Arbitration Bill [Lords]

Josh Babarinde Excerpts

Tuesday 11th February 2025 Commons Chamber

[Dr Kieran Mullan (Bexhill and Battle) (Con)]

I rise to contribute to the Committee stage debate on the Arbitration Bill on behalf of the Opposition. I thank Lord Bellamy, the previous Conservative Minister who originally introduced the Bill in the Lords in the previous Parliament, and I recognise the work of the Law Commission. Much of this Bill is based on the excellent work that the Law Commission did in considering the original legal framework for arbitration.

We fully support this Bill’s objective of modernising and strengthening the UK’s arbitration framework. Arbitration is a vital pillar of our legal system, supporting businesses, individuals and international commerce while reinforcing London’s position as a world-leading hub for dispute resolution. It is important that this legislation is as robust, effective and fair as possible. The Committee stage presents an opportunity to ensure that the Bill delivers on its promise, and we welcome the improvement that it introduces. I do not intend to go through all the Bill’s clauses, but I reassure the House that the necessary scrutiny that one would expect from the Opposition in Committee is taking place. I will just touch on some of the key clauses.

First, clause 1 provides welcome clarity on the governing law of arbitration agreements, particularly in light of the Enka v. Chubb case in 2020. Defaulting to the law of the arbitration seat where no choice is specified increases certainty for businesses.

Secondly, clauses 3 and 4 extend arbitrator immunity to protect them from liability unless bad faith is proven. This is an important step to ensure that arbitrators can act independently without undue fear of litigation. We must retain an effective safeguard to challenge an unreasonable resignation, and we welcome the Minister’s reassurance that parties affected by an arbitration resignation are not unfairly disadvantaged.

Thirdly, clauses 5 and 6 streamline the process for jurisdictional challenges. Parties will either need to seek a preliminary ruling from the court under section 32 of the Arbitration Act 1996, or wait to challenge jurisdiction under section 67.

Fourthly, on the procedural innovations covered in clauses 7 to 9, the introduction of summary disposal of claims is an important step towards greater efficiency, though we would welcome reassurances from the Government that they will monitor its use so that we can be sure that it is applied carefully and fairly, and does not have any unintended consequences. We believe that the recognition of emergency arbitrators is a positive step that enhances the availability of urgent relief, aligning the UK with international best practice.

Also of note is the right of appeal in clause 13. As the Minister stated, there was an unusual previous drafting issue that suggested that appeals to the Court of Appeal were permitted only if expressly allowed under the 1996 Act. That was incorrect. Clause 13 corrects the error, ensuring that appeals are permitted unless specifically restricted. This is a vital change to uphold fairness and legal certainty.

I want to acknowledge an important issue that was raised in the other place by Lord Hacking, whose contributions to the discussion on arbitration have been incredibly valuable. I know that other Members have also pressed for greater scrutiny of how confidential arbitration could be misused to conceal corruption. We welcome the Minister’s assurances that arbitral institutions are taking steps to mitigate those risks, and we believe that the Government must remain actively engaged in monitoring and addressing potential abuses, and not rule out taking further action at an appropriate time if it becomes necessary.

Beyond the issue of corruption, other crucial areas were mentioned in the other place; these are important and warrant further Government attention. They include the need for expedited hearings to prevent undue delays in arbitration proceedings, the role of third-party funding, and ensuring transparency and accountability in funding arrangements, as well as the authority to mandate mediation between parties, where appropriate, to encourage resolution outside of arbitration. The Minister’s attention to these issues is essential, so I would welcome confirmation that they will be addressed in due course.

In conclusion, the Arbitration Bill is a necessary and welcome step in ensuring that the UK remains a pre-eminent jurisdiction for arbitration. However, as with any legislation, its success depends on the details. The Opposition remain committed to ensuring that the Bill delivers legal clarity, procedural efficiency and fairness while upholding the integrity of our arbitration framework. I commend this Bill to the Committee and look forward to seeing its rapid progress through the House.

[Josh Babarinde (Eastbourne) (LD)]

I rise in support of this Bill, which introduces important measures to modernise our arbitration framework. We Liberal Democrats welcome the approach that the Government have taken in refining the Bill’s provisions to ensure clarity and effectiveness.

Clause 1 is a key part of this new Bill, and we are fond of the changes made following the recommendations from the Special Public Bill Committee in the previous Parliament. For example, the Committee proposed removing two words to prevent undue confusion, and I am pleased that the Government have accepted that recommendation. In addition, the Government have further clarified that investor state arbitration agreements derived from treaties or non-UK legislation will not be subject to the default rule, which is a welcome and sensible step that is necessary to bring greater legal clarity to the process.

I also welcome the five amendments to clause 11, which enable procedural reforms under section 67 of the 1996 Act. These changes respond directly to concerns raised in the last Committee, and strike the right balance between efficiency and fairness in arbitration proceedings.

Further improvements were made in the other place, where the Government tabled amendments to clause 13 to correct drafting issues, which have been mentioned, and to ensure that access to the Court of Appeal aligns with established case law. These amendments received cross-party support and I am pleased to reinforce the Liberal Democrats’ support for them today.

This Bill strengthens the UK’s arbitration framework by improving clarity, ensuring fairness and refining procedures. We support its passage and urge the House to do the same. We do not expect any problems with that.

[Sir Nicholas Dakin]

I give my sincere thanks to hon. and right hon. Members on both sides of the House for their contributions today to what has been a succinct and precise debate. We are all agreed that this is an important step forward, and I am particularly grateful to the Opposition spokesman, the hon. Member for Bexhill and Battle (Dr Mullan), and the Liberal Democrat spokesman, the hon. Member for Eastbourne (Josh Babarinde), for welcoming the improvements to the Bill and recognising that they have been the work of many people in the Lords and the Commons as well as of contributors from outside, as my hon. Friend the Member for Harlow (Chris Vince) reminded us earlier.

The hon. Member for Bexhill and Battle raised the important issue of corruption. As I mentioned during the Bill’s Second Reading debate, arbitral corruption is not the result of our domestic framework, which provides several effective remedies to quash corrupt practices. We support sector initiatives to enhance anti-corruption practices such as the International Chamber of Commerce’s anti-corruption taskforce, and we will push for the adoption of best practices as they are developed.

The hon. Member also raised third party litigation and funding issues. The Government have carefully considered the impact of the UK Supreme Court judgment in Paccar, and have decided to wait for the outcome of the Civil Justice Council review before deciding whether to legislate. A comprehensive review of the market will allow us to take a wider range of factors into account. Following the Paccar judgment, concerns have been raised about the need for greater regulation of litigation funding agreements and greater safeguards for claimants. This is therefore an opportune moment to review the status of the market. The review is being undertaken by the Civil Justice Council, supported by a wider consultation group of experts across this area. The final report and recommendations will be published in the summer of 2025, after which the Government will consider the way forward.

The hon. Member also mentioned mandated mediation, and I will try to pick that up as well. The Government agree that dispute resolution, such as mediation, has a key role to play in ending disputes more quickly and cheaply. This is why all parties to a small money claim in the county court are now required to attend a free one-hour mediation appointment with His Majesty’s Courts and Tribunals Service’s small claims mediation service as an integrated step in the litigation journey. This reform will help thousands of people and businesses each year to resolve their legal disputes without the need for a court battle. We will continue to work to drive the uptake of dispute resolution throughout the justice system to allow parties to resolve their disputes more consensually and at an earlier stage.

That concludes my responses to the points raised during the Committee of the whole House. I once again thank all those who have contributed to the debate.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clauses 2 to 18 ordered to stand part of the Bill.

The Deputy Speaker resumed the Chair.

Bill reported, without amendment.

Third Reading

--- Later in debate ---

[Josh Babarinde]

I thank everyone to whom the Minister rightly gave recognition, particularly the behind-the-scenes officials whose work we do not often see, but without whom such landmark legislation would not be possible.

The Liberal Democrats welcome the Arbitration Bill, inasmuch as it represents a significant step forward in modernising and enhancing the arbitration process in the UK. With over 5,000 arbitrations a year in England and Wales, worth about £2.5 billion a year to the economy in fees alone, arbitration has long been a critical alternative to traditional court proceedings, providing a more efficient, cost-effective and flexible way to resolve disputes.

One of the Bill’s key merits is its effort to streamline the arbitration process, which can be complex and protracted. By introducing these clearer guidelines and enhancing the powers of arbitrators, the Bill will help us to secure quicker resolutions, reducing delays and backlogs in the justice system. This is crucial for businesses that seek fast and decisive outcomes to disputes.

Of course, arbitration is part of a wider family of alternative dispute resolutions that help to take pressure off our courts. Recognising this, I pay tribute to legal professionals and firms in Eastbourne that work day in, day out, to facilitate many of these alternative dispute resolutions, including Heringtons, Cramp & Mullaney, Hart Reade, Gaby Hardwicke, Stephen Rimmer, SO Legal, Hobson & Latham, Mayo Wynne Baxter, Lawson Lewis Blakers, Cornfield Law, McCarthy Webb—whose services I have used—and many more.

We are pleased to support this Bill for the reasons that I and many other Members have discussed. It will ultimately help to position the UK as an attractive destination for global arbitration, reinforcing its status as a leading centre for business and legal expertise, whether we are talking about the financial capital of the UK or the sunshine capital of the UK, Eastbourne, with its legal expertise, to which I have just alluded.

The Liberal Democrats are pleased to back this Bill, and I am proud to support it.

Question put and agreed to.

Bill accordingly read the Third time and passed.

Business of the House (Today)

Ordered,

That, at this day’s sitting—

(a) notwithstanding the provisions of Standing Order No. 16 (Proceedings under an Act or on European Union documents), the Speaker shall put the Questions necessary to dispose of proceedings on the Motions in the name of Secretary Jonathan Reynolds relating to Terms and Conditions of Employment not later than two hours after the start of proceedings on the Motion for this Order;

(b) the Speaker shall put the Questions necessary to dispose of proceedings on the Motion in the name of Lucy Powell relating to Scrutiny of European Statutory Instruments not later than one hour after the start of proceedings on that Motion; such Questions shall include the Questions on any Amendments selected by the Speaker which may then be moved;

proceedings on these motions may continue, though opposed, until any hour, and may be entered upon after the moment of interruption; and Standing Order No. 41A (Deferred divisions) shall not apply.—(Anna Turley.)