Arbitration Bill [HL]

Lord Hoffmann Excerpts

Committee stage
Wednesday 11th September 2024 Lords Chamber

It will not be possible, unfortunately, for the Committee chaired by the noble and learned Lord, Lord Thomas, to meet again. However, answers can be easily obtained if my noble friend the Minister would kindly help. The House would then know the answers, within a month of responses being received, on the drafting of my amendment. Above all, I ask my noble friend the Minister to have an open mind. As far as we know, unlike last time, this Government are not under pressure as there is no danger of a sudden Dissolution, so there is time to make proper inquiries so that this very important amendment is included in the Bill. I beg to move.

[Lord Hoffmann (CB)]

My Lords, I declare an interest in that, since retiring from the Appellate Committee of your Lordships’ House, I have practised as an arbitrator. More to the point, I was the presiding arbitrator in the Nigerian case to which the noble Lord referred. Of course, no one could object to the sentiment behind the noble Lord’s amendment—we all disapprove of bribery and corruption—but the question your Lordships have to think about is: what does that mean we arbitrators are supposed to do in practice?

Take, for example, the Nigerian case to which the noble Lord referred. It was a claim for breach of contract against the Government of Nigeria: they were supposed to supply the claimants with quantities of gas over a very long period, but they did not do so. The question was: was that a breach of contract? If it was, what were the damages to be? No objection was made on the validity of the contract. We heard the arguments about whether there had been a breach, and we decided there had. Eventually, at another hearing, we went into the question of what damages had to be paid. Arguments were again brought, with expert witnesses on both sides, and we came to the conclusion that it was a large figure, because the gas was due to have been supplied over a period of 25 years and it all added up. That was the rub.

As the noble Lord said, at the hearing before Mr Justice Knowles it turned out that there had been some bribery and corruption in obtaining the contract and in the conduct of the litigation. None of this was known to us. So the question is: what ought we to have done? Should we have said to the parties at the beginning, “By the way, can you please assure us that there has been no bribery and corruption?” It seems an extraordinary ritual that we would have had to go through, and it would have to be the case in every arbitration.

Arbitration is a consensual arrangement. The parties have agreed that each of them will come before a tribunal, that each will present his case and that the tribunal will decide on the basis of the arguments the parties present. Is it consistent with that form of decision-making that the tribunal should attempt to dig away at a point on which the parties have not relied? Of course, if one of the parties suspects that there has been bribery and corruption on the other side, so to speak, that would enable it to resist the application, it would no doubt do so. But, in a case in which neither party raises this point, it is difficult to see what the arbitrators can do.

It is also difficult to see why that should not also be the case in ordinary litigation in the Commercial Court. Is the judge in the Commercial Court to say to the parties, “Has there been any corruption? Nobody’s mentioned it yet, but can you please tell us and inquire as to whether there’s been corruption?” It is quite inconsistent with the way in which litigation and arbitration are conducted that the tribunal should have to take that sort of active investigatory role.

As far as I can see, all that introducing this amendment would do is add a formalised ritual to the conduct of arbitrations, and it may even provide a technical ground on which a party who has lost an arbitration can say, “Well, it’s true that I can’t say there was any corruption, but the tribunal didn’t do enough to investigate whether there was, and that was a breach of its duty under this new provision in the Arbitration Act”. It would therefore create uncertainty and unnecessary difficulties in the way in which arbitrations are conducted. For that reason, I invite your Lordships to reject the proposed amendment.

[Lord Hope of Craighead (CB)]

My Lords, I entirely endorse what my noble and learned friend Lord Hoffmann has said, but I would like to say a word about the procedure that the noble Lord, Lord Hacking, has invited the Minister to adopt. Surely the stage of conferring with people as to what they think about this amendment has passed. This matter could have been raised in the Committee of the noble and learned Lord, Lord Thomas —it was not, of course—but now it is a matter for this Committee to decide whether or not to accept the amendment. It is as simple as that. With great respect, I think it is a matter for the Committee and not for anybody else now. I agree with my noble and learned friend Lord Hoffmann that this amendment should not be accepted.

Arbitration Bill [HL]

Lord Hoffmann Excerpts

Committee stage
Wednesday 11th September 2024 Lords Chamber

[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.

[Lord Wolfson of Tredegar (Con)]

My Lords, I hope that I can be relatively brief because this is a short point. As the noble and learned Lord, Lord Hoffmann, said, the costs of any arbitration are in the discretion of the tribunal. I would add only a slight gloss on that. As the noble and learned Lord knows, there is provision in the Act that if the parties have agreed the result or the provisions on costs, the tribunal has to respect that agreement, with one exception in the Act. Of course, that underlines a very important point: the whole arbitral process is consensual and contractual. We should therefore tread very lightly in this area generally, and especially when we are considering making changes to the terms of the Act.

With respect to the noble Lord, Lord Hacking, I have a certain amount of sympathy with his language point because we do not use “follow the event” anymore. That phrase is no longer used in the CPR, as he pointed out, but I took the opportunity this afternoon to have a look at the DAC report. At paragraph 268, it said in terms that the intention was to follow the normal rule in this jurisdiction—that the successful party should get the costs. That is one of the reasons why people choose to arbitrate in London and not somewhere else, and certainly not to litigate somewhere else where you can win and not get your costs back. I would be reluctant to do anything which would undermine London arbitration.

We could of course change the words to track CPR 44.2(2)(a), but I suggest that would be unnecessary and ill advised. I am not aware that there is any confusion in the international arbitration community as to what “follow the event” means. Arbitrators are perfectly able to make what are effectively issues-based awards of costs, or to reflect the fact that the claimant might have won on two issues but the defendant has won on another. Although I understand the noble Lord’s language point, I suggest that we should leave matters as they are.

As for the amount of costs or recoverable costs, which is the other point that the noble Lord, Lord Hacking, deals with in his amendment, Section 63(5) of the Act already provides that the tribunal can limit its award on costs to those costs which have been reasonably incurred. As someone whose fees are often challenged on the basis that they are unreasonable, that is a provision with which I am personally familiar. We appreciate the thrust of the amendment but, certainly on these Benches, we would suggest that it is not needed.

Arbitration Bill [HL]

Lord Hoffmann Excerpts

Second reading committee
Tuesday 19th December 2023 Grand Committee

[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.

Defamation Bill [HL]

Lord Hoffmann Excerpts

Friday 9th July 2010 Lords Chamber

[Lord Hoffmann]

My Lords, the House is greatly indebted to the noble Lord, Lord Lester, for raising the subject of defamation law for debate. I look forward to the contributions of the noble Baroness, Lady Hayter, and the noble Lord, Lord Willis. I made my maiden speech in this House on the Second Reading of the Defamation Bill in 1995, so I know something of how they feel.

There are provisions in the Bill which I think are excellent reforms and which I wholeheartedly commend to the House—for example, the clause which says that a corporation cannot sue for defamation unless it proves that it has suffered, or is likely to suffer, financial loss. There seems to me a great difference between the reputation of an individual and that of a corporation. An individual’s reputation is part of his personality. It is what the noble Baroness, Lady McIntosh, in her Shakespearean quotation, called his “immortal part”. He feels the pain when a slur is cast upon it. A company’s reputation, on the other hand, is a commercial asset. It is what brings in the customers, and the company does not suffer as long as they continue to come, so it should not be able to sue unless it can show that it has suffered financial loss.

Then there is the clause that gives effect to the recommendations of the Joint Committee on Parliamentary Privilege about defamation of Members of this House or the other place in relation to their parliamentary duties. That too is an improvement in the law. In 1995, when I moved the amendment which became Section 13 of the Defamation Act 1996, I did so because I thought it was unfair that Mr Hamilton should have no right to clear his name of allegations of parliamentary misconduct. He was entitled to his day in court like anybody else. If he was innocent, he should win, and if he was guilty he should lose. As it happens, the jury disbelieved him and he lost, but that does not affect the principle that he should have been entitled to sue. The Joint Committee agreed that in principle a Member of one of the Houses of Parliament should be entitled to clear his name. However, it drew attention to some defects in Section 13 and recommended that it be replaced by a provision which is now part of this Bill. There is a lesson for us here. I am sure that the noble and learned Lord, Lord Mackay of Clashfern, who piloted that Bill through the House, will agree that Section 13 was hastily put together at the last minute, and that hasty reforms tend to cause trouble.

It is for that reason that, on reading this Bill, I had some misgivings about some of its provisions. I was greatly relieved when my noble friend Lord Lester said at the end of his speech that he did not envisage that it would become law in its present form, but that there would be a process of debate and consultation and possibly a draft Bill, perhaps even an expert committee. My difficulties were not matters of detail which could be considered in Committee, but raised more general questions of legislative policy. I cannot help feeling that there has been something of a campaign over the past year or two by the media to push us into rapid action. Most of that campaign has been concerned with the way in which defamation actions are funded, particularly with conditional fee agreements and their expense. That is perfectly true—it is a great difficulty that needs to be addressed. However, it is not addressed in this Bill, and quite rightly so because the noble Lord, Lord Lester, says that it is not within its scope.

This campaign has been fuelled by hostile criticism of our law by the media in the United States. Our defamation laws do not seem to be any more popular than our oil companies in the United States. But that campaign has been seized upon by the press in this country as demonstrating that our law is in need of urgent reform. It is important to disentangle those parts of the argument which have some merit from those which, in my opinion, have none.

The law in the United States is extremely favourable to the media. A person who is categorised as a public figure, which tends to include almost anyone the press would want to write about, cannot sue for defamation unless he can prove that the writer actually knew what he was saying was false. That is almost impossible to prove. No matter how slipshod the journalism, the publisher has a complete defence. That has been in the law in the United States for more than half a century and it is now firmly settled. I make no criticism of it; no doubt it suits them. But so far as I can tell, it is unique in the world. Courts in this country, Canada. Australia and New Zealand have all been urged by media organisations, naturally, to adopt that rule, and they have all rejected it as giving too little consideration to the right to a good reputation. As one Canadian judge put it:

“An individual’s reputation is not to be treated as regrettable but unavoidable road kill on the highway of public controversy”.

Instead, we have adopted a public interest defence: it is a defence that the article or the book which is complained of was about a matter of public interest and that its research and preparation was in accordance with reasonable, responsible standards. That was the rule laid down by this House in its judicial capacity in the Reynolds case and it was strengthened in the Jameel case. I think that that rule strikes a fair balance between the right to a reputation and the public interest in having information on matters of public interest. It has recently been adopted in its entirety by the Supreme Court of Canada. But there is a clash of cultures when publications by Americans, emanating from America, are disseminated in other countries and Americans are sued for libel there. Of course the internet has made it extremely easy to defame people all over the world from a website in the United States. The American reaction has been to protest vigorously that other countries should adopt the American rule, or at any rate should not apply their own rule to Americans. They do not think that our public interest defence is good enough, and this of course has been seized upon by the media in this country, which would naturally prefer to have the American rule. Indeed, they would prefer to have no law of libel at all, as evidence that our rules are too restrictive and that the balance ought to be tilted in favour of the media, as it is in the United States.

I am relieved to see that my noble friend’s Bill does not accept this argument. But I am slightly puzzled by what it does do—which is to take the public interest defence, as laid down by your Lordships’ House in Reynolds and Jameel, and restate it in its own language. I am always nervous, speaking as a former judge, about legislative attempts to restate rules of common law. They lead to expensive litigation over whether or not Parliament intended to change things. As the Jameel case appeared to be generally welcomed by the press and has been followed by the Canadians, I should have thought that there was a case for leaving well alone.

It is said that in practice the public interest defence is not as useful to the media as might have been hoped. That may be true, but it is not easy to say why and certainly there is nothing in the Bill that identifies some aspect of the public interest defence that needs to be changed. As stated in the Bill, it is all much the same. I suspect, on a purely anecdotal basis, that part of the difficulty for the media lies in the expense—which the noble Baroness, Lady McIntosh, alluded to—of mounting a public interest defence, which often means that a newspaper which would have had a perfectly good defence prefers to pay some damages and settle. If that is right, the problem lies not in the public interest defence but in the costs regime for defamation actions. We simply do not have enough information to know how to address the problem, and I think that it would be a pity to muddy the waters of the substantive law if the solution lies elsewhere.

The other prong of the American reaction has been to say that we should not allow Americans to be sued in our courts for libels emanating from the United States. Legislation has been proposed in Congress to enable Americans to sue before an American jury for three times any loss they claim to have suffered because of being sued for libel in a foreign court. This seems to me an extraordinary example of American extraterritoriality—something which they are very fond of, and something of which I hope the Minister has taken note. If the legislation passes Congress, any UK citizen who attempts to defend his reputation in this country against a libel emanating from the United States would be liable to a triple-damages action in a US court. The proposed American legislation makes no distinction between actions in foreign countries brought by nationals of those countries and actions brought by others.

Of course, attention has been concentrated here on actions brought against Americans by people living abroad. They are called libel tourists. The leading American campaigner, Dr Ehrenfeld, was sued in this country by a Middle Eastern businessman against whom she had made extremely serious allegations that he was a financial supporter of terrorism. There are certain aspects of this cause célèbre about which your Lordships might wish to know. First, the law in this country is that if you have a reputation here which has been significantly damaged, you can sue here. It does not matter that the defamation was sent into this country from abroad. Nor do you have to be a British citizen. That is not only our domestic law but, in cases that have a European element to them, it is binding on us by virtue of the decision of the European Court. In this case, the claimant moved in business circles in London; he had a house here, and he had a reputation here. Secondly, much has been made of the fact that only 23 copies of the book were sold in England. But the material was also published on the internet. One also has to bear in mind the sensible remarks of my noble and learned friend Lord Bingham of Cornhill, who said in another case:

“The law would part company with the realities of life if it held that damage caused by publication of a libel began and ended with publication to the original publishee. Defamatory statements are objectionable not least because of their propensity to percolate through underground channels and contaminate hidden springs”.

Thirdly, Dr Ehrenfeld made no attempt to set aside the proceedings or to defend them in any way. They came before the judge entirely undefended.

This American campaign, which is usually conducted under the banner inscribed “libel tourism”, is actually about Americans being sued by anybody abroad, whether nationals or tourists. Perhaps that is why the New York legislature, when it passed a law making foreign libel judgments unenforceable, called it the Libel Terrorism Act, because suing Americans abroad is a form of terrorism. Whether libel tourism properly so called—that is, actions in England brought by people who have no connection with this country—is a serious problem is debatable. It was debated fairly inconclusively in the Lord Chancellor’s Libel Working Group just before the election. Mr Justice Eady, the senior libel judge who sees libel cases all the time, said that it was not a phenomenon that he came across in his daily life.

Previous reforms of the defamation law have been preceded by the report of an expert committee. As I said, I am anxious that because of the head of steam that has been got up as a result of the Americans, we should not proceed with precipitate haste. It is true that the reports of earlier committees have taken a long time to bear fruit, and sometimes there has been a poor crop; but the Government are committed to reform and there should be no undue delay in taking a little time for careful and dispassionate consideration. There are matters such as libel tourism and the working of the public interest defence about which we simply do not have enough information to make a proper judgment.

The media are strong and vociferous, but there is no lobby or interest group for people whose reputations have been blackened, and we must bear their interests in mind. Many noble Lords will remember the late Lord Aldington, who I think I can say was held in great affection by Members of this House. He spent the last years of his life trying to clear his name of a widely published and totally unfounded libel about his conduct as an officer in the war. After a long trial a jury awarded him £1.5 million in damages. Everybody, including the jury, knew that not a penny of that sum would be paid. The jurors only wanted to mark their disgust at the libel and the way in which the case had been conducted by the defendants. However, the European Court of Human Rights, with the practical common sense which distinguishes that institution, subsequently upheld a complaint that so high an award was an infringement of the defendant’s right to free speech and that it might have a chilling effect on the publication of their opinions. For some conduct, I suggest, a chilling effect is exactly what we want. It is a matter of getting the balance right, and in order to do that there should be an investigation into this matter by an independent committee, comprising not just representatives of interest groups—as the Lord Chancellor's committee did before the last election—but also experts on the law of defamation. Then we can proceed with due speed and in accordance with the Government's promises to reform the law.