Orders of the Day — ARBITRATION BILL [Lords]

– in the House of Commons at 12:00 am on 14th March 1979.

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10.30 a.m.

Photo of Mr Peter Archer Mr Peter Archer , Warley West

I beg to move,

That the Chairman do now report to the House that the Committee recommend that the Arbitration Bill [Lords] ought to be read a Second time.

This is a Bill about improvements in the law of commercial arbitration. Arbitration is a method of settling disputes by referring them for adjudication to a private tribunal of the parties' own choice rather than to the courts of law. Arbitration proceedings have a number of features which the commercial community find attractive, such as speed, informality and privacy, and frequently an arbitrator who is himself an expert in the field concerned. These features have helped to make arbitration a normal aspect of commercial life and an essential part of international trade.

All the major trading nations are bound together by agreements on the enforce- ment of arbitral awards. The United Kingdom is a country which lives by trade to an extent greater than does any other major industrialised country, and for that reason alone it is important that our arbitration law and procedure should be efficient and effective. But there is a further important reason why our arbitration arrangements should compare well with those of other countries. Efficient arbitration is part of the range of legal, financial and trading services offered here, particularly in the City of London, and, as such, it can be a valuable source of income and foreign exchange. London is already one of the world's leading centres for arbitration. A very high percentage of the world's shipping arbitrations are carried out in London and very many commodity arbitrations are conducted by various members of the London commodity exchanges."London arbitration"is a term which has been used in international contracts for many years.

The needs and wishes of the commercial community change from time to time, and it is important to ensure that our arbitration arrangements remain in step with other developments. Experience with cases and changing practices have suggested some modifications in our arbitration law.

Our law on arbitration is contained largely in the Arbitration Act 1950, which consolidated earlier enactments, as amended by the Arbitration Act 1975. The 1975 Act dealt with accession to the New York convention on enforcement of foreign arbitration awards.

Part I of the 1950 Act provides in section 21 a procedure—the case stated procedure—by which the courts can control arbitrators and ensure that they conform with the law. That procedure has been subjected to a great deal of criticism. The Bill before us is concerned largely with the problems now arising from the case stated procedure, which has become a real deterrent to the use of London as an arbitration centre.

The case stated procedure was introduced into arbitration as a nineteenth century adaptation of a similar procedure used in criminal proceedings, and it was applied to arbitration under the Common Law Procedure Act 1854. Until then, a decision could only be upheld or quashed. If the decision was quashed, the arbitration had to be started all over again. The case stated procedure, by contrast, allowed a point of law to be determined without putting the whole proceedings in jeopardy. So at the time it was a useful reform.

The problems have arisen, as so often, because a measure which is sensible in some circumstances has become the universal panacea as a matter of course. Although on the face of the section the arbitrator has a discretion whether or not to state his award in the form of a special case, subject to a discretion in the High Court to order him to do so, the result of certain decisions is that the arbitrator usually adopts the special case procedure on the application of any of the parties to the arbitration, even if there is no great sum of money in dispute and even if the answer is reasonably clear, provided that it can be argued that there is a real point of law which is material to the decision. If he declines, he will normally be ordered to do so.

It is difficult to discourage unmeritorious applications, as a decision has to be taken on the use of the special procedure at a stage where often the arbitrator has not specified any findings of fact upon which the decision might be based. It is difficult to be certain that no serious question of law may be in issue, and the doubt is usually resolved in favour of the applicant.

Furthermore, where a final award is in the form of a case stated, as it may be under the section, there is no financial award operative pending the decision on the point of law. So the procedure has become capable of being used by undeserving parties for the sole purpose of postponing the day of wrath when they will have to pay up.

In many modern arbitrations the large amounts of money at issue may be important for the liquidity and cash flow of the companies involved, they may entail large interest burdens, or they may threaten companies with the prospect of changing large sums at rates of foreign exchange which they consider disadvantageous. So a company may be tempted to use the case stated procedure merely as a means of postponing the date of payment of any award, and if the potential advantages of delay are substantial the company may not be deterred by the costs arising from any further litigation. Indeed, even after the High Court has given its decision on the point at issue, further delays may be engineered by appeal to the Court of Appeal and even to the House of Lords. Therefore, the whole advantage of arbitration as a speedy process may be nullified.

The difficulty about the case stated procedure is aggravated because there is no provision in English law for the parties to contract out of the procedure. There are now an increasing number of supra-national development contracts, for example, for the construction of a dam or a town in one of the developing countries. The parties are often consortia which directly or indirectly include foreign Governments or their agencies, and such Governments may be understandably reluctant to submit to the jurisdiction of foreign courts, whether English or otherwise. Accordingly, even if they prefer to have their disputes resolved in England, with English arbitrators, they are still deterred by the case stated procedure.

But there was a problem about simply abolishing the procedure. The inescapable case stated procedure had the advantage that English commercial law as administered by arbitrators remained consistent with that developed in the courts, and consistent, too, between one arbitrator and another. The consequent coherence, predictability and completeness of commercial law in the United Kingdom has been largely responsible for its international prestige and authority and has helped to establish it as a favoured choice of law among the international commercial community.

These problems have been considered recently in various quarters. They were alluded to by Lord Diplock, a judge of great learning and experience in this field and president of the Institute of Arbitrators, in his Alexander lecture. Then they were considered in another place on 15 May last year in a debate initiated by Lord Hacking, a distinguished international lawyer with great experience of arbitration in New York. On that occasion my noble Friend the Lord Chancellor undertook to consider the matter as one of some urgency.

On 6 June, less than three weeks later, my noble Friend had in his possession a report by the Commercial Court Committee—Cmnd. 7284—a committee consisting of a number of distinguished judges, lawyers and commercial men, under the chairmanship of Mr. Justice Donaldson, who speaks with great authority and experience in these matters. I offer my tribute to the committee for the thoroughness and clarity of its report. Not all its recommendations are uncontroversial, but that does not diminish our debt to the committee.

Broadly, the Government have accepted the committee's recommendations. The Bill contains provisions which would remove the deterrents to arbitration in London, while at the same time allowing the continued development of commercial law on a coherent basis. The special case stated procedure would be abolished and replaced by a more limited right of appeal on a point of law only, and parties in many international arbitration agree- ments would be able to exclude even that right of appeal if they so wished.

Clause 1 contains a number of provisions. First, it repeals section 21 of the Arbitration Act 1950 and with it the case stated procedure. It then abolishes the jurisdiction of the High Court to set aside or remit arbitration awards on the grounds of errors of law on the face of the award—a procedure which discouraged arbitrators from giving reasons for their awards. It establishes instead a limited right of appeal to the High Court on points of law.

In addition, clause 1 imposes limitations on appeals from the High Court to the Court of Appeal beyond those applying at present. It provides that no appeal to the Court of Appeal shall be permitted without leave either of the High Court or of the Court of Appeal itself. So the kind of appeal which the Court of Appeal recently described in the case of William H. Pim Junior v. Kyprianou as an abuse of the procedure will no longer be possible.

Finally, clause 1 provides that the High Court may require arbitrators to give reasons for their award, a practice which would bring us more into line with other countries.

Clause 2 enables the High Court to determine preliminary points of law arising during the arbitration so as to avoid the delays which would arise if it were necessary solemnly to conclude the arbitration and then risk discovering that it had proceded on a false basis.

Clauses 3 and 4 provide for rights to make agreements excluding the jurisdiction of the courts altogether. The question of exclusions is not easy. As I said earlier, there is at present no right under English law to contract out. This follows from the judgment in Czarnikow v. Roth, Schmidt and Company in 1922, when the Court of Appeal held that it was against public policy to allow parties to an agreement to oust the jurisdiction of the courts—saying that there shall be no Alsatia in England where the King's writ does not run. That is the position under the law of England and Wales.

Under Scottish law the position is different, since section 3 of the Administration of Justice (Scotland) Act 1972 allows parties to an arbitration agreement to contract out of the case stated procedure. This Bill affects the law of England and Wales only, but it has the effect of moving the law of England and Wales in the direction of Scottish law.

However, in its report the Commercial Court Committee recommended that the law in England and Wales should reflect the different circumstances of the various types of arbitration. So clause 3 provides that parties to an arbitration agreement, other than a domestic agreement and one relating to special category disputes—that is, an international agreement—should be free at any time to exclude the right of appeal to the High Court. Parties such as foreign Governments involved in supra-national development contracts could then ensure that they could use English arbitrations without fear—if that be the word that seems appropriate to them—of having to submit to the jurisdiction of the High Court.

But clause 3 provides that in the case of domestic arbitrations, that is, arbitrations not involving foreign nationals or companies, the right of appeal to the High Court can be excluded only after the arbitration has begun. The reasoning is that if the right of exclusion applied at any time, a party in a weak bargaining position at the time of the contract might be bullied by a stronger party into agreeing in advance of any dispute to forgo the benefits of the new right of appeal to the High Court.

Arbitrations occur not only in major commercial transactions between what the noble lord Lord Hailsham in another place called the grandees. The procedure may apply to a fairly modest arrangement between humbler folk. One party may be a small retailer or a consumer and he may have little option but to accept the standard or specified form of contract. But when a dispute has already arisen, the need for protection is less evident, and accordingly the Bill would allow the parties to agree to exclusion once that stage had been reached. Thus, we have the major international agreements and domestic agreements.

Clause 4 makes particular provision for a third category described in the report of the Commercial Court Committee as special category disputes. The term embraces disputes arising out of maritime and insurance contracts and contracts relating to commodities. Such disputes form a large proportion of those arbitrated in London each year. Clause 4 provides that in these cases an exclusion agreement should be effective if it is made after an arbitration has begun. Usually the parties to these contracts, where they are international in character, are of more equal bargaining power than in the case of domestic arbitration agreements, and it might be suggested that they should have the right to contract out before a dispute has arisen and arbitration has begun.

The Commercial Court Committee was influenced by four considerations. First, it reported that there is no evidence of any very widespread desire to be able to contract out of a right of judicial review. Second, the committee believed that the right of review by the courts over a wide field of arbitrations is essential if English law is to develop comprehensively and so maintain its place as the first choice of law in international commerce. Third, it was troubled that if contracting out were permitted freely a contracting-out clause might become a normal term in standard form contracts, so that often the parties would not apply their minds to the question. Fourth, is suspected that the present dissatisfaction with abuses of judicial review may evaporate after the commercial community has experienced the new form of procedure in the Bill.

The committee recommended that for a period of two to three years the right of appeal should be entrenched in these special category disputes to the same extent as in domestic arbitration agreements. At the end of this period the advantages of the new system provided for in the Bill could be examined to determine whether the exclusion should be allowed before as well as after arbitration has begun.

Clause 4 reflects those recommendations with added flexibility by enabling the Secretary of State by order to remove the so-called entrenchment if and when it seems appropriate, subject to control by either House of Parliament.

But this solution has not won universal approval. There are those who are troubled that the commercial community may find the inability to contract out of judicial review a disincentive to seeking arbitration in London. In another place Lord Lloyd of Kilgerran drew attention to the matter. The maritime committee of the Society of Labour Lawyers has expressed anxiety, and yesterday I received letters from the president of the London Maritime Arbitrators' Association and from the Grain and Feed Trade Association.

The latter suggested two fairly limited amendments, but the former, in a careful and, if I may say so, well reasoned case, proposed more radical amendments to the Bill. It would, I think, be better if I said no more about the subject today. I have not yet had time properly to consider them, let alone to consult my right hon. Friend the Secretary of State and my noble Friend the Lord Chancellor. I take this opportunity to tell the Committee that I have received the proposal, but it would be quite wrong for me to encourage any hopes or any fears. If the Government or any hon. Member is minded to initiate any further discussions on the question, there will be an opportunity at a later stage.

Photo of Mr Bruce Douglas-Mann Mr Bruce Douglas-Mann , Merton Mitcham and Morden

Among the suggestions made by the people who have communicated with my right hon. and learned Friend has there been included a suggestion that as a condition for an appeal being allowed to proceed, which the court has power to impose under clause 1, there should be a requirement that the amount of the arbitrator's award and an amount in respect of costs be paid into court? It appears to me that that would remove a substantial part of the incentive to make a frivolous appeal solely for the purpose of delay and would substantially alleviate the anxieties that have been expressed about retaining the right of appeal.

Has that been suggested and will my right hon. and learned Friend consider in advance of our reaching the Committee stage whether such an amendment to the Bill would be practicable?

Photo of Mr Peter Archer Mr Peter Archer , Warley West

It is a suggestion which I have received, and as my hon. Friend will know, it was considered in another place. I appreciate that although it cannot necessarily apply to appeals by claimants and respondents, it would eliminate the fear that a reluctant respondent might abuse the procedure in order to delay the unhappy day when he has to pay up. Beyond that, I hope that my hon. Friend will forgive me if I do not anticipate anything which might take place at any later stage on the Bill. I promise that that, along with everything else, will be considered with my right hon. Friend the Secretary of State and my noble Friend the Lord Chancellor. I think that it would be much better for me not to say anything either way at this stage.

Photo of Mr Ian Gow Mr Ian Gow , Eastbourne

Could the Solicitor General tell the Committee whether the representations made in the two letters to which he has referred were made to the Lord Chancellor? I ask that because the proposals which form the basis of the Bill were published as long ago as July of last year, and the Bill itself was introduced into another place at the beginning of January this year. Were those matters considered by the Lord Chancellor?

Photo of Mr Peter Archer Mr Peter Archer , Warley West

Certainly, that has happened in respect of some of the proposals that I mentioned. I do not know about those specific proposals, but it is fair to say that representations along those lines, and from broadly the same sources, had been made earlier. I fully understand the point that no one will benefit if, at this late stage, we start to have major amendments to the Bill which could only have the effect of delaying matters.

Photo of Mr Michael Neubert Mr Michael Neubert , Romford

Could the right hon. and learned Gentleman clarify a point for me? He spoke of having received representations recently from three groups—

Photo of Mr Michael Neubert Mr Michael Neubert , Romford

The right hon. and learned Gentleman mentioned the maritime committee of the Society of Labour Lawyers. He also mentioned two others. Then he spoke of the"former"and the"latter ". Could he say of which he was speaking favourably and of which less favourably in the comments that he subsequently made?

Photo of Mr Peter Archer Mr Peter Archer , Warley West

I am sorry to have been more than usually confusing in my formulation. I did not intend to say that I had had any direct representations from the maritime committee of the Society of Labour Lawyers. I referred to two letters, one from the Grain and Feed Trade Association and the other from the London Maritime Arbitrators' Association. I was not conscious of speaking either more or less favourably of either. I said that the letter from the Grain and Feed Trade Association contained two limited proposals for amendment, whereas that from the London Maritime Arbitrators' Association contained rather broader proposals. I did not intend to say more than that, and certainly I did not intend to imply any value judgments.

Before I leave the point, perhaps I should add that in another place my noble Friend was persuaded that the range of arbitrations where there was to be no right to contract out at the time of contract should be substantially reduced by excepting cases in which the contract is governed by a law other than that of England and Wales. So already, I think, the area of controversy is substantially reduced.

The other clauses in the Bill involve minor, if significant, amendments arising mainly from recommendations of the Commercial Court Committee. They provide for sanctions against parties who fail to comply with the orders of an arbitrator, the appointment of arbitrators and arbitration awards, and the application of certain provisions of part I of the Arbitration Act 1950.

Since the days when the law merchant was developing in courts of piepoudre, the commercial community have sought means of deciding their disputes quickly but in a manner which should gain the confidence of all concerned. A walk through St. Stephen's Hall, past Lord Chief Justice Mansfield, the father of our commercial law, should be enough to remind us that our legal system has responded to that quest according to the changing needs and circumstances of succeeding generations.

I am sure that all members of the Committee will recognise that the City of London and other centres of arbitration in England and Wales ought not to be hampered in their ability both to foster the interests of traders and to make a sizeable contribution to our foreign exchange earnings. The Bill will remove deterrents in our arbitration practices which have emerged in recent years and replace them with procedures which will be attractive to all potential parties to arbitration agreements. I commend the Bill to the Committee and to the House with the hope that it will have a speedy passage.

10.54 a.m.

Photo of Mr Ian Gow Mr Ian Gow , Eastbourne

The Committee will be grateful to the right hon. and learned Gentleman for the clear way in which he has commended the Bill to the Committee. As the Solicitor-General pointed out, nearly 29 years have passed since the Arbitration Act 1950—the principal arbitration Act which governs our law on this topic today—received Royal Assent. The 1950 Act was a consolidation measure of previous Acts of Parliament covering the period 1889 to 1934.

This Bill gives legislative effect to all, or virtually all, of the recommendations of the Commercial Court Committee which were published last July. That committee, as the Solicitor-General explained, was presided over by Mr. Justice Donaldson, and the Opposition certainly join in paying tribute to the work of the learned judge and of the committee.

The Bill makes a very important change in our arbitration law, but it is a change that we welcome. The basis of section 21 of the 1950 Act rests upon the famous judgment delivered by Lord Justice Bankes, as he then was, in the case of Czarnikow v. Roth, Schmidt and Company in 1922. Mr. Blenkinsop, you may not be wholly familiar with the judgment of that learned judge. [HON. MEMBERS:"Oh! "]. I was not going any further than that, Mr. Blenkinsop—you may be. But certainly the hon. Member for Mitcham and Morden (Mr. Douglas-Mann) and I, when we were studying law, before deceiving the examiners to enable us to practice as solicitors, became familiar with it. That was a famous case and it is worth reminding the Committee of part of the judgment quoted in appendix 2 of Cmnd. 7284 There is a gem at the end which one may think not wholly inappropriate at this juncture of our affairs.

Photo of Mr Peter Archer Mr Peter Archer , Warley West

I thought that the hon. Gentleman would not miss that.

Photo of Mr Ian Gow Mr Ian Gow , Eastbourne

The Solicitor-General is quite right, but we shall leave the savoury to the end and move first to the hors-d'oeuvre. In the 1950 Act we were anxious not to oust the jurisdiction of the courts, and it was that which concerned Lord Bankes. He said: The ground of objection to the rule is that as an agreement it ousts the jurisdiction of the Courts of law, and is consequently against public policy and void…commercial arbitrations…will continue their present popularity…so long as the law retains sufficient hold over them to prevent and redress any injustice on the part of the arbitrator ". I believe that clause 1 of the Bill is wholly in conformity with the principle laid down by Lord Bankes, because we have not removed the ultimate jurisdiction of the High Court and, on a point of law, it will still be possible for the High Court to deal with a matter referred to it under clause 1 of the Bill.

The learned judge continued: to secure that the law that is administered by an arbitrator is in substance the law of the land and not some home-made law of the particular arbitrator or the particular association. I skip a few sentences there and come to the point of great interest to the Committee. The learned judge—now, alas, long deceased—said: At present no individual or association is, so far as I am aware, outside the law except a trade union. That comment was made in 1922. Lord Bankes went on: To put such associations as the Refined Sugar Association in a similar position would in my opinion be against public policy. Unlimited power does not conduce to reasonableness of view or conduct. I shall now quote with approval from only two other parts of the report of the Commercial Court Committe. Paragraph 17 states: The most obvious disadvantage of any such right —to judicial review— is that it conflicts with one of the prime objects of arbitration as a means of resolving commercial disputes, namely the achievement of a speedy and final decision. The Solicitor-General touched on this point. One of the reasons why there has been some loss of arbitration from London in recent years is that one of the prime purposes of arbitration—a speedy and quick decision—has been diminished by the operation of section 21 of the 1950 Act. The Bill puts that right. In my opinion, that will mean that some of the arbitration work which has been lost from London and has gone overseas will now be attracted back to London. That is an important consideration.

Before I came to the last quotation, we may reflect upon another truth about the Bill. Perhaps it has crossed your mind, Mr. Blenkinsop, that this Parliament has outlived its useful life. That is a thought that comes to me not from time to time, but almost all the time. However, honesty compels me to admit that those thoughts ought to be interrupted when we contemplate the Solicitor-General, because he has reminded us that even this Parliament is still capable of useful work. This is a very useful Bill and for the reasons—

Photo of Mr Peter Archer Mr Peter Archer , Warley West

For the record, I should be grateful if the hon. Gentleman would confirm that that was a very loose paraphrase of what I said.

Photo of Mr Ian Gow Mr Ian Gow , Eastbourne

I accept the rebuke. We believe that the Bill will enhance still further the high reputation of English law and English arbitration law in the whole international community. We think that we are likely to draw back to London some of those arbitration cases which we have been losing in recent years. English law and English arbitrations have long been favoured by those drawing up international trading contracts. We do not want to see this high reputation diminish. The whole purpose of arbitration is that disputes may be settled quickly. I have told the Committee that I am a solicitor. The legal profession is anxious that disputes should be settled quickly. The quicker they are settled, the more work we can do. I see that the Lord Commissioner, the hon. Member for Bebington and Ellesmere Port (Mr. Bates), may doubt that, but I am sure that his hon. Friend the Member for Mitcham and Morden will confirm that those of us engaged in practising the law are anxious for a speedy solution of our clients' problems. We can then go on to settle even more problems.

My last quotation is in paragraph 21 of the report: A much more serious objection —that is, an objection to the current law— is that the procedure is capable of being used by undeserving parties for the sole purpose of postponing the day when they have to meet their commitments. That point was referred to by the Solicitor-General. An abuse has grown up in recent years. An appeal may be made by way of case stated not because there is any genuine hope of the appeal being successful but in order to postpone the payment of an award that has been made by an arbitrator.

A number of amendments were made to the Bill in another place both in Committee and on Report. I believe that those admendments have improved the Bill. Unlike some Labour Members—not necessarily members of this Committee—I am in favour of a second Chamber.

I congratulate the Government on having introduced the Bill first into another place where there is a galaxy of legal talent. I should not say that galaxy is any greater than the legal talent on the Government Benches or, indeed, among my hon. Friends, but that there is a galaxy of legal talent in the other place few can doubt. The breadth of knowledge and experience brought to bear in another place was most impressive.

We wish the Bill well. We hope that it will soon be on the statute book. I hope that the two letters to which the right hon. and learned Gentleman referred have already been considered by his noble Friend. We should not allow those letters to delay the passage of the Bill, although the Committee and the Solicitor-General will want to give proper consideration to them. We hope that the Bill will be on the statute book before this Parliament is dissolved and that both may come about very soon.

11.6 a.m.

Photo of Mr Bruce Douglas-Mann Mr Bruce Douglas-Mann , Merton Mitcham and Morden

I fear that the hon. Member for Eastbourne (Mr. Gow) is likely to be disappointed in at least one of those anticipations.

I also welcome the Bill. I should make clear that in welcoming it I declare not an interest but a lack of interest. My right hon. and learned Friend the Solicitor-General referred to evidence submitted by the maritime committee of the Society of Labour Lawyers. Although I am the chairman of that Society, I am not a member of the maritime committee and by no means do I necessarily accept the views which it has submitted, although I have read them with interest. Moreover, although both in the House of Commons and in another place we are somewhat prone to have the legal profession over-represented and probably arbitrators and those involved in arbitration under-represented, I have never in some 25 years of legal practice—I do not know about the hon. Member for Eastbourne—had occasion to be involved with an arbitration. Therefore, I approach the subject in a state of blissful ignorance of the problems likely to arise.

I suspect, having noted the imposing weight of judicial opinion expressed in the Lords specifically on the exclusion of the exclusion of the right of appeal for certain categories of arbitrations, that the matter was approached by their Lordships with a degree of sympathy which might not have obtained if they had had as much experience as some of those who have made representations to me of dealing with arbitrations and of cases where arbitrations have not come to London because of the fear of the case stated procedure.

My view as a lawyer is that I am reluctant to see the right of appeal to the courts excluded in any circumstances. All that I am anxious to see is that, where there is a right of appeal to the courts, it shall not be used as an abuse. It is clear from expressions of opinion in speeches in another place and elsewhere that it is the fear of parties to arbitrations that the right of appeal will be abused for the purpose of delaying the making of payment. Where the amount involved is substantial and the costs involved in an appeal are small in relation to it, it is well worth putting off the payment of £1 million or so for the year necessary to get an appeal determined. Frequently, the sums involved can be larger than that.

I think it desirable that the Bill should proceed as rapidly as possible. It may not be necessary for any amendments to be made to ensure that the procedures are not abused, but I hope that my right hon. and learned Friend will consider whether it is desirable to amend the Bill to make it clear that in normal circumstances it should be a condition of going to appeal that the amount of the award and a sum towards the costs of the appeal should be lodged in court to avoid the attractions of appeal solely for the purpose of delay.

Subject to that, I do not wish to go along with the recommendations made by the maritime committee of the Society of Labour Lawyers or some of the others who have sent documents to me proposing the radical change to allow the right to exclude the right of appeal in the categories of cases which the Bill excepts. I feel that, provided that there is the assurance that the right of appeal cannot be seriously abused, it would be preferable to leave the Bill as it stands and to rely on the courts to ensure that their procedures are not abused.

11.11 a.m.

Photo of Mr Michael Neubert Mr Michael Neubert , Romford

As my hon. Friend the Member for Eastbourne (Mr. Gow) said, proceedings on the Bill in another place attracted a galaxy of legal luminaries—including the Lord Chancellor, the noble Lords Lord Hailsham, Lord Rawlinson and Lord Denning, the Master of the Rolls—to such a degree that the impression is left that these issues are for conduct in a sphere not accessible to ordinary mortals such as myself. That impression is reinforced this morning by the presence of the Solicitor-General and my hon. Friend the Member for Eastbourne. As a layman, qualified neither in the law nor in arbitration, I tread with the utmost trepidation in this area.

Nevertheless, I have been struck by the paradox that whereas the prime purpose of the Bill is proclaimed to be the facilitating and increasing of the use of London arbitration by foreign business men, a substantial section of the commercial community in this country remains not only unconvinced of that but convinced that it will lead to the reverse, namely, that what is proposed in the Bill may lead to a decline in the use of London arbitration.

Photo of Mr Peter Archer Mr Peter Archer , Warley West

I hope that the hon. Gentleman will confirm what is certainly my impression, that the criticisms made of the Bill are not to the effect that it will lead to a decline in arbitrations in London but that it does not go far enough. On any showing there is an improvement, but it is said that the improvement is not sufficiently sweeping.

Photo of Mr Michael Neubert Mr Michael Neubert , Romford

That is not my understanding of the representations that have been made. If I may go on to develop the point that is at issue, which has been touched on in all the speeches so far this morning, it is to question whether it is right to have different regimes for the domestic dispute—where there is no question but that it is accepted—for the special category dispute and for the supranational question. It is contended that if it is not possible to opt out of judicial review in the area of special category disputes, that may be a disincentive, and whether it leads to decline is perhaps not as important as whether it is in itself right.

I understand that the decision is not final in the Bill. It is open, after the passage of two or three years, for the matter to be reviewed, and the enabling clause is there. But all members of the Committee will concede that in the course of two or three years business could be lost, and not only during that period but lost for all time because practice and tradition play an important part in arbitration. All I wish to do is to put a marker down on this point in the belief that it might be more appropriate for us to return to it by way of amendment in Committee where the issues could be discussed at greater length and in greater detail.

Of the four reasons which the Solicitor-General advanced this morning for the exception being made, one or two are less strong than others, and there is a doubt on which he did not touch, that even in supra-national contracts the fact that aspects of those contracts might include maritime, insurance or commodity matters—the three areas excluded under the present proposals—might cause some hesitation on the part of those concerned in deciding on London arbitration.

Therefore, while welcoming as I must, as somebody anxious to see the furtherance of trade and, in particular, an increase in invisible earnings for the United Kingdom—a need that will become increasingly important with the continued malaise of manufacturing industry—I have reservations about that aspect of the Bill and look forward to the opportunity of discussing with my colleagues and with the Government the detail of those doubts when we come to a later stage.

11.16 a.m.

Photo of Mr Peter Archer Mr Peter Archer , Warley West

May I have the leave of the Committee to speak again? Until a few moments ago, it was an application that I was not proposing to make because the danger on these occasions is that I am unable to contain my normal loquacity and it is at this stage in a Second Reading Committee that I am liable to get myself into trouble.

I thank all the hon. Members who have spoken for the general welcome which they have given to the Bill.

The hon. Member for Eastbourne (Mr. Gow) emphasised how important it is at this stage that the Bill should make speedy progress towards the statute book. I fully accept that that is the overriding consideration, whatever else may happen. Beyond that, I hope that he will forgive me if I am not drawn into the more controversial matters to which he adverted, which perhaps are not immediately connected with our commercial arbitrations.

My hon. Friend the Member for Mitcham and Morden (Mr. Douglas-Mann) mentioned the possibility of making it a condition of taking an arbitration to the courts that there should be some payment in which would remove the incentive to abuse the procedure in order to delay the day when one had to dip into one's pocket. He said that that would probably not entail an amendment to the Bill. He had considered already clause 1(4) which would enable conditions to be attached to any leave to appeal, and one of the conditions which might be made is precisely the condition that he had in mind. If my hon. Friend wishes to take the matter further we can consider it at a later stage.

The hon. Member for Romford (Mr. Neubert) gave the impression, I thought, that there were suggestions among the users of arbitration that the Bill made matters worse than they are already. I fully take the points to which he adverted, and obviously they will have to be considered at a later stage. They will be carefully considered. But he is, I think, labouring under a misapprehension, because the Bill abolishes a procedure which is manifestly capable of abuse and from which there is no right to contract out, replacing it with a much more limited procedure with limited rights of contracting out.

Photo of Mr Michael Neubert Mr Michael Neubert , Romford

My reservation is not about the provisions of the Bill as a whole but only in relation to those special category disputes of which I was speaking. It is there that the doubts remain. I accept entirely that the Bill as a whole is an improvement.

Photo of Mr Peter Archer Mr Peter Archer , Warley West

I am grateful for that clarification, but even in relation to the special category disputes those who at the moment take part in such arbitrations are subject to the case stated procedure which is clearly capable of being abused and from which there is no escape. Whatever else may happen to the Bill in its present form, it abolishes that. It provides instead a much more limited right of appeal and says that in certain cases there shall be a right to contract out.

Even given all the assumptions which those who have spoken to the hon. Gentleman make, it must be accepted that the Bill makes some progress towards what they want, though I fully understand when they say that it does not go far enough. I think that it would perhaps be better if at this stage I restrained myself from further comment and undertook, as I am bound to undertake, that anything said at a later stage on the Bill will be carefully considered. I am grateful for the general welcome that the Committee has given to the Bill and have pleasure in commending it.

Question put and agreed to.

Ordered,That the Chairman do now report to the House that the Committee recommend that the Arbitration Bill [Lords] ought to be read a Second time.

Photo of Mr Peter Archer Mr Peter Archer , Warley West

May I seize the opportunity, Mr. Blenkinsop, to convey to you the gratitude of the Committee for the happy way in which you have presided over our deliberations and for the expedition with which, under your guidance, we have arrived at a conclusion.

Photo of Mr Ian Gow Mr Ian Gow , Eastbourne

On behalf of the Opposition, may I associate myself with those remarks.

Photo of Mr George Thomas Mr George Thomas , Cardiff West

That is very kind, but the proceedings were too short to justify any such thanks.

Committee rose at twenty minutes past Eleven o'clock.

THE FOLLOWING MEMBERS ATTENDED THE COMMITTEE:
Blenkinsop, Mr. Arthur (Chairman)McKay, Mr. Allen
Bates, Mr.Morton, Mr.
Boardman, Mr.Neubert, Mr.
Douglas-Mann, Mr.Sever, Mr.
Goodlad, Mr.Solicitor-General, The
Gow, Mr.Stradling Thomas, Mr. John
The Committee consisted of the following Members:
Mr. Victor Goodhew (in the Chair)
Anderson, Mr. Donald (Swansea, East)Lyons, Mr. Edward (Bradford, West)
Bates, Mr. Alf (Bebington and Ellesmere Port)Morgan, Mr. Geraint (Denbigh) Price, Mr. Christopher (Lewisham, West)
Body, Mr. Richard (Holland with Boston)Richardson, Miss Jo (Barking)
Havers, Sir Michael (Wimbledon)Silkin, Mr. S. C. (Attorney-General)
Hooson, Mr. Emlyn (Montgomery)Skeet, Mr. T. H. H. (Bedford)
Kilroy-Silk, Mr. Robert (Ormskirk) Lawrence, Mr. Ivan (Burton)Steen, Mr. Anthony (Liverpool, Wavertree)
Lyon, Mr. Alexander W. (York)Stradling Thomas, Mr. John (Monmouth)