Arbitration – Is It A Worthwhile Dance?

A recent High Court judgment has put in lights that there are only limited circumstances when a Court will interfere with an agreement to arbitrate. This judgment provides another example of the Irish Courts’ continued support for the arbitral process. Eamon Harrington, Partner at CKT gives an overview of the judgment.

Summary

In Flatley[1], the Court rejected the challenge by the policyholder, Mr Flatley to the arbitration clause in a policy with his home insurers, which he brought on a number of grounds.  A central plank of the challenge was Mr Flatley’s contention that he was subjected to an unfair contract term as a consumer. He asserted that he was required to arbitrate and would have to pay all his own legal fees, regardless of whether he succeeded. In making this argument, Mr Flatley relied upon the Consumer Rights Act 2022 saying that the arbitration clause did not make clear that he would not have to bear his own costs of the arbitration.

The Judgment

The Court rejected this argument (as well as other grounds of challenge), finding that the Consumer Rights Act did not guarantee him his legal costs regardless of the outcome of his challenge. The Court rejected the idea that Mr Flatley should never be liable for his own legal costs, and/or insurers legal costs, even if he were to lose the arbitration. The Court found that there was nothing in the Consumer Rights Act, or the relevant arbitration clause, that could in any way prevent an Arbitrator from awarding him his legal costs.

Advantages and Disadvantages of Arbitration

Arbitration is an excellent means of adjudicating disputes, though only in suitable circumstances.

There are numerous advantages to arbitration, such as:

1. Parties can choose the arbitrator with appropriate expertise
2. Disputes can be resolved sooner and can be less expensive than a trial
3. The private and confidential nature of the process
4. The very limited scope for Court challenges means that the arbitration will be the end of the dispute

There can be disadvantages, also, such as:

1. No right of appeal
2. Depending on the nature of the matter, an arbitrator’s fees/arbitral process can prove to be disproportionately expensive
3. A determined party can attempt to frustrate progress of an arbitration through procedural challenges/non-cooperation

Conclusion

The judgment reinforces the Courts’ support for arbitration and clarifies that the Consumer Rights Act does not provide blanket protection for legal costs involved. Arbitration remains a valuable tool for dispute resolution, provided it is used in appropriate contexts.

To find out more about CKT’s work in ADR and Mediation, see here

Eamon Harrington is a CEDR Accredited Mediator and a former Chair of the ADR Committee of the Law Society

[1] Flatley v Austin Newport Group Ltd and others, Judgment of Mr Justice Twomey delivered 14 June 2024