington. Panels of conciliators and arbitrators are maintained at the centre and may be called upon by parties to an investment dispute. Resort to conciliation or arbitration is not, however, obligatory under the convention. It is up to the parties to any investment agreement or to any dispute arising from an investment agreement to decide whether or not they wish to use the facilities of the centre, but once consent in writing has been given to arbitration it cannot be unilaterally withdrawn and the other party can insist on arbitration being proceeded with.

In giving private interests direct access to an international tribunal in a dispute with a sovereign state the convention brings a novel feature into the international field. Because a private investor had no status in international law he had no direct access to an international tribunal such as the International Court of Justice in a claim against a sovereign state. If he wished to pursue his claim on the international plane he had to invoke the diplomatic assistance of his own state, which would not be the most appropriate means of resolving a commercial dispute. In an effort to fill this gap the Permanent Court of Arbitration in The Hague adapted its rules in 1962 to permit it to deal with disputes between private investors and states but this did not prove successful. Tribunals set up by private organisations such as the International Chamber of Commerce were frequently unacceptable to Governments in dispute with private investors. Similarly, resort to the courts of the state party to the dispute would not always be acceptable to the private investor. The convention fills the gap in international law by providing an international tribunal acceptable to both the investor and the state with whom the investment agreement has been made. Because the investor is given direct access to the tribunal in a claim against a state he must forego diplomatic assistance of his own country in relation to the particular dispute unless, of course, the state with whom he is in dispute fails to honour its obligations under the convention.

The convention has so far been ratified by 75 states, and provision for the use of the facilities of the international centre has been inserted in an increasing number of bilateral treaties dealing with investment. This indicates that the convention has found a wide measure of acceptance throughout the world. Ireland signed the convention on 30 August 1966.

Most of the provisions of the Washington Convention are taken up with the organisation of the international centre and the conduct and procedures of conciliation and arbitration and do not require implementing provisions in the Bill. Article 54 obliges each contracting state to recognise an award as binding and to enforce the pecuniary obligations imposed by the award as if the award were a final judgment of a court in that state. Section 16 of the Bill gives effect to that provision. Since other provisions of the convention permit applications to be made to the centre for the rectification, interpretation, revision or annulment of an award, which could result in enforcement of the award being stayed, section 17 of the Bill gives power to the High Court to stay enforcement where such applications have been made under the convention.

An award under the Washington Convention is different from an ordinary commercial award for which enforcement might be sought under the New York Convention. The Washington Convention award is made by a tribunal acceptable to all contracting states and in accordance with procedures which are known and accepted by all such states. These procedures have adequate safeguards to ensure compliance with the basic requirements of justice. It is because of this that contracting states can accept that Washington Convention awards should be enforced as if they were orders of a court. This accounts for the absence from the convention and from the Bill of a list of grounds, such as the list in section 9 in relation to New York Convention awards, on which enforcement can be refused.

In accordance with Article 55 of the convention, however, the obligation to enforce an award will not derogate from the law in force in any contracting state relating to immunity of that state or of any foreign state from execution. The only point that needs to be made in regard to this provision is to emphasise that any state against whom an award was made who refused to honour the award by claiming immunity from execution would be in breach of its obligations under the convention and would leave itself open to action on the international plane by the investor's home state on behalf of the investor.

Section 5 of the Bill deals with the power of a court to stay proceedings in a matter which is the subject of an arbitration agreement. Our present law is contained in section 12 of the Arbitration Act, 1954. Subsection (2) of that section requires a court to stay proceedings in certain circumstances where there is an arbitration agreement to which the Geneva Protocol of 1923 applies. Subsection (1) provides that, in matters which are the subject of other arbitration agreements, a court may stay the proceedings if it is satisfied that there is not sufficient reason why the matter should not be referred to arbitration and the party applying for the stay is ready and willing to proceed with the arbitration.

Paragraph 3 of Article 1 of the New York Convention requires a court, at the request of one of the parties, to stay proceedings instituted where there is an arbitration agreement and to refer the parties to arbitration. Article 26 of the Washington Convention provides that consent to arbitration shall exclude any other remedy, unless otherwise stated. Section 5 is designed to give effect to these provisions and to continue the effect given by section 12 (2) of the 1954 Act to the similar provision in the 1923 Geneva Protocol.

Section 5 applies, however, to all arbitration agreements, not just agreements to which the New York Convention, the Washington Convention, or the Geneva Protocol applies. Domestic arbitration agreements are therefore being assimilated to foreign agreements and in relation to domestic agreements, as in the case of other agreements, a court will be required to stay proceedings unless the agreement is null and void, inoperative or incapable of being performed, or there is not in fact any dispute between the parties with regard to the matter agreed to be referred to arbitration.

The reason for applying the requirement to stay proceedings to domestic as well as other agreements is that it is desirable that parties who have agreed to submit a dispute to arbitration should be held to their agreement. I understand that the usual practice of the court in dealing with applications under section 12 (1) of the 1954 Act is to stay the proceedings instituted, in other words, to proceed on the basis that the parties should be held to their arbitration agreement. This is also the position in the continental states of the EEC so that one result of section 5 will be to bring our law into line with those countries' laws.

I trust the Bill will be acceptable to the House. Ratification of the New York Convention, apart from enabling us to comply with an obligation imposed by our membership of the EEC, will bring our rules relating to the enforcement of foreign arbitral awards into line with those applying in most other countries. As I have mentioned, the Washington Convention was sponsored by the World Bank and it is appropriate that Ireland, a member of the World Bank, should ratify it.

This is the first time I have spoken in this House since the new Minister came to visit us here and, as a man from a neighbouring county, Mayo, I should like to wish him well—at least until the next general election—in his present position as Minister.

This Arbitration Bill, 1980, is a very simple matter in relation to which I shall not have much to say. Basically it enables us to honour our international obligations. As a country with a very healthy foreign policy, a country which is involved to a tremendous extent in imports and exports, and with such international obligations, naturally it is acceptable to us. Of the two conventions to which we are addressing ourselves here, it seems to me that the most laudatory is the Washington Convention which is sponsored by the World Bank. It is obviously desirable that we should be a party to this since Ireland is a member of the World Bank. It seems to me a very necessary convention. It deals with the question of the settlement of investment disputes between states and nationals of other countries. It deals with issues concerning private investment in under-developed countries. Obviously there is a problem in this investment area in the Third World because, while such investment is very desirable, whilst it has all kinds of implications for the people of the Third World, and for international peace, there is obviously a commercial problem due to the instability in many of these countries. While in the developed world there may well be the will in the commercial community to invest in projects in such countries, the instability that exists in many of these parts of the world makes this investment a very risky type of activity. Obviously this move by the World Bank to provide this facility for the resolution of such disputes that might exist between the private investor and the State where the investment is made, gives that added necessary stability to the investment which should increase substantially the level and flow of funds into the Third World from the developed world. It is a very significant development. Very happily we agree with it.

The other convention, the New York Convention, is a replacement of the previous Geneva Convention and the Geneva Protocol. From reading about this New York Convention it seems that it is putting the onus of proof, in terms of arbitration, not on the person or individual or company instigating proceedings, but on the defendants to show reasons why the action of the protagonists is not justified. It is probably healthy. I imagine that, under the previous convention, where the onus of proof was entirely with the proposer of the arbitration it would be extremely difficult. Having regard to the problems of attempting to prove this in another country it was probably very unwieldly and this is probably necessary.

This, again, is in line with our international obligations. It has EEC implications under Article 220, simplification of formalities governing reciprocal enforcement of arbitration awards. I gather that all EEC states, with the single exception of Luxembourg, are parties to this New York Convention.

This is an uncontroversial matter. The details were teased out substantially before it was brought to the notice of this House. I want to assure the Minister that this Bill has the support of our party.

As I have mentioned, ratification of the New York Convention will bring our rules relating to foreign arbitration awards into line with those obtaining in other countries. This is important even given the fact that foreign arbitration awards rarely, if ever, come before our courts for enforcement, which indicates that arbitration awards are generally complied with. It is important that foreign commercial interests contemplating contracts with Irish interests will know that our system accepts the internationally recognised rules in this area.

The Washington Convention, perhaps, has most relevance for the underdeveloped countries. However, once ratified by this country, it will ensure for any Irish interest which enters into an investment agreement with a foreign country an acceptable tribunal which, with the agreement of the parties, can be used to have any disputes arising resolved in accordance with rules that ensure fairness and justice to each party.

I want to conclude by thanking Senator Staunton, my western political colleague, very sincerely for his kind welcome.

Question put and agreed to.
Agreed to take remaining Stages today.
Bill put through Committee, reported without amendment, received for final consideration and passed.
The Seanad adjourned at 8 p.m. until 2.30 p.m. on Wednesday, 4 June 1980.
Top
Share