A February 2025 judgment of the high court addressed the issue of arbitration and prescription in a case involving whether a claim for unpaid rent had prescribed and whether the arbitration process affected the running of prescription. The court found that the claim had not prescribed, and that the arbitration proceedings had interrupted the running of prescription.
The respondent had exercised its option to extend a lease between the appellant municipality and the respondent for an additional 20 years. A dispute arose regarding the method of determining the rent for the renewal period. The parties agreed to refer the dispute to arbitration and the arbitrator was tasked with interpreting the relevant clauses of the lease to determine the amount of the rent.
The primary legal issues in this case were whether the appellant’s claim for unpaid rental amounts had prescribed under the Prescription Act, 1969, and whether the arbitration process had interrupted the running of prescription.
The court’s analysis focused on the date the debt became due and the impact of the arbitration proceedings on the running of prescription. The arbitration agreement was signed in February 2016, but the matter was only heard on 2 August 2020. The arbitrator’s award, which determined the amount of the rent, was published on 18 September 2020. The court emphasised that the determination of the rent was dependent on the arbitrator’s award, and until the award was handed down, there was no agreement on the amount of the rent.
The court found that the date of the arbitration award marked the date when prescription began to run. The summons was served on the State Attorney on 11 October 2021, within the three-year period from the date of the August 2020 award and was sufficient to interrupt prescription under section 15(1) of the Prescription Act. The court concluded that the appellant’s claim had not prescribed, because the arbitration process had interrupted the running of prescription for the period from February 2016 to August 2020.