We have recently learned of an unreported, oral decision (ex tempore) of Mr Justice Peter Kelly (15 June 2009), in which he held that an arbitration clause in a consumer contract, where the arbitrator was to be appointed from a list of arbitrators approved by an organisation of which the principal Defendant was a member, was an invalid clause and contrary to the European Communities (Unfair Terms and Consumer Contracts) Regulations 1995.

In this case the principal Defendant was a member of the Construction Industry Federation.  The arbitration clause in the contract provided for an arbitrator to be appointed from a list of arbitrators jointly approved by the President of the Construction Industry Federation and the President of the Law Society. (Healy & Anor –v- Whitepark Developments Limited and Anor).  The Court was of the view that it would offend the notion of natural and constitutional justice to force a plaintiff to arbitrate a dispute before an arbitrator appointed in such circumstances.  Had the list of arbitrators, however, been approved by the Law Society only, then the clause would have been valid.

Whilst it would appear that the ruling applies only in the case of consumer contracts, and in circumstances where there is an approved list of arbitrators, it could be interpreted to extend to an arbitration clause in a contract where the non-consumer contracting party is a member of an organisation which is the arbitrator appointing body under the contract.

Many contracts could be caught by this decision.  A “Consumer” means a natural person who is acting for purposes which are outside his or her business. 

Terms of engagement between professional organisations and individuals (as consumers) obtaining the services of such organisations where the service provider’s professional body is the appointing body under an arbitration clause could also be affected.

It would be prudent for all suppliers of goods or services to consumers to review any arbitration clauses in contracts and to consider amending such clauses should the supplier be a member of an organisation which has either (i) an approved list of arbitrators or (ii) which is the arbitrator appointing body under the contract.

This article was authored by Richard Breen.