HC Deb 05 July 1978 vol 953 cc616-20

Lords amendment No. 1:

The Lords have agreed to the amendment made by the Commons in page 14, line 1, leave out subsection (3) and insert: '(3) Subject to subsection (3A) below, Parts I and II of this Act do not apply to proceedings in respect of matters that occurred before the date of the coming into force of this Act and, in particular, sections 3, 4 and 9 do not apply in the case of any transaction, contract or arbitration agreement entered into before that date. (3A) Sections 2 and 12 above apply to any proceedings instituted after the coming into force of this Act.'

with the following amendment:

In subsection (3), line 4, leave out '3, 4 and 9 do not apply in the case of any' and insert '2(2), 3, 4 and 9 do not apply in the case of any written agreement'

Mr. Deputy Speaker (Mr. Bryant Godman Irvine)

With Lords amendment No. 1, we may take the Commons amendment thereto and Lords amendment No. 2.

The Solicitor-General (Mr. Peter Archer)

I beg to move, as an amendment to Lords Amendment No. 1, to leave out from '2(2)' to end and insert '13(3) do not apply to any prior agreement, and sections 3. 4 and 9 do not apply to any'. At this stage in the evening I normally detect a feeling that the House would appreciate brevity rather than detailed exposition—

Mr. Andrew F. Bennett (Stockport, North)

Too long.

The Solicitor General

I would be neglecting my duty if I omitted to remind the House of the history of this matter. It relates to the situation in which a State enters into a contract with a private individual or a commercial undertaking and agrees by a provision in the contract that, in the event of proceedings arising out of that contract, it will not claim State immunity.

The common law rule in the past has been, in plain English, that that agreement is not worth the paper it is written on. A State can effectively waive its immunity and submit to the jurisdiction only after a dispute has arisen, by a submission made in proceedings which have already been brought.

The Bill provides that that shall no longer be the case. If a State purports to submit to the jurisdiction by a prior written agreement, it will be held to what it has said. I cannot believe that there will be any at the graveside to mourn the passing of the former common law rule. The only question is on the transitional provisions.

The Bill was introduced in another place, and when it arrived at this House it was generally agreed that there was an ambiguity in clause 23. It was not clear whether the new statutory provision applied to contracts made before the Act came into force when the dispute and the proceedings arose after the Act came into force.

In Committee I introduced a Government amendment to resolve that ambiguity. Its effect was that in respect of amendments to the substantive law the Act should apply only as from the date when the Act came into force. But in relation to procedural matters the Act would apply in all proceedings initiated after it came into force, even where the proceedings were in respect of an agreement made prior to the Act.

In Committee the right hon. and learned Member for Wimbledon (Sir M. Havers) moved an amendment to my amendment. He argued that to make the new provision applicable to agreements which had already been concluded was an infringement of the principle against retrospective legislation. I said that I was not entirely convinced, and I still take leave to doubt whether a State could evoke general indignation by saying "I have been deprived retrospectively of a legitimate expectation. I thought I would be allowed to break my promise, and now I find that I am being compelled to keep it." I accepted that there were weighty arguments on both sides, and I said that the matter was for my noble Friend the Lord Chancellor to decide and that I would refer it to him. He considered the matter and was impressed by the arguments adduced by the right hon. and learned Member for Wimbledon and by the arguments in another place. I think that my noble Friend was particularly impressed because the very institutions that stood to gain most from the change in the rule were those most anxious that the provisions should not operate retrospectively, because they feared that this country might acquire a reputation, however unjustly, for legislating retrospectively. Therefore, my noble Friend agreed to the amendment introduced in another place.

It now falls to me to move that we should agree with that amendment, but I fear that there is a further complication. The amendment in its present form makes provision only for written agreements to submit to the jurisdiction, those covered by clause 2(2). It makes no provision for written agreements to submit to execution, dealt with in clause 13(3). Clearly, it would be inconsistent to make different provision for the two cases. Therefore, the proposed amendment to the Lords amendment is to extend this principle to include also those agreements falling within clause 13(3).

Finally, I think that I should repeat a warning given by my noble Friend in another place. The amendment says only that the statutory provision will not apply to agreements made before the Bill comes into effect. Therefore, the rules of the common law will apply, but the common law may no longer always recognise immunity. It appears from the majority of judgments of the Court of Appeal in the Trendex case that the common law itself may have developed. First, a State may have no immunity to waive where a contract was commercial in character, so an undertaking not to claim immunity may transpire to be academic. Secondly, even if it were entitled to immunity, the common law may now recognise that that can be waived by a previous agreement. These questions may have to be argued if and when they arise, but if that is the case at least it cannot be contended that that result came about by reason of retrospective legislation.

Sir Michael Havers (Wimbledon)

I stayed in this Chamber after the division at 10 o'clock and time after time heard Opposition speakers congratulating the Government on their generosity and kindness and wondered whether I had wandered into the wrong Chamber. However, the needle is stuck in the groove and I am in exactly the same position. I, too, must congratulate the Government on responding to the request that I made in Committee and to the amendment made in the other place by Baroness Elles.

I am grateful to the Government, because not only have they accepted the point I made in Committee but they have gone further and taken on board a point which, I confess, we missed. It is right, as the Solicitor-General said, that there was an inconsistency in that we were dealing with the matters covered in clause 2(2) and had overlooked matters provided in clause 13. However, this has now been covered. The Solicitor-General made the point, and it should be appreciated, that it is at the request of those who would stand to gain most if the law had not been altered in the way in which we wish it to be altered by this further amendment that the element of retrospection should be removed. It would be usually their clients who would benefit by the element of retrospection, but quite properly the City of London Solicitors Company put the reputation of our law and legal system in England above the interests of the clients of its members—which in the long term, I suspect, will be in the interests of their clients—and said that it was important that there should be no feeling among foreign sovereign States that if they entered into contracts in this country there would be any risk of future retrospective legislation, which would be very damaging to the very important and remunerative work that is done in the City of London.

Therefore, I join in what has become the common form since 10.15 p.m. in this Chamber tonight and I thank the Government very much for the response they have made to what I wanted them to do.

Question put and agreed to.

Lords amendment No. 2 to Commons amendment agreed to.