Arbitration Bill [HL]

Lord Bellamy Excerpts

Second reading committee
Tuesday 19th December 2023 Grand Committee

Moved by

[Lord Bellamy]

That the Committee do consider the Bill.

[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.

--- Later in debate ---

[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.

[Noble Lords]

Oh!

[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.

Motion agreed.

Arbitration Bill [HL]

Lord Bellamy Excerpts

2nd reading
Wednesday 17th January 2024 Lords Chamber

Moved by

[Lord Bellamy]

That the Bill be read a second time.

Bill read a second time.

Moved by

[Lord Bellamy]

That this Bill be committed to a Special Public Bill Committee.

Motion agreed.

Arbitration Bill [HL]

Lord Bellamy Excerpts

Lords Special Public Bill Committee
Wednesday 27th March 2024 Other Business

Moved by

[Lord Bellamy]

1: Clause 1, page 1, line 13, leave out “, of itself,”
Member’s explanatory statement
This amendment does not change the effect of the provision, and follows comments from respondents to the Committee’s call for evidence that the omitted words are unnecessary and cause confusion.

[The Parliamentary Under-Secretary of State, Ministry of Justice (Lord Bellamy) (Con)]

My Lords, in moving Amendment 1 to Clause 1, I extend my thanks and appreciation first to the Law Commission for all the work that has gone into the preparation of this Bill and secondly to the many stakeholders who submitted evidence to the Special Public Bill Committee, as well as all those who have assisted us throughout this Committee process. Although the submissions have been most carefully considered, in the event the Bill is little changed from the version submitted and prepared by the Law Commission.

None the less, the process has been, in the Government’s view, most valuable. We have thoroughly reviewed the Arbitration Act 1996, which has provided our arbitral framework for some quarter of a century and has underpinned the foremost position that we enjoy as a destination for international arbitration. I hope that the Committee and all concerned will accept that we now have a thorough review of the 1996 Act, which is a most important advance in maintaining an up-to-date and effective procedure for arbitration, especially international arbitration, in this country.

Clause 1 provides certainty beyond doubt that the law governing the arbitration agreement will be the law of the seat, unless the parties expressly agree otherwise. By inserted Section 6A(2), any law chosen to govern the main contract does not count as an express choice of law to govern the arbitration agreement. In the Government’s view, that is a much clearer approach than that provided by the common law, notably through the Supreme Court’s decision in Enka v Chubb.

Members of the Committee will be aware that there has been thoughtful input from stakeholders to the Committee on whether the default rule in Clause 1 should be further improved on. Subject to one change, and having carefully considered those views, the Government’s position is that Clause 1 should not be further amended. The Law Commission’s policy was to reverse the decision in Enka v Chubb but not go further than that. The Law Commission’s draft, which was widely consulted on, seeks to balance the views of the sector while not being overly prescriptive.

The Government support preserving Clause 1 as it is, subject to one change, which is the subject of Amendment 1. Amendment 1 will remove the words “of itself” from new Section 6A(2), following observations that those words were likely to cause undue confusion, a point first raised at Second Reading by the noble and learned Lord, Lord Hope of Craighead, and other noble Lords and further supported by stakeholders’ evidence to the Committee. Amendment 1 deletes those words and, subject to that amendment, I hope noble Lords will agree that Clause 1, as amended, should stand part of the Bill. I beg to move.

[Lord Thomas of Cwmgiedd (CB)]

My Lords, I will briefly make a few observations. First, I thank the clerk of the Committee, who has been invaluable to us all and extremely diligent in the work that he has done. One will have the opportunity no doubt to thank him again at a further stage of the Bill, but I wanted to put that on record. I thank the Committee Members, some of whom are absolutely expert in the law and some who found this an amusing and, I hope, interesting excursion into an important part of our law. I am also deeply grateful to the Minister and his private office for the assistance that they have given us.

The people who deserve the most thanks, however, are those—I prefer not to use the modern term “stakeholders”, because I do not think that it is an accurate description—who came to give evidence to us, who are expert in this highly technical area of the law. They gave us of their wisdom and their experience—not only practitioners, but those who ran the important institutions of arbitration and those who used it. We are immensely grateful for their diligence.

As the Minister said, this is an important Bill for arbitration. Having seen the achievement of the 1996 Act, particularly the work of Lord Mustill, Lord Steyn and Lord Saville in producing a readable document for those whose first language is not English, we have not been complacent. We have grasped the need for change and faced up to the increasingly severe competition for this desirable legal and dispute resolution business. It has been particularly helpful to have had the input of the judges on at least one of the clauses in ensuring that we keep up with the tradition of expert judicial input into this highly technical area of the law. I also thank Professor Sarah Green and her team for their work. Although, as will become apparent, we have concentrated on one or two points, the vast bulk did not need any review by us or the experts who assisted us.

The first of those issues that we have to consider today relates to this amendment. Although other forms of wording were suggested, there cannot be any doubt as to the intention of Parliament. I hope that, if this matter is ever litigated in the future—and I hope that that never arises—there will not be the kind of misunderstanding that occurred in the course of the judgments in Enka about Parliament’s intention.

I want to raise one point. The Law Commission was not adverted to the issue in respect of arbitrations under treaties. This was raised with us at a time, unfortunately, when we had completed the taking of evidence. I still think that there is a difficult issue that needs to be confronted and I hope that, between now and Report, it can be. I am not persuaded at present that this is not an issue that needs addressing. However, as it came up at a late stage, and as the Bill needs to be progressed as soon as possible, it is something to which we can return on Report after those concerned in government have had a chance to take advice from experts in this area—they are simply not “stakeholders”, which is a term that I find discourteous, although I am sure that the Minister intended no discourtesy to people who spend their lives in this kind of business and who in this area are far more expert than the Law Commission itself.

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[Lord Bellamy (Con)]

My Lords, I again associate myself and the Government with the thanks to everyone that have been enunciated this morning, particularly to the noble and learned Lord, Lord Thomas, for his chairmanship of the Committee. One point that arises from the remarks that have been made is the question that was raised by the noble and learned Lord, Lord Thomas, about the bilateral investment treaty. This was not raised during the Law Commission consultations, the written submissions that the Committee received or the oral evidence. It was raised after the 28-day period for taking evidence was completed. However, the Government are now seized of the point, are reflecting carefully on it and will provide an update as soon as they are in a position to take a view on what should happen next.

[Lord Thomas of Cwmgiedd (CB)]

My Lords, may I say how grateful I am to the Minister for his last remarks? It is a misfortune in the experience of those who are lawyers that sometimes someone only sees a point at the very last minute. It is not unusual and no one is to be criticised for it, but once a point is seen it must be put to rest. I look forward to what the Minister has to say, but I am deeply grateful for his further consideration of the matter.

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[Lord Mendelsohn (Lab)]

My Lords, I am grateful for the opportunity to place this amendment before this Special Public Bill Committee. I am not highly experienced with such hybrid procedures and so, while I hope that your Lordships will guide me, you will be pleased to hear that I will also use brevity. I record my thanks and gratitude to the clerk and the noble Lord, Lord Ponsonby, for their help and guidance on this amendment.

This review of the Arbitration Act 1996 builds on its success. The UK has become a global centre of excellence and the proposed amendments to the existing arrangements are sensible and will help to strengthen this position. This amendment seeks to establish as an overarching statutory principle that the arbitral tribunals must confine themselves to resolving disputes that are proper subjects for arbitration and must not purport to make judgments or orders about other matters. It is enormously important that people who take an issue to arbitration do not find their rights affected by the system purporting to go outside the specific dispute between the parties and to resolve other legal rights or to interfere with the operation of statutes.

Even more importantly, arbitral tribunals must not purport to make orders that affect the rights of persons other than the parties to the dispute, such as family members. I will illustrate this point by means of an example. In certain parts of the Orthodox Jewish community there has developed a practice of parties to a divorce being encouraged, or even pressurised, by the religious court—or, as it is known, the Beth Din —handling the ritual side of the divorce to submit to the jurisdiction of the Beth Din by way of arbitration in relation to their financial affairs, and usually to vary a family court-agreed settlement. That in itself is questionable, as the Beth Din is not best placed to adjudicate on these matters, particularly because it has regularly been used as a way of allowing the delivery of the Jewish divorce, or “get”, as it is known, by the man to become a bargaining chip in the wider financial issues between the parties, and there is no provision in religious law for involvement in such issues during the ritual of divorce.

The process becomes particularly objectionable when issues such as access to children, which are not within the range of matters that an arbitral tribunal should be looking at in any event, are brought into consideration, leading to the parties asking the courts to agree to a consent order that risks allowing the children’s welfare, which should be the paramount consideration, being subordinated to the demands of the husband in relation to delivery of the get—in effect, allowing a recalcitrant husband to blackmail children out of their statutory protections.

This is just one example of ways in which religious or other arbitral tribunals may purport to exceed their jurisdiction. I hope the Minister will be able to confirm from the Dispatch Box today that it is a fundamental principle of the law of arbitration that arbitral tribunals should confine themselves strictly to the financial dispute between the parties and not make orders about, or allow themselves to be influenced by, other matters.

[Lord Bellamy (Con)]

My Lords, I thank the noble Lord for his amendment and his remarks. The Government are entirely clear that arbitration tribunals should confine themselves to their jurisdiction and to matters properly subject to that arbitration. That is clear from the Arbitration Act 1996 itself, which provides a regime for the court to control the exercise by the arbitration tribunal of its jurisdiction. I do not think I need to run through the various sections of the Act, but it is perfectly plain that it is a fundamental principle of the Arbitration Act that arbitral tribunals should not exceed their jurisdiction. The Government take that obligation extremely seriously.

I confirm at the Dispatch Box, as the noble Lord requested, that the Government’s view is that arbitration tribunals should confine themselves strictly to the matters subject to the arbitration. That is a most important and serious obligation that must be strictly observed. If there is evidence that that principle is not being observed, any such information should be drawn to public attention. I hope that, with those assurances, the noble Lord will not feel it necessary to press his amendment.

[Lord Mendelsohn (Lab)]

I thank the Minister for that assurance and beg leave to withdraw the amendment.

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Moved by

[Lord Bellamy]

3: Clause 11, page 6, line 29, at end insert “subject to the court ruling otherwise in the interests of justice”
Member's explanatory statement
This amendment provides that court rules within subsection (3C) restricting the raising of new grounds for objection, the consideration of new evidence or the rehearing of evidence must provide that the restriction is subject to the court ruling otherwise in the interests of justice.

[Lord Bellamy (Con)]

My Lords, I shall also speak to Amendments 4 to 7 to Clause 11, which, effectively, enables certain procedural reforms to take place in procedures under Section 67 of the Arbitration Act 1996, where a party challenges an arbitral award before the court on the basis that the tribunal had no jurisdiction. The current approach to these challenges, following the Supreme Court’s decision in Dallah v Pakistan, is that these challenges are by way of a full rehearing.

Clause 11 now amends Section 67 to confer a power for rules of court to allow the court to function in what may be described in a more proportionate way when it comes to consider cases under Section 67. In particular, rules of court will be able to provide that there should be no new grounds of objection and no new evidence before the court unless it was not reasonably possible to put these before the tribunal, and evidence should not be reheard by the court.

Regarding the amendments to Clause 11, as originally drafted, new subsection (3C)(c) was subject to the overriding “interests of justice”. The purpose of the amendments is essentially to provide that the concept of everything being subject to the interests of justice should be an overriding provision for all the paragraphs in new subsection (3C), not just the last one. Amendment 3 applies the saving, subject to the court ruling otherwise in the interests of justice, to all the court rules under new subsection (3C) which previously applied only to new subsection (3C)(c). Amendment 6 is consequential on that amendment.

Amendment 4 deals with a slightly different and technical point. It clarifies that the evidence mentioned in new subsection (3B)(b), on consideration of evidence not put before the tribunal, includes written evidence as well as oral evidence. The current drafting is not as clear as it should be because it uses the word “heard”, and it is not always clear that written evidence is evidence that is heard. This is a technical amendment that simply provides that the relevant provision applies to both written and oral evidence.

Amendment 7 adds language, in new subsection (3D), which makes clear that Clause 11 is not intended to and does not limit the generality of the power to make rules of court.

I hope those are relatively straightforward amendments that meet various points raised during the processes of the committee. I beg to move.

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[Lord Marks of Henley-on-Thames (LD)]

My Lords, I agree with everything that the noble and learned Lord, Lord Thomas, has said. I have one or two small points to add. The first concerns his allusion to the need to be clear. We heard earlier from him and the noble Lord, Lord Ponsonby, about how important the Bill is to maintaining our competitive position in international circles in the field of arbitration. It is in that context that clarity is crucial.

When potential parties to arbitration determine where they are going to have the arbitration, which law will apply and all those questions, clarity is to be highly valued. In that context, it seemed to me, to the committee and to all the experts who gave evidence to us that it should be clear that the court would remain the ultimate arbiter of the arbitral tribunal’s jurisdiction. That was part of the need for these amendments.

To deal with the point about rules of court first, and slightly out of order, the potential problem with the Bill as drawn was that new subsections (3B) and (3C) of the new Section 67, which provided for rules of court, could have appeared too prescriptive. They could have made it look as though that is what the rules of court will say, and that would have two damaging effects. First, it could have been seen to limit the power of the rules committee to set up fair rules in the first place.

Another point that certainly seems important to me is that the rules committee has always had the power to change and adapt rules in the light of experience. If the statute governing the powers of the rules committee looks too prescriptive, that power to change and adapt could be threatened. An amendment along the lines of Minister’s Amendment 7, making it clear that the power of the rules committee would not be limited, is therefore very desirable.

The other point that the noble and learned Lord has made is that there should always be the power for, and indeed an obligation on, the court to act in accordance with the interest of justice. The committee felt, and I feel, that where the interests of justice were mentioned only in new subsection (3C)(c), that suggested that it would not be applicable to new subsection (3C)(a) and (b). The overriding provision in Amendment 3 that

“subject to the court ruling otherwise in the interests of justice”

applies to all three paragraphs was extremely desirable. It also seems important that that renders the clause as a whole entirely consistent with the overriding objective to deal with cases justly by making it clear that that applies consistently with the subsection as drafted and adds to the clarity for those coming to this legislation afresh and determining whether English law will retain its pre-eminent position in the world of arbitration.

[Lord Bellamy (Con)]

My Lords, I thank noble Lords for their support for these amendments, which I commend to the Committee.

Amendment 3 agreed.

Moved by

[Lord Bellamy]

4: Clause 11, page 6, line 35, leave out first “heard by” and insert “put before”
Member's explanatory statement
This amendment makes clear that the evidence mentioned in subsection (3C)(b) includes written evidence as well as oral evidence.

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[Lord Thomas of Cwmgiedd (CB)]

This clause seeks to remove the special provisions in relation to domestic arbitration from the Act, and it is entirely right to do so. However, it gives rise to a question that needs to be addressed, particularly because the broad powers of the court are being removed in respect of domestic arbitration. It is therefore opportune to use this occasion to raise the issue that has come before us. It was raised at Second Reading in relation to the problems of fraud, corruption and other related issues in arbitration.

We were greatly assisted by the evidence that we received on this in the light of two recent decisions: that of Mr Justice Knowles in The Federal Republic of Nigeria v Process & Industrial Developments Ltd, which has won worldwide praise; and that of Mr Justice Butcher in Contax Partners Inc BVI v Kuwait Finance House, where he was asked to enforce an award that was completely fabricated.

My own experience means that I would be extremely surprised if this was an extensive problem, but there may be others who take the view that there is a little more to this. Whatever the view, this issue really has to be examined. We are particularly grateful to what Spotlight on Corruption told us in two submissions; they are valuable papers that deserve close scrutiny. The organisation highlighted the problems by reference to some other cases and put forward some solutions. What is important from the point of view of London, and indeed the rest of the UK, is that it drew attention to the position of other states, included information about important international arbitration centres such as Singapore and Sweden, and the work being done by the ICC task force.

We cannot afford to be complacent about this issue. Plainly, it was not examined by the Law Commission and cannot therefore be gone into in the Bill, but there are issues. How do we mitigate the risk that has been seen to arise? What, if any, duties ought to be imposed on arbitrators? These are extremely difficult questions and I hope this is a matter that His Majesty’s Government will consider.

My only suggestion is that this might be best done through the way in which arbitration law was originally brought up to date in this country: a departmental committee. That brings the practical expertise of people who really are involved in this, and the Government would have the benefit of it costing nothing because the private sector is always happy to help on such matters. I hope consideration will be given to this. That is merely a suggestion as to how it should be done, but it really is something that I believe should be.

The second issue that I want to raise is the way that the Special Public Bill Committee works. It has worked well in this Bill, and in another where I had the honour of chairing the committee, but there are three points that it would be useful to examine. The first is the period of time that the committee has to review the evidence. It is extremely discourteous when the Law Commission has taken, say, two years to review a subject if we tell all the people who want to say something that they have 14 days in which to do so. That does not seem an entirely fair balance. I am not saying we should veer away from 28 days, but we ought to be allowed to have a pause to give people time—not what the Government give people and are criticised for, which is six weeks, but, say, three weeks. We should be slightly more generous in our timetable. That would enable us to focus, see what people are concerned about and get witnesses to come without disrupting the lives of busy people.

Secondly, in these technical areas—some highly technical areas are coming along the road as we move to the greater use of digitalisation and artificial intelligence and the effect this has on legal matters—we have to get right the time at which detailed technical expertise is brought to bear. It is sometimes a mistake to see these areas of the law as being a bit like the rest of it. This Bill and the one relating to digital documentation are highly technical, and it is a question of getting expert help at the right stage before the Committee meets.

Thirdly, there ought to be greater clarity about what a Special Public Bill Committee can do by way of looking at the scope of a Bill, what is in it and what is and is not policy without in any way imperilling a procedure that enables us to get Bills on to the statute book quickly. We now have some experience of these Bills. Given the important question of getting our law right on adjustments that have to be made to face the age of digitalisation and artificial intelligence, it might be wise to have a rethink about the precise way in which this procedure works. It has not caused a problem due to the Minister’s helpful attitude towards this whole process, for which I am most grateful, but I foresee that there could be difficulties if we do not think of the problems that have arisen before more come down the line, which will be vital to the prosperity of the United Kingdom.

Having made those remarks, I do not wish to press my opposition to the incorporation of Clause 15 any further. In fact, I wholly welcome that clause as bringing about a much-needed improvement to the law.

[Lord Bellamy (Con)]

My Lords, in view of the noble and learned Lord’s indication that he is not pressing for the removal of these clauses—which, incidentally, have never been brought into effect—I will say a word or two about the important underlying issue that he raised about corruption. This was raised in the Nigeria and Kuwait cases that he referred to. Those cases revealed that there had been serious issues of corruption in the conduct of the arbitrations, and it is greatly to the credit of the Commercial Court of England and Wales that that was properly exposed and that, in the end, the system was seen to work well.

However, it is important that arbitrators navigating complex cross-border disputes are equipped and empowered to safeguard their process against any misuse or abuse and that everyone perceives our jurisdiction as one that facilitates clean and robust arbitration and is not tainted in any way by corruption. Certainly, it has been most important for the committee to have received evidence about that.

On that issue, I am aware that the ICC Commission on Arbitration and ADR has commissioned a task force

“to explore current approaches to allegations or signs of corruption in disputes and to articulate guidance for arbitral tribunals on how to deal with such occurrences”.

I have written to the principal arbitral institutions seeking their assistance in this matter: the Chartered Institute of Arbitrators, the International Chamber of Commerce, the London Court of International Arbitration, the London Maritime Arbitrators Association and the Grain and Feed Trade Association, as well as the Law Society and the Bar Council, many of whose members will be arbitrators or acting as counsel in arbitration. I have asked in particular what measures they have in place to mitigate the risk of corruption in arbitration, whether more should be done in the sector to mitigate corruption in arbitration, the best way to proceed and how the Ministry of Justice and the Government could support the sector’s efforts. Once we have received the responses, the Government will come to a view on what further action, if any, is needed.

Those matters are in train and this is an issue that the Government take seriously, because the reputation of London is crucial. I think that reputation is intact but we cannot be too careful in this important matter. I hope that that goes some way to reassure the noble and learned Lord that this matter has been properly raised, is on the radar and that action is being taken.

The noble and learned Lord also asked about the procedures of the Special Public Bill Committee, the timelines and the framework for dealing with that matter. Those points are well taken. I think it is a matter for the House authorities rather than the Government, so no doubt the House authorities will reflect on the points that have been made. The Government will support any sensible changes to the Special Public Bill Committee procedure in due course.

Clause 15 agreed.