Arbitration Bill [HL]

Lord Hacking Excerpts

Second reading committee
Tuesday 19th December 2023 Grand Committee

[Lord Hacking (Lab)]

My Lords, I have never spoken in the Moses Room in the two years since my return to the House of Lords and I am not familiar with the procedure, so if I go wrong, I hope that our Deputy Chairman or someone else will put me right.

I am in a rather poignant position, in that I am the sole surviving parliamentarian who took part in the 1979 Bill and the 1996 Bill. That is not to say that I am the only creature still alive who was involved in that Bill, because Robert Ayling was the assistant solicitor in the Department of Trade—the 1979 Bill was taken through partly by the Lord Chancellor’s Department and partly by the Department of Trade. As far as I know, he is alive and kicking; I have not seen him for a little time. Mark Saville, now the noble and learned Lord, Lord Saville of Newdigate, played a critical part in the 1996 Act, but he had not by then arrived in the House of Lords Judicial Committee, which he did a year later, and therefore he sat on the steps of the Throne. He was a very important person, but not a parliamentarian at the time.

Of the parliamentarians of the time—if we could remember them—there was Lord Maurice Peston, who spoke for my party throughout the Arbitration Bill. He mugged up on the subject very well and was a very good participant in our debates. Lord Peter Fraser of Carmyllie was the government spokesman to take through our debates. Alas, both have departed this world, as indeed have other prominent Members of the House who took a very active part, including Lord Mustill, Lord Donaldson and Lord Roskill. So here I am as the one surviving parliamentarian. There is another name I must mention at once—Mr Toby Landau. Not only is he alive and kicking but he is here in this Room to listen to our debate. At least somebody other than me is still alive and kicking.

As I said, I am not familiar with the proceedings in the Moses Room and I am ready to be corrected at any time. I have some memories of the 1979 and 1996 Acts which I think it would be valuable for the Committee to be reminded of. Therefore, I intend to take a little time in doing so. I am aware that this is very close to the Christmas Recess. If any noble Lord, particularly one who is listed to speak, thinks that I am going on too long, I would ask him not to suffer me but to stand up and, if needs be, cut back my words.

The foundation of this Bill, and indeed the foundation of all arbitration law, goes back to the Act of 1698. The Bill in its preamble was described as:

“An Act for determining Differences by Arbitration”.


Further on in the preamble, we have the words: now this Bill is

“for promoting Trade and rendring the Awards of Arbitrators the more effectual in all Cases for the final Determination of Controversies referred to them by Merchants and Traders or others”.

This important Act of so long ago established the support that was needed for the conduct and, indeed, the encouragement of the use of, arbitration as a means of settling disputes. Right up to the present time, our statutory law should create a balance between the courts and arbitrations. It should also be promotional for the conduct of arbitration in the United Kingdom. The importance of that comes out clearly in a briefing that we have just received from the Law Society, which calculates that currently there are no fewer than 5,000 arbitrations annually, bringing an income of £2.5 billion to the economy, so it is of importance. I would suggest that what we are doing today is of importance.

I actually doubt whether 5,000 arbitrations is the right calculation, when one takes into account the numerous LMAA and GAFTA arbitrations, and other arbitrations in the commodity field. Indeed, when I headed up an action group in 2000—I have its paper here—there were then more than 3,000 LMAA arbitrations. But whatever it is, the figure is very large and, I suggest, very important.

The 1979 Act was specifically directed to two matters. One was the setting aside and annulment of these two procedures: the “case stated” procedure and the procedure for setting aside awards for errors on its face, which was also being used. It was used by parties when they were not doing very well in an arbitration and who then sought to take their arbitration to the courts to cause delay, embarrassment and difficulty to the plaintiff or complainant.

Indeed, in the debate that I opened in May 1978 in the Chamber of this House, I read a letter from the general counsel of Raytheon, the massive defence producer of weapons and the like. In that letter, the general counsel said that, because of the way in which two of the major arbitrations were being sucked into the court by the case stated procedure, he had given directions that there should not be any arbitration agreement signed by Raytheon, carrying a London arbitration jurisdiction. That is how serious it was. Thanks to Lord John Donaldson, the 1979 Act effectively got rid of both the case stated procedure and the procedure of setting awards aside on their face. It also created what I believe to be the right balance between the law courts and arbitration, and that has been continued ever since.

When I was citing the 1698 Act, I should have mentioned that were other arbitration Acts in the 19th century, one based on the MacKinnon report. There was of course the consolidating Arbitration Act 1950, but none were developing arbitrations on the foundation Arbitration Act 1698.

The big challenge for getting the 1979 Act through was to get Lord Diplock on side. A former commercial judge—I think he was the first judge of the Commercial Court—he was a man, a judge and a Lord of great influence, and if we did not get him on side, we had no hope of getting the 1979 Act through. The second great challenge in 1978-79 was to get the Government to give time and support for what became the 1979 Act. We achieved the first, getting Lord Diplock on side. We were greatly assisted by Bob Clare, who was then senior partner of the very big American law firm of Shearman & Sterling. He walked Lord Diplock round and round the lake at Selsdon Park until he managed to get his support.

The other way of getting Lord Diplock on side was achieved by Lord Donaldson in creating special categories of arbitrations—those relating to admiralty, commodity and insurance—and setting those aside, so that they were not entitled to opt out of the new arbitration process. Lord Diplock felt very deeply on the subject; he described the commodity and admiralty arbitrations as providing the water in the fountain of the development of English commercial law. That was quite an achievement on the part of Lord Donaldson. Incidentally, at that time Lord Donaldson was the senior judge in the Commercial Court, and, in the very active way that he approached matters, he set up a special committee which issued a report. That was then given accord by the Government of the day, being made into a Command Paper, which was of great influence in getting the 1979 Act.

As for getting the Government on side, we really had to thank Lord Cullen of Ashbourne, who was a retired stockbroker. I won the ballot and therefore succeeded in having the right to open a debate on the future of arbitration in London. There are a number of noble and learned Lords behind me now; at that debate, there were a number of Law Lords in front of me. Lord Diplock took part—I am just trying to remember all those who did—as did Lord Scarman and Lord Wilberforce. This somewhat surprised the Opposition Benches. They could well have replaced Lord Cullen of Ashbourne with Lord Hailsham, who, for example, was close to arbitration law and took an active part in the 1979 Act. However, they remained loyal to Lord Cullen, which meant that we received the evidence from him of the loss of £500 million in invisible earnings, which is what the loss of income to the Government was called then. That was an astounding figure—probably close to £5 billion in today’s currency. The Lord Chancellor spoke to me about it afterwards and said, “Is it really that much?” I was quite sure that it was not, but just said to him, “I think it is a very large sum of money”. He then seized upon the opportunity to push forward that Bill, because the Labour Government were not doing awfully well and he thought it would be awfully good for them to do something that was wholly friendly to the City of London.

It was given the Rolls-Royce treatment—that was the term Sir Thomas Legg gave it, from the Lord Chancellor’s Department—but it nearly got into a disaster. I am going on a little but am getting quite close to my end. We nearly got into a disaster at the end of that because the Labour Government collapsed in March 1979. We had just had the Bill go all the way through the House of Lords and it had not got near the House of Commons. As a result, there was a happy trade-off with the House of Commons through the official channels, which was how the Bill was saved.

Onward therefore to the 1996 Act: it was a rather slow process, which caused Arthur Marriott to take up an initiative. That then brought about the setting-up of what was called the departmental—

[Lord Roborough (Con)]

I give a gentle reminder to the noble Lord that there is an advisory speaking time of 15 minutes. We have time, but if there are points he wishes to make—

[Lord Hacking (Lab)]

I appreciate that, and I am not yet at 15 minutes, but there is nothing on the speakers’ list that stipulates a time of 15 minutes.

[The Deputy Chairman of Committees (Baroness Watkins of Tavistock) (CB)]

If I could clarify, it is normally expected in a Second Reading that 15 to 20 minutes is the maximum. Obviously, sometimes there are exceptions, but particularly as the noble Lord asked at the beginning for any clarification, I thought that would be helpful.

[Lord Hacking (Lab)]

Yes, I am very aware that behind me, and in other parts of this Committee Room, there may well be those who are anxious about getting away for their Christmas. I will therefore be responsive to this interjection and bring the Committee to another very important crisis—one which leads directly to what I have said about the importance of an arbitration Bill. It should not only set the right relationship between arbitration and the courts but be promotional in nature.

The departmental committee was headed up first by Lord Mustill and then by Lord Steyn. They gave up the fight with the parliamentary draftsman who was, dear lady, a very pedantic one. She produced a Bill which was enormously complicated and quite unreadable. It included, most surprisingly—Mr Toby Landau would remember this—the writ of habeas corpus. We had a meeting about it in Queen Mary College, down the Mile End Road, and there was an uproar against it. I remember Jan Paulsson, a leading international arbitrator, making scathing comments. There was a skeleton hang-up and what we should therefore be grateful for, and what I would like to record, is that the noble and learned Lord, Lord Saville, and Mr Toby Landau started all over again. That is the product we have now in the 1996 Act.

The important thing about what we are doing now is that this is a wholly readable Bill. It does not have a whole lot of parliamentary junk in it. It takes you all the way through each stage of the arbitration. What we should be doing now is to make quite sure that we follow in that line. I do have comments about the Bill itself, but I will leave those to another time.

--- Later in debate ---

[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.