Charwin Limited T/A Charlie's Bar v Zavarovalnica Sava Insurance Company D.D [2021] IEHC 489

The High Court has found that the circumstances of the COVID-19 pandemic, although entirely unprecedented, do not trigger sufficient public policy considerations to require a dispute to be determined in a public court as opposed to a private arbitration.

Background

The plaintiff company, the owner and operator of a public house trading as ‘Charlie's Bar', commenced proceedings against the defendant, its insurer, arising from the closure of the plaintiff's public house on 15 March 2020 due to COVID-19 and the defendant's refusal to provide an indemnity to it under its insurance policy.

Following the proceedings being entered in the Commercial List, the defendant made an application for orders under Article 8(1) of UNCITRAL Model Law (the Model Law) referring the parties to arbitration and staying the court proceedings.

Model Law

Article 8(1) of the Model Law places an obligation on a court to refer the parties to arbitration provided that (a) the action had been brought before the court in respect of a dispute between the parties; (b) the action must concern a matter which is the subject of an arbitration agreement; and (c) one of the parties requests reference to arbitration no later than when submitting his first statement on the substance of the dispute.

If these requirements are satisfied, then the court must refer the parties to arbitration unless the court finds that the arbitration agreement is (i) “null and void” or (ii) “inoperative” or (iii) “incapable of being performed”.

Defence

The plaintiff opposed the application. The main ground of contention was that the dispute between the parties was not arbitrable on the grounds that it gave rise to fundamental issues of public policy that were not capable of being determined at arbitration. The plaintiff maintained that the dispute had arisen in unprecedented circumstances, in particular, referring to the COVID-19 pandemic and the Central Bank of Ireland's “COVID-19 and Business Interruption Insurance Supervisory Framework” (the CBI's Supervisory Framework). Subject to that argument, the plaintiff also maintained that part of its case against the defendant did not fall within the scope of the arbitration clause.

Judgment

In considering the defendant's application, the court first looked at whether the plaintiff's two pleaded causes of action fell within the scope of the arbitration cause. The court found that the claim for an indemnity under the policy was clearly covered by the terms of the arbitration clause and that it was, therefore, bound by Article 8(1) of the Model Law to refer the parties to arbitration.

However, the court found that the plaintiff's claim for damages for an alleged breach by the defendant of regulatory obligations pursuant to Section 44 of the Central Bank (Supervision and Enforcement) Act 2013, did not fall within the scope of the clause. Therefore, this part of the plaintiff's case remained to be determined by the court. The court noted that such outcome is a consequence of the proper interpretation of the clause, and is “an eventuality which sometimes does arise, as it did in Kelly v. Lennon [2009] 3 IR 794.”

The court also rejected the plaintiff's non-arbitrable contention stating that the dispute in relation to the claim for an indemnity “is clearly arbitrable”. The court noted that the test required to determine a matter non-arbitrable by reason of public policy consideration is a “demanding” one, requiring “compelling reasons” of Irish public policy in order for such a conclusion to be reached as a “last resort” and that the plaintiff provided a “manifestly insufficient public policy consideration”.

The court was not persuaded by the fact that the dispute arose in the context of the COVID-19 pandemic and that several hundred publicans with similar claims for indemnity may be involved. The court particularly noted that an identical policy was to be considered by the court as part of a “test case” agreed for the purpose of the CBI's Supervisory Framework between the defendant and another policy holder in other proceedings.

The court also commented that the plaintiff had no entitlement to have their case dealt with as a “test case”, stating that both parties had to agree to this and further noted that the CBI Supervisory Framework specifically envisaged arbitration as a means of legal action against an insurer in disputed business interruption COVID-19 claims.

In finding that there were no real policy considerations at issue which could influence the court that the dispute was not arbitrable, the court left over for consideration in another case, the precise parameters of public policy considerations which would render a dispute non-arbitrable.

Comment

This decision is a useful reminder of the importance of arbitration in the context of disputes between policy holders and insurers, which the court commented are almost routinely determined at arbitration rather than in court proceedings.

Further, the judgment confirms that there is a “high bar” set for a party seeking to resist reference to arbitration by reason of overriding public policy considerations, with the court finding that the public policy considerations advanced in this case came “nowhere near” to considerations that might lead a court to determine a dispute non-arbitrable.

Co-authored by Gavin Murray

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