Arbitration: Why burying your head in the sand is not an option

Monday 19 June 2017

 

Arbitration: Why burying your head in the sand is not an option

 

 

The Irish High Court judgment in Hoban v Coughlan & Anor [2017] IEHC 301 is a salutary reminder that where there is an agreement to arbitrate in a contract, turning a blind eye to related  notices, correspondence and proceedings will not end well for that party.

 

Facts

 

The applicant sought to set aside an arbitral award relating to the applicant’s liabilities under a lease agreement with the respondents. The applicant argued that:

 

  1. It was not given proper notice of the appointment of the arbitrator or of the arbitral proceedings, as required under Article 34(2)(a)(ii) of the Model Law; and
  2. The arbitral award did not properly state the reasons upon which it was based, as required under Article 31(2) of the Model Law.

 

The First Issue

 

Article 34(2)(a)(ii) of the Model Law, as adopted under the Arbitration Act 2010, allows for an arbitral award to be set aside if the party making the application was not given proper notice of the appointment of the arbitrator or of the arbitral proceedings.

 

On the facts, the applicant had received notice to refer to arbitration, correspondence from the arbitrator, notice of a preliminary meeting, directions, and notice of the oral hearing; however, the applicant had failed to engage with these communications.

 

It was held that the applicant had received proper notice as required under Article 34, on the basis that the applicant was:

 

  1. given proper notice of the appointment of the arbitrator;
  2. given an opportunity to partake in the arbitral process; and
  3. informed of the date of the arbitration.

 

Under Article 25(c) of the Model Law, the arbitrator was entitled to make an award in the absence of the other party if the other party had reasonable notice of the arbitration hearing. The court noted that its jurisdiction to set aside an arbitral award under Article 34 was restricted and such jurisdiction should be exercised with the utmost care.

 

The court further observed that the relevant provisions of the Model Law are not intended to protect a party from its own failures or strategic choices.

 

 

The Second Issue

 

Article 31(2) of the Model Law stipulates that an award shall state the reasons upon which it is based, unless the parties have agreed that no reasons are to be given or the award is an award on agreed terms under Article 30.

 

The court held that, on the facts, the arbitrator’s award gave sufficient reasons, bearing in mind that it was an uncontested hearing with only the respondents represented.