I beg to move, That the Bill be now read a Second time.

I am pleased to be opening this Second Reading debate on the Government’s Arbitration Bill. This legislation is a direct response to recommendations made by the Law Commission of England and Wales in its report on arbitral reform, published in September 2023. If enacted, the Bill will make targeted reforms to the Arbitration Act 1996, which governs arbitration in England, Wales and Northern Ireland. Scotland has its own devolved arbitral framework under the Arbitration (Scotland) Act 2010, which this Bill will not affect.

Arbitration is a major area of business activity. For example, the Chartered Institute of Arbitrators, headquartered in London, has more than 17,000 members across 149 countries. As the House will know, arbitration is greatly valued by individuals and businesses alike as an alternative to going to court, giving parties the ability to appoint a private tribunal to resolve disputes by issuing a binding and enforceable award. For example, when parties enter into a commercial contract, it is common to find a Clause that provides that any disputes will be resolved through arbitration in this great capital city of London, rather than through litigation in court. That is often true even where a contract has no other connection to the UK, such is the prestige of arbitration here. Furthermore, thanks to an international convention commonly called the New York convention, which dates from 1958, arbitration awards made in the UK can be enforced anywhere in the world. Studies suggest that such enforcement is often faster and more reliable than seeking to enforce court judgments.

The New York convention may date from 1958, but arbitration has been a feature of our justice system for centuries. Arbitration was a common way of settling disputes back in Anglo-Saxon times. It was largely a public affair, with enforcement through community pressure. By Norman times, parties could choose their arbitrator, someone known to both sides and well placed to facilitate a reconciliation. In the 14th century—[Interruption.] The Opposition spokesman, Dr Mullan, is enjoying my little canter through the historical background, which I am sure the massed attendance this afternoon is also enjoying. In the 14th century, the mayor and aldermen of London set up, in effect, an arbitration centre here in this great city. This also provided services to foreign traders whose disputes had no other connection to England. Arbitration then grew in Elizabethan times, and by the mid-18th century arbitration clauses were very common, as were professional arbitrators.

It is said that our first arbitration Act, the Arbitration Act 1698, was single-handedly drafted by the famous political philosopher John Locke after he had been tasked by the then Board of Trade to devise a scheme that would help merchants to reach a satisfactory settlement of their disputes. John Locke’s arbitral framework fitted on one or two sides of paper, which is a real achievement, is it not? If only we could emulate that today, but things have got more complicated and therefore more precise. Arbitration has come a long way since then, though we salute John Locke and his efforts in setting us on this journey.

Today, arbitration happens in a very wide range of settings, from rent reviews through commodity trades and shipping to international commercial contracts and investor claims against states. In each instance, it enables parties to resolve the dispute at hand and move on from it. The parties can choose a neutral venue to resolve their dispute. They can choose trusted arbitrators or arbitral institutions to preside over the proceedings. I add with emphasis that some of the world’s leading trade and arbitral institutions are headquartered here in London. I may have mentioned that before, but we need to be proud of it. They range from the aforementioned Chartered Institute of Arbitrators and the London Court of International Arbitration to important specialist organisations concerned with matters such as shipping and trade in grains, oils and sugars.

Parties can tailor the arbitration process to their own needs, which results in an award that is internationally enforceable. At the same time, the process is respected for its integrity—at least, that is the position here in the UK, thanks in large measure to the regulation of arbitration through the Arbitration Act 1996. The Act ensures that arbitration is conducted in a way that is impartial, fair and without unnecessary cost and delay. The English courts, which command much respect worldwide, retain a supervisory jurisdiction.

Building on its extensive history of arbitration, and thanks to its legislative framework, London has become the world’s leading destination for international arbitration. It is highly respected as a neutral venue for resolving disputes across the world, something in which we all rightly take immense pride. In fact, the Law Commission estimates that at least 5,000 arbitrations take place in England and Wales each year, directly contributing at least £2.5 billion a year to our economy in fees alone. So arbitration and the Bill are part of our growth agenda for our great country. However, as arbitration is a largely private affair, we may speculate that its direct value is likely to be even greater than that £2.5 billion.

Arbitration is also an important offering in our country’s international business package, one that includes legal services, banking, insurance and trade. It is a great advantage of our jurisdiction that business can be done here in the knowledge that when legal disputes arise, they can be resolved swiftly and fairly. We enjoy a worldwide reputation for the quality, independence and ethics of our legal professions. It is therefore no surprise that arbitration here in London is a showcase for that, or that it is very much in demand.

Given that the Arbitration Act 1996 is approaching 30 years of age, the previous Government rightly asked the Law Commission to undertake a thorough review of the legislation back in 2021. It was tasked with determining whether the 1996 Act required Amendment to reflect modern practices and maintain its effectiveness in a growing global market when competing jurisdictions had already updated their own arbitral frameworks. The Law Commission was painstaking in its review, carrying out the commission given to it by the previous Government, and I pay tribute to the members of the Law Commission for their painstaking work on this matter, from which we all benefit.

An initial consultation paper was published in September 2022. It laid out the Law Commission’s analysis of the law as it stood and proposed a small number of areas for reform. That consultation received responses from abroad and from an expert base of consultees including individual practitioners, academics, specialist bodies and international firms and institutions, as well as from our judiciary. Taking this feedback on board, the Law Commission refined its proposals and published a second consultation paper in March 2023. After yet another round of engagement, final proposals and a draft Bill were published in September 2023.

As I said, this process has been painstaking and thorough, and we need to credit everybody involved, including the Conservatives for their leadership of the process during that time. It is a testament to the longevity and flexibility of our arbitral framework that only targeted updates were recommended, with the Law Commission concluding that while some modernisation of the 1996 Act was needed and desirable, root and branch reform was not. And it is testament to the Law Commission’s thorough consultation that the Bill commands such support in the arbitral and legal sectors.

I cannot resist adding that the work has been watched carefully by our competitor jurisdictions abroad. The Law Commission’s report was cited by the Singapore court of its own initiative, and in the last few months, seeing the positive developments here, France has announced a need to review its own arbitration Laws. We lead the way, and this Bill will ensure that we stay ahead.

As hon. and right hon. Members will be aware, the previous Government introduced an Arbitration Bill in 2023 that also sought to implement the Law Commission’s recommendations. That Bill had made its way through Committee in the other place when Parliament was dissolved for the General Election. The legal sector was emphatic in expressing the view that the proposed reforms are vital for updating the arbitral framework and making sure that our jurisdiction remains competitive.

We are first in global class on arbitration, and this Bill will ensure that we stay first in global class. The Government agree wholeheartedly with the legal sector’s view, not least because of our commitment to fostering economic growth in our country. As such, this Bill was introduced in the other place at the very earliest opportunity in July 2024, as one of the first acts of this Government after the general election. I am pleased to see the Bill finally arrive in this House, as I am sure you are, Madam Deputy Speaker.

It is worth saying that the 1996 Act boasts some key strengths. It provides flexible procedures that allow parties to shape proceedings to best suit them. Parties can, for example, arbitrate their dispute with one of our jurisdiction’s many world-leading arbitral institutions, which have developed procedures that parties trust will deliver a fair and timely outcome.

Our current framework also permits effective recourse to our courts, where needed. Parties can request that our courts determine a preliminary matter in the arbitration, such as jurisdiction, or later challenge an award produced by arbitration. Arbitrators can similarly apply to the courts to assist their proceedings, such as by enforcing their orders. At the same time, the regime of court support is carefully balanced to prevent parties from dragging their feet and re-litigating cases. This gives parties huge confidence that arbitrations taking place in our jurisdiction are both efficient and fair.

Many of this Bill’s reforms are designed to build on the strengths of the 1996 Act. I will now go through the key clauses, because I can tell that Members are deeply interested in checking through the detail so that, should we move to a vote, we know exactly what we are voting on.