Irish High Court stays proceedings pending arbitration

In BAM Building Ltd v UCD Property Development Co Ltd [2016] IEHC 582 (20 October 2016), the Irish High Court considered whether to stay proceedings pending arbitration in a construction dispute.

Speedread

The Irish High Court decided to stay court proceedings pending arbitration, holding that there was a presumption that the parties intended that all matters in dispute should be dealt with by way of arbitration. In any event, it was clear from the wording of the construction contract between the parties that the matter at issue should be dealt with by way of arbitration.

This decision illustrates the reluctance of the Irish Courts to intervene in matters which are subject to an arbitration clause.

Background

Section 6 of the Irish Arbitration Act 2010 gives force of law in Ireland to the UNCITRAL Model Law.

Article 8 of the UNICITRAL Model Law provides that:

"A court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests …, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed."

Clause 13 of the construction contract provided that:

"Any dispute that, under sub-clause 13.1 may be referred to conciliation shall, subject to sub-clause 13.1 be finally settled by arbitration…"

Facts

The dispute concerned a construction contract (Contract) where the plaintiff claimed an entitlement to additional monies due. The contract provided for the conciliation and arbitration of disputes arising thereunder. A conciliator was appointed under the Contract who made a recommendation, on 30 November 2015, that the defendant pay a sum of money to the plaintiff.

In accordance with the Contract, the defendant issued a Notice of Dissatisfaction referring the dispute to arbitration. The Contract provided that where the conciliator had recommended the payment of money and a Notice of Dissatisfaction (Notice) was issued, the party who had issued the Notice was obliged to make that payment provided that the receiving party agreed to comply with the arbitration clause in the agreement and furnished a bond to the paying party. However, having issued and served the Notice, the defendant failed to pay the recommended amount to the plaintiff. The plaintiff then issued High Court proceedings seeking, inter alia, a declaration that the defendant was in breach of the Contract, and an order directing payment of the recommended figure.

In response, the defendant sought an order staying the proceedings pursuant to Article 8(1) of the Model Law, as adopted by section 6 of the Irish Arbitration Act 2010, on the grounds that the dispute between the parties was the subject of an arbitration agreement.

Parties' arguments

The defendant argued that the recommendation made by the conciliator was not made within the strict timeframe provided for in the Contract and was, therefore, void. The Notice of Dissatisfaction issued by the defendant referring the matter to arbitration raised both issues, namely quantum and the validity of the recommendation. The defendant submitted that as the matter had been referred to arbitration, any issue concerning the validity of the conciliator's recommendation was also a matter for the arbitrator. The plaintiff argued that, while the dispute on the issue of quantum came within the scope of the arbitration in the Contract, the issue as to whether or not the recommendation was out of time and, therefore, void was not a "dispute" which the parties had agreed could be referred to arbitration. Therefore the court should deal with that issue.

Decision

The High Court noted that the Irish courts have long been supportive of the arbitral process. Recent authorities have clearly established that Article 8 of the Model Law does not allow for discretion as to whether or not matters should be referred to arbitration. If there is an arbitration clause, and the dispute is within the scope of the arbitration agreement, and there is no finding that the agreement is null and void, inoperative or incapable of being performed, then a stay on any court proceedings must be granted.

The court commented on the unusual nature of the application before it. Both parties agreed that there was a valid arbitration clause and that the disputed recommendation of the conciliator had been referred to arbitration. The issue before the court was whether the dispute as to whether or not the defendant was liable to pay the sum recommended by the conciliator pending the arbitration, should be determined by the High Court or by the arbitrator.

The court adopted the decision of Hoffman J in Premium Nafta Products Ltd and others v Fili Shipping Co Ltd and others [2007] UKHL 40. It held that the starting point for any interpretation of an arbitration clause should be the assumption that, unless the language makes it clear that certain questions were intended to be excluded from the arbitrator's jurisdiction, all disputes between the parties should be referred to arbitration, where an arbitration agreement exists.

The court noted that disputes referred to in the Contract were not confined to disputes involving the payment of money.

The court held that quite apart from the presumption that Clause 13 should be interpreted on the basis that the parties intended that all disputes arising out of the conciliation should be capable of referral to arbitration, the text of Clause 13 also pointed in that direction.

Accordingly, the issue was a matter for the arbitrator to decide and the court stayed the proceedings pursuant to Article 8(1) of the Model Law.

Comment

This decision illustrates the reluctance of the Irish Courts to intervene in matters which are subject to an arbitration clause.

Case

BAM Building Ltd v UCD Property Development Co Ltd [2016] IEHC 582 (20 October 2016)

This article was first published by Practical Law and is reproduced from Practical Law Arbitration with the permission of the publishers. For further information visit www.practicallaw.com.

For further information please contact Joe Kelly or Paula Mullooly.