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Arbitration: Court Has Jurisdiction to Lift Stay

The claimants in Jephson and Jephson v Aviva Insurance Ireland DAC [2024] IEHC 309, issued proceedings before the High Court (Court) in 2019 arising out of a refusal by the respondent to indemnify them in respect of a claim made under an insurance policy arising out of property damage caused by subsidence or landfall (Proceedings).

The respondent alleged that the insurance policy specifically excluded this type of property damage. The respondent applied for a stay on the Proceedings under Article 8 of the UNCITRAL Model Law, to allow the issues to be referred to and determined by arbitration. That application was conceded, and the parties concluded agreed terms, under which they agreed to refer the matter to arbitration and an undertaking from the respondent’s solicitors and on its behalf to participate in the arbitration in a timely manner. On foot of the agreed order, the Court made a formal order in January 2020 referring the matter to arbitration and staying the proceedings subject to the undertaking. Significantly, liberty to apply to have the stay lifted in the event of non-compliance with the undertaking was also granted. The parties agreed on a timetable for the pleadings in the arbitration.

Two years later, the claimant applied to the Court to have the stay lifted because of delays on the part of the respondent around discovery. The respondent resisted the application on several grounds, including that the discovery issues should be dealt with by the arbitrator. The respondent also argued that once an order under Article 8 is made, the only way for the Court to end the arbitration process would be if the defendant had failed to comply with his undertaking to such a level that it made arbitration “null and void, inoperative and incapable of being performed” as prescribed in Article 8(1). It claimed that the delay pointed to by the plaintiff did not satisfy that criterion.

The Court disagreed with the respondent’s position as being contrary to the intention of the order and the agreed terms. It was clear that the respondent agreed that the referral to arbitration was subject to the observance of the undertaking, and the consequence of a failure to comply with that undertaking would lead to the lifting of the stay. The Court categorized the respondent’s position as an attempt to resile from that undertaking by arguing that the claimant must establish that the arbitration agreement was invalid.

Addressing the Court’s jurisdiction to lift the stay, it held that it is axiomatic that if the Court can exercise its inherent jurisdiction to grant a stay, it must have inherent jurisdiction to lift the stay. That position applies notwithstanding the introduction of the Model Law into Irish law under the Arbitration Act 2010.

Conclusion

The Court granted an order lifting the stay on the Proceedings. Whilst the particular circumstances underlying the decision were unique, its significance lies in the confirmation that the Court has jurisdiction to lift a stay under less exacting criteria than under Article 8(1).

To discuss any of the matters raised in this article, please contact Gerard James or your usual William Fry LLP contact.

 

Contributed by Gail Nohilly and Nickolas Dergach.