I welcome the Minister of State at the Department of Justice, Equality and Law Reform, Deputy John Moloney.
Arbitration Bill 2008: Second Stage.
Question proposed: "That the Bill be now read a Second Time."
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.
I thank the Minister for outlining this new Arbitration Bill, which is an effort to consolidate existing legislation in this important area of alternative dispute resolution procedures. At the arbitration seminar in October 2008, which the Minister of State referred to, the Attorney General stated the system of appeals from arbitration undermines its raison d’être. That is correct but the Irish courts have, with the enforcement of arbitration awards — the New York convention — been reluctant to intervene. This law is very important but the courts have applied the arbitration legislation which is very much in keeping with international law. What we now have is a codification of existing law and practice by the Irish courts in the arbitration area.
At that conference, the Attorney General stated that legislation in respect of domestic arbitration had served us well and generally functions effectively and relatively efficiently, which is true. He spoke about refinement and that this Bill is essentially a refinement of the process. It repeals the Arbitration Acts 1954 and 1980, as well as the Arbitration (International Commercial) Act 1998, but it preserves all the international obligations under the Geneva Protocol on Arbitration Clauses opened on 24 September 1923; the Geneva Convention on the Execution of Foreign Arbitral Awards of 26 September 1927; and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards done at New York on 10 June 1958.
I know from being involved in international trade that when an agreement is signed, an arbitration clause is standard. It is only when a dispute arises that there is a focus on the exact wording of a clause and in particular the jurisdiction in which the arbitration is to take place. There is familiarity with the Geneva, London and Paris venues for arbitration and the Minister of State has pointed out that these are the key players as centres of arbitration. There is no reason Dublin cannot be a major centre. By implementing and integrating into our arbitration law the UNCITRAL Model Law on international commercial arbitration, this brings Irish legislation into line with international law and the understanding of operators in the international market with best practice.
The integration of domestic commercial arbitration with international arbitration is very important. The end result is that the arbitration dispute system will become familiar and seamless, whether there is somebody operating in the Irish Financial Services Centre or in a multinational company. There can be a foreign or domestic element in the dispute but having the UNCITRAL model incorporated into our legislation would facilitate the procedures.
There are a few implications of adopting the Bill and Model Law. The courts have essentially created an environment where there is very little interference by them in the arbitration process and where the parties to an agreement or contract decide that it should go to arbitration. The model code provides that the environment for arbitration is more of a sealed nature and it is less amenable to interference by the courts. There are also many new procedural powers given to arbitrators with regard to interim reliefs and the want of prosecution to appoint experts to assist the tribunals and to issue consent awards. All of that is very welcome.
The other new element is the giving of reasons, as with many arbitrations in Ireland it has been the practice not to issue reasoned awards in domestic cases. That is to avoid providing reasons that could render the award more amenable to challenge in the courts. The Bill provides for the giving of reasons in line with the UNCITRAL model, which is to be welcomed.
There is another element concerning the erring of law on the face of the award. That was not included in existing statutory procedure but the courts here, including the Supreme Court, have recognised this as valid ground for challenging an award, particularly at common law. Providing a statutory basis for that brings clarity to the procedure.
Enactment of this Bill should be welcomed. We have many well-qualified arbitrators in Dublin and the country who are familiar with the UNCITRAL Model Law. By laying it out in statute, the entire system will be streamlined and the legislation will be modernised and codified. This assists in making Ireland a venue for international dispute resolutions in the area.
What procedures are in place and what efforts will be made by the Government to promote Dublin actively as an arbitration centre in competition with Paris, Geneva and London? The Commercial Court under Mr. Justice Kelly has been a success owing to the speed at which decisions can be taken. Very technical, complicated and serious commercial disputes can be resolved using a fast-track procedure. The standards applied in the court are recognised, as is the fact that we we can deal with commercial disputes efficiently. In offering an alternative mechanism for resolving commercial disputes Dublin can be a serious contender in attracting much of the arbitration business. The key point in the Bill concerns the distinction between domestic and international arbitration which will help greatly in promoting arbitration in resolving commercial disputes, especially in the international arena.
I welcome the Bill. I do not have any difficulties with it. There may be one or two minor issues which may arise on Committee Stage, but the Bill is very welcome. Its importance should be promoted in order that Dublin can become a contender in attracting a much greater volume of arbitration dispute resolution business. I hope the Minister of State can respond to this point.
I welcome the Minister of State and thank him for his lengthy speech on this important matter. We are singing from the same hymn sheet. As Senator Regan pointed out, this is a very important Bill which is timely in making changes to the law on arbitration in Ireland. In particular, it makes improvements to the Arbitration Acts of 1954, 1980 and 1988, the last of which introduced the internationally recognised Model Law to be applied in all cases of international commercial arbitration in Ireland. The new Bill also ensures recourse to the courts will be speedy and avoid unnecessary costs. It also removes the possibility of court orders which can impede an arbitral process through orders for security, costs and discovery. It promotes an alternative dispute resolution mechanism and promotes Ireland as a location for same.
One of the most significant features of the new Bill is the extension of the Model Law to domestic arbitrations. This modernises the system and unifies the two arbitration regimes in place. Modernisation is the key element of the Bill, as it incorporates international best practice into Irish law and could help to establish Ireland as an attractive option as a neutral third party country venue for international arbitration.
Arbitration forms part of the services industry which we hope will develop and make a major contribution to GDP. When one considers the downturn in the economy and the current lack of finance, it is clear that arbitration could give rise to huge benefits in the future. Many international arbitration disputes involve multi-million euro amounts. Choosing Ireland as the arbitration venue in resolving these disputes will be a vote of confidence in the quality of our government, business and legal structures. Ireland is a neutral, English-speaking venue with a common law system and an evolving, strong legal framework which is attractive in dispute resolution. If we get the legislation right and Ireland is marketed to companies and other countries, we could make the new system an economic success.
Hosting the arbitration of disputes has many significant economic, legal and business tourism benefits. Nearly 1,000 overseas companies have made Ireland their European base in many sectors such as finance, information technology, pharmaceuticals and other services. We are promoting Ireland as an IP centre of excellence. We have a wide range of translation and stenography services, another advantage.
The courts also support and encourage arbitration. For example, the Commercial Court provides a fast-track system for dealing with commercial litigation cases which potentially can be used in arbitration. As a young apprentice solicitor back in 1997, I did my training with a commercial law firm. There were rooms dedicated to large commercial litigation disputes that were ongoing for five or six years. That no longer happens owing to the development of the Commercial Court which has been a success under Mr. Justice Kelly. The development of a purpose-built centre for arbitration and dispute resolution would further enhance our ability to attract this business. International best practice is to have such centres. To compete with London, Paris and New York, Ireland must invest in similar facilities.
Many Irish people have figured on the international economic and political stage which helps to attract people from overseas to Ireland. It helps to sell a positive and professional image of Irish people. This business would greatly enhance our economic and legal standing. It would also encourage domestic alternative dispute methods which could only be of benefit in repairing fractured business relationships.
Many sectors in the economy are internationally focused and have made inroads into markets abroad. The legal services community has been more domestically focused until now, but perhaps this Bill will mark a new departure. The conference that took place in Dublin in 2008 has been mentioned. It was the biggest international arbitration conference ever and generated significant goodwill towards Ireland. Coupled with the Arbitration Bill 2009 and the various initiatives prompted by the conference, this should allow us to achieve the goal of establishing Ireland as a premier centre for international dispute resolution.
I would like to address some issues relating to small claims. Far too often, small claims clog up the system. The international dispute resolution procedure will deal not with small claims but also with international claims of significance. Section 14 of the Bill deals with consolidating proceedings where parties are willing to so consolidate. That is interesting because our own law does not promote a class action, a phrase we are barely allowed to mention. However, if we can change the law for dispute resolution, surely we can change it to allow class actions in our court system.
Section 30 provides that the Bill shall not apply to an arbitration agreement that relates to a claim which does not exceed the monetary limit for small claims in the District Court, currently €2,000. We should not clog up the system with such small claims.
Section 34 deals with special oversight powers and preserves the power of the arbitrator to state a case for the appropriate court for an award. It allows a party to an arbitration to make an application to that court seeking that an award be remitted to the arbitrator on the grounds that new evidence has emerged which is likely to alter materially the decision on that award, or seeking a direction that the arbitrator state a case for the decision of the court. This is sensible practice.
Arbitration is hard, given the requirement for privacy and confidentiality on the part of the parties involved and the arbitrator. However, it is always a better solution than going to court. The Minister of State referred to section 11 which provides an alternative path to litigation. As he stated, there is evidence to suggest the parties are anxious to avoid excessive court intervention which can only be welcomed. The philosophy of the Model Law is that minimal court intervention will work to the advantage of the process and ensure finality. However, this also supports agreement on certain points and the narrowing of the issues in order that it can promote conciliation which is welcome.
Section 11 also states there is to be finality to the court's determination in respect of a number of applications. 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 Minister of State has stated it is a new departure for our law that all these applications will no longer be subject to appeal to a higher court, thus giving to the arbitrator a court of final appeal. This promotes Ireland at an international level as a location for dispute resolution. This is a good Bill that reflects the need for modernisation and consolidation in our law. It injects practicality to the system. It answers the need of the international commercial community present in Ireland and it is eminently sensible that we introduce it now. I strongly support the passage of the Bill through the House and I note it has been on the books for a number of years. I hope we can enact this Bill as soon as possible so the arbitrators can send out the signal that we are open for business and other areas of Government can promote Dublin, as Senator Regan said — there is no reason why it cannot apply to other cities — where our main legal apparatus is, as a place of international dispute resolution.
I welcome the Minister of State to the House to discuss this developing area. International arbitration is a multi-million euro business and there is intense competition among countries to attract its business. There is an increasing interest in arbitration and alternative methods of dispute resolution among legal practitioners, commercial practitioners and businesspeople generally. It is recognised that arbitration offers a more cost effective, efficient and timely process as a means of resolving disputes. At least that is the perception and it is not an area I practice in, being more familiar with the criminal courts, which have a different method of resolving matters. Clearly the very strict rules of evidence that apply in the criminal courts and the different balance between prosecution and defence is different to the process used in arbitration, whether this is domestic arbitration involving a smaller value consumer dispute or an international arbitration dispute involving multiple millions of euro. Different arbitration mechanisms exist. Those who work in arbitration tell me the reality of it is somewhat different. Arbitration, just like court cases, can become bogged down and unnecessarily prolonged. In some cases it can be more costly than anticipated. However, generally the perception that it offers a more cost-effective and efficient manner of resolving disputes is fair.
This Bill is to be welcomed, as Deputy Rabbitte did in the Dáil. It was welcomed on both sides of the House. Senator McDonald commented that the Bill has had a long period of gestation, having originated in 2008. I wish to raise a number of concerns about the Bill. There are contradictory messages from practitioners and I am grateful to those who have written in the recent Arbitration and ADR Review of 2010. This offers a useful insight into the views of practitioners on the Arbitration Bill. Ercus Stewart, Peter Shanley and Mark Murphy have written articles and I am grateful for their insights. However, practitioners communicate contradictory messages. Some say the present system is working well and we should not fix it if it is not broken. I do not know if that view is widely shared but it is widely acknowledged that it is more useful to adopt a Model Law applied by the UN Commission on International Trade Law, UNCITRAL. I am not sure the view that we should not fix it if it is not broken has widespread purchase. The only concern is whether the international model is appropriate and whether to offer a one size fits all approach to domestic arbitration as envisaged in this Bill. I note the point made by the Minister of State that the current statutory regime in Ireland is somewhat fragmentary, with three Arbitration Acts and two arbitration regimes. Clearly there is great merit in streamlining the current fragmented system. The concern I raised, which was also raised by Deputy Rabbitte in the Dáil, is whether one Model Law taken from international code is appropriate for all forms of domestic arbitration and whether it should apply to the insurance arbitration and package holiday contracts just as it applies to large commercial disputes. When going through the Bill on Committee Stage, this central theme may emerge. I refer to the necessity to ensure the consumers are given adequate protection where we are applying a Model Law that is supposed to be designed for international arbitration involving large entities and multiple millions of euro. Applying that to much lower value consumer disputes, involving package holidays contracts and insurance contracts, may not provide sufficient safeguards for consumers. Safeguards are provided in the Bill, which I welcome, but we must focus on this on Committee Stage.
The Chartered Institute of Arbitrators has raised concerns about the continued exclusion of labour disputes from the legislation. The Bill proposes to continue the current exclusion of labour disputes. This is a matter raised by Deputy Rabbitte in the Dáil. The current position is that section 5 of the 1954 Act excludes industrial relations matters. One presumes this was done because when the 1954 Act was being passed many of the State agencies governing the resolution of industrial disputes were being established. We have developed an entrenched system of labour dispute resolution in the Labour Relations Commission and the Labour Court. Those mechanisms have developed specialist expertise in industrial dispute resolution and no one would argue for their replacement or supplementation with arbitration. However, there is a concern among those working in employment law that the Employment Appeals Tribunal has become increasingly legalistic. While the Labour Relations Commission retains its original character, the Employment Appeals Tribunal has become a more formalised structure and an institution in which we see lawyers regularly instructed by both sides, where doctrine of precedent has developed. It is worth examining whether arbitration could offer some alternative method to the Employment Appeals Tribunal. Deputy Rabbitte raised this in the Dáil but it does not seem to have been given much consideration in the drafting of this Bill. It appears the 1954 exclusion simply continues. I am not sure it would be a good idea to extend arbitration into the industrial relations dispute arena; I can see arguments for and against. However, it should be considered.
I examined the Law Reform Commission consultation paper on alternative dispute resolution from July 2008. It does not deal with this but what is interesting is that it points out the nature of arbitration in Ireland as the preferred method of dispute resolution in a number of sectors, including construction and insurance. The Law Reform Commission paper outlines how it works in practice in Ireland and refers to a hybrid model. It would be useful to conduct a review on whether a hybrid model can be adopted in Ireland, a hybrid process of mediation and arbitration, known in the US by the very American term Med-arb or Arb-med. This hybrid process is where parties attempt to settle the dispute through mediation and if a settlement is not reached the mediator, usually the same individual, becomes an arbitrator and imposes a binding decision on the disputing parties. It is an interesting process because, as the Law Reform Commission points out, it is commonly used in labour disputes in the United States and in patent disputes. Within the Arb-med process the parties first present the case to arbitration. It is interesting that they first present their case to arbitration and the arbitrator writes up a decision and seals it but does not disclose its content to the parties. The parties then engage in mediation for a fixed period, usually with the same person who has arbitrated. If they reach agreement before the deadline for the end of mediation, they never learn the content of the arbitrator's decision, so this is a novel approach. If they do not reach agreement by the specified deadline, then the arbitrator's decision becomes final and binding on the parties. This model has been used to a limited extent in the US but also in South African union-management relations in the car and steel industry. There has been criticism of the model but I think it is worth exploring whether it could have some effect in Ireland.
The Law Reform Commission did not recommend any action be taken in this regard. It noted the criticisms that parties might be inhibited in their discussions with the mediator if they knew the mediator would also be called upon to act as arbitrator and that a third party who mediated and then became an arbitrator may themselves have been biased by what had been conveyed to them through the mediation process in a more informal and often confidential way.
The exclusion of labour disputes could certainly be re-examined although that is not in any way to suggest we should be looking at any form of alternative to the current, very well-developed mechanisms of the Labour Relations Commission. Has the Minister of State or his Department looked at the rationale for the continued exclusion?
I refer briefly to the consumer protection provisions in the Bill which I look forward to teasing out further on Committee Stage when we will have an opportunity to deal with the sections in detail. There will be particular concern about the application of what I have described as the one-size-fits-all model developed from the international Model Law. We are conscious that the consumer arbitration schemes currently give many people a means of resolving disputes without going to court, and this is very welcome. I refer to package holiday contracts and insurance contracts in particular and any disputes relating to them are often resolved through consumer arbitration. Given that the new model is tailored specifically to international arbitration, it will require some tweaking to ensure it does not diminish consumer protection in particular in cases where people seek to resolve a dispute over what can often be relatively small sums of money involved in a package holiday contract or in an insurance contract.
I look forward to discussing these issues further on Committee Stage. It has been clear from the contributions on Second Stage that a broad welcome for the Bill is forthcoming on both sides of the House.
The economy is very dependent on international trade and exports have increased during a period of economic difficulty. It is important that exporters can benefit from changes in international law by availing of the most beneficial terms of trade and avoiding the judicial process both in Ireland and in another country where a dispute with a trading partner might arise. This Bill is a consolidation law replacing the Arbitration Acts 1954 and 1980 and the Arbitration (International Commercial) Act 1998. I presume dealing with consolidated legislation will be of assistance to both solicitors and barristers in the future. I note the presence in the Chamber of practitioners of those arts.
Arts or crafts or trades, I do not know.
The Bill is based on the United Nations Commission on International Trade Law. International commercial arbitration should provide confidence that there is an accepted international standard and a place for such disputes to be settled. It is hoped this area of national law will be further improved. I welcome the Bill as it will help Ireland's position as an international trading nation.
This Second Stage debate offers an opportunity to refer to wider issues such as the moral dimension of international trade. Ireland benefits from international trade. We should be aware that how we trade and with whom we trade and to what extent we benefit from such trade needs to be subject to other standards as well, such as working conditions, pay levels and environmental standards in other countries. As Senator Bacik has pointed out, we must be aware of consumer rights and protections in the various jurisdictions. This is not the subject of this Bill but it is an important point which may be an area for arbitration, such as the failure of contracts in commercial transactions resulting from the application of this new law and from the application and the existence of such standards.
Ireland, in its foreign policy, tries to promote better standards in many of these areas and we could help inform the United Nations Commission on International Trade Law so that it would adopt many of these principles and make them issues on which arbitration will be applied in the future. Other international bodies such as the World Trade Organisation seem to be almost amoral in how they approach many of these ethical issues relating to trade.
I note the general welcome given to the Bill, not only by Members but by trading bodies, various commercial ventures and the accounting profession. This indicates that this subject does not cause dissent. I suspect there will be a wider debate on Committee and Report Stages as to how the Bill might be nuanced, but in its general principles there seems to be near unanimity that this is valuable and necessary legislation which will be of benefit to the country. I offer my party's support for the Bill and I look forward to its speedy progress through the House and its eventual enactment.
I welcome the Minister of State. I concur with many of the points made in his contribution on this Bill. Arbitration is a concept which is not as widely used in Ireland as would be desirable. It could be usefully used to resolve many commercial disputes and disputes between individuals. It is unfortunate we have allowed access to the courts to become the prerogative of the wealthy due to the captive nature of the fees charged by the legal profession, by members of the Bar in particular. Practitioners, some of whom are Members of this House, will acknowledge that one goes to court to get law but it is not the place to go if one is looking for justice. The costs associated with taking a case to court make it prohibitive for people to follow that course and in many instances the outcome can be unsatisfactory for both plaintiff and defendant. The arbitration method provides an opportunity for an individual to explain exactly what he or she is seeking and in many cases, through the medium of the arbitrator, it enables the parties to interact and, as a result, the outcome is more suitable and commensurate with the needs of both sides.
The Minister of State also spoke about cost issues. On that point, I wish to outline my past experience in that respect with people who tend to look at arbitration. I suggest the exorbitant fees associated with the legal process can influence arbitration fees and thereby contaminate the arbitration system. That might be one of the reasons for the lack of use of the arbitration facility. Our arbitration laws have been on the Statute Book for some time. I think 12 years have passed since we had the last arbitration legislation. Many legal agreements include dispute resolution clauses. One is often advised by one's solicitor that the inclusion of arbitration as a means of resolving a dispute under the agreement exposes one to almost the same cost as going to court. I have often seen agreements drawn up after parties were dissuaded from including arbitration in the process. The whole scandal of legal fees has never been dealt with by any Government, but it needs to be tackled with some urgency. I have urged the Joint Committee on Justice, Equality, Defence and Women's Rights to take a look at it. I hope it does. It takes courage to take on such a strong and influential vested interest group. If we value our republican ethos, equality of access to the court system must be regarded as an essential component that underpins our system. Government authorities should take some degree of control of these exorbitant costs.
I agree with the Minister of State and others that the adoption of the Model Law on international commercial arbitration could pave the way for us to establish a greater remit for this country as a centre for international arbitration. In addition to becoming very wealthy, our lawyers gained tremendous experience at the tribunals. They may be able to apply that experience in the arbitration sector. I remind the House of the manner in which this country positioned itself in the international financial services sector. Despite the many naysayers who criticised the construction of the International Financial Services Centre, it has been a significant success. The disasters that have occurred in banking in the meantime have nothing to do with the centre. We can take great pride in the fact that it was established during the severe economic downturn of the late 1980s. We can take confidence from its success as we can concentrate on other areas such as arbitration in a similar way. In certain trades such as the grain trade one can use internationally recognised methods of arbitration in cases of dispute. We should seek to establish and promote such a centre here. We should try to ensure the costs involved are managed to ensure they do not get out of hand. If we display such competitiveness, we can position ourselves well in this area.
I am pleased the arbitration system will be given greater autonomy. I am not sure how one can promote it — probably through the legal profession. We should try to get economic benefits from this legislation. If we can bring about a shift from the courts system to the arbitration system, for example, we will release time in the courts which will probably enable us to rationalise costs in the civil courts, in particular. I would see this as an admirable objective. I welcome the fact that further appeals will not be allowed beyond the High Court. I am pleased that the parties to arbitration will be allowed, to some degree, to frame aspects of the arbitration process.
This is a good Bill. However, it will not work unless we attract people to use it which we can do by ensuring the costs associated with it are far more competitive than those associated with the courts system.
I thank Senators for their contributions. I look forward to dealing with the various proposals made on Committee Stage. I will respond to the issues raised during the debate. I thank those who contributed to the discussion for their generally favourable comments on the overall purpose of the Bill. While the legislation is somewhat technical, as the debate has shown, it is not especially controversial. I welcome this.
As I said earlier, alternative dispute resolution is a major growth area. Arbitration is particularly popular in the commercial sphere. Parties who wish to continue their business relations with each other may find it appropriate to avail of the advantages arbitration has to offer. I will deal with some of the points raised by individual Senators. The advantages offered by arbitration are different from those offered by the traditional litigation route. If it is properly managed, arbitration can be cheaper and quicker than normal litigation. It offers a flexible approach that can be tailored to the specialised disputes which sometimes arise in the commercial arena. It can facilitate the protection of sensitive commercial information. More importantly, perhaps, it is backed by a guarantee of enforceability in a substantial number of countries.
It is intended that by providing a single regime that applies to all arbitrations, the Bill will create an environment in which Ireland can be marketed as an arbitration-friendly venue. This should help us to increase our international arbitration business and facilitate the further expansion of the domestic arbitration business. The development of arbitration business in this jurisdiction will depend, at least in part, on the ability of practitioners in the field to capitalise on the provisions of the Bill. We are fortunate that considerable legal and professional expertise is available to us. The Irish branch of the Chartered Institute of Arbitrators, for example, is an active organisation with over 800 members from a range of backgrounds and with a wide variety of professional qualifications. The Bar Council, the Law Society and Chambers Ireland have been proactive in this area.
There have been excellent educational opportunities in recent years which enable many more people to build on their skills in this growth area of the legal economy. The Government is willing to play its part in this regard, to the maximum extent feasible.
Senator Regan raised the issue of the marketing drive, to which I will return in more specific detail on Committee Stage. In 2001 the American Arbitration Association opened an international dispute resolution centre in Dublin. This significant development gave added credibility to Ireland as a venue for international arbitration. The importance of arbitration in the international trading community should not be underestimated. It is appropriate that Ireland, as an trade-dependent country, should seek to tap into this area of activity. International arbitration services are offered in most major capital cities. This reflects a desire on the part of the international trading community to resolve disputes which inevitably arise when large amounts of money are at stake quickly, cheaply and in accordance with commonly agreed rules.
Many commercial arbitrations in Europe are conducted under the auspices of the International Court of Arbitration of the International Chamber of Commerce, ICC. In recent years, the ICC has received approximately 600 requests on average per annum for arbitration. ICC arbitration takes place in a wide range of countries and in many of the cases which come to it, the amount in dispute exceeds $1 million. The importance of these statistics is that where the parties in a dispute agree to abide with International Chamber of Commerce rules, the ICC court is often involved in choosing a venue of arbitration which it regards as being compatible with its rules. The new Bill will enhance compatibility in this area, as acknowledged by Senator McDonald.
Senator Regan correctly noted that the courts have been reluctant to intervene in arbitration in the past. The problem from an international perspective was that it was presumed that undue interference was possible. This presumption could be used to our detriment by international competitors and hence the introduction of the Bill. The consolidation effect of the Bill should act to overcome any doubts which may have existed as to the role the courts play in the arbitration process. I welcome the acknowledgement by Senator Regan on this point.
The Bill consolidates existing arbitration law and brings it into line with modern international practice. However, given that the adoption of the model Bill for all arbitration is central to this objective, it may be useful if I take a little time to briefly outline the philosophy which lies behind the Bill. When the Model Law was adopted in 1985, the perception was that international trade would benefit greatly from some harmonisation of national legislation relating to the resolution of international disputes. The idea was that this could be achieved either by countries adopting the Model Law in its totality or adjusting existing legislation to bring it into line with the key provisions of the Model Law.
Given its audience, the text of the law is couched in pragmatic terms and written in relatively plain language. It is a mark of success that when the revision of the law was discussed earlier this decade, the changes eventually adopted were limited in number. The Bill is primarily a framework which enables the parties to operate with considerable autonomy and tailor the arbitration proceedings to suit their particular needs.
The Model Law deals in a comprehensive manner with the key issues which are likely to arise during the course of any arbitral proceedings. Where necessary, the law has been supplemented by specific provisions of the Bill which are aimed at ensuring our arbitration law is comprehensive and user friendly.
In response to Senator Bacik's comment that contradictory messages are being sent to the legal community, there is a general swell of support for the Bill in the arbitration community. Inevitably, there will be some who are comfortable operating in the old framework or using old ways. The Government is satisfied, however, that the enthusiasm and motivation to make the Bill work well in practice exists among all the relevant professions.
With regard to the exclusion of disputes, there is a well-established code of practice in this area which we are reluctant to set aside. There are also inherent flexibilities in the code which enable ADR techniques to be employed in practice.
I thank Senators for their contributions. I will address a number of the issues raised when we debate Committee Stage.
Question put and agreed to.
When is it proposed to take Committee Stage?
On Tuesday, 16 February 2010.
Is that agreed? Agreed.
Committee Stage ordered for Tuesday, 16 February 2010.
When is it proposed to sit again?
Ag 2.30 p.m. Dé Máirt seo chugainn.
The Seanad adjourned at 12.55 p.m. until 2.30 p.m. on Tuesday, 16 February 2010.