Arbitration Bill [Lords]

Nusrat Ghani Excerpts

2nd reading
Wednesday 29th January 2025 Commons Chamber

[Sir Nicholas Dakin]

I am pleased to see the Opposition spokesman give me a willing eye of encouragement, for which I am duly grateful.

I start at the beginning. Clause 1 will make it much simpler to determine what law applies to an arbitration agreement. Currently, the rules for identifying the governing law are found in the common law and a recent Supreme Court decision. That decision shows both immense learning and the complexity of the current approach. The Supreme Court was split in its judgment, and its approach was different from that of the Court of Appeal, which used an approach different from that at first instance.

Instead, to make the law clearer and more predictable, clause 1 provides that the governing law will align with the legal location—that is, the seat—of the arbitration by default. This will ensure that arbitrations, where seated in England and Wales and Northern Ireland, will be fully supported by our law, which is among the most supportive of arbitration globally.

Clause 2 codifies a duty for arbitrators to disclose circumstances that may cause doubts as to their impartiality. This will codify the common law and align domestic law with international best practice, such as the United Nations Commission on International Trade Law model law, which our expert lawyers had a major hand in drafting. The model law’s influence can be found in other jurisdictions as far apart as Scotland and Switzerland. It will promote trust in arbitration by promoting trust in the integrity and impartiality of arbitrators.

Clause 3 and, in the interest of briskness, clause 4 will support arbitrators in making impartial and proper decisions by extending their immunity against liability when they resign for good reason or are removed for no fault of their own. This will support arbitrators to make robust and impartial decisions without fear.

Clause 5 clarifies the two pathways for a party that wants to challenge the jurisdiction of the arbitrators—that wants to question whether the dispute should be arbitrated at all. The party can either apply to the court for an early ruling, or it can wait until the award is issued and then go to court. Clause 5 clarifies that it cannot do both. It is either/or.

Clause 6 ensures that, where arbitrators agree that they should not be hearing a dispute after all, they can still award the costs incurred up to that point against the party that generated those costs.

Clause 7 will allow arbitrators to adopt expedited procedures to dispense with issues that have no real prospect of success. This aligns with summary judgments available in court proceedings and will make arbitrations more efficient.

We move seamlessly to clause 8, which will help emergency arbitrators. Emergency arbitrators are appointed on a temporary basis while a full tribunal is being established—that process can sometimes take weeks. They are, therefore, very important to arbitrations. They are often tasked with vital preliminary matters, such as preserving evidence or assets, and are important to ensuring that arbitrations can proceed smoothly. As the practice of emergency arbitrators post-dates the 1996 Act, our framework did not make explicit provision for them, so looking again gives us an opportunity to examine their role.

Clause 8 empowers emergency arbitrators to handle urgent matters better and ensure compliance with their directions by equipping them with final orders and court enforcement. That will give emergency arbitrators the same pathways to enforce their orders as other arbitrators, and will enhance their effectiveness.

Clause 9 provides that court orders made in support of arbitral proceedings can be made against third parties, which aligns with the position in court proceedings. For example, it would enable a party to arbitration to get an order freezing assets held by a third party, such as a bank.

Clause 10 ensures that when a party challenges an arbitral award at court, the court has the full range of remedies available, regardless of the pathway. This clause irons out discrepancies that courts and practitioners have otherwise sought to work around.

Clause 11 provides more efficient court challenges to the tribunals jurisdiction through rules of court that would prohibit repeating evidence and arguments already debated in front of the tribunal. That will avoid such challenges becoming full re-hearings, reducing costs and delays.

I can deal with clause 12 pretty quickly, you will be pleased to know, Madam Deputy Speaker. Clause 12 ensures that the time limit for challenging awards is consistent across the Act.

Clause 13 corrects a rare example of a drafting error. What the Act meant to say was that court orders could be appealed, but in some cases there would be restrictions. What it actually said was that court orders could be appealed only where there were restrictions. To its credit, the Judicial Committee of the House of Lords spotted this error and interpreted the statute as it was meant to be read. We have taken this opportunity to correct the drafting to reflect the judicial ruling, as a useful bit of tidying up.

Clause 14 streamlines the requirements for applying to court to obtain preliminary rulings from the court on questions of law, or on whether the arbitrators have jurisdiction to hear the dispute. Early rulings, such as those from expert judges, can save time and cost.

I am getting towards the end of going through the clauses. In fact, I have come to the last and final clause that I wish to comment upon, clause 15, as you had probably worked out, Madam Deputy Speaker, because that usually comes after clause 14. [Laughter.] There is no clause 16, so clause 15 is the final clause. Clause 15 repeals provisions that were never brought into force, simply to tidy up the Act. Those provisions would have meant slight differences in approach between domestic arbitrations and international arbitrations. In the event, they were never used or needed, never brought into force and there remains no demand for them. Our arbitration law is first class and applies equally to domestic and international arbitrations, so removing the provisions is a helpful way to tidy things up.

In sum, the Bill will greatly approve the arbitral process in our jurisdiction and further cement our position as a top global business destination, where legal disputes can be resolved fairly and quickly. The Bill has already gone through the other place, where it received considerable examination and support from noble and learned Members, including many experienced arbitrators. There are, apparently, a lot of experienced arbitrators in the other place, and they brought their knowledge, experience and expertise to the debate, for which we are very grateful.

Indeed, I emphasise that the Bill has been reviewed by Members of the other place not once, but twice. The first time, scrutiny was provided by a Committee, led by the noble and learned Lord Thomas of Cwmgiedd, that took further evidence from expert stakeholders. The several technical improvements made to the previous Bill because of that work are retained in this Bill. This time, the Bill was reviewed on the Floor of the other place, where the Government amended clause 13 to fix a long-standing error in our framework on arbitral appeals.

I have been quite thorough in covering the ground. I hope all Members feel they have got a good understanding of the issues behind the Bill and why we need to take the steps that I am urging the whole House to take.

To conclude, I second the remarks made by Lord Thomas on Third Reading:

“We must find a means of doing this very rapidly, as we must keep English law—I say English law deliberately—attractive and at the forefront of use internationally, for the benefit of our whole economy.”

—[Official Report, House of Lords, 6 November 2024; Vol. 840, c. 1499.]

I hope the House agrees, and will give the Bill a Second Reading.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

A tour de force. I call the shadow Minister.

[Dr Kieran Mullan (Bexhill and Battle) (Con)]

I rise on behalf of the Opposition to support the Second Reading of the Arbitration Bill. As the Minister has laid out, arbitration is a cornerstone of the UK’s legal and economic landscape, contributing significantly to our reputation as a global hub for dispute resolution. The Bill seeks to amend the Arbitration Act 1996 to ensure our framework remains world leading and fit for purpose in a rapidly evolving global business environment.

Arbitration plays a vital role across both the domestic and international spheres. It is employed in areas ranging from family law and rent reviews to commodity trading, shipping and investor claims against states. With over 5,000 arbitrations conducted annually in England and Wales, the process directly contributes more than £2.5 billion to our economy in arbitrator and legal fees, while also supporting wider sectors, such as banking, insurance and trade. The Minister used the opportunity of this debate to cover quite extensively the long and distinguished history of arbitration in our judicial system.

We all agree that London stands proudly as one of the world’s most preferred seats for international arbitration, alongside Singapore. Maintaining this position is no accident. It reflects the strength of our legal system, the confidence of global businesses in our expertise and the robustness of the original 1996 Act. However, as other jurisdictions modernise their arbitration laws, we must ensure that ours remain cutting edge to safeguard our competitive lead.

The previous Conservative Government rightly recognised that need, and in March 2021 tasked the Law Commission to review the Act. I thank all those involved at the Law Commission for their hard and excellent work. After extensive consultation and input from stakeholders, the Law Commission published its final report and a draft Bill in September 2023, identifying targeted reforms to enhance our arbitration framework. A Bill to deliver those reforms was introduced by the Conservative Government in November 2023; I thank the Minister for his acknowledgment of the previous Government’s work.

The Bill’s progress was interrupted by the general election. The Opposition commend the Government for reintroducing the Bill swiftly in light of the broad support. Observers may have noticed that we have a quiet Chamber today, but in this the world’s first debating chamber, the lack of attendance is a reflection of the deep and considered consensus and lack of debate around the need for this important Bill and what it is seeking to achieve.

I thank Lord Bellamy in particular for his contributions as the sponsoring Minister of the original Bill and for his continued and important contributions in the development and improvement of this Bill. I also thank Lord Hacking for his contribution to the debates in the other place, particularly on the issue of corruption. We appreciate such valuable input and agree that that matter warrants further consideration. Even if, ultimately, the need to get the Bill on to the statute book for all the benefits that it brings means that it would not be appropriate to do that through the current legislation, we should continue to monitor and revisit that issue.

The Arbitration Bill introduces a range of reforms designed to improve clarity, efficiency and fairness in arbitration proceedings. Those reforms address practical changes while reinforcing the UK’s position as a global leader. I will highlight a few key provisions, as the Minister has explained in detail, which make the Bill significant.

First, the Bill addresses long-standing uncertainties in the legal framework, particularly regarding arbitration agreements where no jurisdiction is specified. By defaulting to the law of the seat of arbitration, the Bill aligns with international norms, thereby enhancing predictability and clarity for parties involved. Secondly, it strengthens the integrity of arbitrators by codifying the duty of impartiality and disclosure. As clarified in the landmark Halliburton v. Chubb case, the Bill ensures greater transparency and fosters trust in the arbitration process. Finally, the Bill promotes procedural efficiency. Provisions such as allowing summary awards, recognising emergency arbitrators and streamlining jurisdictional challenges represent vital steps towards making arbitration more accessible and efficient for all stakeholders.

Those are just some of the many commendable provisions in the Bill that aim to modernise the 1996 Act and ensure that arbitration remains an attractive and effective method of dispute resolution. The Opposition developed the original Bill and support this one to ensure the UK’s ongoing leadership in arbitration. However, we remain committed to scrutinising its provisions in Committee to ensure they achieve their intended goals without unintended consequences. I commend the Bill to the House and I look forward to hearing the contribution of the Liberal Democrat spokesperson to the debate.

[Madam Deputy Speaker]

I call the Liberal Democrat spokesperson.

[Olly Glover (Didcot and Wantage) (LD)]

I thank the Minister for his comprehensive history of arbitration in the United Kingdom. It has been a long time since I have considered John Locke, having studied him as part of a history of political thought paper, which feels almost as long ago as the starting point of the Minister’s survey.

The Liberal Democrats welcome the reintroduction of the Bill and its wide support across the House. As the Minister said, the Arbitration Act 1996, which governs arbitration in England, Wales and Northern Ireland, is more than 25 years old. As he also said, the Law Commission estimates that there are at least 5,000 arbitrations annually in England and Wales, worth at least £2.5 billion to the economy in arbitrator and legal fees alone. Arbitration is also important in supporting a whole range of business activities, as has been outlined.

An effective legal and dispute resolution process is one of the underpinnings of a successful democratic and trading nation, and something of which the United Kingdom has historically been proud. The Bill will help to maintain that status, based on recommendations from the Law Commission and, as the Minister has said, particularly that of London as one of the great centres of international arbitration. The Bill implements recommendations made in a 2022-23 Law Commission review of arbitration law to support more efficient dispute resolution. The legal sector has widely supported the targeted reforms in the Bill, with positive feedback from public consultations held by the Law Commission.

Two key issues were raised in Committee in the other place, which we are happy to see resolved. The first was on the subject of corruption risk. The Liberal Democrats pressed the Government to provide more information to ensure that confidential arbitration is not abused to hide corruption from public scrutiny. We thank the Minister for detailing the actions being taken by arbitral institutions to militate against the risk of arbitration being misused and we were satisfied with the reassurance given. The second concerns the right of appeal. The Liberal Democrats were glad to support the two amendments tabled by the Government to correct the drafting of clause 13, following concerns that the original clause provided a more limited access to the Court of Appeal than was established in case law.

In conclusion, the Liberal Democrats are pleased to support the Bill. Given some of the other discussions in this House today, we welcome an uncontroversial contribution to the economic growth that this country needs.

[Madam Deputy Speaker]

We now come to the wind-ups. I believe the shadow Minister has a few comments he wishes to make.

[Dr Mullan]

With the leave of the House, I will speak briefly. I focused my remarks earlier on the Bill, as hon. Members might expect, but I want to take this opportunity, as important matters such as arbitration are before the House and as I have the Minister’s attention, to reiterate our thanks to everybody involved both in this Bill and in the previous one, in both Houses. Particularly, we thank Lord Hacking for his work in highlighting other issues.

I encourage the Minister to recognise that, although the Bill is welcomed and will be positive, the Government will need to continue work on some issues: as I mentioned earlier, the interplay between arbitration and corruption; the need for expedited hearings; the role of third party funding; and the authority to mandate mediation between parties. The Minister may not have an immediate response, but I would welcome future work from the Government in those areas.

[Madam Deputy Speaker]

I call the Minister.