Irish High Court Refuses to Set Aside Arbitral Award

Speedread

The Irish High Court refused to set aside an arbitral award pursuant to Article 34 of the UNCITRAL Model Law (Model Law). The applicant based its application on Articles 34(2)(a)(ii) and (iii), on the grounds that the sole arbitrator had failed to comply with the applicant's request for discovery; failed to consider points of defence asserted by the applicant; dealt incorrectly with the issue of previous settlement offers made by the applicant; and failed to make an award on the applicant's counterclaim.

The court held that the plaintiff had failed to establish any basis, within the scope of Article 34, to have the arbitral award set aside. This decision serves as a reminder of the extremely limited grounds available to challenge an award in Ireland under Article 34 of the Model Law.

Background

The UNCITRAL Model Law ( www.practicallaw.com/7-205-6044) (Model Law) is part of Irish domestic law pursuant to the Arbitration Act 2010. Article 34 exhaustively sets out the grounds upon which an aggrieved applicant may seek to set aside an arbitral award. The proceedings in this case concerned Articles 34(2)(a)(ii) and (iii) which provide:

" (2) An arbitral award may be set aside by the court specified in Article 6 only if:

(a) the party making the application furnishes proof that:

...

(ii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

(iii) the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside…"

Facts

The applicant relied on the following grounds in its application to set aside the award:

• The arbitrator refused or failed to comply with or deal with the applicant's request for discovery as set out in a letter from the applicant's solicitor's to the arbitrator, and/or failed or refused to direct the respondent to make discovery in the terms of that letter (Article 34(2)(a)(ii), Model Law).
   
• The arbitrator failed or refused to consider and/or take into account certain points the applicant pleaded in his statement of defence and counterclaim (Article 34(2)(a)(ii) and/or (iii), Model Law).
   
• The arbitrator was factually incorrect in finding that the issue of the prior settlement offers had not been put to the respondent during the arbitration (Article 34(2)(a)(ii) and/or (iii), Model Law).
   
• The arbitrator failed to deal with and make an award on the applicant's counterclaim (Article 34(2)(a)(iii), Model Law).

Decision

McGovern J dismissed the application in its entirety. He held that the applicant had failed to establish any basis, within the scope of Article 34, to have the arbitral award set aside, and rejected the application. McGovern J stated that he had found no evidence of any breach of natural justice or want of fairness in the manner in which the arbitration was conducted. The arbitrator had set out in great detail the evidence that he had heard from both parties to the arbitration and the basis for his award.

Alleged failure to comply with request for discovery

McGovern J noted that in the course of the hearing, the applicant accepted that there is no power to make an order for discovery set out in the Model Law and the question of discovery was not raised before the arbitrator. Further, the applicant conceded that no application for discovery had been made. Insofar as the applicant relied on a letter from his solicitors to the arbitrator, that did not amount to an application for discovery.

Alleged failure to consider points of defence

The court held that it was a matter for the arbitrator as to how he should approach the evidence and what weight he should give to it.

Incorrect dealing with issue of prior settlement offers

The court found that this ground of challenge amounted effectively to an attempt to appeal the arbitrator's decision, which was not permissible. In McGovern J's judgment, an application to set aside an arbitral award under Article 34 is in the nature of a review to ascertain whether any of the grounds set out in Article 34 have been made out. The court held that an arbitration award may not be set aside simply on the basis that it is incorrect either in fact or in law (Snoddy v Mabroudis [2013] IEHC 285).

Failure to deal with counterclaim

McGovern J held that the failure of the arbitrator to deal with the counterclaim did not amount to a valid ground of challenge under Article 34(2)(a)(iii). He stated that, if there was a perceived omission that was of concern to the applicant, there were two options open to him. First, the arbitrator at the conclusion of his award stated "if any issue arises, I give the Parties liberty to apply to me." Second, by virtue of Article 33(3) of the Model Law, it was open to the applicant, on notice to the respondent, within 30 days of receipt of the award, to request the arbitral tribunal to make an additional award as to claims presented in the arbitral proceedings but omitted from the award. However, the applicant failed to take any steps to have the award corrected; nor did he apply for an additional award to be made within the 30 days permitted.

This decision, once again, shows the reluctance of the Irish courts to interfere with an arbitral award and the extremely limited grounds to challenge an award pursuant to Article 34. It also serves as a reminder that an application under Article 34 for an order setting aside an award is not a proceeding in the nature of an appeal against the award, in which the court will review the evidence heard by the arbitral tribunal or second-guess the correctness of the arbitrator's decision on the merits, on the facts or on the law. Instead, the application is in the nature of a review to determine whether any of the grounds in Article 34 have been made out.

Case: Patrick O'Leary trading as O'Leary Lissarda v John Ryan [2015] IEHC 820 (Bailii)

This note was first published by Practical Law Arbitration.  Reproduced with permission of the publisher.  For more information please see http://uk.practicallaw.com

For further information please contact Joe Kelly at jkelly@algoodbody.com or Davinia Brennan at dbrennan@algoodbody.com

Date Published: 2 February 2015