Ivana Bacik

Arbitration Bill 2008: Second Stage

Thursday, 11 February 2010

Senator Ivana Bacik: I welcome the Minister of State to the House to discuss this developing area. International arbitration is a multi-million euro business and there is intense competition among countries to attract its business. There is an increasing interest in arbitration and alternative methods of dispute resolution among legal practitioners, commercial practitioners and businesspeople generally. It is recognised that arbitration offers a more cost effective, efficient and timely process as a means of resolving disputes. At least that is the perception and it is not an area I practice in, being more familiar with the criminal courts, which have a different method of resolving matters. Clearly the very strict rules of evidence that apply in the criminal courts and the different balance between prosecution and defence is different to the process used in arbitration, whether this is domestic arbitration involving a smaller value consumer dispute or an international arbitration dispute involving multiple millions of euro. Different arbitration mechanisms exist. Those who work in arbitration tell me the reality of it is somewhat different. Arbitration, just like court cases, can become bogged down and unnecessarily prolonged. In some cases it can be more costly than anticipated. However, generally the perception that it offers a more cost-effective and efficient manner of resolving disputes is fair.

This Bill is to be welcomed, as Deputy Rabbitte did in the Dáil. It was welcomed on both sides of the House. Senator McDonald commented that the Bill has had a long period of gestation, having originated in 2008. I wish to raise a number of concerns about the Bill. There are contradictory messages from practitioners and I am grateful to those who have written in the recent Arbitration and ADR Review of 2010. This offers a useful insight into the views of practitioners on the Arbitration Bill. Ercus Stewart, Peter Shanley and Mark Murphy have written articles and I am grateful for their insights. However, practitioners communicate contradictory messages. Some say the present system is working well and we should not fix it if it is not broken. I do not know if that view is widely shared but it is widely acknowledged that it is more useful to adopt a Model Law applied by the UN Commission on International Trade Law, UNCITRAL. I am not sure the view that we should not fix it if it is not broken has widespread purchase. The only concern is whether the international model is appropriate and whether to offer a one size fits all approach to domestic arbitration as envisaged in this Bill. I note the point made by the Minister of State that the current statutory regime in Ireland is somewhat fragmentary, with three Arbitration Acts and two arbitration regimes. Clearly there is great merit in streamlining the current fragmented system. The concern I raised, which was also raised by Deputy Rabbitte in the Dáil, is whether one Model Law taken from international code is appropriate for all forms of domestic arbitration and whether it should apply to the insurance arbitration and package holiday contracts just as it applies to large commercial disputes. When going through the Bill on Committee Stage, this central theme may emerge. I refer to the necessity to ensure the consumers are given adequate protection where we are applying a Model Law that is supposed to be designed for international arbitration involving large entities and multiple millions of euro. Applying that to much lower value consumer disputes, involving package holidays contracts and insurance contracts, may not provide sufficient safeguards for consumers. Safeguards are provided in the Bill, which I welcome, but we must focus on this on Committee Stage.

The Chartered Institute of Arbitrators has raised concerns about the continued exclusion of labour disputes from the legislation. The Bill proposes to continue the current exclusion of labour disputes. This is a matter raised by Deputy Rabbitte in the Dáil. The current position is that section 5 of the 1954 Act excludes industrial relations matters. One presumes this was done because when the 1954 Act was being passed many of the State agencies governing the resolution of industrial disputes were being established. We have developed an entrenched system of labour dispute resolution in the Labour Relations Commission and the Labour Court. Those mechanisms have developed specialist expertise in industrial dispute resolution and no one would argue for their replacement or supplementation with arbitration. However, there is a concern among those working in employment law that the Employment Appeals Tribunal has become increasingly legalistic. While the Labour Relations Commission retains its original character, the Employment Appeals Tribunal has become a more formalised structure and an institution in which we see lawyers regularly instructed by both sides, where doctrine of precedent has developed. It is worth examining whether arbitration could offer some alternative method to the Employment Appeals Tribunal. Deputy Rabbitte raised this in the Dáil but it does not seem to have been given much consideration in the drafting of this Bill. It appears the 1954 exclusion simply continues. I am not sure it would be a good idea to extend arbitration into the industrial relations dispute arena; I can see arguments for and against. However, it should be considered.

I examined the Law Reform Commission consultation paper on alternative dispute resolution from July 2008. It does not deal with this but what is interesting is that it points out the nature of arbitration in Ireland as the preferred method of dispute resolution in a number of sectors, including construction and insurance. The Law Reform Commission paper outlines how it works in practice in Ireland and refers to a hybrid model. It would be useful to conduct a review on whether a hybrid model can be adopted in Ireland, a hybrid process of mediation and arbitration, known in the US by the very American term Med-arb or Arb-med. This hybrid process is where parties attempt to settle the dispute through mediation and if a settlement is not reached the mediator, usually the same individual, becomes an arbitrator and imposes a binding decision on the disputing parties. It is an interesting process because, as the Law Reform Commission points out, it is commonly used in labour disputes in the United States and in patent disputes. Within the Arb-med process the parties first present the case to arbitration. It is interesting that they first present their case to arbitration and the arbitrator writes up a decision and seals it but does not disclose its content to the parties. The parties then engage in mediation for a fixed period, usually with the same person who has arbitrated. If they reach agreement before the deadline for the end of mediation, they never learn the content of the arbitrator’s decision, so this is a novel approach. If they do not reach agreement by the specified deadline, then the arbitrator’s decision becomes final and binding on the parties. This model has been used to a limited extent in the US but also in South African union-management relations in the car and steel industry. There has been criticism of the model but I think it is worth exploring whether it could have some effect in Ireland.

The Law Reform Commission did not recommend any action be taken in this regard. It noted the criticisms that parties might be inhibited in their discussions with the mediator if they knew the mediator would also be called upon to act as arbitrator and that a third party who mediated and then became an arbitrator may themselves have been biased by what had been conveyed to them through the mediation process in a more informal and often confidential way.

The exclusion of labour disputes could certainly be re-examined although that is not in any way to suggest we should be looking at any form of alternative to the current, very well-developed mechanisms of the Labour Relations Commission. Has the Minister of State or his Department has looked at the rationale for the continued exclusion?

I refer briefly to the consumer protection provisions in the Bill which I look forward to teasing out further on Committee Stage when we will have an opportunity to deal with the sections in detail. There will be particular concern about the application of what I have described as the one-size-fits-all model developed from the international Model Law. We are conscious that the consumer arbitration schemes currently give many people a means of resolving disputes without going to court, and this is very welcome. I refer to package holiday contracts and insurance contracts in particular and any disputes relating to them are often resolved through consumer arbitration. Given that the new model is tailored specifically to international arbitration, it will require some tweaking to ensure it does not diminish consumer protection in particular in cases where people seek to resolve a dispute over what can often be relatively small sums of money involved in a package holiday contract or in an insurance contract.

I look forward to discussing these issues further on Committee Stage. It has been clear from the contributions on Second Stage that a broad welcome for the Bill is forthcoming on both sides of the House.

Committee and Final Stages (24th February 2010) 

Senator Ivana Bacik: I welcome the passage of the Bill and add my voice to that of Senator Regan in my party’s welcome for it. We decided in the Labour Party not to table amendments to it. However, I raised a number of concerns on Second Stage which the Minister of State indicated he would take on board.

It is welcome that we are streamlining arbitration procedures. It is extremely important that we would generate the notion of Dublin as a hub for international arbitration. On the previous occasion I raised a concern expressed by some arbitration practitioners that “if ain’t broke, don’t fix it”, but I believe, on balance, there is a strong argument to be made for implementing and applying this international model here across arbitrations. I hope there will be sufficient protections in this legislation for the consumer in terms of the small contracts to which arbitration will also be applied from now on. I welcome the Bill. I thank the Minister of State for his time in dealing with it.