Arbitration Bill [HL]

Lord Hacking Excerpts

Committee stage
Wednesday 11th September 2024 Lords Chamber

Moved by

[Lord Hacking]

2: Before Clause 10, insert the following new Clause—
“Award of costsIn section 61(2) of the Arbitration Act 1996 (award of costs), for the words from “costs should follow” to the end substitute “a reasonable amount of the costs of the successful party should be paid by the other party or parties, but account should be taken of costs incurred by the successful party which were unnecessary or excessive in whole or in part and which should not fall to be paid by the other party or parties.””

[Lord Hacking (Lab)]

My Lords, I will pause for a moment to allow Members of the House to leave, so that only those taking part in this Committee remain. I look to my right with some caution, because when I stood in support of my Amendment 1, I was unaware of a bank of noble and learned Lords on my right-hand side—there were three of them. Now there is only one: the noble and learned Lord, Lord Hoffman, who is sitting in his place. He told me over tea that the reason he is remaining is to oppose my next amendment. He opposed my Amendment 1 with some fierceness, and now he is staying back to oppose my next amendment.

This amendment goes back 28 years to the passage of the Arbitration Bill in 1996. I then objected to the introduction of the principle of “costs following the event”, which was in general usage in the English courts when the successful party was seeking costs against an unsuccessful party or parties. It was generally thought then that the event meant the winner won the costs, but Mr Justice Bingham—later Lord Bingham, Lord Chief Justice and then a senior Law Lord—said that was not right. It was in a case called Re: Catherine that Mr Justice Bingham said we should look at which party was responsible for what costs, and that the costs order should accordingly be made. My argument was that this obscure phraseology went against the drafting of the whole Bill.

Noble Lords who remember those days and now look at the Bill may remember that there was much praise for Mark Saville, later the noble and learned Lord, Lord Saville, who was chairman of the DAC that drafted the Bill—assisted by the secretary of that committee, the young barrister Toby Landau, and the wonderful parliamentary draftsman Geoffrey Sellars. The joy of the 1996 Act is that you can read it, passage by passage, in its clear, logical way and its clear, logical language. What a contrast that is to so many Bills that come before us—the detail and complication of many clauses cause most of us to put cold towels around our heads before we have a chance of understanding what is meant. I am not sure what the phraseology was then, in 1996, of the rules of the Supreme Court or the county court—in other words, the White Book and the Green Book—but I know now what the rules are in the new CPR. In particular, CPR rule 44.2(2)(a) says that

“the unsuccessful party will … pay the costs of the successful party”.

That is in the clearest possible language, so why should we continue to inflict upon the international community these ancient words of “costs following the event” when they are not used anywhere else? Why do international parties have to seek out the meaning? I am not suggesting that my drafting is perfect—indeed, noble Lords who have been looking at the Marshalled List will note that I made a mistake and had to re-draft—but it can all be quite simply done without any delay. For example, my drafting could be put in front of the rules committee of the Supreme Court, which can be consulted, as can the Chartered Institute of Arbitrators, the London Court of International Arbitration, the ICC and so forth. There is no cause for delay. If the drafting of my amendment is thought to be worthy of improvement, I accept that, but can the Minister—and this is the second time I am asking him, almost imploring him after the response I got to my earlier amendment—keep an open mind and not leave this strange phraseology of “follow the event” in Section 61(2) of the Arbitration Act?

[Lord Hoffmann (CB)]

My Lords, I greatly regret that the noble Lord should have cast me as his personal nemesis, particularly since it is entirely desirable that an arbitration tribunal should have the power to do what he said Lord Bingham did in the case to which he referred; that is, to distinguish between the cost of issues on which people have been successful and those on which money has been spent and on which they have been unsuccessful. However, the tribunal has such a power already.

I am sure that my friend the noble Lord, Lord Hacking, would recognise that in the end the power to award costs is entirely a matter for the discretion of the tribunal. It can take into account whether it thinks the party has spent too much or whether it has succeeded on this or that issue. All these issues can be taken into account. What it says that is salutary—this is something which attracts persons to come to London and have arbitrations under English law—is that in the ordinary way, if you have not spent too much and not lost on some issues, if you have won the case you will get your costs. That is a very attractive thing to offer to people who are about to launch an arbitration.

We have in the 1996 Act a time-honoured formula which everybody knows. They know exactly how it works and I really see no advantage in substituting a new formula, when nobody quite knows now how it is going to work.

--- Later in debate ---

[The Parliamentary Under-Secretary of State, Ministry of Justice (Lord Ponsonby of Shulbrede) (Lab)]

My Lords, perhaps I might read out from Rule 44.2 of the CPR. It says that

“the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party; but … the court may make a different order”.

There is then considerable further guidance on the assessment of costs in the remainder of Rule 44. I can say, as a non-lawyer, that I think that is pretty clear. I note the point that the noble Lord, Lord Wolfson, made about having some sympathy with the language used, but the language which I just quoted is quite straightforward.

My noble friend Lord Hacking said that he was imploring me and he called the noble and learned Lord, Lord Hoffman, his nemesis. I might be my noble friend’s nemesis as well, because I will be arguing to reject his amendment. Of course, I thank him for tabling it. It is right that it is common practice that arbitrators already have great discretion on this matter under Section 61 of the 1996 Act. The Law Commission has made no recommendations for reform of Section 61, so we believe there is no reason for having a reform that may introduce some level of uncertainty, which we do not believe is necessary.

The previous arbitration Acts of 1889 and 1950 simply provided that costs were at the discretion of the arbitrators but the 1996 Act then provided the current default rule, which mirrored the position in the rules of the Supreme Court, which were the court rules then in force. Although the language has changed with the CPR now in force, the underlying principle is still the same. The CPR, and the RSC before them, take the view that costs should follow the event as a fair default rule. Section 61 allows arbitrators to depart from that rule as appropriate. In substance, therefore, Section 61 already allows the arbitration tribunal to award whatever costs it thinks fair.

The Law Commission received no representations from stakeholders that Section 61 was causing any difficulties in practice, and it is unusual to change the language of an Act if there is no change in principle. Indeed, it is possible that the amendment could be interpreted as a new, untested principle. In the light of this, I am grateful for the opportunity to clarify the current arrangements and would suggest that no amendment is needed. I therefore invite my noble friend to withdraw his amendment.

[Lord Hacking (Lab)]

My Lords, I intend to withdraw this amendment but perhaps I could say a short word before I do that. Of course, I have to do it because I have no support from anybody; I am doing no better than I did 28 years ago. I still say that this is unfortunate terminology and that it would be much more sensible if we brought the description of what decision should be made by the tribunal on costs into modern language, but if noble Lords like this ancient phrase of following the event they can chase around and look at Mr Justice Bingham’s judgment in Re: Catherine and so forth.

So I am in no better position than I was 28 years ago. However, there is one point I would like to make, which the noble Lord, Lord Wolfson, correctly made when he drew attention to Section 55. He could have drawn attention to Sections 62, 63, 64 or 65, because all of them deal with various provisions that are applicable to the cost issues that the tribunal faces. I respect and agree with that. I agreed with it 28 years ago and I agree with it now, but I still think it would be much nicer if we dropped this strange phraseology of costs “following the event”.