1. Lecture 3 – Arbitration Agreements

2. Arbitration Agreements Freedom of parties to negotiate terms of arbitration agreement. Written agreement not necessary. But to benefit from Arbitration Act 2010 it must be in writing. Arbitration legislation aims to facilitate arbitration. Arbitration agreement that does not fall under the legislation will be treated by the law as any contract.

3. Arbitration Act 2010 The Arbitration Act 2010 repeals the earlier Arbitration Acts 1954-1998. S.3 (1) This Act shall not apply to an arbitration under an arbitration agreement concerning an arbitration which has commenced before the operative date but shall apply to an arbitration commenced on or after the operative date.

4. Arbitration Act 2010 s.2(1)(a) & (b) of the Arbitration Act 2010 provides that “arbitration” means both an international commercial arbitration, or a standard arbitration. Option 1 of Article 7 defines an “arbitration agreement”.

5. Arbitration Act 2010 – definition of an arbitration agreement CHAPTER II. ARBITRATION AGREEMENT Option I Article 7. Definition and form of arbitration agreement (1) “Arbitration agreement” is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. (2) The arbitration agreement shall be in writing. (3) An arbitration agreement is in writing if its content is recorded in any form, whether or not the arbitration agreement or contract has been concluded orally, by conduct, or by other means.

6. Arbitration Act 2010 (4) The requirement that an arbitration agreement be in writing is met by an electronic communication if the information contained therein is accessible so as to be useable for subsequent reference; “electronic communication” means any communication that the parties make by means of data messages; “data message” means information generated, sent, received or stored by electronic, magnetic, optical or similar means, including, but not limited to, electronic data interchange (EDI), electronic mail, telegram, telex or telecopy. (5) Furthermore, an arbitration agreement is in writing if it is contained in an exchange of statements of claim and defence in which the existence of an agreement is alleged by one party and not denied by the other. (6) The reference in a contract to any document containing an arbitration clause constitutes an arbitration agreement in writing, provided that the reference is such as to make that clause part of the contract.

7. Sweeney v Mulcahy [1993] ILRM 289 O’Hanlon, J.: “were the intention of the Arbitration Act to make it a necessary part of an agreement that it should be not only in writing but also signed by both parties to the agreement, one would have expected this provision to be spelt out in clear terms, following the traditional modules of the Statute of Frauds and the Sale of Goods Act.”

8. Arbitration Act 2010 Option II Article 7. Definition of arbitration agreement “Arbitration agreement” is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.

9. Arbitration Act 2010 Option II Article 8. Arbitration agreement and substantive claim before court (1) 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 not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed. (2) Where an action referred to in paragraph (1) of this article has been brought, arbitral proceedings may nevertheless be commenced or continued, and an award may be made, while the issue is pending before the court.

10. Arbitration Act 2010 Option II Article 9. Arbitration agreement and interim measures by court It is not incompatible with an arbitration agreement for a party to request, before or during arbitral proceedings, from a court an interim measure of protection and for a court to grant such measure.

11. Statutory definitions of an arbitration agreement under the Arbitration Acts 1954-1998 (NOW REPEALED) Section 2 of the Arbitration Act, 1954 defined an arbitration agreement as: “…a written agreement to refer present or future differences to arbitration, whether an arbitrator is named therein or not.” Section 2 of the Arbitration Act, 1980 provided this definition: “…a written agreement (including an agreement contained in an exchange of letters or telegrams) to submit to arbitration present or future differences capable of settlement by arbitration.” Section 3 of the Arbitration (International Commercial) Act, 1998: “…an arbitration agreement concerning international commercial arbitration.”

12. Arbitration agreement under the Arbitration Act Usual practice is to include an arbitration clause in the contract. Inclusion of such a clause is not necessary. Reference can be made to an agreement to go to arbitration in another document that forms a central part of the contract e.g. rules of a trade association. Courts will decide if an arbitration agreement exists. Sweeney v Mulcahy [1993] ILRM 289 Lynch Roofing Systems (Ballaghadereen) Ltd v Bennett and Another, unreported, High Court, 26 th June 1998 McCrory Scaffolding Ltd v McInerney Construction Ltd [2004] 3 IR 592 – High Court had to consider if an arbitration clause was properly incorporated into a scaffolding sub-contract between the parties.

13. Sweeney v Mulcahy [1993] ILRM 289 Defendant hired to carry out renovation and restoration work to a house. Plaintiff initiated legal proceedings against the defendant claiming that the works had not been carried out correctly. Defendant sought a stay on the legal proceedings claiming that an arbitration agreement existed between the two parties. The plaintiff denied the existence of the arbitration agreement.

14. Sweeney v Mulcahy [1993] ILRM 289 The plaintiff and defendant first met at the house in question in 1987. The defendant wrote a letter to the plaintiff setting out the work to be carried out, stating that the Royal Institute of Architects of Ireland conditions of engagement and scale of minimum charges would apply. A copy of the RIAI conditions were not sent to the plaintiff, however a copy was available upon request. The plaintiff already had received a copy of the RIAI conditions in 1984 from a different architect on an earlier project. There was no formal acknowledgement by the plaintiff of receiving this letter. Plaintiff contested the defendant’s application for a stay on the legal proceedings on the grounds that there was no written arbitration agreement as required by s.2 of the Arbitration Act 1980. The plaintiff also argued that the agreement would have had to be signed by both parties in order to incorporate the provision for arbitration in the RIAI conditions into the contract. Justice O’Hanlon granted the stay.

15. Arbitration Act 2010 Legislation does not require that both parties must sign the arbitration agreement. (Sweeney v Mulcahy) Arbitration agreements cannot regulate 2 types of disputes: (1) Arbitration Act 2010, s.30(1) (a): any question relating to the terms or conditions of employment or the remuneration of any employees, including persons employed by or under the State or local authorities. (2) Arbitration Act 2010, s.30(1) (b): Industrial Relations Act 1946, s.70: trade dispute between employer and trade union Other disputes that may not be referred to arbitration include: matrimonial & family disputes; public law (criminal matters; registers e.g. register of trade marks); dispute that involves a person or body who is not party to the arbitration agreement.

16. Arbitration agreements & clauses Careful drafting of an arbitration clause is essential as this provides for the enforceability of the arbitration clause & the arbitrators’ jurisdiction. Wording of arbitration clauses can give rise to disputes later on. Standard arbitration clauses can be useful but it is preferable to draft a clause that suits the particular contract. Heneghan v. Western Regional Fisheries Board (No.1) [1986] ILRM 225 Heneghan v. Western Regional Fisheries Board (No.2)

17. What Constitutes Arbitration? Sutcliffe v Thackrah [1973] 2 All ER 1047 Architects engaged by plaintiffs to design and build a house. Oral contract. Implied term that architects would perform instructions in competent and efficient manner. Plaintiff contracted with firm of builders – RIBA standard form contract. Date of completion – 31 st January 1964. Plaintiff had to remove builders from site by end of June 1964. Employed another firm of builders to complete the house. Plaintiffs sued first firm of builders but they had gone into liquidation.

18. Sutcliffe v Thackrah [1973] Plaintiff then sued architects for failing to supervise the builders. Architects were responsible for examining builder’s work & issue certificates stating amount due to builders (total work properly executed & materials and goods delivered to the site). Final certificate binding on the employer once it was issued. Contractor given 14 days within which to take steps to challenge it by setting in motion the arbitration agreement. The question raised was whether the architects could be sued in negligence for over certifying in interim certificates. Lord Morris held that generally an architect will be liable if he causes loss by reason of his negligence.

19. Existence of Certain State of Affairs A certain state of affairs may have to exist before arbitration proceedings can begin. Problem is who decides if state of affairs exists or not. Smith v Martin [1925] 1 KB 745 Rohan Construction Ltd v Antigen Ltd [1989] ILRM 783 Arbitration agreement itself may provide arbitration clause will be operational when certain steps have been taken.

20. Independence of the arbitration clause Will an attack on the substantive contract render the arbitration clause inoperative? Irish & English courts have held that arbitration agreement is independent. Heyman v Darwins Ltd [1942] AC 356 Arbitration clause does not impose on one of the parties an obligation in favour of the other party. (a) repudiation, misrepresentation & fundamental breach; (b) void contract; (c) non-existence of the agreement.

21. Repudiation Repudiation occurs where a party to a contract decides that the contract has come to a premature end because of the other party’s conduct. Heyman v Darwins Ltd [1942] – House of Lords held that an arbitration agreement survives the repudiation of the substantive contract. This approach has been followed by the Irish courts in Doyle v Irish National Insurance Co plc [1998] 1 ILRM 502 – motor insurance – plaintiff claimed arbitration clause was inoperative. Kelly J. rejected this claim & followed the approach of the House of Lords in Heyman. Parkarran Ltd v M & P Construction Ltd [1996] 1 IR 83 – Morris J. endorsed the Heyman decision.

22. Void contract & arbitration clauses A contract may be void because of the parties’ actions. However, this does not mean that the arbitration agreement has come to an end. Harbour Assurance v Kansa General International Assurance [1993] 3 All ER 897 English Court of Appeal held that an arbitration clause/agreement is capable of surviving the invalidity of the contract provided that it is not affected by the invalidity of the contract.

23. Interpretation of Arbitration Agreements Arbitration agreements will be interpreted according to its language and in light of the circumstances it was made. The conduct and words of the parties may influence the interpretation of the agreement. Ashville Investments Ltd v Elmer Contractors Ltd [1988] 2 All ER 577 Courts have interpreted some expressions: ‘all differences or disputes arising out of this contract’: Doyle v Irish National Insurance Co. plc [1998] 1 ILRM 502 Harbour Assurance Co Ltd v Kansa General International Assurance Co Ltd [1993] HE Daniel Ltd v Carmel Exporters and Importers Ltd [1953] 2 QB 242

24. Court Interpretation - continued ‘any difference or dispute that arises or occurs between the parties, in relation to any thing or matter arising under, out of or in connection with this agreement’ Ashville Investments Ltd v Elmer Contractors Ltd [1988] 2 All ER 577 Carroll (A Minor) v Budget Travel and Another (unreported), High Court, 7th December 1995 ‘arbitration agreement does not cover dispute between the parties’ Failure to cover dispute between parties will mean that it will have to go to litigation or enter into a separate arbitration agreement. Nova Knit Ltd v Kammgram [1977] 2 All ER 463

25. Parties to Arbitration Agreements To be bound by the arbitration agreement, the person must be a party to it. Imperial Metal Industries (Kynoch) v AUEW [1979] 1 All ER 847 Assignability of a contract containing an arbitration clause – Shayler v Woolf [1946] 2 All ER 54; Baytur SA v Finagro Holding SA [1991] 4 All ER 129. Bankruptcy – arbitration agreement may form part of contract if party is bankrupt. Arbitration agreement is not terminated by death of a party Legislation provides for a State authority to be a party to an arbitration agreement.

26. Consumer Contracts Sheehan v FBD Insurance plc (unreported, Supreme Court, 1999) – courts are reluctant to interfere in arbitration process even where insured person is not in position to alter standard form insurance policy. Consumer contracts – issue in the past as to whether arbitration clauses breach statutory provisions to protect consumer, however this may change because of s.31(1) of the 2010 Act. McCarthy v Joe Walsh Tours [1991] ILRM 813; Carroll (A Minor) v Budget Travel and Another (unreported, High Court, 1999). Unilateral reference – some arbitration agreements provide that only one party can refer the dispute to arbitration. English courts have held validity of arbitration agreement cannot be challenged for this reason. Tote Bookmakers Ltd v Development and Property Holdings Co Ltd [1985] 2 All ER 555

27. Arbitration Act 2010 & Consumers S.2(1) defines a “consumer” as a natural person, whether in the State or not, who is acting for purposes outside the person’s trade, business or profession S.31(1) Subject to subsection (2), a party to an arbitration agreement who is a consumer shall not be bound (unless he or she otherwise agrees at any time after the dispute has arisen) by an arbitration agreement where— (a) the agreement between the parties contains a term which has not been individually negotiated concerning the requirement to submit to arbitration disputes which may arise, and (b) the dispute which has arisen between the parties to the agreement involves a claim for an amount not exceeding €5,000.

28. Cases Heneghan v. Western Regional Fisheries Board (No.1) [1986] ILRM 225 – see Stewart, E. for discussion of this case. Heneghan v. Western Regional Fisheries Board (No.2) O’Dwyer and Another v. Boyd (2002) F.L. 5883