The purpose of the Arbitration (International Commercial) Bill, 1997, is to enable the State to adopt the Model Law of the United Nations Commission on International Trade Law, which is generally referred to as UNCITRAL, to provide a framework to enable Ireland to market itself as an attractive venue for international commercial arbitrations. The Model 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. In adopting this law as part of its domestic legislation, Ireland is following a well recognised international trend.
Arbitration is concerned with the resolution of disputes outside the ordinary court system. This type of resolution mechanism is recognised as being particularly suitable for 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. Properly managed, arbitration can be cheaper and speedier than litigation. It also offers a guarantee of privacy and flexibility of approach in specialised disputes where parties may wish to have the option of appointing as an arbitrator someone who is an expert in the area in question.
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, which 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.
At present, 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. The Bill, by providing for the adoption of the Model Law, will bring those familiar rules into our legal environment and, in this way, should facilitate the conduct of major international arbitration hearings in this country.
I will now deal with the main elements of the Model Law, 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 to enable it 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 Model 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 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 contains 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 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 contains standard provisions in relation to short title and references. Because there is no commencement provision in the Bill, the usual practice will apply and the Bill will come into operation immediately it is enacted. The central elements of the Bill are contained in Part II. Section 3 contains standard interpretation provisions. The key provision in the Bill is section 4 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 such matters as the scope of court intervention in support of arbitral proceedings; powers of the arbitral tribunal in relation to the examination of witnesses; 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 5 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.
The High Court is specified as the court for the purposes of Article 6 of the Model Law by virtue of section 6 which also specifies that court as the court for certain other purposes which are provided for in the Model Law. Article 6 provides for a State, when enacting the Model 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.
The other relevant purposes are covered by four particular articles. 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.
The question of court involvement in the arbitration process is, perhaps, the most significant example of the way the Model Law differs from our existing legislative régime. 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 state such a case 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. Under the Model Law, this kind of court intervention will no longer be possible.
The powers of the High Court which are exercisable in support of international commercial arbitration proceedings are set out in section 7 and equate with the powers which are available to the court in relation to any other action or matter before it. The purpose of this section is to set out in clear terms the type of court assistance which is envisaged by articles 9 and 27 of the Model Law. Examples of such assistance would be measures directed towards the conservation of the subject matter of the arbitral proceedings or towards the production of documents.
Subsection (2) of this section seeks to ensure that parties in the context of international commercial arbitration proceedings are not disadvantaged because they are individuals who are ordinarily resident outside the State or corporations or associations incorporated or formed under a law other than the law of the State or whose central management and control are exercised outside the State. The rules of the Superior Courts as they stand at present encompass a fairly wide ranging jurisdiction to order security for costs against foreign plaintiffs.
Section 8 deals with the powers of an arbitral tribunal in relation to the examination of witnesses. The purpose of this section is to enable an arbitral tribunal to direct that a party to an arbitration agreement or a witness who gives evidence in arbitration proceedings, be examined on oath or affrmation. It also enables the tribunal to administer such oaths and affirmations. It is considered that such a provision would be of assistance to an arbitral tribunal and could help it to carry out its functions in a more efficient and effective manner. It is, however, open to the parties to agree that the tribunal should not have this power.
Section 9(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 10 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 existing law, there is some uncertainty as to the ability of an arbitrator to award interest in these circumstances.
The cost provisions of the arbitration are dealt with in section 11. Under subsections (1), (2) and (3), the parties to an arbitration agreement are free to agree on how the costs of the arbitration, which include the costs as between the parties and the arbitrators' fees and expenses, are to be allocated and on the costs recoverable. Subsections (4), (5) and (6) deal with the situation where there is no agreement of the parties as to costs and allow the arbitral tribunal, subject to the consent of the parties in the case of the costs as between themselves only, to make a determination and to specify certain matters. Subsections (7) to (9) are concerned with the role of the High Court in dealing with applications relating to costs and subsection (10) is a general statement of intent about the right of a tribunal to its fees and expenses, including the fees and expenses of any expert it may appoint to report to it on specific issues it may have to determine. The appointment of such an expert is provided for in Article 26 of the Model Law.
Section 12 makes clear that an arbitrator will 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, solicitor or person holding equivalent qualifications obtained in another jurisdiction who appears in proceedings before an arbitral tribunal shall have the same privileges and immunities as barristers and solicitors in proceedings before the High Court. The section recognises that, because the scope of the Bill is concerned with international commercial arbitration, there may be circumstances where lawyers from other countries may wish to act for parties in arbitral proceedings conducted in the State.
Patent agents and trademark agents, who appear for parties in arbitral proceedings relating to disputes involving patents and trade marks, have also been granted these privileges and immunities. These agents are a clearly defined professional group for the purpose of the Patent and Trade Marks Acts and practice in the area of intellectual property law. As such, they may appear for parties in intellectual property disputes which require recourse to arbitration, and it is important they enjoy the same level of protection as will be enjoyed by barristers and solicitors in proceedings involving the use of the Model Law.
Section 13 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 that 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. Subsection (1) of section 14 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. The 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) of this Bill makes it clear that nothing in section 14 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 itself.
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 15. In the interests of fairness to those parties who may have commenced arbitration proceedings before the day on which the Bill comes into operation, subsection (1) of that section makes it clear that Part II shall not apply to such proceedings unless the arbitration is concluded after that day and that the parties so agree. Subsection (2) provides that Part II shall apply to relevant arbitrations commenced on or after the day on which the Bill 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. In addition, subject to the exception provided for in section 14(4) to which I have already referred, section 16 ensures that the Arbitration Acts 1954 and 1980 shall not apply to international commercial arbitrations.
The main emphasis of the Bill is on international commercial arbitration. However, the opportunity is also being taken in section 17 to bring the domestic interest provisions contained in section 34 of the Arbitration Act, 1954, into line with those contained in section 10 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 section 10(1) to 10(4) which I described to the House earlier.
The new section 34 deliberately excludes property arbitrations from its scope. This is a very specialised category of arbitration and one where there is already a body of detailed legislative provisions. Accordingly, it is provided under subsection (7) 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.
Section 18 contains an amendment to section 5 of the Arbitration Act, 1980, which obliges a court to stay proceedings commenced by any party to an arbitration agreement, or any person claiming through or under that party, in respect of any matter agreed to be referred to arbitration, unless the court is satisfied that the arbitration agreement is, inter alia, null and void.