People often assume that their right to litigate a dispute is an absolute right and that they will not be denied a right of access to the Courts. However, where they have agreed to be bound by an arbitration clause, they will almost certainly be denied the right to litigate. An arbitration clause is not something to be taken lightly. Arbitration is given such weight in law that the Court has no option but to stay proceedings except in very limited circumstances. Article 8(1) of the UNCITRAL Model Law on International Commercial Arbitration, as adopted by Ireland in the Arbitration Act 2010 allows a Court to refuse a stay only where:
- A party delays invoking the arbitration clause
A party must plead Article 8 in its first substantive statement to the Court. Prior to the 2010 Act, the legislation provided for estoppel from invoking the arbitration clause if had one ‘taken a step’ in Court proceedings. This was defined as having caused the other party to expend monies, or promising something unequivocally and causing reliance.
The wording of Article 8 and its caselaw have clarified when one might be said to have relinquished their right to arbitrate. In GoCode Limited v Capita Business Services Limited [2015] IEHC 673 McGovern J held that a party was not estopped from relying on Article 8 where its solicitor had demanded a statement of claim before pleading Article 8, by sending letters threatening a motion to dismiss for want of prosecution, as this was not a statement to the Court.
2. The Arbitration Agreement is null, void or inoperative
It is settled law that if that the main contract fails, the arbitration clause remains intact. Arguments must therefore be made on the validity of the arbitration clause only. While the usual principles of contract apply, courts tend to take a hands-off approach.
The test was set out in P Elliot & Company Limited v FCC Elliot Construction Limited [2012] IEHC 361 where the High Court endorsed the test set out in a Canadian Case, that a stay should be granted where it is arguable that the dispute falls within an arbitration agreement and where it is arguable that the parties are privy to that agreement.
A clause was found inoperable in Barnmore Demolition and Civil Engineering Limited v Alandale Logistics Limited and ors [2010] IEHC 544 where several draft clauses were exchanged but none agreed upon. The arbitration agreement was a nullity as it had never concluded and the parties’ intentions were not ad idem.
3. Or, the agreement is incapable of being performed
In Franmer Developments Ltd v. L&M Keating Ltd and ors [2014] IEHC 295 Ryan J held that an arbitration agreement will not be deemed a nullity simply because it is ‘complex or difficult or inconvenient’ to perform, such as where one party was delaying the arbitration but it was not impossible, or where the respondent has no defence- these difficulties do not defeat the clause.
In Oceanpoint Development Company v Patterson Bannon Architects Limited [2019] IEHC 311 Barniville J held that the court has no discretion as to whether to grant a stay. There is very limited scope to avoid a stay; the Courts have said such as in Re Via Networks [2002] 2 IR 47 that where parties have chosen arbitration, it is because they want to avoid the time and cost of litigation and the court will uphold their agreement, even to the point of disapplying a statutory remedy.
The above is provided for information purposes and is not intended as legal advice. If you have questions about an arbitration clause we, at Fitzsimons Redmond, would be happy to advise you on your next steps. Please contact us on 01-676 3257.
By Lisa Quinn O’Flaherty
Solicitor at Fitzsimons Redmond
