Ireland ranks below developing nations for enforcing contracts. Here's why that must change

AS A SMALL, open economy, Ireland’s international competitiveness has always been a priority.

However with the increased likelihood of a hard Brexit and the subsequent evolution of the UK into a competitor for investment, protecting the relative competitiveness of our economy has never been more important.

Every year, the World Bank ranks international economies according to their ‘ease of doing business’ – that is, how conducive the regulatory environment is to opening and operating a business.

In 2016 Ireland was ranked 18th overall, but it again identified the country as an expensive location in which to enforce a business contract.

While Ireland places well in categories such as paying taxes, ranked at number five, and for starting a business, where we rank 10th, we place 90th globally in enforcement of contracts – behind many developing nations. This attribute harms our national competitiveness and our attractiveness as a place to do business.

Notably, we are ranked significantly behind the UK, which comes in at 31st. This poor ranking has been flagged by the National Competitiveness Council as hindering our ability to compete and attract investment.

If the UK eventually leaves the European Union and the single market, Ireland will have to work even harder to distinguish itself as a preferable location for international investment. Marked differences between the UK and Ireland in key criteria that inform major investment decisions will need to be tackled in the short-term.

Yet, improving the efficiency of enforcing commercial contracts is not a simple matter and there are no easy solutions. Some great progress has been made by the Courts Service of Ireland in recent years in streamlining the process of resolving of commercial disputes through the courts.

The introduction of the Commercial Court and the appointment of an arbitration judge have all helped to speed up the resolution of commercial disputes. Nonetheless, going through the courts can sometimes be an arduous process.

The mediation solution

Indeed, one of the key distinguishing factors between the UK and Ireland when it comes to enforcing contracts, particularly when it comes to the length of time it takes (on average 650 days in Ireland compared to 437 in the UK) is the UK’s far more proactive approach to case management and the use of ‘alternate dispute resolution’.

Chambers Ireland has long been an advocate for increased use of these mechanisms, particularly mediation, to resolve commercial disputes. Going to court can be an adversarial and polarising experience, whereas the benefit of mediation is that it can often preserve business relationships.

Whether a dispute is with a valuable client or an important supplier, mediation focuses on resolving the matter in a way that keeps relationships intact. Mediators help shape the discussion to promote mutual respect and common goals, and generate creative ideas to resolve the dispute.

Unfortunately, in the absence of a firm statutory basis for mediation in Ireland, it can be difficult to persuade the business community that mediation is the best way forward.

A draft mediation bill was published by the Department of Justice in 2012. The enactment of the bill would see more commercial and civil disputes addressed through mediation rather than by going to court.

The bill itself is yet to be published but was included as priority legislation for publication in the spring/summer legislative programme for 2017, and is expected early in the spring term.

However, this legislation has long been promised (in fact, the bill has been included as priority on several legislative programmes in recent years) and to date there has been little visible progress towards its delivery.

Protecting our national competitiveness is the best way Ireland can prepare for Brexit and the economic challenges that we will face in the coming years.

Making commercial dispute resolution more cost-effective for business is a simple way of doing this, reducing backlogs of cases in the courts and improving our international reputation as a location for investment. In this context, the mediation bill must be seen as a priority for this legislative programme.

Emma Kerins is international affairs executive with Chambers Ireland. The organisation launched a business and commercial mediation service during 2015 in conjunction with several organisations, including the Law Society.

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