Lord Faulks
Main Page: Lord Faulks (Non-affiliated - Life peer)Department Debates - View all Lord Faulks's debates with the Ministry of Justice
(8 months, 1 week ago)
Grand CommitteeMy Lords, I too welcome the Bill and agree with what noble Lords have said about it. The Library Note on the Bill suggests that the arbitration industry centred on London could be worth at least £2.5 billion to the UK economy each year, although that is described as possibly an underestimate.
There have always been some areas of doubt about certain aspects of the law in relation to arbitration and the Bill is a welcome clarification of many of them. I did not wholly anticipate the problems that the noble and learned Lord, Lord Hope, identified in Clause 1 —it seemed on the face of it to be the answer to what was a somewhat uncertain position as to the law—and I am sure the Minister will consider carefully what he said.
That change and others have been generally welcomed, not least by the Chartered Institute of Arbitrators. I declare an interest as a fellow of the institute, although I have to say that my services have not been called upon very often. I should also declare that the Independent Press Standards Organisation, which I chair, provides for arbitration—extremely cheaply—for those who have complaints against regulated newspapers and their online manifestations. Unfortunately, lawyers for the parties seem to prefer litigation to arbitration.
There is one area that the Law Commission considered but decided not to include in the draft Bill. This was a matter raised not just by the one very assiduous consultee referred to by the noble and learned Lord, Lord Hope; it was in relation to the secrecy or confidentiality of arbitration. Confidentiality has long been a hallmark of the arbitration process and a significant attraction to users. The rule is not absolute. The contours of those circumstances where one party or another loses confidentiality or secrecy have been developed by the courts. I understand that the reason for omitting any provisions about this may have been that it is regarded as preferable to leave the law to the courts rather than try to capture in legislation in what circumstances there should be a departure from the general principle. It is, of course, always open to those entering into an arbitration agreement to be specific about these matters.
The case law acknowledges that the courts have an important role in ensuring standards of fairness in arbitrations. The 1996 Act, particularly Sections 67 to 69, provides the basis on which a party can challenge an arbitration award in the courts. However, there is an inherent tension between the principle that justice should be both done and seen to be done and the privacy and confidentiality that go with arbitration.
My attention has been drawn to a case reported a few months ago before Mr Justice Robin Knowles, the Federal Republic of Nigeria v P&ID. In a lengthy and comprehensive judgment, Mr Justice Knowles found that P&ID had practised
“the most severe abuses of the arbitral process”.
The judge said in his decision that it
“touches the reputation of arbitration as a dispute resolution process”.
He asked himself whether, on the facts, there was an irregularity within Section 68 of the 1996 Act and found that, notwithstanding the high bar that has to be surmounted to prove a serious irregularity, it had been proved. He found that documents had been obtained by fraud and in breach of professional obligations, that deliberate lies had been told to the panel and that there had been wholly inadequate disclosure. In his view, it was important that Section 68 was available to “maintain the rule of law”.
The case involved huge sums of money that the arbitration panel decided were owed by Nigeria to a shell company in relation to a gas pipeline. After carefully examining the facts and concluding as he did, the judge said:
“I hope the facts and circumstances of this case may provoke debate and reflection among the arbitration community, and also among state users of arbitration, and among other courts with responsibility to supervise or oversee arbitration. The facts and circumstances of this case, which are remarkable but very real, provide an opportunity to consider whether the arbitration process, which is of outstanding importance and value in the world, needs further attention where the value involved is so large and where a state is involved”.
In discussing the principle of confidentiality, the judge said:
“The privacy of arbitration meant that there was no public or press scrutiny of what was going on and what was not being done. When courts are concerned it is often said that the ‘open court principle’ helps keep judges up to the mark. But it also allows scrutiny of the process as a whole, and what the lawyers and other professionals are doing, and (where a state is involved) what the state is doing to address a dispute on behalf of its people. An open process allows the chance for the public and press to call out what is not right”.
The judgment was unusual and should cause the arbitration community to reflect on the risks inevitably involved in the confidentiality of arbitration proceedings. I do not have any amendments to suggest for the Bill, but I respectfully seek a response from the Minister on the serious questions this judgment raises about the appropriateness of arbitration, in particular its confidentiality, when the facts are similar to those of that case. Are the Government satisfied that there is no need for further provision and the matter can be left to individual judges, or has this case caused any change of heart such that they will legislate specifically to avoid a repetition? I do not necessarily expect a response now, except in general terms, but I ask for a more substantial response in writing.
I do not suggest that there is anything inherently unsuitable in encouraging arbitration, for the reasons we have heard, but I wonder whether there are sufficient safeguards to prevent the abuse of the process so starkly illustrated by this case. That said, I welcome the Bill.