The Arbitration (Guernsey) Law 2016 – A New Hope
The introduction of a new arbitration law in Guernsey has been expected for some time, with Guernsey’s current legislation being perceived as out of date and failing to properly facilitate an effective and efficient process.
It is hoped that The Arbitration (Guernsey) Law 2016 (“the 2016 Law”) will address the shortfalls of the present legislation and encourage more parties to arbitrate their disputes in Guernsey.
The Approach to Arbitration in Guernsey
Arbitration is an often overlooked process for the resolution of commercial disputes in Guernsey, and while the provision of Arbitration clauses in commercial contracts appears to have increased in recent years, there remains an obvious reluctance for parties to arbitrate here, with mediation being the favoured form of ADR.
One of the key reasons for the avoidance of arbitration is that the legislation is deemed outdated and unhelpful.The primary source of domestic arbitration law is the Arbitration (Guernsey) Law, 1982 (“the 1982 Law”) which is considerably out of line with the provisions of contemporary legislation in other jurisdictions, where arbitration is a well-utilised method of dispute resolution.
It certainly is not the case that arbitration is considered to be inferior to other forms of dispute resolution, and indeed the legislation in force at present was clearly passed with the intention of promoting arbitration as a useful means of avoiding costly and time consuming litigation. The 1982 Law deals with domestic arbitration proceedings and the enforcement of particular foreign arbitration awards, and the (English) Arbitration (International Investment Disputes) Act 1966 was incorporated into domestic Guernsey law by the Arbitration (International Investment Disputes)(Guernsey) Order 1968 (“the Order”).
Guernsey is also a party to the New York Convention (the UK having extended the territorial application of the Convention to Guernsey in April 1985) and enforcement of Convention awards was facilitated by the 1982 Law, which also provides for the enforcement of awards by parties to the Geneva Convention and the Protocol on Arbitration Clauses of 24 September 1923. With regards enforcement, a domestic arbitration award can be enforced in the same way as a Royal Court judgment and, while leave of the Court must first be granted, the Royal Court’s active encouragement of ADR means that it is likely to enforce an arbitration award.
However, despite such facilitative legislation and a clear intention to make arbitration accessible in Guernsey, the perception remains that the 1982 Law does not serve to support the arbitration process as it should. One of the key attractions of arbitration is the likely costs saving when compared with litigation and, where the power of the arbitral tribunal is limited, there is a risk of procedural error and thus wasted time and costs. For this reason, parties have typically avoided arbitrating in Guernsey.