Alternatives to litigation
1. Overview of alternatives to litigation
Reference to arbitration is commonplace in commercial contracts. However, as arbitration becomes increasingly formalised and thus more akin to traditional adversarial proceedings, there is an increasing trend towards consent-based non-binding forms of ADR such as mediation and expert determination as more flexible and cost-efficient ADR mechanisms.
The Arbitration Act 2010 (2010 Act) came into operation on 8 June 2010, repealing all previous arbitration legislation in Ireland. The 2010 Act incorporates the UNCITRAL Model Law (Model Law) and applies to all domestic and international arbitration commenced after 8 June 2010.
The 2010 Act led to a number of significant changes to the previous regime. In strengthening the integrity of the arbitration process, the 2010 Act abolished the case stated procedure, whereby the arbitrator could refer a question of law to the High Court. In addition, the jurisdiction of the arbitrators was increased as they are given the power to review challenges to their appointment and can determine their own jurisdiction. The provisions of the 2010 Act go further to increase Ireland’s attractiveness as a potential destination for commercial arbitration by requiring an arbitrator to give reasons for his or her award, unless the parties have agreed otherwise, and also by allowing the parties to agree allocation of costs, whether before or after the dispute has arisen. The 2010 Act also restricts the grounds for setting aside an award to those grounds specified under Article 34 of the Model Law:
- a party to the agreement is under some incapacity or the agreement is invalid;
- improper notice was given regarding the arbitrator’s appointment or arbitral proceedings;
- the award deals with matters outside the scope of the submission to the arbitrator;
- the tribunal or procedure was improperly constituted;
- the subject matter of the dispute is not capable of settlement by arbitration under the law of the state; or
- the award is in conflict with the public policy of the state.
The Irish courts are supportive of the arbitral process and will only intervene where required.
The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York Convention) applies in Ireland, and an award made in the territory of the state that is party to the New York Convention shall be enforceable in the same manner in Ireland as the award of an arbitrator made in a domestic arbitration.
The New York Convention has been overtaken in Ireland by the incorporation of the Model Law into Irish law on foot of the Arbitration (International Commercial) Act 1998. A party may seek to have an arbitral award recognised and enforced regardless of whether it has been made in a signatory or non-signatory country, subject to that country having adopted the Model Law.
To enforce an award, application may be made to the High Court by way of originating notice of motion grounded on affidavit exhibiting the original arbitration agreement and the award (together with a translation of same).
Enforcement will only be refused on limited grounds such as where it would be contrary to public policy. However, in Broström Tankers AB v. Factorias Vulcano SA, the High Court held that the public policy defence was of narrow scope and could only be invoked where there was some element of illegality or where enforcement of the award would be clearly injurious to the public good or wholly offensive to the public.
The Mediation Act came into effect on 1 January 2018. The Mediation Act applies to all civil disputes with some exceptions, including arbitrations, Workplace Relations Commission disputes, applications seeking leave to apply for judicial review and judicial review proceedings.
Under the Mediation Act, solicitors, including in-house solicitors, are required to advise their clients to consider mediation as a form of dispute resolution and make a statutory declaration confirming they have done so. More particularly, a solicitor is required to:
- provide the client with information regarding mediation, including the names and addresses of the people who provide mediation services;
- inform the client of the advantages of ADR and of the benefits of mediation;
- inform the client that mediation is voluntary and, if relevant, that it may not be an appropriate means of resolving a dispute where the safety of the client or his or her children is at risk;
- inform the client that he or she (the solicitor) will need to make a statutory declaration confirming that he or she has complied with his or her obligations; and
- inform the client that if the statutory declaration is not provided the court will adjourn the legal proceedings.
A party does not have to go to mediation and can proceed directly to court if they wish.
If the parties agree to mediate, time stops running for the purpose of the limitation period in which to bring proceedings on the date when the parties sign the agreement to mediate. Time will recommence 30 days after any termination of the mediation.
A court may adjourn legal proceedings to afford parties an opportunity to engage in mediation. A party who refuses to engage in mediation without good reason may later be penalised in costs. The Court of Appeal in Danske Bank & Anor v. SC refused an application to adjourn proceedings to allow the parties to mediate, having regard to the conduct of the litigation, the stage of the proceedings, the potential effect of an adjournment on the proceedings, the likely success of the mediation and the bona fides of the application. The Court of Appeal referred to its decision in Atlantic Shellfish Limited & Anor v. Cork County Council & Ors and the principle that a court should only exercise its discretion to invite parties to mediate if it considers it appropriate to do so having regard to all of the circumstances of the case.
4. Other forms of ADR
Conciliation is often used in employment and construction disputes. Expert determination and adjudication have been most often utilised in specialist disputes, for example, construction disputes. Reference to expert determination is usually also included in agreements for lease in the context of rent review disputes.