Second Reading Committee
(11 months, 1 week ago)
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Arrangement of Business
(11 months, 1 week ago)
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The Deputy Chairman of Committees (Baroness Watkins of Tavistock) (CB)
My Lords, before the Minister moves that the Bill be considered, I remind noble Lords that the Motion before the Committee will be that the Committee do consider the Bill. I should perhaps make it clear that the Motion to give the Bill a Second Reading will be moved in the Chamber in the usual way, with the expectation that it will be done formally.
Arbitration Bill [HL]
Tuesday 19th December 2023
(11 months, 1 week ago)
Grand CommitteeRead Full debate Arbitration Bill [HL] 2023-24 View all Arbitration Bill [HL] 2023-24 Debates Read Hansard Text Read Debate Ministerial Extracts
The Parliamentary Under-Secretary of State, Ministry of Justice (Lord Bellamy) (Con)
My Lords, as our learned Chairman has just indicated, the procedure is, as I understand it, that we will formally move a Motion for Second Reading on the Floor of the Chamber after this debate and then I will move a Motion that the Bill be referred to a Special Public Bill Committee for further consideration. It is a kind of hybrid Bill procedure because this is a Law Commission Bill following the Law Commission report of 5 September 2023, which contained a draft Bill.
I should say at the outset that there are two changes to the draft Bill presented by the Law Commission. First, Clause 1(3) of the Law Commission version provided that the Bill would not apply to any existing arbitration agreement. That caused a certain amount of concern because there are many thousands of existing arbitration agreements going back many years and, if that situation had prevailed, we would have had a dual system for a very long time, as old arbitration agreements became subject to arbitration. The Bill now provides that its changes do not apply to arbitrations that have already commenced, as distinct from existing arbitration agreements. I have taken the precaution of checking with the law officers that that is regarded as satisfactory and that it is in line with earlier precedent in relation to the Arbitration Act 1996, which this Bill amends. That is the first point.
The second point is that the Bill now extends to Northern Ireland, which is thought to be consistent with policy. It does not extend to Scotland, as the noble and learned Lord, Lord Hope of Craighead, well knows. Scotland has its own regime under the Arbitration (Scotland) Act 2010.
Following those introductory comments, I will briefly take your Lordships through the Bill, conscious as I am that almost everyone in the Room knows much more about it than I do. I have a certain sense of déjà vu, as this is not unlike appearing once again in front of the Supreme Court, or the House of Lords as it was, considering the galaxy of knowledge and experience that we have before us this afternoon. Your Lordships well know that the arbitral process is of great importance and value, particularly to the commercial community of this country, which is a most important centre for international arbitration. Arbitration is a method of resolving disputes to which the parties willingly submit and, in the Government’s view, it should be promoted and kept up to date.
The background to this Bill is the decision by the Lord Chancellor in 2021 to ask the Law Commission to review the Arbitration Act 1996, which contains the present law—I know that certain noble Lords, notably the noble Lord, Lord Hacking, go back well before that and have lived this development over many years. The 1996 Act contains a thorough code of the principles and practice of arbitration in this country. This Bill is intended to bring that structure and framework up to date and ensure that we remain abreast of international developments and that London and these jurisdictions remain competitive on the international scene. Arbitrations in England and Wales generate some £2.5 billion annually in arbitral and legal aid fees alone and in 2021, according to the Law Commission, London was the world’s most popular seat for international commercial arbitration, notably in banking, insurance, trade and other businesses.
Your Lordships will be very familiar with the provisions of the Bill, but I will briefly summarise them. Clause 1 provides that the law governing the arbitration will, unless the parties agree otherwise, be the law of the seat of arbitration. As noble Lords know—I will try to get this completely right—in contractual disputes, the contractual liability will normally be determined by the proper law of the contract, but the contract may provide that the arbitration be elsewhere. A contract may be governed by Russian law but have arbitration in London. In that event, what is known as the curial or supervisory jurisdiction is governed by English law; for example, whether an arbitrator should be removed or to which court some challenge to the arbitral award may be made will be the subject of the law of the seat—in that example, English law.
However, suppose the question is whether the dispute is within the agreement to arbitrate in the first place. In my example, would it be governed by the Russian law of the contract or the English law of the seat? This question has exercised the courts over many years and there have been different views and decisions. In Enka v Chubb in 2020, the Supreme Court, in a split 3:2 decision, arrived at a somewhat complex test for deciding exactly which law governed the agreement to arbitrate. That gave rise, among other things, to a desire for certainty and a clear and simple rule. That simple rule is now provided in Clause 1, which provides that it would normally be the law of the seat unless the parties agree otherwise.
My understanding is that that is already in line with certain standard arbitration agreements and the rules of bodies that provide arbitration services. That is the essential provision of Clause 1. As I am sure the noble and learned Lord, Lord Hope of Craighead, is well aware, England, Wales and Northern Ireland will thereby align with Scotland, so we will have a common position across the four jurisdictions.
Clause 2 provides a statutory duty on arbitrators to disclose circumstances that might reasonably give rise to justifiable doubts as to their impartiality, to maintain the integrity of arbitration in this country. There have been some well-publicised incidents, as a result of which it should be put beyond doubt that arbitrators have a full duty to disclose anything that may reasonably give rise to justifiable doubts as to their impartiality.
Clauses 2 and 3 support arbitrators in making impartial and proper decisions without fear that they might incur some personal liability. In the case of an application for the removal of an arbitrator, Clause 3 provides that the arbitrator will not be liable personally for costs unless they have acted in bad faith. Clause 4 provides that an arbitrator will not be liable for resigning unless the resignation is shown by a complainant to be unreasonable. Those provisions effectively support the independence of arbitrators.
Clauses 5 and 6 deal with jurisdiction. Under Clause 5, if there is a challenge to the tribunal’s jurisdiction on which the tribunal has already ruled, the losing party cannot go directly to the court on a preliminary point to challenge that; it must await the final arbitral award and then make that challenge under Section 67. That in effect rules out earlier challenges to the court on jurisdiction.
Clause 6 clears up something of a mystery: when an arbitral tribunal decides that it has no jurisdiction, does it none the less have jurisdiction to award costs? Clause 6 provides that it does; there is a power to award costs even if the arbitral tribunal has found that it has no jurisdiction over the dispute in question. Clause 7 effectively replicates the summary judgment procedures available in the court and empowers arbitrators to make an award on a summary basis if a particular issue has no real prospect of success.
Clauses 8 and 9 pertain to the powers of the court. Clause 8 empowers it to make court orders reinforcing the orders of emergency arbitrators. These powers already exist in relation to normal arbitrators, but on occasion emergency arbitrators are appointed, so this makes sure that the existing powers to issue court orders apply equally where there is an emergency arbitrator. Clause 9—again, similarly to normal court proceedings—entitles arbitrators to make orders in support of arbitral proceedings against third parties, most likely banks that may be holding relevant funds. That provision resolves a certain conflict in the case law and aligns the position of arbitral proceedings with that in court proceedings.
Clause 10 is essentially a tidying-up measure. There are various bases for challenging an arbitral award in the 1996 Act: Section 67 for lack of jurisdiction, Section 68 for serious irregularity or Section 69 for a point of law. Clause 10 ensures that, where there is a challenge under Section 67 for lack of jurisdiction, the remedies available to the court are the same as they would be were the challenge under Sections 68 or 69, to bring a certain degree of consistency across the three main ways of challenging arbitral awards.
Under Clause 11, if an arbitral party applies to the court to challenge an arbitral award on the basis that the tribunal had no jurisdiction under Section 67, that challenge should not be a full rehearing with new evidence and arguments—it should, in effect, be decided on the existing record so that the court does not have to restart or do the whole thing afresh on the basis of the challenge to the jurisdiction of the tribunal. That will streamline and simplify the operation of such challenges.
There are then some quite short, technical provisions. Clause 12 clarifies certain time limits. Clause 13 codifies the law in relation to the staying of legal proceedings and Clause 14 streamlines the process of applying to the court under the 1996 Act for certain preliminary rulings on jurisdiction and points of law. Clause 15 repeals certain sections that have never been brought into force and are therefore redundant.
That is a very brief outline. I am not sure whether it was a fast trot or a slow canter. Your Lordships are much more familiar with this area than I am. The Bill is intended to increase the competitiveness of England, Wales and Northern Ireland, and primarily London, as a seat of international arbitration, to foster growth in both domestic and international arbitration, to introduce a fairer and more efficient process and to reduce reliance on resort to the court. I beg to move.
Lord Hacking (Lab)
My Lords, I have never spoken in the Moses Room in the two years since my return to the House of Lords and I am not familiar with the procedure, so if I go wrong, I hope that our Deputy Chairman or someone else will put me right.
I am in a rather poignant position, in that I am the sole surviving parliamentarian who took part in the 1979 Bill and the 1996 Bill. That is not to say that I am the only creature still alive who was involved in that Bill, because Robert Ayling was the assistant solicitor in the Department of Trade—the 1979 Bill was taken through partly by the Lord Chancellor’s Department and partly by the Department of Trade. As far as I know, he is alive and kicking; I have not seen him for a little time. Mark Saville, now the noble and learned Lord, Lord Saville of Newdigate, played a critical part in the 1996 Act, but he had not by then arrived in the House of Lords Judicial Committee, which he did a year later, and therefore he sat on the steps of the Throne. He was a very important person, but not a parliamentarian at the time.
Of the parliamentarians of the time—if we could remember them—there was Lord Maurice Peston, who spoke for my party throughout the Arbitration Bill. He mugged up on the subject very well and was a very good participant in our debates. Lord Peter Fraser of Carmyllie was the government spokesman to take through our debates. Alas, both have departed this world, as indeed have other prominent Members of the House who took a very active part, including Lord Mustill, Lord Donaldson and Lord Roskill. So here I am as the one surviving parliamentarian. There is another name I must mention at once—Mr Toby Landau. Not only is he alive and kicking but he is here in this Room to listen to our debate. At least somebody other than me is still alive and kicking.
As I said, I am not familiar with the proceedings in the Moses Room and I am ready to be corrected at any time. I have some memories of the 1979 and 1996 Acts which I think it would be valuable for the Committee to be reminded of. Therefore, I intend to take a little time in doing so. I am aware that this is very close to the Christmas Recess. If any noble Lord, particularly one who is listed to speak, thinks that I am going on too long, I would ask him not to suffer me but to stand up and, if needs be, cut back my words.
The foundation of this Bill, and indeed the foundation of all arbitration law, goes back to the Act of 1698. The Bill in its preamble was described as:
“An Act for determining Differences by Arbitration”.
Further on in the preamble, we have the words: now this Bill is
“for promoting Trade and rendring the Awards of Arbitrators the more effectual in all Cases for the final Determination of Controversies referred to them by Merchants and Traders or others”.
This important Act of so long ago established the support that was needed for the conduct and, indeed, the encouragement of the use of, arbitration as a means of settling disputes. Right up to the present time, our statutory law should create a balance between the courts and arbitrations. It should also be promotional for the conduct of arbitration in the United Kingdom. The importance of that comes out clearly in a briefing that we have just received from the Law Society, which calculates that currently there are no fewer than 5,000 arbitrations annually, bringing an income of £2.5 billion to the economy, so it is of importance. I would suggest that what we are doing today is of importance.
I actually doubt whether 5,000 arbitrations is the right calculation, when one takes into account the numerous LMAA and GAFTA arbitrations, and other arbitrations in the commodity field. Indeed, when I headed up an action group in 2000—I have its paper here—there were then more than 3,000 LMAA arbitrations. But whatever it is, the figure is very large and, I suggest, very important.
The 1979 Act was specifically directed to two matters. One was the setting aside and annulment of these two procedures: the “case stated” procedure and the procedure for setting aside awards for errors on its face, which was also being used. It was used by parties when they were not doing very well in an arbitration and who then sought to take their arbitration to the courts to cause delay, embarrassment and difficulty to the plaintiff or complainant.
Indeed, in the debate that I opened in May 1978 in the Chamber of this House, I read a letter from the general counsel of Raytheon, the massive defence producer of weapons and the like. In that letter, the general counsel said that, because of the way in which two of the major arbitrations were being sucked into the court by the case stated procedure, he had given directions that there should not be any arbitration agreement signed by Raytheon, carrying a London arbitration jurisdiction. That is how serious it was. Thanks to Lord John Donaldson, the 1979 Act effectively got rid of both the case stated procedure and the procedure of setting awards aside on their face. It also created what I believe to be the right balance between the law courts and arbitration, and that has been continued ever since.
When I was citing the 1698 Act, I should have mentioned that were other arbitration Acts in the 19th century, one based on the MacKinnon report. There was of course the consolidating Arbitration Act 1950, but none were developing arbitrations on the foundation Arbitration Act 1698.
The big challenge for getting the 1979 Act through was to get Lord Diplock on side. A former commercial judge—I think he was the first judge of the Commercial Court—he was a man, a judge and a Lord of great influence, and if we did not get him on side, we had no hope of getting the 1979 Act through. The second great challenge in 1978-79 was to get the Government to give time and support for what became the 1979 Act. We achieved the first, getting Lord Diplock on side. We were greatly assisted by Bob Clare, who was then senior partner of the very big American law firm of Shearman & Sterling. He walked Lord Diplock round and round the lake at Selsdon Park until he managed to get his support.
The other way of getting Lord Diplock on side was achieved by Lord Donaldson in creating special categories of arbitrations—those relating to admiralty, commodity and insurance—and setting those aside, so that they were not entitled to opt out of the new arbitration process. Lord Diplock felt very deeply on the subject; he described the commodity and admiralty arbitrations as providing the water in the fountain of the development of English commercial law. That was quite an achievement on the part of Lord Donaldson. Incidentally, at that time Lord Donaldson was the senior judge in the Commercial Court, and, in the very active way that he approached matters, he set up a special committee which issued a report. That was then given accord by the Government of the day, being made into a Command Paper, which was of great influence in getting the 1979 Act.
As for getting the Government on side, we really had to thank Lord Cullen of Ashbourne, who was a retired stockbroker. I won the ballot and therefore succeeded in having the right to open a debate on the future of arbitration in London. There are a number of noble and learned Lords behind me now; at that debate, there were a number of Law Lords in front of me. Lord Diplock took part—I am just trying to remember all those who did—as did Lord Scarman and Lord Wilberforce. This somewhat surprised the Opposition Benches. They could well have replaced Lord Cullen of Ashbourne with Lord Hailsham, who, for example, was close to arbitration law and took an active part in the 1979 Act. However, they remained loyal to Lord Cullen, which meant that we received the evidence from him of the loss of £500 million in invisible earnings, which is what the loss of income to the Government was called then. That was an astounding figure—probably close to £5 billion in today’s currency. The Lord Chancellor spoke to me about it afterwards and said, “Is it really that much?” I was quite sure that it was not, but just said to him, “I think it is a very large sum of money”. He then seized upon the opportunity to push forward that Bill, because the Labour Government were not doing awfully well and he thought it would be awfully good for them to do something that was wholly friendly to the City of London.
It was given the Rolls-Royce treatment—that was the term Sir Thomas Legg gave it, from the Lord Chancellor’s Department—but it nearly got into a disaster. I am going on a little but am getting quite close to my end. We nearly got into a disaster at the end of that because the Labour Government collapsed in March 1979. We had just had the Bill go all the way through the House of Lords and it had not got near the House of Commons. As a result, there was a happy trade-off with the House of Commons through the official channels, which was how the Bill was saved.
Onward therefore to the 1996 Act: it was a rather slow process, which caused Arthur Marriott to take up an initiative. That then brought about the setting-up of what was called the departmental—
Lord Roborough (Con)
I give a gentle reminder to the noble Lord that there is an advisory speaking time of 15 minutes. We have time, but if there are points he wishes to make—
Lord Hacking (Lab)
I appreciate that, and I am not yet at 15 minutes, but there is nothing on the speakers’ list that stipulates a time of 15 minutes.
The Deputy Chairman of Committees (Baroness Watkins of Tavistock) (CB)
If I could clarify, it is normally expected in a Second Reading that 15 to 20 minutes is the maximum. Obviously, sometimes there are exceptions, but particularly as the noble Lord asked at the beginning for any clarification, I thought that would be helpful.
Lord Hacking (Lab)
Yes, I am very aware that behind me, and in other parts of this Committee Room, there may well be those who are anxious about getting away for their Christmas. I will therefore be responsive to this interjection and bring the Committee to another very important crisis—one which leads directly to what I have said about the importance of an arbitration Bill. It should not only set the right relationship between arbitration and the courts but be promotional in nature.
The departmental committee was headed up first by Lord Mustill and then by Lord Steyn. They gave up the fight with the parliamentary draftsman who was, dear lady, a very pedantic one. She produced a Bill which was enormously complicated and quite unreadable. It included, most surprisingly—Mr Toby Landau would remember this—the writ of habeas corpus. We had a meeting about it in Queen Mary College, down the Mile End Road, and there was an uproar against it. I remember Jan Paulsson, a leading international arbitrator, making scathing comments. There was a skeleton hang-up and what we should therefore be grateful for, and what I would like to record, is that the noble and learned Lord, Lord Saville, and Mr Toby Landau started all over again. That is the product we have now in the 1996 Act.
The important thing about what we are doing now is that this is a wholly readable Bill. It does not have a whole lot of parliamentary junk in it. It takes you all the way through each stage of the arbitration. What we should be doing now is to make quite sure that we follow in that line. I do have comments about the Bill itself, but I will leave those to another time.
Lord Etherton (CB)
I am grateful to the noble Lord, Lord Hacking, for his fascinating historical overview from a personal perspective. For my part, I consider the Bill to be good and extremely useful, and I congratulate the Government on seeking to implement the Law Commission’s recommendations so quickly after the publication of its final report.
There is one matter I should like to raise for the Government to consider, but I want to emphasise that it is not my intention that there should be any amendment to the Bill. The issue concerns discrimination in arbitrator appointments. This matter was raised by the Law Commission in its consultations, in which it observed that women were up to three times less likely to be appointed than men. Consultees had different views about this but in the end the Law Commission decided that there should be no anti-discrimination provision in its draft Bill.
I ask the Government to consider, perhaps when there is next a review of the Equality Act 2010, whether there might be some provision in that Act concerning discrimination in arbitrator appointments. I recognise that it would be important for the Government to carry out a consultation prior to any decision on the matter to see whether such a provision would for technical or other reasons place the United Kingdom at a disadvantage in competing with other countries for the conduct of international arbitrations.
As I have said, this should not be the subject of an amendment to the Bill, not least because it is proceeding in accordance with the special expedited procedure for uncontentious Law Commission Bills. It is a matter for future consideration, possibly in relation to the Equality Act.
Lord Verdirame (Non-Afl)
My Lords, I declare an interest on this matter: I am a practising member of the Bar and my practice includes arbitrations including proceedings under the Arbitration Act. I am also a member of the Commercial Bar Association, but I had no involvement in Combar’s response to the consultation on the Bill.
I, too, welcome the Government’s decision to press ahead with this Bill so soon after the completion of the excellent work by the Law Commission, to which I pay tribute. The number and quality of the responses to the two consultations is also to be commended. It is a testament to the breadth and depth of expertise and experience in the field of arbitration that we are lucky to have in this jurisdiction.
I should like to say a few words in support of the conclusions reached by the Law Commission, as reflected in this Bill, on a couple of points. The first is the scope of the court’s review of an arbitral tribunal’s jurisdiction under Section 67 of the current Arbitration Act. This is addressed in Clauses 10 and 11 of the Bill. In its first consultation paper, the commission suggested that in order to avoid delay and costs for the parties, instead of a full review, there should be an appeal. After two rounds of consultation, the commission concluded that there should not be a radical departure from the current system, proposing instead some limited and pragmatic procedural improvements.
That is the right conclusion. A key question in any system of consent-based jurisdiction is who should police the boundaries of that jurisdiction. An arbitral tribunal can of course rule on its own jurisdiction under the principle of kompetenz-kompetenz, but it does not follow from this principle that that tribunal should be the final arbiter of its jurisdiction. Arbitration is successful because it is widely seen as having legitimacy. That legitimacy depends to a significant degree on the jurisdiction of the arbitral tribunals being subject to effective controls that go well beyond the self-policing by the same tribunal of its own jurisdiction.
In the wider world of international law, where consent-based jurisdiction is also the norm, an exorbitant jurisdictional determination by an international court or tribunal does not always have a clear or easy fix and that can create a legitimacy problem, and it sometimes does so. It was therefore important to preserve the architecture created under Section 67 of the Arbitration Act, as interpreted by our courts. At the same time, I believe that Clause 11 provides some protection to the winning party from the risk of unnecessary time-wasting and delay that follow from having to relitigate jurisdiction. Under Clause11, this objective would be achieved through the use of rules of court, which strikes me as a sensible and pragmatic solution.
The other question on which I wanted to touch was the one on which the noble and learned Lord, Lord Etherton, has spoken: the principle of discrimination and whether there should have been an amendment to ensure that it applied to the appointment of arbitrators. There were a number of problems with that, as the Law Commission rightly identified. One is that under Article V of the 1958 New York convention, it is stated:
“Recognition and enforcement of the award may be refused”
where it is shown that
“The composition of the arbitral authority … was not in accordance with the agreement of the parties”.
Another difficulty discussed in the consultation was that, particularly in international arbitration, it is quite common to require arbitrators to be of a nationality different from that of the parties.
In the course of considering this question, the commission helpfully set out the ways in which discrimination already applies to arbitration. That is so particularly through the duty of impartiality but also, as far as barristers and solicitors are concerned, through our professional codes of conduct. The obligation not to discriminate is, of course, a core professional duty.
It bears noting that in the 2022 review of discrimination in professional codes of conduct by the International Bar Association, England and Wales came out as one of the best jurisdictions. We have codes of conduct that prohibit discriminatory conduct by lawyers in any capacity, and not only in the exercise of professional functions. This matters because it is lawyers who advise clients on the contractual terms on the appointment of arbitrators and, ultimately, on whom to appoint. In doing so, in this jurisdiction, lawyers have to be mindful of their responsibility. The Law Commission was right to conclude on this point, after its thorough consideration of the question, that there should not be
“any further legislation within the Arbitration Act to prohibit discrimination, in particular in the appointment of arbitrators by … parties, because we think that this will not improve diversity of arbitral appointments, but could well lead to unwarranted satellite litigation and challenges to awards”.
My final, brief point is on Clause 1, which settles a complex question—one on which the case law had never been fully and satisfactorily settled. New Section 6A has the clear benefit of clarity and simplicity.
In sum, I too very much welcome this Bill. It is a timely and measured intervention in our law that we should all be grateful to the Law Commission for, and to the Government for pressing ahead.
Lord Hope of Craighead (CB)
My Lords, I too, I think in common with all your Lordships, very much welcome this Bill. It is plain from the Law Commission’s report that it is the product of a great deal of hard work on the parts of the Law Commission itself and those who responded to its papers in the course of this process.
The result is a compact measure that seeks to amend the Arbitration Act 1996 in 15 distinct respects. I do not think that anything in the Bill is controversial. On the contrary, the proposals will all contribute to the improvement of the law of arbitration in England and Wales in the various ways that the Minister explained in his helpful introduction. Our thanks must go to all the members of the Law Commission who contributed to this process and to His Majesty’s Government for finding time to bring the Bill before us. We very much hope it will achieve its results before the next election.
At first sight, the best guide to what has been going on might be thought to be found in Appendix 3 to the Law Commission’s final report, which sets out for the reader a list of all the suggestions that have not been taken forward. No less than 54 such suggestions are listed. I thought that this was perhaps quite a good indication of the amount of interest among practitioners that this project has generated. However, my sense of excitement was somewhat dampened when I read in paragraph 3.3 that almost all these suggestions were raised by only one consultee, and that there was, indeed, no widespread clamour for reform in respect of the various suggests that that consultee put forward. On the other hand, the consensus was that the 1996 Act works well, as indeed it does, and that root and branch reform was not needed or wanted. What was looked for, instead, was some updating and refinement of what we already have. Indeed, this is essential if we are to ensure that England and Wales remains the jurisdiction of choice for the resolution of international disputes.
The fact is that there is a very competitive market out there in the wider world. We must keep our heads in front. We do not want to lose our place to others in the Middle East and elsewhere, who are marketing their services vigorously to attract as much business as they can. That is why the work that the Law Commission has done in bringing this Bill forward is so important and so much in the public interest.
Leaving Appendix 3 aside, a word should be said about the work done by some very experienced practitioners in Brick Court Chambers, including my noble and learned friend Lord Hoffmann. I should mention that, although I am a door tenant there, I was not one of those practitioners. They worked to persuade the Law Commission to include a provision in the Bill about the law applicable to the arbitration agreement. I understand that what is now Clause 1 was not in the first draft of the Bill, but it is good to see that the Law Commission was persuaded that there was a need to clarify the rules as to its determination.
As the Minister mentioned in his introduction, the position in Scotland is set out in Section 6 of the Arbitration (Scotland) Act 2010, which provides that:
“Where (a) the parties to an arbitration agreement agree that an arbitration under that agreement is to be seated in Scotland, but (b) the arbitration agreement does not specify the law which is to govern it, then, unless the parties otherwise agree, the arbitration agreement is to be governed by Scots law”.
There is currently no such provision in the Arbitration Act which precedes this Bill. On the contrary, as the law stands in England and Wales, no necessary inference can be drawn that by choosing an English seat, and with it English law as the law which governs the proceedings in the arbitration, the parties also, by implication, have chosen English law as the law which governs the arbitration agreement itself.
The need for clarity was rendered all the more pressing by the decision of the UK Supreme Court in Enka v Chubb in 2020. In that case, it was held that the question as to the law applicable to the agreement was to be determined by applying English common law rules for resolving conflicts of laws. According to those rules, the law applicable to the arbitration agreement was the law chosen by the parties or, in the absence of such choice, the system of law with which the arbitration agreement was most closely connected.
The reasoning in that case—it was a majority decision, as mentioned earlier—was perfectly orthodox, but it seemed to open up issues which, in this context, were best avoided. It was argued that the better view was that where there was no agreement, the law to be applied to the arbitration agreement should be the law of the seat of the arbitration. That simple solution is what is now provided for in new Section 6A(1) of the 1996 Act, which is set out in Clause 1 of the Bill. This provision achieves the clarity that is needed, in line with the position in Scotland.
However, new Section 6A(2) adds a rider to what is set out in Section 6A(1), which perhaps need to be clarified. It states that:
“For the purposes of subsection (1), agreement between the parties that a particular law applies to an agreement of which the arbitration agreement forms a part does not, of itself, constitute express agreement that that law also applies to the arbitration agreement”.
The words “of itself” beg the question: what do they mean? What do they envisage as necessary to displace the default rule that, where no such agreement is made, the law to be applied is the law of the seat of the arbitration?
These questions arise because it may be said that the wording of subsection (1) is perfectly clear in itself; it already uses the word “expressly”. We are told there that the law applicable is
“the law that the parties expressly agree applies to the arbitration agreement”.
What, then, does subsection (2) add to what is already provided for in subsection (1)? Indeed, do we need that provision at all? I hope that, at some point, clarity could be given as to the reasoning behind subsection (2) so that we fully understand how it interacts with what is already set out in the clearest language in subsection (1).
That point aside, the wording of the other provisions in the Bill, all of which are very welcome, do not seem to me to give rise to any questions. I hope that the Bill will receive a Second Reading in due course and as soon possible, and I wish it well as it proceeds through its remaining stages in this House and in the other place.
Lord Faulks (Non-Afl)
My Lords, I too welcome the Bill and agree with what noble Lords have said about it. The Library Note on the Bill suggests that the arbitration industry centred on London could be worth at least £2.5 billion to the UK economy each year, although that is described as possibly an underestimate.
There have always been some areas of doubt about certain aspects of the law in relation to arbitration and the Bill is a welcome clarification of many of them. I did not wholly anticipate the problems that the noble and learned Lord, Lord Hope, identified in Clause 1 —it seemed on the face of it to be the answer to what was a somewhat uncertain position as to the law—and I am sure the Minister will consider carefully what he said.
That change and others have been generally welcomed, not least by the Chartered Institute of Arbitrators. I declare an interest as a fellow of the institute, although I have to say that my services have not been called upon very often. I should also declare that the Independent Press Standards Organisation, which I chair, provides for arbitration—extremely cheaply—for those who have complaints against regulated newspapers and their online manifestations. Unfortunately, lawyers for the parties seem to prefer litigation to arbitration.
There is one area that the Law Commission considered but decided not to include in the draft Bill. This was a matter raised not just by the one very assiduous consultee referred to by the noble and learned Lord, Lord Hope; it was in relation to the secrecy or confidentiality of arbitration. Confidentiality has long been a hallmark of the arbitration process and a significant attraction to users. The rule is not absolute. The contours of those circumstances where one party or another loses confidentiality or secrecy have been developed by the courts. I understand that the reason for omitting any provisions about this may have been that it is regarded as preferable to leave the law to the courts rather than try to capture in legislation in what circumstances there should be a departure from the general principle. It is, of course, always open to those entering into an arbitration agreement to be specific about these matters.
The case law acknowledges that the courts have an important role in ensuring standards of fairness in arbitrations. The 1996 Act, particularly Sections 67 to 69, provides the basis on which a party can challenge an arbitration award in the courts. However, there is an inherent tension between the principle that justice should be both done and seen to be done and the privacy and confidentiality that go with arbitration.
My attention has been drawn to a case reported a few months ago before Mr Justice Robin Knowles, the Federal Republic of Nigeria v P&ID. In a lengthy and comprehensive judgment, Mr Justice Knowles found that P&ID had practised
“the most severe abuses of the arbitral process”.
The judge said in his decision that it
“touches the reputation of arbitration as a dispute resolution process”.
He asked himself whether, on the facts, there was an irregularity within Section 68 of the 1996 Act and found that, notwithstanding the high bar that has to be surmounted to prove a serious irregularity, it had been proved. He found that documents had been obtained by fraud and in breach of professional obligations, that deliberate lies had been told to the panel and that there had been wholly inadequate disclosure. In his view, it was important that Section 68 was available to “maintain the rule of law”.
The case involved huge sums of money that the arbitration panel decided were owed by Nigeria to a shell company in relation to a gas pipeline. After carefully examining the facts and concluding as he did, the judge said:
“I hope the facts and circumstances of this case may provoke debate and reflection among the arbitration community, and also among state users of arbitration, and among other courts with responsibility to supervise or oversee arbitration. The facts and circumstances of this case, which are remarkable but very real, provide an opportunity to consider whether the arbitration process, which is of outstanding importance and value in the world, needs further attention where the value involved is so large and where a state is involved”.
In discussing the principle of confidentiality, the judge said:
“The privacy of arbitration meant that there was no public or press scrutiny of what was going on and what was not being done. When courts are concerned it is often said that the ‘open court principle’ helps keep judges up to the mark. But it also allows scrutiny of the process as a whole, and what the lawyers and other professionals are doing, and (where a state is involved) what the state is doing to address a dispute on behalf of its people. An open process allows the chance for the public and press to call out what is not right”.
The judgment was unusual and should cause the arbitration community to reflect on the risks inevitably involved in the confidentiality of arbitration proceedings. I do not have any amendments to suggest for the Bill, but I respectfully seek a response from the Minister on the serious questions this judgment raises about the appropriateness of arbitration, in particular its confidentiality, when the facts are similar to those of that case. Are the Government satisfied that there is no need for further provision and the matter can be left to individual judges, or has this case caused any change of heart such that they will legislate specifically to avoid a repetition? I do not necessarily expect a response now, except in general terms, but I ask for a more substantial response in writing.
I do not suggest that there is anything inherently unsuitable in encouraging arbitration, for the reasons we have heard, but I wonder whether there are sufficient safeguards to prevent the abuse of the process so starkly illustrated by this case. That said, I welcome the Bill.
Lord Thomas of Cwmgiedd (CB)
My Lords, I shall be brief as I agree with almost everything that has been said so far. I declare my interests as set out in the register in respect of arbitration and institutions that try to engage with those in arbitration to ensure better enforcement and a better relationship with the courts.
This is an excellent Bill. I commend the work of Professor Sarah Green, who has produced a number of proposals to modernise our law. However, it is important to reflect on one matter. The attempt to establish an online procedural rule committee was frustrated by three general elections, even though it was an uncontroversial, technical piece of law. As it is inevitable that there will be a general election within 13 months—it could be much sooner—I hope we will get on with this Bill as soon as possible so that it is not lost. Progress and speed are essential.
My noble friend Lord Faulks raised concerns about arbitration in London in relation to fraud and other matters. It is important to look at this in the context of what my noble and learned friend Lord Hope said about the competitiveness of the arbitration market. Without any doubt, London is under pressure. It is extremely important that London does not in any way fall under suspicion that something unsavoury can be done in its arbitrations or through its arbitral process.
I therefore hope that the Ministry of Justice takes up this suggestion or, given that its funds are almost non-existent, gets some work done by those who profit so much from the success of London—the Law Society, the Bar Council and arbitral institutions—to ensure that people understand three things: first, that the case to which my noble friend referred is an extraordinarily rare and quite exceptional example of things going wrong, and that it is easy for one case to contaminate things; secondly, that in other debates the legal profession has unfortunately gained a reputation in some quarters for not being anxious to have transparency; thirdly, that there has been concern about the tactics lawyers have used, particularly SLAPPs, on which the Minister brought forward such an important amendment in recent legislation.
I am sure that there is no problem in London, but it would be very good if a small body could quickly report that everything possible is being done to ensure that London arbitration is fair, honest and clean, and that the issues which arose from the Nigeria case and the concerns sometimes expressed about lack of transparency do not affect its fundamental integrity. Otherwise, I have a horror that that kind of criticism will undermine London’s competitiveness. We must not be complacent. However, this is not a matter for the Bill, which needs to go through before the general election.
Lord Hoffmann (CB)
My Lords, I will make a declaration. Since I retired from being a member of your Lordships’ Appellate Committee some 14 years ago, I have practised as an arbitrator in London, including having presided over the Nigerian arbitration to which my noble and learned friends on my right referred.
I have come only to make a modest suggestion for improvement, which has already been anticipated by my noble and learned friend Lord Hope, in relation to new Section 6A(2). I can see entirely why it has been inserted into the draft; it has been done in case some literal-minded judge, not really knowing much about the background to this legislation, might say, “It says that the law which the parties expressly agree applies to the arbitration. The parties have expressly agreed that the document in question shall be governed by the law of Patagonia, so why doesn’t that include the arbitration agreement, which is part of that document?” As I say, you have to be fairly literal and ignorant to be able to come to such a conclusion, but there it is—that is what it is for.
However, I am afraid that, as I think my noble and learned friend Lord Hope pointed out, the existing new Section 6A(2), which is meant to deal with that problem, has problems of its own because of the words,
“does not, of itself, constitute express agreement”.
If you say that, you can say, “What else is needed, and what else will count as sufficient?” You find that all you can do is to go back and say, “Well, you need an express agreement that the arbitration agreement shall be governed by a different law”. I do not want to say anything which might possibly derail the special procedure under which the Bill is going through the House but, if it were possible quietly to drop new Section 6A(2), that would be an improvement.
The Minister said that we are now aligning our law with the law of Scotland, but the law of Scotland does not have such a provision—it manages perfectly well with Section 1. Likewise, if you sign up to the rules of the London Court of International Arbitration, you get the law of Scotland, not this extra new Section 6A(2). The draftsmen of both those instruments had sufficient confidence in the judiciary to be able to arrive at the proper conclusion, simply on the basis of what is now Section 1. That is the only contribution which I have to make to your Lordships’ debate.
Lord Mance (CB)
My Lords, I shall make just a very brief intervention. First, I disclose that, since retiring from practice as an arbitrator in the Supreme Court, I have also taken part in the representations which were made to the Law Commission, and indeed met with it, and I was one of the judgment writers in a case called Dallah against the Government of Pakistan, which forms part of the background to the clause which amends Section 67.
I echo the congratulations to the Law Commission on its responsiveness and diligence in this matter. The fact that the most significant clause in practical terms emerged only part way through the consultation process shows the commission’s willingness to listen. The way it has dealt with this seems largely satisfactory. I hear what was said about the words “of itself”, which must be read against the background that, as my noble and learned friend Lord Hoffman said, express agreement otherwise is required. There may be a difference regarding Scottish law here, which says simply
“Unless the parties otherwise agree”.
It does not require them “expressly” otherwise to agree. However, that sort of nuance will probably not be decisive. I suspect that the courts will make good sense of Clause 2, even though it looks a bit awkward.
I will say a few words on the important question: what is the approach to review? This will depend in part on the nature of the rules that are permitted to be made under Clause 11. However, I heard the Minister say that the aim was that the challenge should not be de novo. That is an oversimplification; the position is quite nuanced. In new subsection (3C), provision is understandably made for circumstances whereby someone, having argued a jurisdictional point before a tribunal, then seeks to raise objections that they could have raised but did not previously, or seeks to allow evidence that they could have adduced but did not before the tribunal. Not surprisingly, that sort of conduct, without good excuse, potentially will be sanctioned, assuming rules giving effect to new subsections (3C)(a) and (b) are passed.
Otherwise, the scene is largely discretionary. New subsection (3B) simply indicates what type of provision may be made by rules where the tribunal has already ruled, and new subsection (3C)(c) prescribes that,
“evidence that was heard by the tribunal must not be re-heard by the court, unless the court considers it necessary in the interests of justice.”
Like my noble friend Lord Verdirame, I emphasise that it can be important to retain the ability for a court to review de novo the jurisdictional basis on which a tribunal acted, so long as it does not fall foul of one of the situations that I mentioned. It is wrong for a tribunal’s analysis of its own jurisdiction to be axiomatically final. That would be a classic case of bootstrapping and there is a considerable risk—which, I am sure, escapes no one —of conferring on to individuals the power to be arbiters of their own powers. It is healthy to have a review.
That is also internationally contemplated. Take the New York convention, which contemplates that the court of the seat will have an important role in reviewing, among other things, the jurisdictional basis of an arbitrator’s activity if the arbitrators have exceeded their jurisdiction in setting aside their award. The convention also contemplates that enforcement courts may have a parallel role, although their activity may be subject to considerations of issues of stop law and abuse of process if there has been a prior decision by the court of the seat or, indeed, by another enforcement court.
I join my noble friend Lord Verdirame in what he said on this area. Otherwise, I strongly commend the Bill.
Lord Beith (LD)
My Lords, it is a very good principle in the House of Lords to speak mainly on things of which you have a great deal of knowledge and experience. That principle has been followed in this debate admirably so far, and would have continued to be followed had my noble friend Lord Marks of Henley-on-Thames not been otherwise engaged today, leaving me with the task without that essential qualification.
What a fascinating debate it has been. We had the long sweep of history from the noble Lord, Lord Hacking, whose knowledge goes back even further than I had realised. The emphasis on the competitive market in arbitration, in which England is currently very successful, and its wider legal implications, which the noble and learned Lords, Lord Hope and Lord Thomas of Cwmgiedd, mentioned, means it is important to keep the laws and procedures up to date so we can continue to get that benefit. It is indeed competitive: was it last year or the year before when Singapore equalled the amount of arbitration that England had been able to achieve?
In the course of the debate, the noble and learned Lord, Lord Hope, initiated a discussion, in which others joined, of the additional subsection in Clause 6 of the 1996 Act. When I read it, I took it to mean that you could not automatically read across, from the contract being by English law, that the arbitration would necessarily be governed by the law of the seat unless it was expressly stated. It seems bizarre that you could conduct proceedings on a contract that was expressly stated to be of English law but you chose to do it by arbitration not under English law, but sometimes Bills have to prohibit bizarre things from happening. No doubt the Minister will be able to explain that to us.
I was helped by the noble Lord, Lord Faulks, who saved me the task of explaining the Nigerian case, the anxiety that it promotes about how corruption could be concealed within arbitration proceedings and what restraints there were on preventing that from happening by the clear, common-sense statement that if you discover serious corruption, you should not allow it to be buttressed or assisted by the legal process that you are engaged in—that is, the process of arbitration. Arbitration takes place under commercial confidentiality, but it is not meant to be there as a means of allowing corrupt actions to be perpetrated. If the Minister could help us on what might be necessary to deal with that, I would certainly be very grateful. However, I recognise that amending the Bill at this stage, given the special procedure to which it is subject, is not necessarily an easy option even if we could agree on what that amendment should be.
The history of arbitration in England and Wales in recent years is a huge success. It is a major source of foreign earnings and, even more importantly, a great reputation support for our legal system in general and, consequently, for our commercial success. The 1996 Act has operated as a model of its kind and has worked extremely well. There are a huge number of commercial contracts, often nothing to do with England or English entities, that include English arbitration clauses, making England the seat of any arbitration and often subject to English law. A large number of such contracts make English law the law of the contract, not just the law of the arbitration. Undoubtedly significant in that success is the reputation of English arbitrators, including many well-known retired judges—some of them might be Members of this House—for legal incisiveness, incorruptibility, impartiality, courtesy and an unfussy and relatively informal style.
The Bill makes small changes to the Arbitration Act 1996 and introduces some reforms, all of which will be beneficial. It is a model of the Law Commission’s work and, welcome to say, a model of Parliament attending to the Law Commission’s work with due expedition, which has not always been the case. When I chaired the Justice Committee in the Commons, we were constantly complaining about the work that the Law Commission had done that was going nowhere because parliamentary opportunities had not been found to take it forward. This is a very good example of the Government taking it forward and using the fast track that is available. The work itself—two public consultations and thorough consideration of the responses —is also commendable.
The debate so far has identified most of the significant features of the Bill. Other things that I have not mentioned so far include the duty of disclosure, which may be important for parties from outside the UK who are not accustomed to the way in which normal practice would support disclosure in this country. Having an explicit provision may be helpful from that point of view.
Then there is the power to make awards on a summary basis, which reflects the power that courts have to make summary determinations where one party or the other has no real prospect of success. That does not have to be in relation to the whole claim but can relate to particular issues, and the benefit is to stop parties running hopeless points, often at the risk of running up costs for both sides that may not prove recoverable, and at further risk of delaying the proceedings.
Good case management by arbitrators, with the help of the parties in identifying and defining issues suitable for summary determination, could save time and costs. Importantly, it can encourage parties to settle proceedings where summary awards are given on particular issues.
Then we have in Clause 11 the streamlining of the procedure for determining challenges to the courts for awards on jurisdiction under Section 67. That, too, is a helpful improvement in the Bill.
This Bill has been carefully prepared. We spend a lot of time in this House looking at Bills which have been woefully or inadequately prepared, contain numerous unresolved issues or do not even give proper effect to their stated purposes. We cannot say that about this. It is a model of its kind, as is the way that it has been gone about, and I welcome it.
Lord Ponsonby of Shulbrede (Lab)
My Lords, the noble and learned Lord, Lord Bellamy, introduced the Bill by saying “Everyone in the Room knows more about this than me”. There is an exception—I suspect that I know less about it than any other noble Lord here.
I am the only speaker in this debate who is not a lawyer. However, I have employed a lot of lawyers in my time and my business experience in employing them was in trying to avoid litigation or arbitration. I was very much of the view that it was not a route that would be beneficial to the businesses which I was involved with, but it was very welcome that that resource was there. Litigating or arbitration within England and Wales was trusted by all international parties with which I was dealing. There was never any question about the jurisdiction in which any future disputes would be agreed and it was always an easy thing to agree with international colleagues.
My noble friend Lord Hacking gave us a tour de force on the historical context. He took us all the way back to 1698 and talked about his early days in this House. I have been around here quite a long time too and remember very well Maurice Peston, Peter Fraser and a number of the other noble Lords to whom he referred when the 1996 Bill was being considered, although I do not go back as far as 1979.
The noble and learned Lord, Lord Etherton, opened by congratulating the Government on the Bill, as I think everyone did. However, it is fair to say that all noble Lords, while congratulating the Government, raised particular issues. The noble and learned Lord referred to anti-discrimination procedures, the Equality Act and the appointment of arbitrators. I will be interested to hear what the Minister has to say on that.
The noble Lord, Lord Verdirame, spoke in a wider context, if I can put it like that, about how English and Welsh arbitration fits within an international framework. I have been on the edges of those types of procedure and they have been wholly unsatisfactory, from my point of view. There is an international frame- work for dealing with matters when they cross boundaries and, when there are disputes about jurisdiction, it can be an extremely lengthy and expensive procedure in which to be involved. When there are these jurisdiction issues, I would be interested to know whether the Bill may, for example, go some way to resolving them, because I understand that they can be difficult.
The noble and learned Lord, Lord Hope, asked a particular question about the Scottish position on arbitration. Again, I will listen to the Minister’s response on that.
The noble Lord, Lord Faulks, raised Nigeria v P&ID Ltd. This case was referred to in the Explanatory Notes and I had a look at that judgment. It seemed that the concern raised within it by Mr Justice Knowles was whether going through the arbitration process itself can be used as a way of money laundering. That is a concern. The noble Lord asked a number of questions of the Minister on whether, in that set of circumstances with those particular concerns raised, the Bill will go any way to addressing those concerns or whether it is such a particular set of circumstances that it is not appropriate for this Bill. I thought that was an interesting question.
The noble and learned Lord, Lord Thomas, essentially raised the same point about making sure, to quote his words, that London arbitration is seen as fair, honest and clean. If it is anything less than that, it will undermine its competitiveness and its standing in the world.
We then had the two speakers in the gap, the noble and learned Lords, Lord Hoffmann and Lord Mance. They both spoke with huge amounts of expertise and raised their own particular technical points, which I am sure the Minister will answer fully. The noble Lord, Lord Beith, concluded that he agreed that this is an important and well-prepared Bill—a model, to use his word, of how Bills should be handled in this House.
The Labour Party obviously supports this Bill. The only point I have for the Minister is that none of the measures introduced in the Bill can be easily measured. Will there be any sort of assessment, in a year or two’s time, of whether the changes introduced are working satisfactorily and whether this may need to be returned to in the next few years? Whether the changes are actually having any impact would not seem to be easily measured but, other than that, we support the Bill.
Lord Bellamy (Con)
My Lords, I thank all noble Lords and noble and learned Lords for their contributions to this debate, in particular for the broad welcome that the Bill has received from the Committee. I take it on myself—authorised, if I may, on behalf of this Committee —to pass on our warm thanks to the Law Commission and its team, one of whose representatives are here, for the extraordinary work that has been done on the Bill, and indeed to all those who participated in the consultation. As has been said, it is a model of its kind. All legislation should aspire to reach this kind of standard. That is the first thing I need to say.
Secondly, I also warmly congratulate the noble Lord, Lord Hacking, on his tour de force, going back to 1698—almost as if he was there in 1698, though not quite perhaps—and thank Mr Landau for coming today and blazing an earlier trail, in which we follow with diffidence as the years go by. We are well aware of the points he made on the importance of achieving a good balance between the courts and arbitration on the one hand, and promoting arbitration in this country and pursuing that objective, as the Law Society has today underlined.
With those introductory comments, perhaps I could deal briefly with at least some of the points that have been made, bearing in mind that we still have the Public Bill Committee to come; further points can, of course, be raised then. The equality point, raised by the noble and learned Lord, Lord Etherton, and commented on by the noble Lord, Lord Verdirame, is a difficult one. The Law Commission decided not to proceed to do anything about it but it is something that we can, of course, keep under review. When the Equality Act next comes up for consideration, I anticipate that this point would need to be addressed.
The noble Lord, Lord Faulks, raised the Nigeria case and the tension inherent in arbitration between privacy and transparency. I will make two points about that case. First, in a sense, it established that London is capable of dealing with this kind of fraud, because there was a judge who was able to expose it, and a procedure and, in the end, it was demonstrated that the supervisory jurisdiction in England and Wales works very well.
Secondly, I agree with the noble and learned Lord, Lord Thomas of Cwmgiedd, that it was almost certainly a one-off—a quite extraordinary exception to the general rule. However, the Government ought to take under advisement whether we should do anything to further establish or reinforce what is undoubtedly the case—that London is clean, to use the word of the noble and learned Lord. With the co-operation of the professions, we ought to quietly establish whether anything further should be done to ensure that that is indeed the case. However, it was a disturbing case and, as the noble and learned Lord, Lord Thomas, observed, question marks remain in some cases, over some aspects of the legal profession in relation to SLAPPS, transparency and so forth. In some areas, further consideration may be necessary in due course.
I am glad that the issue with the words “of itself” in new Section 6A(2) has been drawn to the Government’s attention. Again, we should reflect on that. I think that I understand what the draftsman is driving at, but perhaps we should embark on further amendment to that section and whether it is necessary—perhaps we should consider that further.
The noble and learned Lord, Lord Mance, raised the issue of the review under Clause 11 and the whole question of what the rules of court should do and how far they should go. That may link back to our earlier discussion about the Nigeria case, because this is the court taking a very active review role. No doubt there will be a consultation in due course on the rules of court, and it will be important to bear in mind the points made today.
Those were the main points raised. The noble Lord, Lord Ponsonby, asked whether we planned to have an assessment in a year or two. That is a little far ahead for the Government to be looking at the moment.
Lord Bellamy (Con)
However, this is an area where Governments, the profession and practitioners are constantly aware of the need for London to be competitive, fair, open and transparent and to prosper. As the years pass, this will be reviewed over time to ensure that London remains competitive by the natural play of market forces.
I think I have covered the main points raised. I thank all noble Lords for their contributions.
Lord Hacking (Lab)
Could I draw the Minister’s attention to Section 61 of the 1996 Act, which the Law Commission has not pronounced upon? This is the section on the power of the arbitrators to award costs, and how they should do so. Section 61(2) says that
“the tribunal shall award costs on the general principle that costs should follow the event”.
That is the regular jargon used in cases conducted before our law courts. At the very end of the case, the winning party gets up and asks the judge to award costs following the event—namely, that that party has won and therefore the other party should pay all the costs. That goes to the point that I was making that this should be a promotional Act, attractive to those from overseas—and how are those overseas persons meant to know or understand what
“costs should follow the event”
means?
It is more complicated than that. This came out in two cases, both under the jurisdiction of the wonderful Law Lord, Tom Bingham. When he was a mere Mr Justice, he did the case of “Catherine” in 1982—and then, when he was the Lord Justice of Appeal, he presided on the Norwegian Cruise case of April 1988. In both those cases, he did not follow the normal rule of costs following the event, because in both those cases the winning party had taken up excessive time on matters that it lost in the dispute. Therefore, it is not so simple as costs following the event and the loser paying.
What I suggest concerning this clause is that we take the opportunity during the passage of the Bill to remove that phrase and leave it as a simple judgment of the arbitrator or arbitrators—what is the fair order on costs that that they should make.
Lord Bellamy (Con)
My Lords, I thank the noble Lord, Lord Hacking, for that intervention. As far as I know, the Law Commission did not consider that specific question, so I am not entirely sure, as of now when I am on my feet, to what extent we should widen the debate in the context of this particular Bill. But I shall take his point back and further consider it, and see whether the Government have a position on the point that he very strongly makes.