Charwin Ltd T/A Charlie's Bar v Zavarovalnica Sava Insurance Company D.D. (Approved)

Factual and Procedural Background

This judgment concerns an application by the defendant insurer in proceedings initiated by the plaintiff, a limited liability company operating a public house in The City, following its closure in March 2020 due to the COVID-19 pandemic. The plaintiff seeks declarations and damages under an insurance policy issued by the defendant. The defendant applied under Article 8(1) of the UNCITRAL Model Law to refer the parties to arbitration and stay the court proceedings, based on an arbitration clause in the insurance policy. The plaintiff opposed this application, contending the dispute was non-arbitrable on public policy grounds and that part of its claims fell outside the scope of the arbitration clause. The proceedings are part of a broader context of COVID-19 related insurance claims, with other similar cases ongoing, including a "test case" agreed between the defendant and another policyholder under the Central Bank’s Supervisory Framework. The court was tasked with resolving the disputed application to refer to arbitration and stay proceedings.

Legal Issues Presented

1. Whether the dispute between the plaintiff and defendant falls within the scope of the arbitration clause in the insurance policy.
2. Whether the dispute is arbitrable or non-arbitrable due to overriding public policy considerations.
3. Whether the court should refer the parties to arbitration and stay the proceedings under Article 8(1) of the Model Law, in whole or in part.
4. How to interpret the arbitration clause in the context of the plaintiff’s two distinct causes of action: indemnity claims under the policy and damages claims for alleged regulatory breaches.

Arguments of the Parties

Plaintiff's Arguments

• The dispute is non-arbitrable because it raises fundamental public policy issues that should be resolved in public court proceedings with precedential value, rather than in private arbitration.
• The arbitration clause does not cover the plaintiff’s alternative claim for damages under statutory regulatory obligations, only the indemnity claims under the policy.
• The plaintiff sought to have these proceedings treated as a "test case" under the Central Bank’s Supervisory Framework, but the defendant refused.
• The plaintiff expressed concerns about potential time bar issues under the arbitration clause, though this was later resolved by the defendant’s confirmation not to raise such a point.

Defendant's Arguments

• The dispute is arbitrable and falls within the scope of the arbitration clause in respect of the indemnity claims.
• The arbitration clause should be interpreted broadly, reflecting a presumption of a “one-stop” forum for disputes, including the regulatory damages claim.
• The defendant relies on the mandatory nature of Article 8(1) of the Model Law requiring the court to refer disputes to arbitration unless the arbitration agreement is null, void, or inoperative.
• The defendant pointed to the Central Bank’s Supervisory Framework which expressly contemplates arbitration as a dispute resolution mechanism for COVID-19 business interruption claims.
• The defendant agreed not to raise a time bar defense regarding the arbitration clause’s twelve-month referral requirement.

Table of Precedents Cited

Court's Reasoning and Analysis

The court commenced by identifying the two distinct causes of action pleaded by the plaintiff: (1) claims for indemnity under the insurance policy for business interruption and loss of licence, and (2) alternative claims for damages under statutory regulatory obligations for alleged breaches by the defendant.

Applying established principles of contractual and insurance policy interpretation, including the modern "text in context" approach and the contra proferentem rule, the court found that the arbitration clause clearly and unambiguously covers disputes regarding the defendant’s liability in respect of claims or amounts payable under the policy. This includes the indemnity claims. The words of the clause were interpreted as referring specifically to disputes about liability under the insurance policy, not to statutory damages claims arising from regulatory breaches.

Although the defendant urged a broad, liberal interpretation of the arbitration clause to encompass both causes of action, the court rejected this with detailed analysis, distinguishing the alternative damages claim as outside the scope of the clause. The court noted that the presumption favoring a “one-stop” forum for dispute resolution does not override the clear wording of the arbitration clause in this context.

Regarding the plaintiff’s fundamental public policy objection to arbitration, the court examined the concept of non-arbitrability under Irish law and comparable jurisdictions. It acknowledged that certain disputes may be non-arbitrable if public policy so requires, but emphasized that the burden is on the party resisting arbitration to establish compelling public policy reasons. The court applied a high threshold, consistent with the principle that arbitration agreements must be respected unless exceptional circumstances exist.

The court found no such compelling public policy considerations arising from the COVID-19 pandemic, the Central Bank of Ireland’s Supervisory Framework, or the number of affected policyholders. The existence of a parallel “test case” proceeding agreed by the defendant in relation to the same or similar policy further undercut the plaintiff’s arguments. The court also rejected any suggestion that arbitration is inferior to litigation in this context, noting that insurance disputes are routinely resolved by arbitration and that the Supervisory Framework contemplates arbitration as a legitimate dispute resolution mechanism.

Consequently, the court concluded that the indemnity claims are arbitrable and must be referred to arbitration under Article 8(1) of the Model Law, while the alternative damages claim falls outside the arbitration clause and must remain before the court.

The court also made tentative observations on the procedural sequencing of the claims, suggesting it may be sensible to await the outcome of the “test case” and arbitration determinations before proceeding with the damages claim, but deferred making directions pending further submissions.

Holding and Implications

The court’s final ruling is as follows:

The defendant’s application under Article 8(1) of the Model Law is granted in part and refused in part.

The plaintiff’s claims for indemnity under the insurance policy for business interruption and loss of licence fall within the arbitration clause and are referred to arbitration, with the court proceedings stayed as to those claims.

The plaintiff’s alternative claims for damages for alleged breaches of regulatory obligations under statutory provisions fall outside the arbitration clause and will remain for determination by the court.

No new legal precedent is established beyond the application of existing principles to the facts. The decision underscores the mandatory nature of arbitration referrals under the Model Law where the arbitration agreement applies, while recognizing the limits of arbitration clauses in excluding statutory or regulatory claims. It also affirms the high threshold for public policy to render disputes non-arbitrable and confirms the appropriateness of arbitration as a dispute resolution mechanism in insurance claims, including those arising from the COVID-19 pandemic.