Arbitration Bill [HL]

Lord Hope of Craighead Excerpts

Second reading committee
Tuesday 19th December 2023 Grand Committee

[Lord Hope of Craighead (CB)]

My Lords, I too, I think in common with all your Lordships, very much welcome this Bill. It is plain from the Law Commission’s report that it is the product of a great deal of hard work on the parts of the Law Commission itself and those who responded to its papers in the course of this process.

The result is a compact measure that seeks to amend the Arbitration Act 1996 in 15 distinct respects. I do not think that anything in the Bill is controversial. On the contrary, the proposals will all contribute to the improvement of the law of arbitration in England and Wales in the various ways that the Minister explained in his helpful introduction. Our thanks must go to all the members of the Law Commission who contributed to this process and to His Majesty’s Government for finding time to bring the Bill before us. We very much hope it will achieve its results before the next election.

At first sight, the best guide to what has been going on might be thought to be found in Appendix 3 to the Law Commission’s final report, which sets out for the reader a list of all the suggestions that have not been taken forward. No less than 54 such suggestions are listed. I thought that this was perhaps quite a good indication of the amount of interest among practitioners that this project has generated. However, my sense of excitement was somewhat dampened when I read in paragraph 3.3 that almost all these suggestions were raised by only one consultee, and that there was, indeed, no widespread clamour for reform in respect of the various suggests that that consultee put forward. On the other hand, the consensus was that the 1996 Act works well, as indeed it does, and that root and branch reform was not needed or wanted. What was looked for, instead, was some updating and refinement of what we already have. Indeed, this is essential if we are to ensure that England and Wales remains the jurisdiction of choice for the resolution of international disputes.

The fact is that there is a very competitive market out there in the wider world. We must keep our heads in front. We do not want to lose our place to others in the Middle East and elsewhere, who are marketing their services vigorously to attract as much business as they can. That is why the work that the Law Commission has done in bringing this Bill forward is so important and so much in the public interest.

Leaving Appendix 3 aside, a word should be said about the work done by some very experienced practitioners in Brick Court Chambers, including my noble and learned friend Lord Hoffmann. I should mention that, although I am a door tenant there, I was not one of those practitioners. They worked to persuade the Law Commission to include a provision in the Bill about the law applicable to the arbitration agreement. I understand that what is now Clause 1 was not in the first draft of the Bill, but it is good to see that the Law Commission was persuaded that there was a need to clarify the rules as to its determination.

As the Minister mentioned in his introduction, the position in Scotland is set out in Section 6 of the Arbitration (Scotland) Act 2010, which provides that:

“Where (a) the parties to an arbitration agreement agree that an arbitration under that agreement is to be seated in Scotland, but (b) the arbitration agreement does not specify the law which is to govern it, then, unless the parties otherwise agree, the arbitration agreement is to be governed by Scots law”.


There is currently no such provision in the Arbitration Act which precedes this Bill. On the contrary, as the law stands in England and Wales, no necessary inference can be drawn that by choosing an English seat, and with it English law as the law which governs the proceedings in the arbitration, the parties also, by implication, have chosen English law as the law which governs the arbitration agreement itself.

The need for clarity was rendered all the more pressing by the decision of the UK Supreme Court in Enka v Chubb in 2020. In that case, it was held that the question as to the law applicable to the agreement was to be determined by applying English common law rules for resolving conflicts of laws. According to those rules, the law applicable to the arbitration agreement was the law chosen by the parties or, in the absence of such choice, the system of law with which the arbitration agreement was most closely connected.

The reasoning in that case—it was a majority decision, as mentioned earlier—was perfectly orthodox, but it seemed to open up issues which, in this context, were best avoided. It was argued that the better view was that where there was no agreement, the law to be applied to the arbitration agreement should be the law of the seat of the arbitration. That simple solution is what is now provided for in new Section 6A(1) of the 1996 Act, which is set out in Clause 1 of the Bill. This provision achieves the clarity that is needed, in line with the position in Scotland.

However, new Section 6A(2) adds a rider to what is set out in Section 6A(1), which perhaps need to be clarified. It states that:

“For the purposes of subsection (1), agreement between the parties that a particular law applies to an agreement of which the arbitration agreement forms a part does not, of itself, constitute express agreement that that law also applies to the arbitration agreement”.


The words “of itself” beg the question: what do they mean? What do they envisage as necessary to displace the default rule that, where no such agreement is made, the law to be applied is the law of the seat of the arbitration?

These questions arise because it may be said that the wording of subsection (1) is perfectly clear in itself; it already uses the word “expressly”. We are told there that the law applicable is

“the law that the parties expressly agree applies to the arbitration agreement”.

What, then, does subsection (2) add to what is already provided for in subsection (1)? Indeed, do we need that provision at all? I hope that, at some point, clarity could be given as to the reasoning behind subsection (2) so that we fully understand how it interacts with what is already set out in the clearest language in subsection (1).

That point aside, the wording of the other provisions in the Bill, all of which are very welcome, do not seem to me to give rise to any questions. I hope that the Bill will receive a Second Reading in due course and as soon possible, and I wish it well as it proceeds through its remaining stages in this House and in the other place.