ARBITRATION BILL [H.L.] (Hansard, 19 November 1974)

§ THE LORD CHANCELLOR (LORD ELWYN-JONES)
My Lords, I beg leave to move that this Bill be now read a second time. The Bill has the merit of brevity. Its broad intention is to enable the United Kingdom to accede to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which was prepared in New York as long ago as 1958.
The background against which the Bill is framed is this. Businessmen have traditionally looked to arbitration rather than litigation to resolve their disputes. Arbitration has the advantages of being a speedy, informal and cheap procedure, conducted in privacy, often by an expert in the field in question. The United Kingdom, and in particular London, has long been a major centre for arbitration settlements of disputes arising in international trade.
This pre-eminence has no doubt arisen from the country's position as one of the leading trading nations of the world, and the needs of our exporters and importers to have an independent arbitrator to refer to in cases of dispute with buyers and sellers abroad. In time this requirement has produced, in the United Kingdom, a highly experienced body of professional arbitrators who cover a wide range of activities, including trade and commerce, engineering, insurance, surveying, and so on. Due, no doubt, to their skilled conduct of arbitration procedures, and their 960 fair and equitable judgments, our arbitrators have built up a reputation second to none. Their services are therefore frequently sought, not only by those engaged in trade and commerce in this country, but also by parties in foreign countries.
Clearly, there must be many countries which are unable to provide comparable facilities to those available in the United Kingdom, and often people engaged in trade between two foreign countries may find it easier to agree that any arbitration should be carried out in a third country. Many of these look to the United Kingdom for this service. Your Lordships will readily appreciate that this provides a valuable source of income to those engaged in arbitration, and it brings in substantial amounts of foreign currency. It is clearly in the interests of the country, therefore, to foster and sustain this activity in so far as it lies within the Government's power to do so.
As your Lordships will appreciate, the awards of arbitrators in disputes involving parties in different countries would not be of much use if they were not readily recognised and enforced by courts of law in the countries concerned. The United Kingdom, both because of its wide trading interests and because of its deep involvement in arbitration as such, has taken a full part in promoting international agreements which provide common rules for arbitration and which make arbitration awards and agreements of an international nature more effective by ensuring that they are recognised by contracting States and by obliging courts of law to enforce foreign arbitral awards.
There are two main international agreements which bear on arbitration and to which the United Kingdom is already a party—the Protocol on Arbitration Clauses of 1923 (known as the Geneva Protocol) and the Convention on the Execution of Foreign Arbitral Awards of 1927 (known as the Geneva Convention). These instruments were made rather a long time ago, and though they have worked reasonably well over the years, inevitably certain defects and shortcomings have become apparent. In order to remedy these defects, an international conference, under the auspices of the United Nations, was held in 1958 which resulted in a new Convention, generally known as the New York Convention.
961 I must concede that it has taken a very long time, even by the standards of international Conventions, for the Government to reach the point of proposing accession. There are reasons for this, some of which are more compelling than others. Initially, the Government of the day had certain reservations about the Convention and it was referred by my noble and learned predecessor, Lord Kilmuir, to the Lord Chancellor's Private International Law Committee—the PIL Committee—in 1959. The Committee studied the provisions of the New York Convention very carefully, and in 1961 they produced their report. They concluded that the Convention was an improvement on the 1927 Geneva Convention, and recommended that, with one reservation, it could be accepted by the Government.
In particular, the Committee pointed out that, compared with the earlier Geneva Convention, the New York Convention covered a wider range of agreements and awards. They stressed that it clarified the burden of proof as between a party seeking and a party resisting the enforcement of an award, and made obstruction of an award more difficult. And they emphasised that the New York Convention reduced the risk that the courts of the enforcing country might retry the dispute as a condition of enforcing the award, in order to see if the award was consistent with the principles of their own law.
The reservation of the Committee related to domestic agreements, that is to say, arbitration agreements where both parties and the agreed abitrator reside or are based in the United Kingdom. Interpreted literally, the Convention might appear to require recognition not only of international agreements, but also of purely domestic agreements, and would therefore remove from English and Northern Irish courts the discretionary powers they have under current law to try such a dispute. This discretion (which does not exist in Scots law) is valued in England and Northern Ireland, and the PIL Committee thought that the courts would not wish it to be removed. They also took the view, however, and the Government agree, that it would, in fact, be consistent with the intentions of the Convention if our legislation excluded purely domestic agreements from its provision, 962 so far as English and Northern Irish courts are concerned; and this point is taken care of in Clause 1 of the Bill.
Following the recommendations of the PIL Committee, legal and commercial organisations were consulted by my Department and the then Board of Trade to ascertain their views on the desirability of the United Kingdom acceding to this Convention. This process took a considerable time, but resulted in widespread support for, and no objection to, accession. There was prolonged discussion over the domestic agreement point I have just referred to, and it proved quite difficult to find a definition which was acceptable to all, but eventually this difficulty was overcome, and agreement was reached.
In 1970, my predecessor, the noble and learned Lord, Lord Gardiner, in answer to a Parliamentary Question, declared the then Government's intention to accede to the Convention, subject to Parliamentary approval, as soon as legislative time could be found. Unfortunately—and I do not make this as a Party political point—there was a change of Government shortly after this. The new Administration considered the proposal afresh and sensibly agreed that they, too, would endeavour to pass the necessary legislation as soon as Parliamentary time could be found. As your Lordships know, available time is about the rarest Parliamentary commodity, and it was not in fact until last November that a private Member introduced the Bill in another place. Unhappily, the Bill did not achieve a Second Reading before it was lost on the Dissolution of the Parliament last February. I reintroduced the Bill in this House last July, but it got no further before Parliament was again dissolved in September.
The Bill has thus had a frustrated history. With the passage of time, numerous other countries have acceded to this Convention, and the United Kingdom, which might be expected to take the lead in such matters, is now almost the only major trading nation not to have acceded. There are considerable disadvantages in this situation. Our failure to have acceded not only hampers recognition and enforcement of arbitration awards to the detriment of our trading interests, but it also keeps away from 963 London arbitrations which would otherwise come here and would provide valuable business and foreign exchange. However, we now have the opportunity to put matters right.
The Bill is fairly simple in its intent—that is, to enable the United Kingdom to accede to the New York Convention—but it may be helpful if I briefly describe the purposes of its clauses. Clause 1 describes the conditions under which courts in the United Kingdom are required, by virtue of the Convention, to stay proceedings before them where there is an agreement between the parties that the dispute should be submitted to arbitration. This clause specifically excludes domestic agreements, to meet the point I explained earlier. Clause 2 provides that awards made in countries which are parties to both the Geneva and New York Conventions shall be treated as New York awards—a necessary clarification.
Clause 3 enables awards made in other countries which are parties to the New York Convention (referred to as Convention awards) to be enforced in the United Kingdom in the same way as awards made here. Clause 4 requires persons seeking to enforce Convention awards to provide certain specified evidence to show that the award exists and is a proper award. Clause 5 allows the courts to refuse to enforce a Convention award if it can be proved, by the person against whom the award is made, to be defective in certain respects. Clause 6 is a saving clause which retains the freedom to enforce awards by other methods than under this legislation. Clause 7 provides for interpretation, and Clause 8 for repeals, commencement and the like.
In common with most other countries which have acceded to the Convention, the Government propose that we should take advantage of a reservation permitted by the Convention. This is to confine the recognition and enforcement of awards to those made in other countries which are parties to the Convention. There is no reason why the United King dom should bind itself to enforce awards made in countries which do not similarly bind themselves to enforce British awards. The PIL Committee attached great importance to this principle of reciprocity, and I am sure your Lordships will agree that it is both prudent and sensible.
964 In commending this small but none the less useful and important Bill to your Lordships' House, I believe I can say that it is entirely uncontroversial. The legal and commercial worlds have long advocated, and successive Governments of both colours have accepted, that we should adhere without further delay to the New York Convention. I very much hope, therefore, that your Lordships will give this Bill a swift and favourable passage. My Lords, I beg to move.

§ LORD HAILSHAM OF SAINT MARYLEBONE
My Lords, I do not think I need add very much. I am sure the House would like me to thank the noble and learned Lord the Lord Chancellor for the lucid exposition he has given us. I confirm that in our view this is non-controversial legislation. I also confirm that we have not exactly rushed into this and that it was on my agenda for the last Session in which I was Lord Chancellor. We were hoping to use private Members' time for the purpose, but when Parliament came to an end that, together with other law reform measures, was frustrated for the time being.
As the noble and learned Lord rightly told the House, the present position as regards foreign awards is governed by the legislation embodying the Protocol of 1923 and the Convention of 1927. I believe that they are both now enshrined in the Act of 1950. There must be—although I put this interrogatively—countries which have ratified those earlier protocols and conventions and which have not yet ratified the New York Convention. I should like to ask the noble and learned Lord to tell us how many there are of these. I should also like to ask the noble and learned Lord to confirm that those protocols and conventions, in so far as they have not been superseded by the New York Convention, are still effective for the purpose of reciprocal enforcement of foreign awards. Subject to that, I think this is something which the House can take in its stride.

§ THE LORD CHANCELLOR
My Lords, I am most grateful to the noble and learned Lord for the support he has intimated will be given to this Bill. I am 965 afraid I cannot answer his question as to the countries which he identified, but I think I can say that we are about the last of the trading countries not to ratify the Convention to which we shall now accede. So, as he said, it is now high time that the matter was put right, and the Bill will achieve that purpose. I will communicate with him about the other matter which he raised.