AMENDMENT OF ARBITRATION ACT 1950 (Hansard, 17 July 1985)

§ Mr. Richard Ottaway (Nottingham, North)
I beg to move, That the clause be read a Second time.
Clause 57 blocks a loophole in the law of arbitration but creates an inconsistency. The clause is welcome in that it stops people being able to avoid appointing an arbitrator and therefore to avoid having a properly constituted arbitration panel but, as those who follow the debate on clause 57 in Committee will be aware, I was anxious that its approach was wrong in that it provided for a court appointment of a replacement arbitrator. I thought that a somewhat surprising decision in view of the weight of opinion of people in the arbitration profession who went to the Department of Trade and Industry to make their case. It is regrettable that their views did not prevail.
As a result of clause 57, section 10 of the Arbitration Act 1950 is inconsistent with section 7 of that Act. Section 7 provides that, when parties have agreed to refer a dispute to two arbitrators as umpire, in the event of default in the appointment of one of the arbitrators, a properly constituted panel becomes a sole arbitrator. Clause 57 404 provides that when there is a default in the appointment of an arbitrator, there are three arbitrators, and the second is appointed by the court. That is bad law and, inconsistent and should be remedied.
In Committee, I tried to provide consistency with section 7 of the 1950 Act but my proposal was rejected on three grounds. I should like to consider the arguments that my right hon. and learned Friend the Attorney-General used to reject my proposal. First, he said that a fundamental requirement was that the clause should provide that a dispute should be settled by a three-man arbitration tribunal. I have managed to comply with that requirement by providing in the new clause for a three-man arbitration tribunal. Secondly, he said that it was important for such a clause to have the blessing of the United Nations Committee on International Trade Law and that clause 53 should be in line with the model clause on arbitration. Again, I have got over that hurdle by providing in the new clause for a three-man arbitration panel, which is consistent with the UNCITRAL model code.
The most important point, however, is that the Government took the advice of Mr. Justice Mustill. To quote again my right hon. and learned Friend, he said: Mr. Justice Mustill is probably the greatest expert on the law of arbitration … Mr. Justice Mustill is probably the leading expert of all time in this respect.—[Official Report, Standing Committee D, 4 July 1985, c. 196.] I am happy to accept my right hon. and learned Friend's view of Mr. Justice Mustill. It is unfortunate that in Committee we did not have before us a letter dated 26 February 1985 from Mr. Justice Mustill to Lord Hacking. Referring to sections 7 and 10 of the Arbitration Act 1950, he said: We accept that section 7 provides a precedent for party-appointment. There is, however, much to be said for the view that it is an anomaly, which should not be perpetuated. The Advisory Committee will have to look at sections 7, 10 and 25 together, since they do not really add up. The unfortunate point about clause 57 is that it does not take Mr. Justice Mustill's advice but looks in isolation at section 10. All I am seeking to do in the new clause is to follow Mr. Justice Mustill's advice by taking sections 7 and 10 together. I have adopted in my new clause the Government's wording of clause 57. Having deployed my right hon. and learned Friend's arguments in Committee and having adopted the Government's wording in the new clause, I hope that he will be able to accept it.

§ The Attorney-General
I admire my hon. Friend's great ingenuity, but I am afraid that I still have to disappoint him. I appreciate that his approach is consistent and unobjectionable but the problem is that it goes beyond the intention of clause 57, which was designed to fill a specific gap in the Arbitration Act that had been identified by the Mustill committee on a temporary basis—I emphasise "on a temporary basis"—prior to consideration by the departmental advisory committee on arbitration for the reform of arbitration law in the light of the UNCITRAL model. The solution chosen in clause 57 was recommended by the sub-committee and it was adopted in the UNCITRAL model law. As yet there is no evidence that section 7 is creating difficulties for arbitrators but the ingenuity shown by my hon. Friend will be drawn to the attention of the sub-committee.

§ Mr. Ottaway
Although I am somewhat disappointed, I am reassured by the assurance of my right hon. and learned Friend that the matter will be looked at. Therefore, I beg to ask leave to withdraw the motion.