Ireland: GAR Construction Arbitration Know-how 2020

Legal system

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 Parliament, Statutory Instruments, regulations, European Union legislation all have legal force and effect. The Oireachtas (the Irish parliament comprising two houses – Dáil Éireann and Seanad Éireann) is the lawmaking body. New laws are published by the Oireachtas on the Irish Statute Book (irishstatutebook.ie) 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. As such, there is a limited pool of decisions relating to constructions disputes emanating from the Irish courts. Practitioners, therefore, tend to look to court decisions coming from the United Kingdom for guidance.

Contract formation

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

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 30 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 30 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 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.

In October 2019, the Irish High Court in XPL Engineering v K&J Townmore Construction Ltd [2019] IEHC 665 stayed court proceedings and ordered that the matter be referred for arbitration. This is consistent with article 8(1) of the UNCITRAL Model Law where, in circumstances where there is a valid and binding arbitration agreement and one of the parties so requests, the court must refer the dispute between the parties to arbitration.

In a further October 2019 decision, the Irish High Court in K & J Townmore Construction Ltd v Kildare and Wicklow Education and Training Board [2019] IEHC 666 found 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.

Implied terms

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. 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

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 applied in a number of recent Irish cases.

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This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.