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Early resolution of disputes in Ireland

December 2018  |  SPECIAL REPORT: INTERNATIONAL DISPUTE RESOLUTION

Financier Worldwide Magazine

December 2018 Issue


There has been a significant movement away from traditional court litigation in Ireland in recent years in favour of mechanisms designed to bring about an early resolution to disputes. There are many benefits to early resolution, particularly in relation to costs, speed and allowing individuals and corporate entities the opportunity to focus on their primary activities, as opposed to becoming bogged down in protracted and ultimately self-defeating court litigation.

We take a look at the primary alternative dispute resolution (ADR) mechanisms that are used in Ireland to facilitate early resolution of disputes along with possible future developments in relation to Ireland as a venue for international dispute resolution.

Types of ADR mechanisms in Ireland

The primary ADR mechanisms in use in Ireland are listed below.

Arbitration. Arbitration involves parties agreeing to submit a dispute in which they are involved to an independent adjudicator for determination. The majority of arbitrations in Ireland are governed by the Irish Arbitration Act 2010 which applies the UNCITRAL Model Law. The UNCITRAL Model Law comprises a set of arbitration rules and procedures that was introduced by the United Nations Commission on International Trade Law in 1985 and updated in 2006. It is widely accepted as the gold-standard in terms of arbitration practice and procedure and has been adopted in 111 jurisdictions across the world. Where the parties to a dispute have agreed to arbitrate, Irish courts are generally bound to stay any proceedings between parties and refer the dispute to arbitration.

Arbitration in Ireland is very similar to court proceedings in that the appointed arbitrator will direct the conduct of the arbitration, both at pre-hearing and during the hearing itself, and assess the merits of each party’s case by examining oral and written evidence before making a binding award. Arbitrations can also progress by way of written submissions only. This removes the need for a hearing and renders the process much cheaper.

Although adversarial in nature, arbitration is a more collaborative process than court litigation, as it involves the parties coming together with the arbitrator to decide how the arbitration should be structured and the format it should take. This can include the parties agreeing to dispense with certain steps that are otherwise required in formal court proceedings.

Ireland, along with 159 other countries, is a party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. This requires that its contracting states recognise and enforce arbitration awards made in other contracting states, ensuring the easy enforcement of arbitral awards in these jurisdictions.

Mediation. Mediation is a process in which an independent third party facilitates parties in attempting to reach a mutually acceptable resolution to their dispute. It differs from arbitration in that the mediator is assisting the parties to resolve their differences rather than adjudicating on the merits of the dispute.

The importance of mediation as an alternative to traditional court litigation in Ireland is reflected in the fact that mediation has been placed on a statutory footing by way of the Mediation Act 2017. The 2017 Act imposes an obligation on legal advisers to provide advice and information to their clients on the possibility of mediating a dispute prior to the commencement of court proceedings. It also provides an ability for the Irish courts (either at their own initiative or at the request of one of the parties) to invite parties to existing court proceedings to consider the possibility of referring the dispute to mediation, and enables Irish courts to take into account an unreasonable refusal by a party to court proceedings to consider mediation when awarding costs.

Conciliation and adjudication. Conciliation is a process that is primarily deployed for disputes in the construction sector. It is very similar to mediation with the exception that if the parties fail to resolve their dispute further to the conciliation process, then the conciliator has the ability to issue a recommendation that is binding on the parties unless it is expressly rejected by one of them.

Adjudication deals specifically with situations where payments are being withheld in the context of a construction contract dispute. A matter of this nature may be referred to an adjudicator for a preliminary determination on the issue of payment pending resolution of the broader dispute. Adjudication is therefore an interim measure designed to provide for sufficient cash flow in construction projects even though an overall unresolved dispute still exists.

Attractiveness of ADR mechanisms

The use of ADR mechanisms to bring about the early resolution of disputes has become an attractive alternative to traditional litigation through the courts in Ireland for a variety of reasons, including those outlined below.

Control and flexibility. Parties are not restricted by the deadlines, delays and procedural rules inherent in formal court proceedings. Parties, therefore, retain much more autonomy in terms of how the ADR process proceeds. This includes the freedom to appoint a mediator or arbitrator who is an expert in the area that the dispute relates to. Participation is also on a voluntary basis. A key difference between mediation and traditional court litigation is that the parties to mediation may agree to what documents and information are to be exchanged in advance. These can include short statements setting out the respective positions and any background documents that may be relevant to the issues arising that would be the subject of a formal discovery order in traditional court proceedings. Another appealing feature of mediation is that the parties can shape an outcome that is agreeable to both sides, whereas with traditional court litigation one party inevitably ends up on the losing side.

Privacy. ADR processes are nearly always confidential and cannot be relied upon in any subsequent court proceedings in the event that the ADR process is unsuccessful. This can be contrasted with traditional court litigation which involves disputes being ventilated in public. This can often garner negative publicity for the parties or reveal otherwise private business information.

Future-orientated. This applies to mediation in particular. The non-adversarial nature of mediation and its focus on constructive dialogue and cooperation between the parties is much more conducive to preserving goodwill between parties than court litigation. Even if parties are not willing to engage with one another directly, alternative methods of communication can be employed. For instance ‘shuttle diplomacy’ involves the mediator meeting with parties separately and communicating their views from a neutral standpoint. Methods such as these are usually much more palatable than concepts such as cross-examination that form part of traditional court litigation, which often breed hostility and lead to entrenched positions.

Control and costs. ADR processes usually represent a much cheaper and efficient method of dealing with a dispute than traditional litigation through courts. For example, with mediation, typically parties will split the costs. By contrast, the losing party in court litigation in Ireland will normally have to pay for the other party’s legal costs.

Expertise. If a dispute involves a specialist or technical subject matter, parties can appoint an expert in that field to arbitrate or mediate the dispute. This usually removes the need for expensive expert witnesses who are typically involved in traditional court proceedings.

Ireland as a venue for international dispute resolution

Following the UK’s anticipated departure from the EU at the end of March 2019, Ireland will be the only English-speaking common law jurisdiction in the EU. Ireland is also a long-recognised hub for international commercial activity, particularly in the technology and financial services sectors. These factors demonstrate the suitability and desirability of Ireland as a venue for international dispute resolution, including ADR.

The increasing emphasis in Ireland on ADR is evidenced by the fact that ADR solutions have been integrated into the rules governing the practice and procedure of the Irish courts by way of statute. Irish courts can now stay court proceedings to allow parties to pursue arbitration, mediation or conciliation mechanisms. Under the Irish Mediation Act 2017, a failure without good reason to engage in mediation can be taken into account by Irish courts when awarding costs at the conclusion of court proceedings.

This statutory endorsement of ADR and the prospect of costs sanctions for failure to at least try some of these procedures are incentives for parties to disputes in Ireland to participate in ADR. The parties to settlement agreements reached pursuant to an ADR mechanism can apply to the Irish courts to have these agreements made ‘a rule of court’, so that they in effect become court orders.

Following Brexit, the UK may no longer be able to avail of international instruments such as the Recast Brussels Regulation, which provides for rules of mutual recognition and enforcement of member state judgments across the EU. Enforceability issues may therefore arise in attempting to have a UK court order enforced in another EU member state after March 2019. Conversely, no such issues will arise in respect of Irish court orders. This will undoubtedly increase the attractiveness of Ireland as a venue for international dispute resolution, including ADR.

It is notable that when speaking in New York recently, the chief justice of the Irish courts, Mr Justice Frank Clarke, highlighted Ireland’s attributes in this area and stated that “…in all the uncertainty which currently surrounds Brexit… Ireland can provide, not least for those outside the EU in the common law world, a safe haven. In a time of great uncertainty, I would like to think that that safe haven may prove to be a significant advantage”.

 

Colin Monaghan is a partner and Noel Kealy is a associate at Mason Hayes & Curran. Mr Monaghan can be contacted on +353 1 614 2149 or by email: cmonaghan@mhc.ie. Mr Kealy can be contacted on +353 1 614 2482 or by email: nkealy@mhc.ie.

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