Your present case is not an uncommon one and it encompasses the characteristics of a classic contractual dispute. However in a quarrel such as this one, where the contract in question includes an arbitration clause, further differences will invariably arise over the appropriate means of resolving the dispute. Since the establishment of the 1954 and 1980 Arbitration Acts, the courts have exhibited a predominantly favourable attitude toward applications to stay legal proceedings pending arbitration.
Recent history suggests that arbitration has advanced as a preferred alternative to litigation, as it merges procedural elasticity with binding resolutions and can be monitored by the courts. 1 Arbitration allows parties to engage in a somewhat more cost-effective process where they can dictate the parameters of the investigation to be carried out by an independent adjudicator. 2
In this correspondence I will enlighten you as to the likelihood of an application to stay any legal proceedings being granted to you by the courts. I will analyse the legislation and explore the relevant domestic and international case-law that illustrates the courts' regular reluctance to intervene in the arbitration process and how such a method of alternative dispute resolution has been outwardly encouraged by the judiciary.
I will also caution you as to those (atypical) circumstances where an arbitration clause will be overlooked in favour of litigation and how such grounds for refusing a stay may be applied to the current dispute. The Arbitration Act, 1980, augmented the influence of the arbitration clause. Section 5 of this Act3 progressed the matter of staying litigation pending arbitration from one of general discretion for the courts to a mandatory course of action with only limited exceptions: "5.
-(1) If any party to an arbitration agreement, or any person claiming through or under him, commences any proceedings in any court against any other party to such agreement, or any person claiming through or under him, in respect of any matter agreed to be referred to arbitration, any party to the proceedings may at any time after an appearance has been entered, and before delivering any pleadings or taking any other steps in the proceedings, apply to the court to stay the proceedings, and the court, unless it is satisfied that the arbitration agreement is null and void, inoperative or incapable of being performed or that there is not in fact any dispute between the parties with regard to the matter agreed to be referred, shall make an order staying the proceedings. (2) Nothing in this section shall be construed as limiting or otherwise affecting the power conferred on the High Court pursuant to section 39 (3) of the Principal Act to refuse to stay any action brought in breach of an arbitration agreement. " The courts have swiftly applied this piece of pro-arbitration legislation. The Supreme Court validated the provisions of the above Act in the Via Net Works (Ireland) Limited case4 where Keane C. J. expressly acknowledged that an arbitration agreement remained legitimate once it did not fall under the heading of those exceptional circumstances mentioned in Section 5(1):
"There is no express provision in the Arbitration Acts… delimiting the applicability of Section 5 of the 1980 Act in respect of an application for relief pursuant to statute. " 5 The Chief Justice was obviously of the opinion that the legislature expressly favoured the encouragement of arbitration as an alternative to litigation through the courts in the drafting of the legislation. Other Irish decisions have generally consented to requests for a stay on legal proceedings. In Williams v. Artane Service Station Ltd. 6, Campus and Stadium Ireland Development Ltd. v. Dublin Waterworld Ltd. 7 and O'Dwyer v. Boyd8 for example the High Court leaned in favour of arbitration, with Geoghegan J.
in the latter case remarking on the court's "very limited discretion to refuse" 9 any application for a stay under section 5 of the Arbitration Act, 1980. This indicates that your application for a stay on legal proceedings will be approved of, barring any of the excepted circumstances provided for in section 5(1). 10 Before establishing the legitimacy of the arbitration clause in the current contract, I must notify you of the important procedural regulations that must be adhered to prior to you applying for a stay of the legal proceedings. You must be alerted as to the significance of timing your application for a stay correctly as it is imperative that you are not adjudged to have taken any steps in the legal proceedings provided for under section 5(1). 11
Any exception to the civil proceedings may be taken after "an Appearance has been entered" but "before delivering any pleadings or taking any other steps" in the proceedings. 12 You must not act so as to prejudice your right to apply for a stay nor should you suggest an aspiration to relinquish the entitlement to have the dispute referred to arbitration by involving the jurisdiction of the courts in a way conflicting with a wish to arbitrate. O'Hanlon J. underlines the undesirability of seeking such dual proceedings in refusing a stay to the defendant in MacCormac Products Ltd. v. Town of Monaghan Co-operative Agricultural and Dairy Society Ltd. 13:
"It can hardly be intended that a party seeking to enforce his contractual rights in a situation where the contract contains an arbitration clause, should be entitled to conduct the two forms of proceedings in tandem, extracting from the High Court such relief as it may not be open to him to obtain at arbitration, while resorting to the arbitration for concurrent rights under the contract. " 14 There has been a large degree of uncertainty as to what exactly constitutes a "step". This uncertainty has been reflected in the substantial caseload incorporating varying notions on the issue. In O'Flynn v. An Bord Gi?? is i?? ireann15 the question of what amounted to a step in the proceedings was assessed.
The crucial condition was taken to be whether the step taken involved costs that would be lost were the stay to be granted and the matter referred to arbitration. In that instance, the defendant's solicitor wrote to the plaintiff's representatives requesting an extension of time to file a defence. Finlay P. , in his judgment, held that this request was not equivalent to a step in the litigation process: "It seems clear that the step which should be fatal to a party seeking to refer a matter to arbitration is a step which involves costs, in other words a step which invokes the jurisdiction of the court at his instance or which institutes some matter whether by way of motion or otherwise in the court. "