Construction Arbitration: Ireland

• Published date: 19 August 2022
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Real Estate and Construction, Contracts and Commercial Law, Arbitration & Dispute Resolution, Construction & Planning
• Law Firm: Arthur Cox
• Author: Ms Karen Killoran, Niav O'Higgins and Fiona Egan

Legal system

1. Is your jurisdiction primarily a common law, civil law, customary law or theocratic law jurisdiction? Are the laws substantially derived from the laws of another jurisdiction and, if so, which? What instruments have legal force and effect? Who are the lawmaking bodies? How and where are new laws published? Can laws be passed with retrospective effect?

Ireland

Ireland is a common law jurisdiction deriving its laws substantially from laws of other common law jurisdictions, principally England and Wales. The Constitution, Acts of the Oireachtas (Parliament), Statutory Instruments, regulations, and European Union legislation all have legal force and effect. The Oireachtas (the Irish parliament comprising two houses - D'il Éireann and Seanad Éireann) is the lawmaking body. New laws are published by the Oireachtas on the Irish Statute Book and are signed into law by the President. Laws can be passed with retrospective effect, provided they do not seek to render as an infringement an act that was innocent at the time of its commission (article 15.5.1 of the Constitution) as upheld by the Irish Supreme Court in McKee v Culligan [1992] 1 I.R. 223.

Typically, construction contracts in Ireland provide for alternative forms of dispute resolution procedures such as mediation, conciliation, arbitration, etc, rather than referral of disputes under a construction contract to the courts. All parties to a construction contract also have a statutory right to refer a payment dispute to adjudication under the Construction Contracts Act 2013, which is steadily growing in popularity in this jurisdiction. As such, there is a limited pool of decisions relating to construction disputes emanating from the Irish courts. Practitioners, therefore, tend to look to court decisions coming from the United Kingdom for guidance, albeit that there are some divergent trends emerging from the Irish courts.

Contract formation

2. What are the requirements for a construction contract to be formed? When is a "letter of intent" from an employer to a contractor given contractual effect?

Ireland

The essential requirements of a construction contract are: agreement, consideration, certainty, intention to create legal relations and capacity.

If a letter of intent is to be given contractual effect, this should be clear from its terms. The letter of intent should: record the agreement of both the parties, provide for consideration and be clear on its face that the parties intend to enter into a contractually binding arrangement (an intention to create legal relations) and that the terms of that arrangement are clear.

Choice of laws, seat, arbitrator and language

3. Are parties free to choose: (a) the governing law of their contract; (b) the law of the arbitration agreement; (c) the seat of the arbitration; (d) any arbitral rules; (e) anyone to act as arbitrator; and (f) the language of the contract and the arbitration? If not, what are the limitations on choice and what happens if the parties act contrary to them?

Ireland

Under the Arbitration Act 2010 (the 2010 Act), parties are free to choose the governing law of their contract, the law of the arbitration agreement, the seat of the arbitration, the arbitral rules, the choice of arbitrator(s) and the language of the contract and arbitration.

If the parties do not agree the number of arbitrators or the appointing body in their arbitration clause, the 2010 Act provides that the arbitral tribunal will consist of one arbitrator and the Irish High Court has the power to appoint the arbitrator in the absence of an alternative agreement between the parties. In an arbitration with three arbitrators, each party appoints one arbitrator, and the two appointed arbitrators will appoint the third arbitrator. If a party fails to appoint the arbitrator within thirty days of receipt of a request to do so from the other party, or if the two arbitrators fail to agree on the third arbitrator within thirty days of their appointment, the appointment will be made by the High Court. The 2010 Act incorporates the UNCITRAL Model Law wholesale and so its provisions will apply to an arbitration under the 2010 Act unless the parties agree to use another set of ad hoc rules or institutional rules.

In February 2021, the Chartered Institute of Arbitrators published new All-Ireland Arbitration Rules (2020) designed to be capable of use in, and with the support of judiciary from, both jurisdictions on the island of Ireland and to be compatible with the 2010 Act and UNCITRAL Model Law. The rules apply where their application is agreed by the parties or alternatively if the arbitration agreement provides that the appointment of an arbitrator shall be made by the Chairman of the Irish Branch of the Chartered Institute of Arbitrators.

The High Court in Ireland has set out the approach the Court is required to take when considering an application under article 8 of the UNCITRAL Model Law for a court to refer parties in a dispute before it to arbitration in the judgment of Ocean Point Development Company Limited (In Receivership) v Patterson Bannon Architects Limited and ors [2019] IEHC 311.

The High Court has also confirmed on several occasions that, where the requirements of article 8(1) are met, the court is under a mandatory obligation to make the reference to arbitration and does not have a discretion whether to refer or not.

The High Court has also set out the approach to determining whether an agreement amounts to an arbitration agreement: see K & J Townmore Construction Ltd v Kildare and Wicklow Education and Training Board [2019] IEHC 666, in which the Court considered that the conditions of article 8(1) were not met because a later agreement between the parties to refer the dispute for expert determination had the effect of disapplying the conciliation and arbitration clauses in the original building contract. The Court commented on the standard of judicial consideration that must be given to this question in Bowen Construction Ltd ((in Receivership)) v Kelly's of Fantane (Concrete) Ltd ((in Receivership)) [2019] IEHC 861. The guidance in these cases was reiterated in Narooma Ltd v Health Service Executive [2020] IEHC 315.

The High Court also commented on the approach the courts should take when interpreting whether there is a 'dispute' when looking at arbitration agreements (see XPL Engineering v K&J Townmore Construction Ltd [2019] IEHC 665 in which the High Court stayed court proceedings and ordered that the matter be referred for arbitration).

In January 2018, the Irish High Court in Achill Sheltered Housing Association CLG v Dooniver Plant Hire Ltd [2018] IEHC 6 granted an order determining that the appointment of an arbitrator had been invalid, as the matters referred to arbitration had not previously been referred to conciliation as required under the contract.

Implied terms

4. How might terms be implied into construction contracts? What terms might be implied?

Ireland

The common law of Ireland has developed to include various specific implied terms in construction contracts, many of which relate to design and quality. Terms may be implied into a construction contract by statute, by custom or practice or to satisfy the 'business efficacy' test so as to make a contract workable. Generally, an employer under a construction contract will be under an implied term of cooperation, which includes doing all that is necessary on its part for the execution of the Works. In Airspace Ltd v Healson Properties Ltd (2008) IEHC 82,for example,Justice Edwards found that it was commonplace for the courts to imply a general term of cooperation into a contract to secure performance of that contract.

Contractor implied terms include a duty to complete works within a reasonable period of time (where none is specified or where an act of prevention makes the date for completion inapplicable), a duty to execute work with proper skill and care in a good and workmanlike manner and a duty to use materials that are reasonably fit for purpose and of good quality.

The Sale of Goods and Supply of Services Act 1980 (the Sale of Goods Act) applies to construction contracts in Ireland and implies terms that include that the contractor has the necessary skill to render the service, that the service will be supplied with due skill, care and diligence and that where materials are used, they will be sound and reasonably fit for purpose. The Sale of Goods Act also creates a statutory right of action for misrepresentation.

Certifiers

5. When must a certifier under a construction contract act impartially, fairly and honestly? To what extent are the parties bound by certificates (where the contract does not expressly empower a court or arbitral tribunal to open up, review and revise certificates)? Can the contractor bring proceedings directly against the certifier?

Ireland

There is an implied contractual obligation for the certifier to act independently, fairly and impartially as between the contractor and the employer. It is not unusual in Ireland for the employer to appoint an employee within its organisation as employer's representative and certifier under the construction contract, but where that does happen, the same duties of impartiality will apply.

The commonly held position in Ireland prior to 2007 was that a contractor was entitled to enforce an interim payment certificate by way of summary judgment as a debt due. Following the decision of the Irish High Court in Moohan v Bradley Construction Limited v S&R Motors (Donegal) Limited [2007] IEHC 435, contractors operating under the standard RIAI contract terms can no longer rely on being awarded summary judgment in court on interim certificates where a valid defence is raised. In such cases, even where judgment is granted, the execution of that judgment may be stayed pending the outcome of an arbitration hearing on all the issues between the parties. Moohan v Bradley has continued to be...