Arbitration Bill [HL]

Lord Wolfson of Tredegar Excerpts

Committee stage
Wednesday 11th September 2024 Lords Chamber

[Lord Mance (CB)]

My Lords, I declare an interest as an arbitrator, including in cases involving corruption in my practice hitherto. It seems to me that there are two types of corruption that we may be talking about. One is substantive corruption affecting the transaction which is the subject of an arbitration. That is regularly arbitrated and investigated, and tribunals do their best. With respect to the noble and right reverend Lord behind me who has just spoken, I am afraid that sometimes involves trying to see into men’s minds. Arbitrators do make findings of corruption. I will come back to what might be done with those findings slightly later.

We have been talking mainly about corruption in relation to the arbitration proceedings, which is the area to which the amendment of the noble Lord, Lord Hacking, is directed. We have heard of cases in which—one hopes, remarkably—it has been found in court that both sides were involved in some sort of collusion. I am thinking not of the case which has been expressly mentioned but of a case which I believe was decided in the Commercial Court by Mr Justice Butcher, where a non-existent arbitration award endorsed by a non-existent foreign court judgment was attempted to be enforced in the Commercial Court. That could happen only by some form of collusion between those appearing in front of the court, hoping that the persons to be affected by an English judgment would not get to know of it or involve themselves in time. As it happens, they did, and of course the non-existent award was not enforced. I believe the matter was referred to public authorities who might be interested.

I agree with my noble and learned friend Lord Hoffmann that such investigations into the propriety or ethical behaviour of those appearing in front of arbitrators as a matter of standard procedure would be difficult to contemplate, given the sort of exercise that would be involved. That said, I am sure that arbitrators, if they were on notice for any reason of possible complicity in some corrupt activity by those appearing in front of them, would be very concerned to try as best they could to get to the bottom of it. I suggest that the noble Lord’s proposed amendment would, if anything, be duplicative and unnecessary if read mildly, but if read widely, as involving the sort of initial admonition which he suggested, it would be problematic and would not carry matters very far, so I, too, do not support it.

I will make a general observation about corruption, which, as I have indicated, is regularly fought in the courts in a substantive respect. Of course, arbitrators have the problem that they are confined by the agreement to arbitrate, which usually relates to a specific transaction. However, if you are talking about a widespread scheme of corruption, perhaps involving fraud on a foreign state, the state may not be party to the arbitration, and it may be quite difficult to investigate all the other ancillary transactions that form part of the web of corruption. Corruption notoriously involves complexity designed to confuse and conceal. That problem is inherent in arbitration; it seems to me that it may be one of the disadvantages of arbitration. It is a problem that can, to some extent, be alleviated by court assistance. There is a valuable clarification of Section 44 of the Arbitration Act 1996 in this Bill, which will enable that assistance to be secure when third parties are involved.

It is difficult to foresee arbitrators being made into investigators. That would be a change of role for which they are not suited. The one possible area where I suggest that legal attention might be considered—but not in this Bill, for the reasons already given by noble Lords—is where corruption is found by an award. There might be something to be said in that context for an express provision permitting disclosure, to interested public authorities, of corruption that has actually been found. One would not have or contemplate a situation where arbitrators had to disclose allegations of corruption that they were concerned to decide. But once they decided that there was corruption, disclosure might then be contemplated. It seems to me that it is probably already permitted by common law, because there is no privilege in iniquity; on the other hand, I do not believe that arbitrators at the moment would, without express legislative backing, be likely to disclose even corruption that they had found in their award. That might be a possible area where an express legislative provision—so they could at least just disclose corruption —would be valuable.

[Lord Wolfson of Tredegar (Con)]

My Lords, I begin with an apology. I could not attend Second Reading because I was having my cataracts done. The happy consequence is that I can now see the Minister even more clearly on the Government Front Bench. I take this rather belated opportunity to welcome him to that place and to wish him well.

I declare two interests: first, as a barrister working in international commercial arbitration as both counsel and arbitrator. Secondly, in 2021, when I was in government, I invited the Law Commission to undertake this review of the Arbitration Act, to burnish what is generally regarded as a gold standard for an arbitration statute. It bears taking 30 seconds to put on record that the Law Commission is an underappreciated part of our legal landscape and does sterling work. Indeed, the Minister introduced earlier today the digital assets Bill, which also emanates from the Law Commission. The Government accepted all the Law Commission’s recommendations in this context.

I also pay tribute to my noble and learned friend Lord Bellamy, who, when he was a Minister, worked very hard on this issue and introduced a previous Bill before it fell, with others, at the general election. Nevertheless, this is a good Bill, and we should get it on to the statute book.

On the amendment before the Committee, the noble Lord, Lord Hacking, kindly referred to my role as counsel in the Nigeria v P&ID case. Of course, client confidentiality applies even now, but he was kind enough not to point out that I lost that case, and I am grateful to him for not making that clear. As to the other cases he mentioned, I appeared early on in the Mozambique litigation and acted in the Steinmetz proceedings before the ICSID tribunal in Paris. I also acted for BSG in the LCIA arbitration and the subsequent litigation in London. I won a number of those cases, fortunately.

Nobody wants corruption in arbitration—we all want to root it out—but we are not persuaded that the general duty either is necessary or would achieve its aims, for the reasons set out so clearly by the noble and learned Lord, Lord Hoffmann. It is not clear what arbitrators are meant to do; under Section 33 they already have a duty to resolve cases fairly, and if corruption disentitles a right to a remedy, the tribunal can say so.

As the noble and learned Lord, Lord Mance, pointed out, there are a number of issues here. Take a case where there is a London seat but the substantive contract is governed by Ruritanian law. Ruritanian law might regard as permissible that which English law regards as impermissible. Would this clause mean that the London-seated tribunal would have to decline to enforce or to give a remedy? The Act as presently drafted provides that public policy can trump an award in some cases. Section 103(3) deals with foreign awards, substantially reflecting Article V of the New York convention, and Section 68(2)(g) deals with appeals from London-seated arbitrations—that was a provision in the Nigerian case.

Arbitration Bill [HL]

Lord Wolfson of Tredegar Excerpts

Committee stage
Wednesday 11th September 2024 Lords Chamber

[Lord Hoffmann (CB)]

My Lords, I greatly regret that the noble Lord should have cast me as his personal nemesis, particularly since it is entirely desirable that an arbitration tribunal should have the power to do what he said Lord Bingham did in the case to which he referred; that is, to distinguish between the cost of issues on which people have been successful and those on which money has been spent and on which they have been unsuccessful. However, the tribunal has such a power already.

I am sure that my friend the noble Lord, Lord Hacking, would recognise that in the end the power to award costs is entirely a matter for the discretion of the tribunal. It can take into account whether it thinks the party has spent too much or whether it has succeeded on this or that issue. All these issues can be taken into account. What it says that is salutary—this is something which attracts persons to come to London and have arbitrations under English law—is that in the ordinary way, if you have not spent too much and not lost on some issues, if you have won the case you will get your costs. That is a very attractive thing to offer to people who are about to launch an arbitration.

We have in the 1996 Act a time-honoured formula which everybody knows. They know exactly how it works and I really see no advantage in substituting a new formula, when nobody quite knows now how it is going to work.

[Lord Wolfson of Tredegar (Con)]

My Lords, I hope that I can be relatively brief because this is a short point. As the noble and learned Lord, Lord Hoffmann, said, the costs of any arbitration are in the discretion of the tribunal. I would add only a slight gloss on that. As the noble and learned Lord knows, there is provision in the Act that if the parties have agreed the result or the provisions on costs, the tribunal has to respect that agreement, with one exception in the Act. Of course, that underlines a very important point: the whole arbitral process is consensual and contractual. We should therefore tread very lightly in this area generally, and especially when we are considering making changes to the terms of the Act.

With respect to the noble Lord, Lord Hacking, I have a certain amount of sympathy with his language point because we do not use “follow the event” anymore. That phrase is no longer used in the CPR, as he pointed out, but I took the opportunity this afternoon to have a look at the DAC report. At paragraph 268, it said in terms that the intention was to follow the normal rule in this jurisdiction—that the successful party should get the costs. That is one of the reasons why people choose to arbitrate in London and not somewhere else, and certainly not to litigate somewhere else where you can win and not get your costs back. I would be reluctant to do anything which would undermine London arbitration.

We could of course change the words to track CPR 44.2(2)(a), but I suggest that would be unnecessary and ill advised. I am not aware that there is any confusion in the international arbitration community as to what “follow the event” means. Arbitrators are perfectly able to make what are effectively issues-based awards of costs, or to reflect the fact that the claimant might have won on two issues but the defendant has won on another. Although I understand the noble Lord’s language point, I suggest that we should leave matters as they are.

As for the amount of costs or recoverable costs, which is the other point that the noble Lord, Lord Hacking, deals with in his amendment, Section 63(5) of the Act already provides that the tribunal can limit its award on costs to those costs which have been reasonably incurred. As someone whose fees are often challenged on the basis that they are unreasonable, that is a provision with which I am personally familiar. We appreciate the thrust of the amendment but, certainly on these Benches, we would suggest that it is not needed.

--- Later in debate ---

[Lord Beith (LD)]

My Lords, we support this amendment and are grateful to the Government for bringing it forward. The Minister’s remarks could usefully be framed and provided as an object lesson in the fact that drafting really does matter and that, when it goes wrong, the consequences mount up in subsequent legislation. He illustrated that well.

[Lord Wolfson of Tredegar (Con)]

My Lords, I am personally grateful to the Minister for engaging with me and others on this. These are technical matters, but it is important to get them right. I acknowledge the assistance I have had from my colleague Toby Landau KC, who, as the noble Lord, Lord Hacking, said on the previous group, did a lot of work on the original DAC report. I also acknowledge members of the Law Commission team with whom the Minister and I have both engaged, especially Nathan Tamblyn.

As the Minister said in moving his amendment, in Inco Europe, Lord Nicholls of Birkenhead, with whom the rest of the Appellate Committee agreed, said:

“I am left in no doubt that, for once, the draftsman slipped up”.


He put it in those terms because, again, as the noble Lord, Lord Hacking, said on the previous group, this is an extremely well-drafted Act. It is probably one of the best-drafted Acts on our on our statute book. To pick up the other phrase that Lord Nicholls used in that case, for once, Homer had nodded. This amendment rectifies the position—I am not sure what the opposite of nodding is, but, whatever it is, it puts Homer’s head back upright. I am grateful to the Minister for bringing forward this amendment, which we support.

[Lord Ponsonby of Shulbrede (Lab)]

My Lords, I thank both noble Lords for their support for this amendment. I agree with noble Lord, Lord Beith, that drafting matters, and I agree with the points made by the noble Lord, Lord Wolfson. I note the support given to him by those individuals, including Toby Landau, who was an expert witness in the previous consideration of these matters.