HL Deb 16 July 1929 vol 75 cc94-108

Order of the Day for the Second Reading read.

LORD PARMOOR

My Lords, in spite of that which has been indicated as a possibility by the noble Marquess opposite regarding the future of this Bill, I regard it, and I think the noble and learned Viscount opposite will regard it, as neither a contentious nor a controversial Bill, though it may be that, as a matter of drafting, some alteration may be required in its wording. The Bill was read a first time last week and it has been in the hands of the noble and learned Viscount opposite since that date, and, no doubt, he will tell us later what his views are. I can only say that it is desired to meet noble Lords in every possible way in order that the Bill may pass, as it is really an agreed Bill and, even in regard to its drafting, there is nothing of substance that is in dispute. The Bill of which I am now proposing the Second Beading is a further step in the direction of improving facilities for international trade. It was framed under the last Government, I think practically in its present form—I may be wrong about that, but I am not aware of any alteration since—and, as I have said, in my opinion it can be neither contentious nor controversial.

In 1923 an International Protocol on Arbitration Clauses was devised at Geneva, which provided that signatory States should recognise agreements on the part of their respective subjects to submit to arbitration disputes arising out of commercial contracts. So far as this country is concerned effect was given to that Protocol by the Arbitration Clauses (Protocol) Act, 1924. The arrangement, however, did not go far enough, particularly as regards the enforcement of arbitration; so, as your Lordships will notice, Part 1 of this Bill is entitled" Enforcement of Foreign Arbitral Awards. "The object is that these foreign arbitral awards, admittedly of great value, should be easily enforced here and elsewhere in the interests of both parties to an arbitration dispute. The World Economic Conference, under the Chairmanship of M. Theunis, in March, 1927, recommended the adoption by all countries of recourse to arbitration, and it was in pursuit of this that the Economic Committee of the League devised a new document. This new document is the Convention attached to the present Bill and the signatories to which agree to enforce in their own Courts arbitration awards made in due form in other signatory countries. This project was considerably revised as a result, largely, of suggestions from His Majesty's then Government, the late Government in this country, and it was adopted by the Assembly of the League in September, 1927.

On December 7 in that year the then Foreign Minister, Sir Austen Chamberlain, speaking at Geneva on behalf of His Majesty's Government, said that he had signed the Convention on the previous day. Then he added that— in order to carry out the Convention the British Government would need Parliamentary authority, and proposed to promote legislation at the earliest convenient moment. As matters have turned out, this seems to be the earliest convenient moment—it is impossible to foresee the future—and the fact that I am introducing this Bill rather than a representative of the present Opposition is merely a result which could not have been foreseen. This is, in a direct sense, a continuity of former policy.

If your Lordships will look at the Bill itself, you will see that the preamble states in short language what I have already stated. It is as follows:— Whereas a Convention, set out in the Schedule to this Act, on the Execution of Arbitral Awards was on the twenty-sixth day of September, nineteen hundred and twenty-seven, signed at Geneva on behalf of His Majesty: And whereas it is expedient that such provisions should be enacted by Parliament as will enable the said Convention to become operative in the United Kingdom: Now, therefore, be it enacted as follows:— I propose shortly to state what is the purport of the various clauses in this Bill. As I have said, their drafting has been very carefully considered, but if any amendment is necessary, we shall receive any proposal in a perfectly friendly spirit, and if it appear to be an improvement it will certainly be adopted.

The first clause says: This Part of this Act applies to any award made after the twenty-eighth day of July, nineteen hundred and twenty-four— That date is really fixed by the provisions of the 1923 Protocol and the 1924 Agreement which brought it into operation after there had been two ratifications. Therefore the date on which it came into operation was July 28, 1924. I do not think it is necessary to read more of Clause 1 until we come to subsection (2), which says:— The Governments to which this Part of this Act applies are those Governments in respect of which His Majesty may by Order in Council declare the said Convention to be in force. The object of that is that there shall be no doubt as to the areas within which these commercial arbitrations will be implemented and enforced under the provisions of this Bill, and that everyone shall have due notice of what they are.

Under Clause 2 they are subject to enforcement under one of the two methods which are recognised by the law of this country, particularly since the Arbitration Act, 1889—either by action or under the provisions of Section 12 of the Arbitration Act, 1889. The procedure here, which I assume will be the procedure adopted under the terms of the Act, is that if any substantial difficulty is involved the procedure will be by action, and if there is no difficulty whatever then the arbitral award will be enforced in the same way as a judgment or order by an Order made under the recognised procedure adopted in this country. With regard to subsection (2) of Clause 2, the intention is that the award shall be regarded as valid, not only between the parties but in its general purport, and therefore, as regard any proceedings, it may be utilised by way of defence, set off or otherwise, in any legal proceedings in England, and any references in this Part of this Act to enforcing a foreign award shall be construed as including references to relying on an award. It may be used for purposes of defence as well as for purposes of obtaining rights which have been claimed.

Clause 3 sets out, I think quite clearly, the conditions for enforcement of these foreign awards. I do not think that anything which is not quite clear turns upon Clause 3 until we come to subsection (3) of that clause, which says:— If a party seeking to resist the enforcement of a foreign award proves that there is any ground other than the non-existence of the conditions specified in paragraphs (a) (b) and (c) of subsection (1) of this section, or the existence of the conditions specified in paragraphs (b) and (c) of subsection (2) of this section, entitling him to contest the validity of the award.— these are specified reasons for which you may test the validity of the award. The subsection continues:— —the Court may, if it thinks fit, either refuse to enforce the award or adjourn the hearing until after the expiration of such period as appears to the Court to be reasonably sufficient to enable that party to take the necessary steps to have the award annulled by the competent tribunal. I think that, in order to safeguard the position in every direction, that is necessary, and if the noble and learned Viscount opposite will take the reference to Article 3 of the Convention itself he will find how closely the provision of Article 3 is followed in the provision which I have just read.

Clause 4 sets out the evidence which must be produced before the Court in order that an award may be enforced. I do not think there can be any difficulty about that. Clause 5 contains a definition which is essential. The award is known as a "final award" in this country when it has been finally made, although there may be difficulties ahead as regards its enforcement. The clause says:— For the purposes of this Part of this Act an award shall not be deemed final if any proceedings for the purpose of contesting the validity of the award are pending in the country in which it was made. I think that is quite essential as a definition of what we mean by "final award," and it also indicates a distinction by the way in which that expression is used in this arbitration proposal as against the way it would be used in ordinary procedure in this country. Then there are saving clauses, on which I think really nothing turns. In Clause 7 we have the application of this Part of the Act to Scotland and Northern Ireland. That is a matter for the Scottish Office and those who advise Northern Ireland, and the provisions incorporated here have been incorporated under their advice and after their full consideration.

That is the whole of this Bill as far as Part I is concerned. May I pause there for a moment? I hope the noble and learned Viscount will agree with me that there is nothing either contentious or controversial in this. If there is any improvement as a matter of drafting which he would care to bring to our notice I can assure him at once that it will have every consideration, and I hope it will be settled by arrangement between the Parties. Part II is simply a slight alteration in the Arbitration Clauses (Protocol) Act, 1924, by adding the words "or that there is not in fact any dispute between the parties with regard to the matter agreed to be referred." If there is no dispute as regards the matter agreed to be referred there is really no arbitration in the sense in which we use the term, and there can be no valid arbitral award. I hope the explanations I have given are sufficient. If any questions are asked I will certainly endeavour to supplement what I have said. I beg to move the Second Reading of this Bill.

Moved, That the Bill be now read 2a.—(Lord Parmoor.)

VISCOUNT HAILSHAM

My Lords, the noble and learned Lord, the Leader of the House, has moved the Second Reading in a speech of a most disarming and conciliatory nature, and he is quite right in saying that the Bill in principle is not in any sense a contentious or controversial measure. Either in its exact form or in substantially the present form it was in draft when the late Government were in office and, as he truly says, it would have fallen to my lot to bring forward this or some similar Bill if the circumstances of the last General Election had not intervened. But when the noble and learned Lord tolls your Lordships that this Bill is a further step to improve the facilities for foreign trade he is using somewhat euphemistic language. The fact is that this Bill is a Bill to remedy the dreadful handicap which was imposed upon our foreign trade by the Convention of 1923, and the circumstances which render this Bill necessary are a signal example of the folly of those misguided enthusiasts who will rush into international conventions regardless of their effect upon trade interests at home, and who have a sort of idea that nothing but good can come from Geneva and are apt to inflict serious injury upon vital interests of this country through their excessive zeal.

The facts are these. As your Lordships know, the great bulk of our commercial contracts made in the City of London contain what is known as an arbitration clause, that is to say, a clause which provides that in the event of dispute the matter shall be referred to arbitration; and when the contract is made between two British subjects there is ample protection afforded by our legislation. The Courts will stay an action brought in defiance of an arbitration clause unless some good reason is shown to the contrary; and an arbitration award when it is made can be enforced by execution. But when a commercial contract was made between a British subject in the City with a foreigner a different position was created. No foreign country recognises or will enforce the award made in any other country, that is to say no foreign country would enforce, for instance, a British award; and no foreign country would before 1923 recognise the existence of an arbitration clause as a bar to an action.

The consequence was that if a dispute arose between a British merchant and a foreigner upon a contract made in the ordinary British form, if the British merchant obtained an award in an arbitration he was no nearer obtaining satisfaction because no foreign Court would recognise that award. On the other hand, if a foreigner had a claim under such a contract against a British subject he could, notwithstanding the arbitration clause, sue in the Court of his own country, which would not recognise the arbitration clause as a bar. Those were the two disadvantages which existed in the case of an arbitration clause in a contract between an Englishman and a foreigner. In 1923 a Convention was made at Geneva by which it was provided that the States which became parties to the Convention would stay any action brought in defiance of an arbitration clause between their own subjects and the subjects of another State which was a party to the Convention; and that removed the difficulty that a foreigner was able to sue an Englishman in his own country upon a contract with an arbitration clause and that there would be no stay.

So far, then, a grievance was removed. But a far greater difficulty was created by the Convention. Before 1923, although the British merchant when he had a claim against a foreigner could not enforce an award when he had obtained it, he could always bring an action in the Courts of the foreigner's own country and obtain judgment which, of course, could be enforced against the foreigner. By virtue of the Convention of 1923, he was no longer able to bring such action because the Convention provided that the State was bound to stay an action brought when there was an arbitration clause in the contract. The result was that if an Englishman had a contract with a foreigner containing an arbitration clause and the foreigner failed to implement his contract, the Englishman, by virtue of the 1923 Convention, was left absolutely without remedy. He could not sue on the award if he got it because the foreign country would not recognise the award, and he could not sue on the original cause of action because the Convention compelled the foreign Court to stop the action. The result, therefore, of this well-meant effort to cure the difficulty that the foreigner could sue in defiance of an arbitration clause, was to create the much graver ill that the British subject was absolutely helpless against any foreigner, unless he had assets in this country, in regard to such a contract.

That was an impossible state of affairs, and it was to remedy that difficulty that the Convention which is the foundation of the present Bill was entered into in 1927. I confess that the Convention does not seem to me in every way satisfactory. There was representing this country a very eminent lawyer, a friend of my own, Mr. Claughton Scott, who did all that could be done; but naturally, as in every international convention you have to give as well as take, he was not able to get the Convention into a form that was altogether satisfactory. To my mind, at least, its language is somewhat obscure and it is, I believe, for that reason that the present Government have done what the late Government intended to do; that is to say, they have not merely asked Parliament to pass an Act giving effect to the Convention but have set out in the Bill what they believe the effect of the Convention to be. I have the best reason for knowing that Mr. Claughton Scott was invited to interpret the Convention as well as he could, and that the Bill represents his view of what the Convention was intended to effect. The Convention itself uses foreign terms for which we have no exact equivalent in English, and it uses English terms in a sense contrary to that in which they are used in England. The noble and learned Lord gave an instance when he referred to the term "final award." What is meant by "final award" in English law is something quite different from what is meant by "final award" in the Convention.

However, the Bill is the best that Mr. Claughton Scott could obtain and, as the noble and learned Lord has said, the Convention provides that under certain conditions British awards will be enforceable in foreign countries which become parties to the Convention. In exchange we undertake to enforce in this country foreign awards made in such countries. One curious result is that an award made in a foreign country by a foreign arbitrator is actually in a better position than a foreign judgment. A foreign judgment can only be enforced in this country by action; a foreign award will be enforceable under this Bill by execution upon the person against whom the award is made. I do not know that this is altogether satisfactory or desirable; still, that was one of the points we had to concede.

I do not suggest that this House or Parliament could or should do anything except pass this Bill, but I think it needs careful consideration by the legal talent in which this House particularly is so very rich, because your Lordships will appreciate that it is important not only that the Bill shall be clear in the use of the legal phrases it contains, but also that the Bill shall carry out the Convention; otherwise, we shall have it said in foreign countries that we have not carried out the Convention and, therefore, our awards will not be enforceable in other countries which become parties to the Convention. Whether it carries it out accurately is a matter which requires very careful study. I hope, therefore, that the noble and learned Lord opposite will give a reasonable opportunity to the lawyers in this House to consider the terms of the Bill, and I hope that some of my noble and learned friends will apply themselves to that task. If they had a week or some reasonable time to consider whether the Bill does carry out what it is designed to do, unless there were Amendments, speaking for myself, I should have thought the other stages might then be taken almost at once. But I think there ought to be a reasonable interval allowed to ensure that there are not alterations to be made in Committee.

In regard to Part II of the Bill, which amends the Act of 1924, that again is an illustration of the same unfortunate result of the too hasty and too enthusiastic acceptance of these international conventions. Under our own Arbitration Act, when there is an arbitration clause the Court has a discretion in staying an action, and it will stay an action brought in defiance of an arbitration clause unless some reason is shown to the contrary. Under the Convention the Court has no discretion. It has merely to be said that there is an arbitration clause and there-upon the Court can do nothing but stay the action, although there may be no real dispute between the parties and the defence may be purely dilatory. That was found to be so very inconvenient that a Committee was set up over which, I think, Mr. Justice Mackinnon presided. That Committee recommended that a stay should only be imposed where there was a real dispute between the parties; that is to say, that some really substantial cause was shown why the person stayed should have a question to try. It has been thought, I gather, that it is not possible to go as far as that because you would then be breaking the Convention. Therefore, all that Part II does is to say that where there is any dispute between the parties there must be a stay, and the flimsiest dispute which any dilatory defendant may choose to raise will in itself be sufficient ground, if this be passed, for compelling the Court to stop the action, however ill-founded the defence or the matters alleged to be in dispute seem to the Court to be. I cannot think that is altogether satisfactory. At the same time, I recognise that the Convention of 1923 renders it difficult, perhaps impossible, for the Government to go as far as Mr. Justice Mackinnon recommended, and to compel the defendant to show that there is a substantial dispute with regard to the matters upon which the action is brought.

I have ventured to trouble your Lordships with these observations not, as I hope the noble and learned Lord will believe, with any desire to criticise the Bill he has introduced, which, as I have said, I should have had to introduce myself in other circumstances, and not with any desire to criticise any individual, but only because it seems to me that the difficulty which this Bill has to remove is a very signal and very salutary example of the danger of ill-considered international conventions and of the handicap which may be imposed upon our trade by entering into those conventions without a full consideration of the reactions and repercussions which such conventions might have, and because I hope that the lesson may be taken to heart by some who are at present a little too apt, I think, to regard anything as desirable as long as it is labelled international.

LORD ATKIN

My Lords, I do not desire to venture upon a criticism of anything that has already taken place, but to ask a question or two about the scope of this Bill, concerning which doubts have been raised in my mind by what has been said by the noble and learned Lord President and the noble and learned Viscount. The difficulties that have arisen have been, as the noble Viscount said, due to the fact that foreign Governments, as a rule, have been unable, or unwilling, to pass legislation which enables their Courts to enforce foreign awards, or indeed even foreign judgments. They are very jealous of the exclusive jurisdiction of their own Courts over disputes, and this Convention has provided that the contracting parties will enforce not foreign judgments but foreign awards. The result of that will be that in some countries, when the Convention is thoroughly carried out in those countries, there will presumably have been legislation which will enable the Courts of each country to enforce an English award; but one would have thought that at any rate the intention of the Convention was that such rights as are given by the Convention should be reciprocal. I find it difficult to conceive that we are asked in this country to enforce the awards of a foreign country where that foreign country is not in itself prepared to enforce our awards, and I wish to know whether the provisions of this Bill are such as to make the obligations reciprocal?

The only clause that I can see in the Bill dealing with that is Clause 1 (2) which states that— The Governments to which this Part of this Act applies are those Governments in respect of which His Majesty may by Order in Council declare the said Convention to be in force. I gather that the Convention would be in force as soon as it is ratified, and each party that has ratified a Convention could claim that the other parties who had ratified the Convention should perform it, but ratification is one thing and legislation to carry out the obligations which are imposed by the act of ratification seems to me to be a different thing. It has been known to happen that a country has entered into a convention and ratified it, and yet at the same moment has not proceeded to legislate so as to give effect to the convention which has been ratified. If it is intended only by Order in Council to apply this Bill to such countries as have, by their legislation, taken steps to see that an English award will be enforced in that country, well and good; but if we are asked here and now to enforce foreign awards in respect of any country which does not give reciprocal conditions to us, I venture to think this House should think several times before it embarks upon that legislation. It really was merely for the purpose of putting that query that I rose to address your Lordships.

VISCOUNT BERTIE OF THAME

My Lords, this may or may not be a controversial Bill. I and other noble Lords only received the Bill when we came down to the House this afternoon. That applies also to the two following Bills, and it applied at the end of last Session to two Bills emanating from the Government Bench. I hope that the Socialist Government are not going to make a practice of keeping noble Lords from getting their Bills till they arrive here.

LORD PARMOOR

My Lords, in answer to the noble Viscount who spoke last, I may say that the Bill has certainly been circulated in print for some time. I do not know whether he gives a general order at the Printed Paper Office that all Bills should be sent to him when they are printed.

VISCOUNT BERTIE OF THAME

Yes.

LORD PARMOOR

Of course if he has not given an order of that kind he would not have received the Bill until he came down to the House. But I am told it has been printed for some time, and I certainly received it some time ago. It is a week since it was read a first time and ordered to be printed.

As regards the points raised by the noble and learned Viscount opposite [Viscount Hailsham] and by the noble and learned Lord, Lord Atkin, I should like to say one or two words. I do not want to embark upon the so-called shortcomings of international arrangements. That is a point upon which I dare say I should differ from the noble and learned Viscount opposite, but I do not think it is really relevant to the matter we are considering at the present moment. The Convention of 1923 was, I think, both signed and ratified while he was in a very prominent place as a legal adviser to the Government in power. It was in 1923 that that was done. I do not want to go back on questions of that kind; it is never really any use to do so. The point now is whether the Bill as at present proposed does bring about what both the late Government and ourselves desire, a fair method—I use the phrase purposely—a fair method as between ourselves and other countries of bringing into force this later Convention signed in 1927 on behalf of the late Government by their Foreign Secretary. On a subsequent occasion he gave a pledge that suitable legislation would be introduced in this country in order that ratification might follow. So soon as this Bill becomes law, ratification will follow, and the matter will become binding between the countries.

I think the point that the noble and learned Lord, Lord Atkin, has raised, deserves further consideration. I agree with him that we want, as far as possible, to ensure what he properly called reciprocity. I think it really is assured by subsection (2) of Clause (1). I mean the safeguard is that it applies only after an Order in Council. I imagine the Order in Council would depend on the reciprocity element. I do not quite know how further proposals could be made in order to ensure what I desire with him should be ensured as much as possible.

There is one further matter I should like to mention to the noble and learned Viscount opposite. If he feels—I am not sure that he does feel—that this matter would require further consideration, we do not want to quarrel over it. We want to be conciliatory and to come to right terms as between ourselves and other countries in regard to these commercial awards, which are of the greatest value. No one who understands commercial awards can doubt their value for a moment. I believe about 75 per cent. of what I may call international commercial awards which require to be generally enforced, are made in this country, much to our honour, and they may have to be enforced outside. If it would meet the views of the noble and learned Viscount, I propose that we should take the Committee stage of this Bill on Thursday, but if he would prefer that the Committee stage should be postponed until Tuesday in next week in order that he might have further time to consider the Bill, I will put the Committee stage down for then instead of for Thursday.

THE MARQUESS OF SALISBURY

That would do better.

LORD PARMOOR

I hope the noble and learned Viscount will realise that this is done in the hope that any Amendments which are required will be brought to our notice, and I hope, if possible, we shall settle them by talking the matter over rather than by coming in an adverse way to a Division in this House. If the noble and learned Viscount agrees with the noble Marquess that Tuesday would be a better day in order that he may have further time to consider the matter I will put the Committee stage down for Tuesday.

VISCOUNT HAILSHAM

May I, with noble Lords' permission, say it is not so much that I personally should have time to consider the draft, but that the legal luminaries in which this House is very rich may have an opportunity of bringing their minds to bear upon it, so that if there are flaws which either the noble Lord or myself have failed to detect they may possibly be put right before the Bill is sent down to another place. If there are none, and none are detected, so far as I am concerned I should think that the Report and Third Reading might follow very quickly.

LORD PARMOOR

I am much obliged for the way the noble Viscount puts it, because I think his mind has been upon the Bill quite as much as mine and probably more. At any rate I will take Tuesday, and on Tuesday I will move that Standing Order No. XXXIX be suspended as regards this Bill so as to get the further stages. It really is impossible to wait longer than Tuesday to complete the matter. I will leave the matter in that way.

On Question, Bill read 2a, and committed to a Committee of the Whole House.

LORD PARMOOR

The Committe stage will be put down for Tuesday next. I do not know whether your Lordships are aware that Lord Darling's Motion has been postponed until next Wednesday.