ARBITRATION BILL [H.L.] (Hansard, 5 February 1979)

HL Deb 05 February 1979 vol 398 cc529-74 529

§ 6.39 p.m.

§ Report of Amendments received.

§ Clause 1 [Judicial review of arbitration awards]:

§ Lord LLOYD of KILGERRAN moved Amendment No. 1: Page 2, line 11, after ("applicant") insert ("paying into court the amount of the award and").

§ The noble Lord said: My Lords, I beg to move Amendment No. 1 and, with 530 the leave of the House, I shall speak to Amendment No. 2. The effect of this short Amendment is to strengthen the position of the High Court in respect of attaching conditions to granting leave to appeal. The object is to avoid frivolous appeals and, rather than leaving the payment of a sum awarded by an arbitrator as discretionary to the court, the proposed Amendment will make the payment mandatory.

§ It seems to a number of practitioners that the inclusion of this type of clause in the Bill will have a helpful effect in reducing the number of non-meritorious applications for leave to appeal in an award. No doubt the noble and learned Lord on the Woolsack will point out that, of course, the court has power to make such a condition for leave to appeal. But this is an area dealing with commercial matters and to include such an Amendment as I am moving would have, in practice, a useful effect. I beg to move.

§ The LORD CHANCELLOR (Lord Elwyn-Jones)
My Lords, in my submission, these Amendments are unnecessary and I rather apprehend that the noble Lord suspected that that might be my answer. As drafted, the Bill would enable a court to make any leave which it gives conditional upon the applicant paying into court the amount of the award. The High Court should be free to impose such conditions as it may think appropriate. A typical condition would be a requirement that the minimum sum due to the successful party should be paid over to him or that the sum in dispute should be secured.
If the noble Lord will permit me to say so, the difficulty is that an Amendment of this nature might cast doubt on other enactments which give power to the court to impose conditions. I hope that in the light of what I have said the noble Lord will not desire to press this Amendment.

§ Lord DIPLOCK
My Lords, there is also one other difficulty as regards this Amendment. As often as not the applicant to the court is the plaintiff in the arbitration, and to require him—indeed, to make it mandatory—to pay into court the money that he is claiming will not work.

531

§ Lord LLOYD of KILGERRAN
My Lords, I had anticipated what the noble and learned Lord upon the Woolsack would say, but I had not anticipated that the noble and learned Lord, Lord Diplock, would raise that point. We must introduce a certain amount of common sense into the situation arising, and to expect the plaintiff to pay an award into the court would, of course, be foolish. I should have thought that even with an Amendment tabled from these Benches on the Arbitration Bill we would not have heard a comment of that kind, if I may say so with the greatest possible respect.
However, we are dealing with a condition of a commercial arbitration. We are dealing with people who are not accustomed to come into the court. They do not know the rules of the court; they do not know what is within judges' discretion. I believe that if this Amendment were included in the Bill—that there should be payment into court of the amount of the award—that would probably help to reduce the number of frivolous and unmeritorious applications. Having regard to what the noble and learned Lord the Lord Chancellor has said, however, I beg leave to withdraw this Amendment.

§ Amendment, by leave, withdrawn.

§ [Amendment No. 2 not moved.]

§ 6.42 p.m.

§ The LORD CHANCELLOR moved Amendment No. 3: Page 2, line 13, at beginning insert ("Subject to subsection (5A) below").

§ The noble and learned Lord said: My Lords, it may be convenient for us to consider together Amendments Nos. 3, 4 and 5. They share a common purpose—namely, to ensure that the arbitrator has prior notice that the award is required to be reasoned and to make the notice a condition precedent of an order under Clause 1(5) requiring the arbitrator to give his reasons.

§ I hope noble Lords will think that this Amendment gives substantial effect to suggestions made during the Committee stage—particularly by the noble and learned Lord, Lord Diplock—that a request by a party to the arbitrator during the reference for reasons to be given should be a condition precedent to an order being 532 made under Clause 1(5) requiring an arbitrator to give his reasons. In giving effect to that proposal, the Amendment also introduces a degree of flexibility by enabling the court to make an order requiring reasons in the absence of such a request where there is a special reason why the request was not made. Examples of such special reasons would be where there was a genuine misunderstanding and a party relied on a trade practice that reasons are always given, or where he was led to believe, wrongly, that the other party had requested that reasons be given.

§ The Amendment of the noble Lord, Lord Lloyd of Kilgerran—Amendment No. 4—has a similar purpose to the Government Amendment, but I venture to submit that it is unacceptable: first, because it would often be impracticable to expect the parties to give notice that an appeal was likely, and what the area of law involved was likely to be before the arbitrator had made his award. Often it would not be until the award was made that any grounds for an appeal would become apparent, and it would be undesirable if the right to seek reasons were to be lost by default in such circumstances.

§ In addition, it would be contrary to principle for an arbitrator, who as such is exercising a quasi-judicial function, to be allowed to express an opinion on the worthiness of the appeal. I venture to submit that that should be a matter for the parties and the court. I beg to move.

§ Lord LLOYD of KILGERRAN
My Lords, as the noble and learned Lord upon the Woolsack indicated, Amendment No. 5 goes some way towards meeting the points which the noble and learned Lord, Lord Diplock, and I raised on the previous stage. However, as the noble and learned Lord the Lord Chancellor has referred to Amendment No. 4, with the leave of the House perhaps I may also speak to that Amendment and indicate the difference between my Amendment and Amendment No. 5. The main difference is that not only should the arbitrator give reasons, but he should give some views as to the law involved. In commercial arbitrations invariably the arbitrators give the reasons for their award. It should be required that the arbitrator be notified of the likelihood of an appeal and the area of law so concerned. This 533 would allow the arbitrator to draft his awards so that he covered as fully as possible the facts and the reasons which are relevant to the potential appeal, thus avoiding as far as possible the court ordering more reasons long after the hearing, as apparently is permitted under Clause 1(5).
The noble and learned Lords the Lord Chancellor and Lord Hailsham of Saint Marylebone, in Committee saw difficulties about my Amendment providing that notification should be given to the arbitrator of an appeal. However, I understand that in practice it is unlikely that such difficulties will occur as, by the end of the hearing, both parties should usually be well aware of the areas of law involved in the dispute. I understand that your Lordships will be well aware that under the present system of the special case it is virtually universal that the special case is requested before the end of the hearing, and the area of law involved is often clearly demarcated, albeit without exact detail, so that all relevant persons are cognisant of the position. It may be that the actual questions of law require to be further sharpened up after the hearing, but this in no way derogates from the usual practice of an arbitrator's knowing the area of law involved before the end of the hearing. If this has been the practice so far for many years, there seems to be no good reason why under the new proposed procedure, the arbitrator should not be informed of the area of law applicable before the end of the hearing.
These questions of appeal are of considerable commercial importance. May I draw your Lordships' attention, for example, to a letter I have received—and no doubt many other Members of this House have received—from the President of the London Maritime Arbitrators Association. Mr. Bishop, the President, has said: .… we cannot over-emphasise the strength of feeling expressed unanimously by the Committee of this Association both in regard to the exclusion of London maritime arbitrations from those international cases to which contracting-out privileges at any time are granted by the Bill and also at the proposed appeal procedure which will make London arbitration awards still open to review by the Courts. Such review is not what so many foreign parties intend to have built into their arbitrations and it is this factor which in many 534 cases deters such foreign parties from agreeing to London arbitration of their contracts. We do feel that in so far as maritime arbitration is concerned the proposed appeal procedure provides no advantages whatsoever over the well-established and understood Special Case procedure under Section 21 of the 1950 Act and has a practical disadvantage in that it will lead to delays and more costly arbitrations". I have also in my hand a letter from the director and secretary of the Institute of Arbitrators, Mr. V. W. Vigrass. He emphasises the importance of amendments to the proposed appeals procedure in the Act. He tells me that a Mr. Donald Davies referred to proposed amendments concerning the appeals procedure, which I have now moved and, Members of the Committee strongly supported an amendment on these lines which would eliminate the difficulties that are envisaged for arbitrators attempting to work within the provisions of the Bill as at present drafted".

§ Lord HAILSHAM of SAINT MARYLEBONE
My Lords, I do not want to say very much about this matter. I am grateful to the Lord Chancellor for having listened to the argument on Committee. I think that his proposal is a fair attempt to meet the point made by my noble and learned friend Lord Diplock, and it also to some extent meets a point which I made both on Second Reading and at Committee. I have been concerned throughout that these grandees would have it all their own way. A great number of arbitrations are very small and deal purely with quality, or matters of that kind, very largely by inspection. It is not really the practice in such cases to give reasons and to contemplate appeal at all. I feel that the Lord Chancellor's proposals to some extent meet this fact.
It could very well be that in cases where the respondent to an arbitration claim in a small matter wanted to avoid payment that he would go through the appeal procedure as a means of delay. I said this on Second Reading and I say it again now. But now that the Lord Chancellor has introduced his Amendment, I think that that danger is largely safeguarded against. Naturally enough one takes seriously what the maritime arbitrators and others have been saying about this Bill, but I would say two things about it: first, it is of course a matter of policy whether or not you include maritime arbitrations. My own feeling throughout has been that you will not get this piece of 535 legislation unless you stick pretty closely to Donaldson, because, as a predecessor of the Lord Chancellor said in the middle of the 19th century, law reform is either by consent or not at all. He was speaking from a lifetime of experience of both Houses (as I know the Lord Chancellor has) in trying to get legislation through. There is a means whereby the area of exclusion agreements can be added to by administrative means subject to the control of Parliament. I think we really ought to be content with that.
The only other thing I would say to them is that I think they have made a big mistake in thinking that the new procedure, whether it was superior or inferior to the old special case procedure which was being superseded, would make the courts more likely to interfere in arbitrations of any kind, whether commercial or not. My reading of the matter is the opposite: the courts will be discouraged from intervening, whereas under the reported authorities under the special case procedure they have tended perhaps to intervene too much. This is taken away from them and the boot, I think, will to some extent be on the other foot, now that the new procedure is being introduced. This is a matter of opinion evidently not shared by everybody, and therefore I put it forward with my customary diffidence.

§ The LORD CHANCELLOR
My Lords, I am grateful to the noble and learned Lord, Lord Hailsham, for having indicated that we have in the Bill sought to compromise the conflict of approach which has been identified by the noble Lord, Lord Lloyd of Kilgerran. I submit that what is proposed in my Amendments endeavours to meet a point of substance that was made at Committee stage, and it does so with a degree of flexibility. Accordingly, I maintain the first Amendment that I proposed.

§ On Question, Amendment agreed to.

§ 6.56 p.m.

§ Lord LLOYD of KILGERRAN had given Notice of his intention to move Amendment No. 4: Page 2, line 17, after (''court") insert ("it shall be a condition precedent to the application to the court that the arbitrator or umpire shall 536 have been notified prior to the close of the hearing that his award is likely to be the subject of an appeal. In the event of the arbitrator or umpire being given notice that the award may be appealed on a point of law then he shall be notified of the area of law applicable and be permitted to state within his award whether or not he considers the appeal should be allowed. If")

§ The noble Lord said: My Lords, I shall be brief in this matter, as we have discussed the context of it. Having regard to the fact that the noble and learned Lord, Lord Hailsham, has referred to "grandees" so frequently in the course of these discussions, I wonder whether there is not a danger of looking at many of these matters from an ivory tower. The practitioners in this field have strong exceptions to certain parts of the Bill, particularly on appeal procedure. If, therefore, as we all agreed, the main object of this Bill is to attract arbitration to London, then the question of what should be done when the position is reached of a likelihood of an appeal is important in large cases.

§ The noble and learned Lord, Lord Hailsham, talked about arbitrations which are concerned with quality. There is usually no law involved in that at all; therefore it would be absurd to introduce mandatory clauses to deal with that kind of arbitration. But a person like myself is always in a difficulty about drafting in proper wording to cover all cases. I am concerned with those cases where there is a likelihood of appeal, where there is a likelihood of law being involved, and that an Amendment of this kind should be introduced. I am grateful to the Lord Chancellor for his Amendment No. 5 which goes some way to meeting the matter. In view of what he has already indicated, I shall not move this Amendment.

§ The LORD CHANCELLOR moved Amendment No. 5:

§ Page 2, line 23, at end insert—

§ (" (5A) The High Court shall not make an order under subsection (5) above unless it is satisfied—

(a) that before the award was made one of the parties to the reference gave notice to the arbitrator or umpire concerned that a reasoned award would be required; or
(b) that there is some special reason why such a notice was not given.").

§ On Question, Amendment agreed to.

537

§ 6.59 p.m.

§ Lord HACKING moved Amendment No. 6:

§ Page 2, line 34, at end insert—

§ (" (8) No appeal may be brought, nor application made, under this section, by a party to a reference under an arbitration agreement, which is not governed under English law, unless such appeal or application concerns a question or questions of English law.").

§ The noble Lord said: My Lords, Amendment No. 6 is one of three Amendments which concern foreign declaratory clauses. With your Lordships' approval I shall address the House on Amendments Nos. 6, 9 and 10 at the same time. In tabling these Amendments I am inviting the House to consider one of two ways of incorporating into this Bill foreign declaratory clauses. The first method that I am asking the House to consider is the pure declaratory clause which is set out in Amendment No. 10. This pure declaratory clause is the same in draft as the clause that I tabled in Committee and spoke upon in Committee except that I am not inviting the courts to give rulings when invited on points of foreign law. I have been frightened off by Lord Diplock's views about the Hamburg rules.

§ The other alternative method I am inviting your Lordships to consider is what I might describe as the restricted declaratory clause—Amendments Nos. 6 and 9—which deals only with a foreign law contract (which was the point raised by the noble and learned Lord, Lord Wilberforce) and which only concerns the specific right under the Bill to appeal under Clause 1 and to make an application under Clause 2.

§ I must begin by seeking to satisfy the House on the need for a foreign declaratory clause. I do so first on the basis that there is doubt overseas and that it would be of great assistance in the presentation of this measure abroad to clear the doubt. A number of noble Lords will have received a letter from Mr. Mark Littman, QC, a distinguished international arbitrator of immense experience, and will be aware of the argument which he puts in his letter to the noble and learned Lord the Lord Chancellor. Mr. Mark Littman supports without qualification the concept of a foreign declaratory clause and the concept that 538 such a clause should be included in the Bill.

§ As noble Lords will be aware, I have been talking to and seeking opinion of a number of American lawyers who are concerned with international arbitration and, with the leave of the House, I shall read extracts from two letters which support this need overseas for a foreign declaratory clause in the Bill. The first quotation is from a letter from the General Counsel of the American Arbitration Association. It says: I understand that, save in exceptional cases, contracts that are governed by a law other than English law would not usually come within this stated case procedure". Of course, read for that the new appellate procedure— It is my further understanding that it is not intended that contracts governed by foreign law would come within the new appeal and reference procedures. It seems to me that from the United States presentational point of view, it would be very desirable that this be made clear in an express provision in the legislation. It is common for example for attorneys to provide for Swiss law to be applicable if the arbitration is to be held in London. Having an express provision in the legislation indicating that in this situation the reference and appellate procedure do not apply would be most helpful".

§ My second quotation comes from a letter by a very experienced American international arbitrator and a senior partner in a major firm in Washington DC, Mr. Lloyd Cutler: My suggestion is that in the course of the legislative process, it be made explicit that no appeal shall lie to a British court on every question of law that is not a question of United Kingdom law. I understand it to be the view of the draftsman that this is already true under existing arbitration Acts and that there is no need to say so explicitly in the Amendment. However, the point is not clear to many non-British lawyers, especially in cases where the governing law of the contract is international law, or Jamaican law, or Israeli law, or Australian law or some other law which is derived from and still has close connections to United Kingdom law. To avoid risk, these lawyers will still decline to arbitrate in England in cases where an opting-out provision does not exist and is not attainable. In our country, where we pay more attention to legislative history than to the words of the statute, the problem could be resolved by an explicit sentence in a committee report or by a Question on the Floor answered by an authoritative spokesman for the Bill. Under British law, which is less respectful of legislative history, some other solution may be required, even an explicit amendment of the Bill.".

§ Those are the views from overseas, but I should draw to your Lordships' 539 attention the fact that there is some doubt in this country. I have given notice to the noble and learned Lords the Lord Chancellor, Lord Hailsham of Saint Marylebone and Lord Diplock, of my intention to mention Oppenheimer v.Cattermole, which was heard by your Lordships' Judicial Committee in 1973, a case which may be familiar to some noble Lords. Lord Hailsham presided over that Judicial Committee and a then distinguished Member of the Bar, Sir Elwyn-Jones, Q.C., appeared for the taxpayer. I think I hear Lord Hailsham say "successfully", in which case we congratulate him.

§ Lord HAILSHAM of SAINT MARYLEBONE
Unsuccessfully, my Lords, but eloquently.

§ Lord HACKING
My Lords, can we retain the congratulations? That was a case which, among other things, was considering a foreign tax statute. The opinion of the Judicial Committee was delivered by the noble and learned Lord, Lord Cross of Chelsea, and on page 270 he said: The special commissioners preferred the views of Dr. Cohn on both points and since foreign law is a question of fact it might be argued that the view taken by the commissioners was binding on us even if we disagreed with it—unless indeed it was one which we thought no one could reasonably entertain. But in a case of this sort it would, I think, be unfortunate if we were obliged to give effect to a view as to the relevant foreign law which we thought to be wrong …". Those lawyers from overseas who examine our case law authority may be gravely disturbed as to whether the law is beyond doubt in the United Kingdom.
I should like to recall the discussion thus far because we considered the matter in Committee. On the subject of the pure declaratory clause, there were two principal arguments against it, first that it was not necessary and against legislative practice and, secondly, (Lord Hailsham's point) that there was a danger of throwing doubt on the application of law in other areas. I am not sure that it is really unnecessary; one must remember, with respect, the counterbalance of the presentation advantage. Nor is there any real danger here, in my submission, of throwing doubt in other fields of law.
540 In any event, this can all be avoided if Amendments Nos. 6 and 9 are adopted and No. 10 is abandoned. Indeed, that is precisely what I am inviting your Lordships to do; that is, to drop what I have described as the pure declaratory clause in Amendment No. 10 and adopt the more limited form of the proper law contract declaratory clause in Amendments Nos. 6 and 9. These Amendments come twice over because they deal first with the appeal provisions in Clause 1 and secondly with the reference provisions in Clause 2.
Your Lordships will recall that there is still a difficulty here—namely, the difficulty that, even though it is a foreign proper law contract, there still may, in certain circumstances, be questions of English law which arise during the course of the reference; for example, an arbitrator's conclusion on foreign law as against the weight of the evidence or the presumption of English law when no foreign law is pleaded or there is no evidence on that foreign law. One can think of Renvoi and other examples.
I am told by men much more experienced in arbitrations than myself that these situations rarely arise and that nobody need be concerned. However, this is all answered in the form of my Amendments, which would still allow points of English law to be raised, and I need only read Amendment No. 6, because exactly the same concept is followed in Amendment No. 9: No appeal may be brought, nor application made, under this section, by a party to a reference under an arbitration agreement, which is not governed under English law, unless such appeal or application concerns a question or questions of English law". I have received a copy of the letter which the noble and learned Lord wrote recently to the noble and learned Lord Lord Hailsham of Saint Marylebone, following the Committee debates, and I recognise that the other way of dealing with the matter is—to quote the noble and learned Lord—"by education and publicity". Indeed, the noble and learned Lord, Lord Hailsham, gave the flattering suggestion to me that I might write an article in the Harvard Law Review. I am not sure that I have the scholarship to match the scholarship of the editorial board of the Harvard Law Review, but this, in my submission, does not answer the problem.
541 We will all do our best to use such appropriate moments as arise for education and publicity, but we shall not be there at the crucial moment when, perhaps late at night in New York City, or in other places in the world, a contract is being negotiated and the lawyers and the parties to the negotiations come to consider the arbitration clause. But what will be there, if the Bill happily passes through both Houses of Parliament, will be the Act, and if that Act expressly states that matters of foreign law are not matters which will give rise to appeal or reference under the new procedures, then the matter will be put beyond any doubt whatsoever. That is precisely what I am seeking from your Lordships. I beg to move.

§ 7.11 p.m.

§ Lord LLOYD of KILGERRAN
My Lords, I should like, briefly, to support the noble Lord, Lord Hacking, in the proposal that there should be included in the Bill a declaratory clause embodying the concept on foreign law in the way he has put forward. This kind of clause would be welcomed by commerce. The problem is essentially a marketing problem, and I should like to make the appeal that this is a matter considered from a marketing point of view, and not from the point of view of the ivory tower.

§ The LORD CHANCELLOR
My Lords, I am not sure that I accept the suggestion that I am existing in an ivory tower. We ran over this ground at the Committee stage, and I quite understand the eagerness of the noble Lord, Lord Hacking, that there should be a clear indication to American lawyers of the legal position. However, my experience of American lawyers is that they learn pretty fast, and I should have thought that the process of education which will follow the Bill when it becomes law, by way of the pronouncements of Lord Hacking and others, would soon alert our colleagues across the water to the position, though, with great respect, I should have thought that it was already fairly familiar ground to them.
I am afraid that I adhere to the view expressed at the Committee stage by the noble and learned Lord, Lord Hailsham of Saint Marylebone; namely, that the effect of inserting these clauses—the three 542 Amendments seek to achieve the same purpose of being declaratory in their effect—could well be to cast doubt in all other cases not governed by the Bill where there is no Statute containing a declaratory clause. Therefore I believe that there would be a risk of undermining the doctrine of the law in cases other than those in which the Statute applies.
I should have thought that not only is it a well-established principle of English law that questions of foreign law are questions of fact, but that if this is not already known to American lawyers, they would discover that it is the case when they endeavoured to examine the new arrangements for arbitration. I take the view that the potential injury and confusion of the Amendment would more than outweigh the benefits in presenting this package to America and would be too substantial. Therefore, while I share the eagerness of the noble Lord, Lord Hacking, to effect the best presentation of this package, I think that what he proposes would be too high a price to pay.

§ 7.14 p.m.

§ Lord HAILSHAM of SATNT MARYLEBONE
My Lords, I must say, for the little it is worth, that I agree with the noble and learned Lord on the Woolsack in everything that he has said. There are two quite separate points here, and I think that he has dealt with only one of them. I was rather hoping that he would deal with both of them, and perhaps, by leave of the House, he will do so at a later stage. I have no doubts whatever that he is right about Amendment No. 10. I would say to the noble Lord, Lord Hacking, that we cannot alter the general law of England, which extends over every field, that foreign law is a question of fact, simply to please the New York Commercial Arbitration Panel. If the panel does not know this rule of English law, then I wonder what Lord Hacking is doing, living in New York and advising his American colleagues, if he cannot tell them that. It would also astonish me if that principle were not also American law, for although I am acting now on the presumption, which is very seldom true, that foreign law is the same as English law, I should be rather surprised if the law of Japan is not a question of fact in American law; and the noble Lord, Lord Hacking has certainly not told us to the contrary.
543 The noble Lord, Lord Lloyd of Kilgerran, has twice used the term the "ivory tower". The first occasion was when I ventured to say that I had some experience of small arbitrations, having lived in a humbler world than he. The ivory tower is usually associated with those who do not know the facts of life, but the fact is that as Lord Chancellor I played a very considerable part in trying to encourage, for instance, arbitration in the county court. That experience, apart from the fact that I have had many conversations at the Polytechnic of Central London with those who take part, for instance, in what is called the Small Claims Court, (which is in fact a form of arbitration) has convinced me of what I said then. This is not an ivory tower situation; it is based on a wider—not smaller—experience of the facts of life than has the noble Lord, Lord Lloyd of Kilgerran. In this particular Amendment—

§ Lord LLOYD of KILGERRAN
My Lords, again I am in the difficult position of not being able to use the precise words. An "ivory tower" may not be the right term, but what encouraged me to use it was the rather nonchalant way in which the noble and learned Lord dismissed all the arguments put forward by experienced arbitrators in the field (if that is the correct word). It may be that the noble and learned Lord has been a long time away from the real hurly-burly of arbitrations. I was merely emphasising that we are dealing with problems which many arbitrators have, and which many institutions have wished to be put forward to this House.

§ Lord HAILSHAM of SAINT MARYLEBONE
My Lords, I was quite aware of what the noble Lord had in mind; I was merely pointing out that his experience ranged over only a limited class of arbitration. I was about to say that the second time the noble Lord used the term "ivory tower" it was about the noble and learned Lord the Lord Chancellor. It is a marketing problem, said the noble Lord, and apparently his contention there was that in order to market the Bill in the American market we have to fiddle about with its draftsmanship. I personally do not take this view at all. Drafting Bills is not an altogether simple matter, and I do not regard the draftsmanship of 544 English legislation as being a marketing problem at all. The marketing is done somewhere else, by other people.
I was a little disappointed that the noble and learned Lord the Lord Chancellor did not deal with the second and, to my mind, the far more important point raised by this series of Amendments; namely, the point about the foreign law of contracts and the English law of contracts. The noble and learned Lord, Lord Wilberforce, referred to this at the Committee stage, and the noble Lord, Lord Hacking, in proposing the Amendment under discussion, raised it with the considerable weight given to it by our quadripartite correspondence with Mr. Mark Littman. I was wondering whether, with the leave of the House, the noble and learned Lord might add a word about that.

§ The LORD CHANCELLOR
My Lords, what I feel about the two Amendments we are discussing now, Nos. 6 and 9, is that they really add nothing to the Bill but merely declare the effect of the Bill—that points of English law, however they arise, are appealable under the Bill. I do not think they have a greater effect than that, and I should have thought that that was not a necessary proposition to establish in this legislation.

§ Lord DIPLOCK
My Lords, like my noble and learned friend Lord Hailsham, I regret that your Lordships were unable to accept favourably the suggestion made at the Committee stage by my noble and learned friend Lord Wilberforce, supported by myself, which indeed carries out a recommendation of the Commercial Court Committee itself, that if a contract is expressed to be governed by foreign law, such as Swiss law, then there should be a right to exclude reference to the court. It is true that in such case where the proper law is a foreign law, it is only in rare cases that English law will be relevant.Renvoi is one of the obvious ones. But if parties to a contract have chosen Swiss law, then in the ordinary course of events, if they took the matter to the courts, they would be accepting the Swiss view of what the English law is; and if they choose to go to arbitration instead of to the courts, and accept an arbitrator whom they regard as being an appropriate arbitrator for Swiss law, the proper law of the contract, then there seems to me to be no reason 545 why they should not accept that Swiss view of what the law of England is, which they would be accepting if they had gone to the Swiss courts, which would have been the natural choice of curial law of the contract.
The Amendment moved by the noble Lord, Lord Hacking, does not deal with that position, which, I would remind your Lordships, was recommended by the Commercial Court Committee. What it would require is something of this kind—and I would invite the noble and learned Lord on the Woolsack to consider the possibility of this at the Third Reading stage. We want to strike out the last two lines, so that it would read (and I am reading from Amendment No. 6): No appeal may be brought, nor application made, under this section, by a party to a reference under an arbitration agreement contained in or relating to disputes arising under a contract which is expressed to be governed by a law which is not English law". It would be of great assistance, I think, in the supranational contracts if a provision of that kind were included. It would very seldom have any effect because, as I say, it is only by such odd doctrines as Renvoi that English law would arise. But I would invite the noble and learned Lord on the Woolsack to consider that possibility, which has considerable support, at the Third Reading stage.

§ The LORD CHANCELLOR
My Lords, quite frankly, I found this a difficult matter, and I will not conceal that. I ventured to deal with this point in paragraph 8 of my letter to the noble and learned Lord, Lord Hailsham, which has been referred to, when I expressed the view that the Bill had got the dividing line about right by allowing points of English law, however they arise, to be appealed, but impliedly preventing appeals on foreign law. However, in the light of the view which has been expressed by the noble and learned Lords, Lord Diplock and Lord Wilberforce, I am certainly willing to look at it again. I am not sure that it touches directly upon the Amendments we are now discussing, but I should certainly be willing to look at that point and have further discussion on the matter.

§ Lord DIPLOCK
My Lords, I agree that it does not touch directly on the Amendments we are discussing, but I 546 thought it would be a good opportunity to get it in.

§ The LORD CHANCELLOR
My Lords, I thought I saw a mischievous look in the eyes of the noble and learned Lord, Lord Diplock. I shall willingly do that, but I am afraid that, as at present advised, I cannot meet the wishes of the noble Lord, Lord Hacking, in the wider context of declaratory provisions.

§ Lord HACKING
My Lords, in a moment I am going to ask your Lordships' leave to withdraw this Amendment, but before I do so I should like to pass a few comments. It is perfectly true that in support of my argument I used opinions which had been expressed to me in New York, for the very good reason that I work there and that I hear opinions expressed to me in New York. But I am not speaking for any sector in the international community; nor, indeed, for any sector in any community. I am just anxious that, where there is a doubt in the law of England, that doubt should be resolved in the clearest possible terms.
As I said in my first submissions to the House on this matter, the vehicle which I described as the pure declaratory clause is clearly not the appropriate vehicle, or at least has such resounding opposition to it as is sufficiently strong to give it no prospect of receiving the assent of this House. Perhaps I have been guilty of loose terminology, because my Amendments Nos. 6 and 9 are not really declaratory Amendments; they merely state the rights of the parties under, first of all, the appeal procedure and, secondly, the reference procedure in Clause 2. It is the rights of those parties that, in my submission to your Lordships' House, have been at least clouded by the decision of the judicial committee which I drew to your Lordships' attention. I find it somewhat surprising, if I may say so to your Lordships, that nobody sought to counter my argument there, when I read from one of the opinions, from the opinion of the noble and learned Lord, Lord Cross, who clearly crossed over, within those few sentences, the frontier between questions of fact and questions of foreign law.
Having made those comments to your Lordships' House, I hope that, in the light of what the noble and learned Lord, 547 Lord Diplock, has said, the noble and learned Lord the Lord Chancellor will give further thought to the concept contained in Amendments Nos. 6 and 9. I would never put myself before your Lordships' House as a drafter par excellence of any Parliamentary legislation. It is not my drafting, it is the concept, on which I am seeking to persuade. Having said those words, I beg the leave of the House to withdraw Amendment No. 6.

§ The LORD CHANCELLOR
My Lords, in response to what the noble Lord has said, I shall certainly look at Amendments Nos. 6 and 9 in the context, although it is a slightly different context, I think, of what the noble and learned Lord, Lord Diplock, has said.

§ Amendment, by leave, withdrawn.

§ 7.30 p.m.

§ Lord LLOYD of KILGERRAN moved Amendment No. 7:

§ Page 2, line 34, at end insert— (" (8) All appeals from awards relating to (a) intellectual property or (b) the Treaties or Community Treaties as defined in the European Communities Act 1972 or (c) Articles 85 or 86 of the Treaty of Rome shall be referred to the Patents Court.").

§ The noble Lord said: My Lords, this is in the nature of a probing Amendment. It is to the effect that all appeals from award relating, first of all, to intellectual property shall be referred to the Patents Court. It is not quite clear whether intellectual property matters would be referred directly to the Patents Court. It would be preferable, it seems to me, to have such matters referred to a specialist tribunal such as the Patents Court. The expression "intellectual property" covers not only patents, but also trade marks, confidential information, designs; and it is a broad term. It seems to me that it might be helpful if, in the Bill, there was a reference that these appeals would go to the Patents Court. The noble and learned Lord may feel that the problem does not arise in practice, but it would be helpful to have a declaration that intellectual property, as a whole, should go to the Patents Court.

§ Coming for a moment to the question of an ivory tower, I have been closely concerned over my life with patent 548 matters and I remember the great difficulty it was for members of the Patent Bar to get a Patent Judge. I remember the opposition that was made in high circles to the appointment of a Patent Judge. The late Mr. Justice Lloyd-Jacob was the first Patent Judge. We practitioners in this country were the envy of practitioners from all over the world in that at last we were able to put to a distinguished patent practitioner who had been made a Patent Judge these difficult matters of science and law. Therefore, on this aspect I would ask the noble and learned Lord to consider whether a declaratory statement as to intellectual property would not be helpful. As to the two other parts of my Amendment, (b) and (c), the noble and learned Lord has already written me about those matters and therefore I shall not press subparagraphs (b) and (c) in begging to move this Amendment.

§ The LORD CHANCELLOR
My Lords, to hear the noble Lord, Lord Lloyd of Kilgerran, speaking on patent law and the Patent Court is to be in the presence of an unqualified admirer of both. He and I, and noble and learned Lords who are in the House, achieved, I hope, considerable progress in the patents field in our Patents Act, which I remember so well from last year, having had to learn so much in order to try to understand it. What this Amendment proposes is that patent matters should necessarily be assigned to the Patents Court. The assignment of business within the High Court is usually, but not always, dealt with by Rules of Court. The Patents Court is a part of the Chancery Division and the assignment of business is expressly provided to be a matter for the Rules of Court. If a case was shown for assigning to the Patents Court questions of law arising out of arbitrations relating to intellectual property, the Rule Committee could assign such business to that court. But I think it is important to maintain flexibility in these matters and that it would not be desirable for the question to be determined finally and immutably in the Bill.
Even without any Rule of Court it would be open for an approprite case to be assigned to a Patent Judge sitting as a judge of the Chancery Division; and I think that is what in practice would happen. We now have strengthened the Patents Court and I think, in the new 549 situation in which we are, that what the noble Lord would seek to achieve will, in practice, be achieved.

§ Lord LLOYD of KILGERRAN
My Lords I am grateful to the noble and learned Lord for what he has said. In the circumstances, I beg leave to withdraw the Amendment.

§ Amendment, by leave, withdrawn.

§ Clause 2 [Determination of preliminary point of law by court]:

§ The LORD CHANCELLOR moved Amendment No. 8:

§ Page 2, line 36, leave out from ("Court") to ("with") in line 39 and insert ("made by any of the parties to a reference—

(a) with the consent of an arbitrator who has entered on the reference or, if an umpire has entered on the reference, with his consent, or
(b)").

§ The noble and learned Lord said: This Amendment is a response to the warning given by the noble and learned Lord, Lord Diplock, during the Committee stage that subparagraph (a) of Clause 2(1) could well be a dead letter, as arbitrators would be unwilling to incur the cost and trouble of applying to the High Court for the determination of a preliminary point of law. Accordingly, the Amendment would have the effect of enabling a party, with the arbitrator's consent, rather than the arbitrator himself, to apply to the High Court for the determination of a preliminary point of law. That seems to be the most senbile way of dealing with the matter. I beg to move.

§ Lord HAILSHAM of SAINT MARY-LEBONE
My Lords, I think that the noble and learned Lord has made an excellent response to my noble and learned friend Lord Diplock. There is only one short point I should like to draw to the attention of the House. If this Amendment is passed, as it will be, I think that perhaps the Rules Committee should be asked to state how the consent of the arbitrator should be signified.

§ The LORD CHANCELLOR
My Lords, I will see that that is done.

§ On Question, Amendment agreed to.

§ [Amendments Nos. 9 and 10 not moved.]

550

§ Clause 3 [Exclusion of rights under sections 1 and 2.]:

§ The LORD CHANCELLOR moved Amendment No. 11: Page 3, line 20, leave out ("the section") and insert ("this section and section (Exclusion agreements not to apply in certain cases unless entered into after commencement of arbitration)below").

§ The noble and learned Lord said: My Lords, with this Amendment, it may be convenient to consider Amendments Nos. 28 and 29. Clause 3, as your Lordships will have noticed, is already very lengthy. It consists of no less than nine subsections. The addition of the two further subsections which I propose to insert—Subsections (2A) and (5A)—would make it very unwieldy. Therefore, it is proposed to divide Clause 3 into two clauses in the way indicated at the natural break point after new Subsection (5A). These two minor Amendments which are set out are consequential upon that basic division. I beg to move.

§ On Question, Amendment agreed to.

§ Lord HACKING moved Amendment No. 12:

§ Page 3, line 28, at end insert ("and (d) subject to subsection (2) below, no application may be made under subsections 23(1) or 23(2) of the principal Act").

§ The noble Lord said: My Lords, I would ask your Lordships to consider together Amendments Nos. 12, 13, 14 and 15. Having said that, I would draw your Lordships' attention to this: the noble and learned Lord himself has tabled Amendment No. 17, which covers the same ground as my Amendment No. 13. Therefore, at this stage I do not intend to address the House on Amendment No. 13, although, as I have indicated, it is within the group of Amendments Nos. 12, 13, 14 and 15. Your Lordships will recall from the Committee stage that I have concern that there may be other vehicles of abuse available to the parties once the case-stated procedure, and the other rights to set aside an arbitration award on the grounds of errors of fact on the face of the award, arc abolished.

§ The purpose, therefore, in moving Amendments Nos. 12, 14 and 15 is to enable parties to international agreements 551 to exclude the operation of the misconduct provisions in Section 23(1) and (2) of the Arbitration Act 1950 except when the arbitrator has acted dishonestly, which is a very rare occasion. Mr. Justice Donaldson recalled only one case in 30 years of practice at the Bar or on the Bench. It covers such examples as the arbitrator's acceptance of a bribe. Even though these circumstances are so rare, there should be some power, when and if that occasion arises, to remove an arbitrator. The second exception is when an arbitrator has acted in breach of natural justice. I hope that the noble and learned Lord, Lord Hailsham, will note that the word "gross" has been removed from my Amendment. The third exception is when an arbitrator has acted in excess of his authority. What I am asking therefore is that the misconduct provisions contained in Section 23 should apply to international agreements only when: (1) the arbitrator has been dishonest; (2) he has acted in breach of natural justice; or (3) he has acted in excess of his authority.

§ So far as Amendment No. 14 is concerned, it is a tidying-up Amendment at the end and I need not address your Lordships on that. I accept again that the terms of my drafting may be found wanting. I am seeking agreement on the concept and not the terms of my draft. I accept also that, as drafted, my provisions affect domestic exclusion agreements made after the commencement of arbitration as well as to international exclusion agreements which are made at the time of the contract or thereafter. I believe this to be a real concern. There are very large sums of money at stake and experience has shown in recent years that parties will seek any means for abuse. Of greater importance, those who examine our law after the passage of this Bill will be looking through the Act, particularly Section 23, and they think that, at the time the contract is made, there is this power to abuse the system.

§ As the noble and learned Lord who sits on the Woolsack will be aware, I have support from Mr. Justice Donaldson and Lord Justice Megaw. These are two judges of eminent experience in the commercial field. I emphasise this time that I am not seeking generally to alter Section 23(1) and (2) or to disturb the 552 settled authorities which have come under those two sections. I am asking the House to fall into line with the practice of other jurisdictions.

§ It may be helpful for your Lordships to know how the United States Arbitration Act, Section 10, deals with the problem. It is entitled: "Same; Vacation; Grounds; Rehearing". It reads as follows: In either of the following cases the United States court in and for the district wherein the award was made may make an order vacating the award upon the application of any party to the arbitration—

(a) Where the award was procured by corruption, fraud, or undue means.
(b) Where there was evident partiality or corruption in the arbitrators, or either of them.
(c) Where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced.
(d) Where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made …"

§ I could quote—but I shall not burden your Lordships—other jurisdictions which follow through on the same concept. I also submit that these Amendments are not out of line with practice in England. I refer to a lecture which Mr. Justice Donaldson gave to the Institute of Arbitrators last summer. This is what he said. All systems of law provide that the National Courts shall have a supervisory jurisdiction over arbitrations. This is clearly necessary and I doubt whether any arbitrator would have it otherwise. The biased or fraudulent arbitrator is almost unknown in this country. Certainly I have only heard of one in over 30 years of practice. But there must be some power to remove him when he does appear. This jurisdiction also extends so as to enable the Courts to intervene if an arbitrator acts in breach of the rules of natural justice. This is not as heinous an offence as it sounds. Indeed, on the rare occasions when it occurs, it arises largely as a result of mistake or ignorance. For example, an arbitrator may get himself in to the position in which he receives evidence from one side and, thinking that the other side know all about it, fails to give them any opportunity for answering it. These things can happen even in the best regulated arbitrations. And when they do, someone should be able to set the proceedings aside and let the parties start again. Finally, the Courts must have power to step in when an arbitrator exceeds his jurisdiction. This, too, sounds to be a heinous offence, but, of course, it is not. An arbitrator's jurisdiction depends upon the consent of the parties and this 553 is usually contained in the contract which has given rise to the dispute. Once the existence of that contract is in issue, so is the jurisdiction of the arbitrator and no one can determine his own jurisdiction. The arbitrator must therefore take a view on whether he has or has not jurisdiction. If he thinks that he has jurisdiction and is wrong, a Court must have power to set the award aside. So much for the supervisory jurisdiction of the Courts. No one has criticised it and I do not anticipate any changes. However, the Appellate or review jurisdiction of the Courts is a different matter. This has been under close study by the Commercial Court Committee.

§ On those two grounds—-that my Amendments are consistent with existing practice in England and that they are consistent with the practice in other jurisdiction—T commend them to your Lordships. I beg to move.

§ 7.45 p.m.

§ The LORD CHANCELLOR
My Lords, in considering Amendments Nos. 12 to 15, it is at any rate pleasing to me that I have been able in regard to Amendment No. 13 at last to go a great deal of the way with the noble Lord. I wish I could have done it in other matters, too. We shall come to the fraud aspect of the matter in a moment and perhaps when I move Amendment No. 17. What remains is the variant, if I may so describe it, of the proposal that the noble Lord, Lord Hacking, made at the Committee stage to Amendments which would have enabled the parties to contract out of the misconduct jurisdiction altogether. Then a separate operation would have narrowed the scope of the jurisdiction generally. Now the Amendment seeks to safeguard the power of the court to intervene where—and I use the word "grosser" without being wedded to it—the grosser forms of misconduct are alleged but not otherwise.
The difficulty that the House must face is that the attempt to distinguish between the various forms of misconduct is inevitably a difficult one and an uncertain one in a field which is governed by a good deal of case law. In my view—and I have said this in my letter to the noble and learned Lord, Lord Hailsham of Saint Marylebone—changes in this area should be contemplated only after thorough consideration of the issues involved. Frankly, there has not been thorough consideration of this difficult field as yet either by the Donaldson Committee or by departments, and I am afraid that as we want to get this Bill on the Statute 554 Book there is not time for it now. In any event, the categories of misconduct which Lord Hacking's Amendment would preserve from the right to contract out leave a broad, uncertain and, I submit, potentially elastic field over which the court's jurisdiction would be maintained in any event. I feel that if exceptions of that breadth are needed, the usefulness of the Amendment to contracting parties is greatly reduced. They would leave the extent of the right to contract out far more uncertain than is the position under the Bill as it now stands.
In any event, is not Section 23 and its provision unlikely to prove an alternative source of delay as the court has power under subsection (3) of that section to order that all or part of the award be brought into court? I would have thought that that power should be sufficient to discourage spurious applications under the umbrella of misconduct. I hope accordingly, partly for the avoidance of long delay and further consideration of a very difficult field, that the noble Lord will not press these Amendments.

§ Lord HACKING
My Lords, I will not press these Amendments and in a moment I will withdraw them. May I say that I was not—I do emphasise this again—seeking to disturb as I did seek to disturb for very good reasons, as I like to think, the wording of Section 23. I was merely moving these Amendments, seeking to define the use of Section 23 as it refers to international agreements. The noble and learned Lord has raised various objections. I, if I may, would like to consider them and in the meantime I beg leave to withdraw the Amendments.

§ Amendments, by leave, withdrawn.

§ 7.50 p.m.

§ Lord LLOYD of KILGERRAN moved Amendment No. 16:

§ Page 3, line 34, at end insert— (" An agreement in writing shall include any agreement in the written or typed form but shall exclude all agreements in printed or clearly in standard form.")

§ The noble Lord said: My Lords, I beg to move Amendment No. 16 and, with the leave of the House, I should like to speak to Amendments Nos. 21 and 22 in order to try and save some time at this late hour. The effect of these Amendments to 555 Clause 3 would be that all international agreements and all domestic arbitrations in relation to intellectual property and EEC competition law will come within the proposed legislation, which allows parties to enter into an exclusion agreement at any time, so long as such an agreement is in the written or typed form.

§ The clause, as amended, will also allow the Secretary of State to extend the right of exclusion agreements to domestic arbitration if it becomes necessary or expedient, subject to the annulment provisions of Section 3(9). These are of profound significance, I submit, to commercial interests. It seems to me there is no logical case for distinguishing between supranational and special category disputes of an international character, as the Bill now stands. It would appear to me sensible that all international agreements should be treated in the same manner, particularly when the parties appoint the arbitrators and the arbitration proceeds on the usual ad hoc basis. The arbitrators who sit on the international special categories disputes tend to be of a very experienced kind. The noble and learned Lord, Lord Diplock, emphasised this when he gave his views on the appeals procedure during the Committee stage of the Bill. Indeed, he pointed out that he felt there were numbers of experienced arbitrators who would be able to give their views on appeals, which would be helpful.

§ During the Second Reading of the Bill, no speaker seemed to me to make a valid case for distinguishing between supranational and special category disputes. The only reason for distinguishing between the two came from the noble and learned Lord, Lord Diplock, who stated, as reported in Hansard on 12th December, col. 450: There are many branches, or at any rate several branches, of commerce in which it is impossible in practice to trade, or to enter into a transaction, except upon a standard form prepared by a trade association, customarily on the Baltic, or whatever it may be. If you want to enter into that kind of contract, that kind of transaction, at all, you are, for practical purposes, forced to contract upon the standard terms. The danger is that the standard terms will include an exclusion term to which the other party to the contract, or indeed neither party to the contract, has an opportunity of saying, ' No, we want to reserve our normal rights.' That was the reason why I, at any rate, took the view that the special category contract ought to be excluded for the time being.

556

§ The objection raised by the noble and learned Lord if, with great respect to him, it could be at all valid, could be removed, it seems to me, by the Amendment relating to type added clauses which ensures that the parties apply their minds to an exclusion agreement, as the noble and learned Lord would have wished.

§ In the Committee stage, the noble and learned Lord the Lord Chancellor said—I rather think it was more in jest than otherwise—that a party who wished to exclude the new right of appeal would merely have the standard contract typed or written out, if my Amendment were accepted. Again, with great respect, I think he may forget how contracts are negotiated in the commercial world, particularly in respect of international agreements. It is highly unlikely, in my experience and in that of many well-known arbitrators who have written to me, that parties will indulge in the manner suggested by the noble and learned Lord the Lord Chancellor.

§ In any event, I again find myself in a difficulty about the wording of any amendment and it is the principle, therefore, that I am trying to get across. In the event, my Amendment could be tightened up to take care of the point raised by the noble and learned Lord the Lord Chancellor by stipulating that an exclusion agreement had to be by way of a special addendum to the contract.

§ All that is necessary in order to deal with the point raised by the noble and learned Lord, Lord Diplock, is really to ensure somehow that the parties have had an opportunity of discussing the whole matter and that the standard form is not imposed directly. With great respect to the noble and learned Lord, I suggest that the Amendment I have put forward, possibly with a slight improvement in words that the noble and learned Lord the Lord Chancellor could no doubt introduce without any difficulty, would be a useful Amendment to introduce into the Bill.

§ Again, in addition to those points, it is perhaps worth remembering that the parties to all international agreements would only be given the freedom to contract out. There is no question of abolishing judicial review and that question of principle did affect the minds of certain noble and learned Lords during the 557 Committee stage. Many parties in the course of practice would not contract out of judicial review and there would be ample simple cases going to the courts to ensure the continuation of the development of English commercial law.

§ The fear was expressed to your Lordships that there might be built up a "closed shop", as it were, of law developed by arbitrators to the exclusion of the courts. That danger, in my submission, would not arise. However, there is a danger from another point of view: that if the shipping, insurance and commodity contracts—these are special categories—are not allowed to fall within the exclusion agreement provisions, the so-called supranational contracts may well be seriously affected because of those contracts having shipping, insurance or commodity aspects attaching to them, and they would not be brought to arbitration in this country.

§ It might well be, therefore, so I am advised, that the major aim of this Bill, to attract the supranational to London arbitration, would be lost because of the exclusion of special category international disputes from the special exclusion agreement provisions as at present in the Bill. Uncertainty would arise as to whether or not supranational agreements fall within the exclusion provisions, and thus many foreign organisations would be wary of agreeing to London arbitration for fear that a party might use shipping, insurance or commodity features of the contract in order to use the appeal procedure of judicial review. In this context, the present Bill refers to the "Admiralty jurisdiction of the High Court", rather than to shipping, and this jurisdiction is a very wide one. It covers virtually every aspect of shipping and matters incidental to shipping. Many large organisations which are prolific users of London commercial abritration have indicated that they want the freedom to contract out of judicial review at any time, and failure to give them this freedom would see London being used less and less as an arbitration centre in the future. My Lords, I beg to move.

§ 8. p.m.

§ The LORD CHANCELLOR
My Lords, we covered some of this ground at the Committee stage. The aim of the 558 Amendment, as I understand it, is to prevent exclusion clauses from being forced on unwilling parties in standard form contracts. But I again venture to say what I said at an earlier stage, that the Amendment is impracticable, as the party wishing to exclude the new right of appeal would merely make such modifications to the standard form as were necessary to destroy the standard form of the contract, and would have the standard contract typed or written out with such modifications as were required.
Further, I am advised that while the Amendment appears to be aimed at standard form contracts, it is drafted so that it bites on standard form exclusion agreements. As a result, if an exclusion agreement in a standard form appears as a term of even a one-off contract which has been closely negotiated between the parties, it would still be ineffective. As it is likely that standard form exclusion agreements would be used even in such one-off contracts, the Amendment might have the result, for practical purposes, of rendering the right to exclude applications to the court under the Bill nugatory. In those circumstances, and in the light of those dangers, perhaps the noble Lord will reconsider the Amendment.

§ Lord HACKING
My Lords, before the noble Lord withdraws his Amendment or takes a different position upon it, I should like to give him support in one area. A likely consequence of the passing of this Bill—as we hope, it will be passed—into an Act, is that arbitration bodies will incorporate the exclusion clause into the rules of those arbitration bodies. That presents a real problem, which I think the noble Lord, Lord Lloyd, was focusing upon when he was moving this Amendment.

§ Lord DIPLOCK
My Lords, the Explanatory and Financial Memorandum to this Bill starts with the sentence: The Bill implements provisions of the report on arbitration by the Commercial Court Committee. The question of special category disputes was discussed almost interminably in many fora. I myself would have made a slightly different dividing line between special category disputes and the others, though a much more elaborate one than my noble friend Lord Lloyd suggests in these Amendments. The Commercial 559 Court Committee, however, came to a different conclusion as to where the dividing line is to be. I accept their conclusion, because I am extremely anxious that a Bill to this effect should come into force as soon as possible, and to try to raise again these controversies, which went on and on, is an infallible recipe for losing the Bill.

§ Lord LLOYD of KILGERRAN
My Lords, before the noble and learned Lord sits down, may I say that he emphasised that there were interminable discussions upon this point in the Commercial Court Committee. I am advised—and perhaps he could help me on this matter—that the views of certain eminent arbitrators and institutions were not considered in the course of what the noble and learned Lord referred to as "interminable discussions". One of the reasons why I am presuming to raise these matters is that—

§ Lord HAILSHAM of SAINT MARY-LEBONE
My Lords, this is a second speech. It is the Report stage.

§ Lord LLOYD of KILGERRAN
My Lords, why I am presuming to interrupt the noble and learned Lord is because these are matters that were put to me, and I should be grateful for his comments.

§ Lord DIPLOCK
My Lords, I have been subject to the same lobbying as my noble friend Lord Lloyd of Kilgerran. The Commercial Court Committee has a composition which can easily be found, and all the relevant interests are represented there.

§ The LORD CHANCELLOR
My Lords, I hope that the noble Lord, Lord Lloyd of Kilgerran, will take note of that solemn warning which we have just heard from the noble and learned Lord, Lord Diplock.

§ Lord LLOYD of KILGERRAN
My Lords, I beg leave to withdraw the Amendment.

§ Amendment, by leave, withdrawn.

§ 8.7 p.m.

§ The LORD CHANCELLOR moved Amendment No. 17:

560

§ Page 3, line 41, at end insert— (" ( ) In any case where—

(a) an arbitration agreement, other than a domestic arbitration agreement, provides for disputes between the parties to be referred to arbitration, and
(b) a dispute to which the agreement relates involves the question whether a party has been guilty of fraud, and
(c) the parties have entered into an exclusion agreement which is applicable to any award made on the reference of that dispute,

then, except in so far as the exclusion agreement otherwise provides, the High Court shall not exercise its powers under section 24(2) of the principal Act (to take steps necessary to enable the question to be determined by the High Court) in relation to that dispute.")

§ The noble and learned Lord said; My Lords, this Amendment would have the effect that where the parties had validly contracted out of the right to apply to the High Court under the Bill, the High Court's power to intervene and assume jurisdiction under Section 24(2) of the Arbitration Act in cases where fraud is alleged against a party would also be excluded, unless the parties otherwise agreed. There is no fundamental objection, as I submit, to allowing the parties to agree that their chosen tribunal should determine questions of fraud as between themselves, and this Amendment would have the advantage of allowing parties to block off that alternative avenue of delay. It is substantially the same as Amendment No. 12, which had been put down by the noble Lord, Lord Hacking, and I hope that it will receive the approval of your Lordships. My Lords, I beg to move.

§ Lord HACKING
My Lords, I rise to my feet only to express gratitude.

§ On Question, Amendment agreed to.

§ 8.8 p.m.

§ The LORD CHANCELLOR moved Amendment No. 18: Page 4, line 11, leave out from ("agreement") to ("unless") in line 12.

§ The noble and learned Lord said: My Lords, with this Amendment, it may be convenient to deal also with Amendments Nos. 19, 20, 30 and 31. The purpose of both my Amendment and the Amendment of the noble Lord, Lord Hacking, is to ensure that, for the purpose of the right 561 to contract out of applications to the court, the domestic or non-domestic character of an arbitration agreement should be determined once and for all at the time when the agreement is made. This Amendment repeats in substance the definition of a domestic arbitration agreement in Section 1(4) of the Arbitration Act 1975, save that it refers to "he time the agreement was entered into" rather than, as in Section 1(4) of the 1959 Act, "the time the proceedings are commenced".

§ The Amendment of the noble Lord, Lord Hacking, while aimed at the same purpose as my Amendment, would amend the definition of a domestic arbitration agreement in Section 1(4) of the 1950 Act itself. That definition was carefully tailored to enable the United Kingdom to accede to the New York Convention on the enforcement of arbitral awards, and should not therefore be amended for the collateral purpose of this Bill. I hope the noble Lord may think that my Amendment meets the point of substance that he himself was making. My Lords, I beg to move.

§ Lord DIPLOCK
My Lords, there is a point on Amendment No. 20. Although it meets the point that you can tell whether or not the agreement is an arbitration agreement for the purposes of deciding whether an exclusion agreement can be made, it does not meet the point about the mandatory refusal of a stay under Section 1 of the Arbitration Act 1975. It would be desirable, I suggest, that it should cover also the right to a mandatory stay where there is an exclusion agreement—that is to say, where the parties were foreign or non-foreign at the time that the agreement was made. I thought that I had found a way of doing it, but now that I look at it I am a little doubtful, because there are so many negatives in the definition. I believe that if one inserted: In this section ' domestic arbitration agreement ' means and in Section 1 of the Arbitration Act 1975 includes … we might get the answer, but I would not bet on it. However, there is a point about the mandatory stay which is not covered by Amendment No. 20 and would be covered by the other Amendments, but they have objections to them of a different kind.

562

§ Lord HACKING
My Lords, I should like to express gratitude to the noble and learned Lord for having taken up this matter. If my recollection is correct, this was the only Amendment which I moved during the Committee stage upon which I did not immediately get a cold shower from the noble and learned Lord. Therefore I am grateful to him for having moved this Amendment. There are two problems, one of which has been aired by the noble and learned Lord, Lord Diplock. The first is that the result of this Amendment will be that there will be two definitions of domestic arbitration agreements set at two different times: first, the definition in the 1975 Act—set at the time of commencement of proceedings—and the second under this Bill: set at the time that the contract was made. That is my terminology: the terminology of the noble and learned Lord is "entered into".
The second problem—and this is the point which the noble and learned Lord, Lord Diplock, made—is that this does not deal with the inherent weakness in Section 1(4) of the Arbitration Act 1975; namely, that at the time that the parties contract they do not know whether at a later time that contract will cease to be an international contract and become a domestic contract and that what was a mandatory power in the courts at the time that they made the agreement—namely, the mandatory power to stay any court proceedings once arbitration proceedings have been commenced—may go if the agreement becomes a domestic agreement. Hence, on this matter of stay as well as under this Bill, the parties do not have the assurance at the crucial time of making the contract. It is on those two grounds that I respectfully ask the noble and learned Lord to review this Amendment.

§ The LORD CHANCELLOR
My Lords, since it is a technical matter I am certainly willing to look at it again, in case we have not got it quite right. Accordingly, I beg leave to withdraw Amendment No. 18.

§ Amendment, by leave, withdrawn.

§ [Amendments Nos. 19, 20 and 21 not moved.]

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§ Lord LLOYD of KILGERRAN moved Amendment No. 22: Page 4, line 16, leave out subsections (6) and (7).

§ The noble Lord said: My Lords, I beg to move Amendment No. 22. Its purpose is to omit subsections (6) and (7). I put forward my arguments in favour of deleting these two subsections when I spoke to Amendment No. 16. I indicated then that there was no logical case for distinguishing between supranational and special category cases of an international nature and that it appeared to be sensible that all international agreements should be treated in the same manner, in particular when the parties appoint the arbitrators and the arbitration proceeds on an ad hoc basis. I did not apprehend that the noble and learned Lord dealt with that point—he dealt very severely but charmingly with my Amendment No. 16. My only reason now for moving Amendment No. 22 is to give the noble and learned Lord an opportunity to pay some direct attention to it. I beg to move.

§ The LORD CHANCELLOR
My Lords, we have already covered this ground, which relates to one of the more controversial provisions in the Bill. The view that seemed to meet with the approval of the House was that the compromise in the Bill was the best that we could arrive at in order to secure its early passage. Those who attach importance to the uniform development of English commercial law and its contribution to international commercial law—they are the judges and, broadly speaking, the lawyers—favour the court's supervision over the kinds of dispute we are considering here (maritime, insurance and commodity contracts) at least until some experience of the working of the provisions contained in the Bill has been gained.
On the other hand, I appreciate that many interests within the business community wish to have the widest possible powers to exclude by agreement at any time the High Court's supervisory jurisdiction over arbitration. I draw attention to the provision in the Bill giving to the Secretary of State power by order to extend the right to contract out to the special category of disputes that we are speaking of now. I hope that in the circumstances this compromise arrangement will be acceptable so that we may 564 see how things work out. When they are shown to work satisfactorily, the matter can then be dealt with by order by the Secretary of State.

§ Lord HACKING
My Lords, I find this to be a difficult matter. There is absolutely no logic to the creation of the special category of disputes identified in the field of Admiralty, insurance and commodity. The shipping commercial communities feel strongly that the parties ought to be left to contract out of the judicial process, and they are, as recognised in the commercial court committee's report, almost always of "equal bargaining power." These provisions have also brought out criticism from the advisers on supranational contracts.
I have presented one side of my concern, but there are, on the other hand, views that these three categories of contracts have made a massive contribution to English commercial law. It is as a result of this massive contribution to English commercial law that, without any modesty, we can all reflect that this is the reason why so many countries wish to come to England for their arbitration and, indeed, to deal with their commercial disputes. It is because of the strength and experience of English commercial law and English commercial lawyers.
There is another matter which also causes me concern. To cut the bridge between the courts of arbitration and the courts of law could result in the development of an arbitration commercial law different from a court commercial law, as has been the experience in New York. Therefore, I venture to suggest to your Lordships that the question we have to ask ourselves is whether we have reached the right compromise. It is for that reason that I would earnestly ask the noble and learned Lord the Lord Chancellor to think very carefully about the matter.

§ The LORD CHANCELLOR
My Lords, if I may say so, I have already thought about it very carefully. This recommendation of the commercial court committee seems to be the realistic one to make at this point in time.

§ Lord HAILSHAM of SAINT MARY-LEBONE
My Lords, I believe that we must stick to the commercial court 565 committee or lose the Bill. I may be wrong about this; it is a pure political judgment which has nothing to do with law. However, my judgment of the matter is that we have a better chance of getting this Bill in its present form than in any other.

§ Lord LLOYD of KILGERRAN
My Lords, I am grateful for the support given to these Amendments by the noble Lord, Lord Hacking, and I fully appreciate the problem which has been adumbrated by the noble and learned Lord, Lord Hailsham. A great deal of information has been put to noble Lords about the practical commercial aspects in relation to these two classes of contracts and in particular relating to subsections (6) and (7). The noble and learned Lord, Lord Diplock, suggested that he had been subject to the same lobbying in these matters as I had been, and I fully appreciate that the noble and learned Lord, Lord Diplock, in referring to the lobbying was not introducing any derogatory atmosphere in relation to the word "lobbying".

§ Lord DIPLOCK
My Lords, I did not intend to. It is very proper that people should write and express their views to those of us who are Members of either House of Parliament, and are concerned with legislation.

§ Lord LLOYD of KILGERRAN
My Lords, I am much obliged to the noble and learned Lord for that explanation. But an attitude had been presented to me that the Commercial Court Committee had not been in a position, for a variety of reasons, fully to examine submissions made by eminent arbitrators and eminent institutions. But be that as it may, in these circumstances and having regard to the indications of the noble and learned Lord the Lord Chancellor, I beg leave to Withdraw the Amendment.

§ Amendment, by leave, withdrawn.

§ 8.22 p.m.

§ Lord HACKING moved Amendment No. 23: Page 4, line 16 leave out ("an arbitration award or")

§ The noble Lord said: My Lords, in moving this Amendment, I also ask your Lordships to consider Amendment No. 24 566 at the same time. I believe that these two Amendments coupled together represent the right position of compromise upon this difficult matter of the special category disputes. The noble and learned Lord, Lord Hailsham, says, with great political experience behind him, that the sensible course is to adopt the Commercial Committee's report. The difficulty here is that this Bill goes one step further: it does not simply adopt the Commercial Committee's report. It creates a second form of judicial review in Clause 2.

§ Perhaps I may briefly trace the history of this matter because, in view of the comments made by the noble and learned Lord, Lord Hailsham, I believe it is important. The Commercial Court Committee recommended a new form of judicial review to replace the case stated procedure and of course the other common law right which granted the High Court the jurisdiction to set aside an award of arbitration on the ground of error of fact or law on the face of the award by, and only by, an appellate procedure based upon recent awards. That is Clause 1 of the Bill. The Commercial Court Committee recommended that parties to special category disputes—those are the ones under discussion; namely, Admiralty, Commodity and Insurance—should not be entitled to contract out of this judicial review on the grounds—and I am quoting from paragraph 48 of the report—that: there is no evidence of any very widespread desire to be able to contract out [and that the entrenched right to judicial review for the parties to these disputes is very important to the maintenance of English law as the first choice of law in international commerce.

§ The second, and if I may say so, wholly admirable form of judicial review is the reference procedure which is in Clause 2 of the Bill. This was introduced by the drafters of the Bill and I am certain that the noble and learned Lord, Lord Diplock, at the Second Reading, when he referred to the maintenance in this Bill of the case stated procedure, had this clause in mind because it is a modified and swifter and, if I may say so, a much more efficient form to enable, during the course of arbitration proceedings, reference to be made to the courts so that the arbitrator may be assisted when matters of difficulty on law come before him. The result therefore now is that there are now two points of access between English courts 567 and arbitrations in England from which the development of English law can continue to feed.

§ The difficulty is that there is strong opposition to the full judicial review. First, as has already been said in this debate, it comes from the shipping and commercial circles, but there is also strong opposition from the advisers to the so-called supranational contracts. They base their concern upon two grounds. First, they say that the definitions of the special category disputes are too broad. I shall read only very briefly because I have already read several extracts from letters that I have received, but I think it would be helpful. I read from another section of the letter that was sent to me by the General Council of the American Arbitration Association. It reads as follows: The first item concerns the three categories of contracts, Admiralty, Insurance or Commodity, to which foreign parties are not permitted to opt out of the new appeal and reference procedures at the time of contracting. This approach appears to add an unnecessary burden to major trading arrangements which, according to the Lord Chancellor quoting from Hansard, form a very large portion of the disputes arbitrated in London, England, each year. Then he refers to the column in Hansard and the Hansard debate of 12th December, which was the Second Reading. The Lord Chancellor said it well when he indicated that the parties should be free to enter into exclusive agreements at the time of negotiating the contract, not only after disputes have arisen. It may be difficult to tell in which category the contracts fall into the three stated classes of exceptions. Take the case, for example, where a Romanian manufacturer of shoes ships them by a foreign vessel to an American purchaser and the shipment is insured and the contract calls for arbitration in London. Is it clear that the parties may avoid the case stated procedure"— and again he is referring to the appellate procedures— by so indicating in their contract or may the Bill's language cause unnecessary litigation over the question of whether the section applies because there may be elements of insurance or Admiralty involved?

§ I shall only cite from another letter a reflection of one strongly expressed view from the senior partner, Mr. Robert Clare, of the New York law firm of Shearman and Sterling, which has immense experience in these large supranational contracts. This is what Mr. Robert Clare said in his letter to me: 568 I recognise that the elimination of Admiralty, Insurance and Commodity contracts must be a compromise because logically it cannot be justified. Certainly, the parties to these contracts are every bit as sophisticated as the parties to a pipeline construction contract which could be made subject to the Arbitration Act.

§ However, the most telling example that I can give your Lordships comes from arbitration proceedings of which the writer of another letter had special experience. This is what he says in reference to Clause 3(6) of the Bill: The proposed exclusion of the three special cases in Clause 3(6) might be more finely tuned. As an example of what I mean, I have just settled a very substantial arbitration that would have been held in London under ICC rules between an Asian seller and an American purchaser of sugar under a long-term supply contract. Although sugar is a commodity, regularly dealt with on a commodity market or exchange in England or Wales, this contract had no connection to such a market or exchange and made no reference to any English contractual form. It would seem that either the Bill itself or the order of the Secretary of State contemplated in Clause 3(8) should more narrowly define commodities contracts, as well as Admiralty or Insurance contracts, to encompass only such agreements as have a rational connection with the English forum. Otherwise the definition of 'special cases' in Clause 3(6) will sweep with too broad a brush. That expresses the concern of those advising in supranational contracts on the grounds that the terms of subsection (6) are too broad.

§ There is another problem and that is the problem of related contracts. Here is an example which I can quote: A United States contractor in Saudi Arabia has a contract with a Saudi Royal Commission for the construction of a town and this contract has an arbitration agreement in it which contains an exclusion agreement. That contractor will in turn with his sub-contractors attempt to get backup agreements with each of the subcontractors". Then it sets out in further detail how on major projects these large contracts are related to one another, and indeed one can have and often does have a large group of them. If, as part of this group of contracts, there are contracts that fall into the definition of commodity, admiralty or insurance, then difficulties, as I am sure your Lordships will find it plain to see, are bound to arise because of the different treatment which is proposed under this Bill for these separate but related contracts.

§ On the other hand, the reference procedure in Clause 2 has, in comments to me, been widely welcomed. The 569 view that has been expressed to me time and time again is how extremely helpful and useful it will be for parties to have an easy reference to the courts when, during the course of the reference, they or the arbitrator run into difficulties in the construction of a clause. So in these Amendments I am asking your Lordships to recognise the difficulties and to recognise that they can be narrowed and in the main resolved by use only of Clause 2, the reference procedure, and not the full appellate procedure. The fact of the matter is that it is going to be difficult, if not impossible in terms of definition, to resolve the definition problems on these contracts. I share with the noble and learned Lord, Lord Diplock, and others, abiding concern that we should find compromise, so that we can send this Bill to the other place when we are all agreed and when we are satisfied that the major worries of the customers have been met. It would be a tragedy if this Bill was lost because it was subject to excessive lobbying in the Commons. I beg to move.

§ The LORD CHANCELLOR
My Lords, I do not know what the concept of excessive lobbying is but I have no doubt the lobbying will go on. I repeat the plea that has been made earlier that in the light of the fact that the compromise that is contained in the Bill in regard to the treatment of special category disputes is one which the Commercial Court Committee came to after much consideration of this matter. Quite frankly, I do feel that if we now make substantial changes in the compromise there is a real risk that the thing will be shipwrecked. I think it is common ground that, despite the criticisms that have been made of Clause 3(6), the Bill as it stands will be of great value.
I hope, accordingly, that those who are concerned will be reassured by the provision in the Bill that the Secretary of State has power by order to remove the restrictions on the right of parties to special category disputes to exclude the courts' jurisdiction. The process of making the change by order could, therefore, be a speedy one. Whether it would be desirable to introduce and approve such an order could be judged fairly soon in the light of experience gained after the Bill has been implemented. So I hope that 570 not too tragic a view will be taken by those who criticise this provision, and I do appeal to noble Lords to let the matter proceed as it stands in the Bill.

§ Lord LLOYD of KILGERRAN
My Lords, I was intending to support the noble Lord, Lord Hacking, in trying to reach a compromise on this very difficult question of definition, but in view of the earnest appeal made from the Woolsack now I do not propose to press this matter any further at this stage.

§ Lord HACKING
My Lords, I beg leave to withdraw the Amendment.

§ Amendment, by leave, withdrawn.

§ [Amendments Nos. 24 to 26 not moved.]

§ Lord LLOYD of KILGERRAN moved Amendment No. 27: Page 5, line 4, leave out ("either House") and insert ("both Houses").

§ The noble Lord said: My Lords, I beg to move this Amendment, very briefly. It is a probing Amendment. Is it politically or constitutionally expedient that at this time the annulment should be made by passing through both Houses rather than "either House", in regard to the Statutory Instrument introduced by the Secretary of State. I beg to move.

§ The LORD CHANCELLOR
My Lords, in my submission, this Amendment makes an unjustified departure from the normal provisions for parliamentary supervision, requiring both Houses to approve the Secretary of State's order. I have commended the provision in the Bill as a useful one so that in the event of experience showing that an order of that kind should be introduced it could be done pretty quickly. I do submit that to make this a requirement of both Houses having to approve would be an unnecessary obstruction to what might need to be done speedily.

§ Lord LLOYD of KILGERRAN
My Lords, in those circumstances, I beg leave to withdraw the Amendment.

§ Amendment, by leave, withdrawn.

§ The LORD CHANCELLOR moved Amendment No. 28:

§ Page 5, line 4, at end insert— 571 (" (10) In this section "exclusion agreement" has the same meaning as in section (Exclusion agreements affecting rights under sections 1 and 2) above.")

§ The noble and learned Lord said: My Lords, we have dealt with this Amendment already. It has been spoken to and approved. I beg to move.

§ On Question, Amendment agreed to.

§ The LORD CHANCELLOR moved Amendment No. 29: That Clause 3 be divided into 2 clauses the first consisting of subsections (1) to (5A) (Exclusion agreements affecting rights under sections 1 and 2) and the second consisting of subsections (6) to (10) (Exclusion agreements not to apply in certain cases unless entered into after commencement of arbitration).

§ The noble and learned Lord said: My Lords, this Amendment was discussed at the same time. I beg to move.

§ On Question, Amendment agreed to.

§ Lord HACKING had given Notice of his mention to move Amendments Nos. 30 and 31: After Clause 3, to insert the following new clause:

§ Amendment of s. 1(4) of Arbitration Act 1975

§ (" . In subsection 1(4) of the Arbitration Act 1975 after "is a party" there shall be added the words "to the proceedings".")

§ After Clause 3, to insert the following new clause:

§ Amendment of s. 1(4) of Arbitration Act 1975

§ (" . After subsection 1(4) of the Arbitration Act 1975 there shall be added the words "or was a party to the arbitration agreement at the time the agreement was made".")

§ The noble Lord said: My Lords, we have discussed Amendments Nos. 30 and 31 and the noble and learned Lord has been kind enough to say that he will give the matter further consideration. In those circumstances I do not move these two Amendments.

§ [Amendments Nos. 30 and 31 not moved.]

§ Clause 5 [Minor amendments relating to awards and appointment of arbitrators and umpires]:

§ 8.38 p.m.

§ The LORD CHANCELLOR moved Amendment No. 32:

§ Page 5, line 40, at beginning insert— 572 (" (1) In subsection (1) of section 8 of the principal Act (agreements where reference is to two arbitrators deemed to include provision that the arbitrators shall appoint an umpire immediately after their own appointment)—

(a) for the words "shall appoint an umpire immediately there shall be substituted the words" may appoint an umpire at any time"; and
(b) at the end there shall be added the words "and shall do so forthwith if they cannot agree".")

§ The noble and learned Lord said: My Lords, with this Amendment it is convenient to consider Amendment No. 33, which is proposed by my noble friend Lord Lloyd of Kilgerran. Both these Amendments are intended to ensure that an umpire is not appointed where the arbitrators agree on their award. We went over this ground earlier. As was pointed out during the Committee stage, when two arbitrators are appointed by the parties, Section 8(1) of the Arbitration Act 1950 imposes a duty on the arbitrators to appoint an umpire immediately. Discharge of their duty often results in wasted time and fees. Where the arbitrators eventually agree on an award obviously the umpire is never required to act. The Amendment of the noble Lord, Lord Lloyd of Kilgerran, is, I am advised, technically defective and its purpose is achieved by the Government Amendment which would give the arbitrators a discretion to appoint an umpire at any time but would impose the duty on them to do so where they disagreed. I hope the noble Lord, Lord Lloyd of Kilgerran, thinks that that effectively meets his point.

§ Lord LLOYD of KILGERRAN
My Lords, I am very grateful to the noble and learned Lord, the Lord Chancellor, for moving Amendment No. 32, which goes a long way towards meeting the point which I raised during the Committee stage and which, of course, had the support of the noble and learned Lord, Lord Denning. I am much obliged to the noble and learned Lord.

§ On Question, Amendment agreed to.

§ [Amendment No. 33 not moved.]

§ Lord HACKING moved Amendment No. 34.

§ After Clause 3, to insert the following new clause:

§ Amendment of section 25 of the principal Act

§ (" . In section 25 of the principal Act leave out subsections (1) and (2) and insert—

573

§ "(1) Where an arbitrator or an umpire is or are removed by the High Court or where the authority of an arbitrator or umpire is revoked by leave of the High Court, any party to the reference may serve on the other parties to the reference, a written notice to appoint, or, as the case may be, to concur in appointing, an arbitrator or umpire in place of the arbitrator or umpire so removed, and if the appointment is not made within seven clear days after the service of the notice, the High Court or a Judge thereof may, on application by the party who gave the notice, appoint an arbitrator or umpire who shall have the like powers to act within the reference and make an award as had the arbitrator or umpire who has been removed or whose authority has been revoked.".")

§ The noble Lord said: My Lords, I beg to move Amendment No. 34. I can be brief about this matter. In Section 25 of the Arbitration Act 1950, which concerns the replacement powers granted to the court when an arbitrator or umpire is removed or the authorities revoked, there are certain extensive powers, including the power to replace a body of arbitrators by a single arbitrator and the power to order that an arbitration agreement shall cease to have effect. Those are much more extensive powers than the court reserves unto itself in other sections of the Arbitration Act.

§ I draw your Lordships' attention to Section 9 of the Arbitration Act 1950, as amended in Clause 5(3) of the Bill, and to Section 10 of the Arbitration Act 1950. This Amendment simply seeks to remove those more extensive powers of interference (in particular, the power in the court to order that the arbitration agreement shall cease to have effect) and brings the powers of the court directly into line with those two sections to which I have referred your 574 Lordships—namely, Section 9 of the Arbitration Act, as now proposed to be amended under the Bill, and Section 10 of the Arbitration Act 1950 as it now exists. I beg to move.

§ The LORD CHANCELLOR
My Lords, the effect of the Amendment would be to repeal Sections 25(1) and (2) of the Arbitration Act 1950 and insert in their place the new clause that is set out on the Order Paper. As I understand it, the effect would be that the High Court would no longer have power, on the application of a party to the arbitration agreement, to appoint an arbitrator or umpire in place of the person or persons removed by the court, until a party had served on the other parties a written notice to appoint the arbitrator or umpire, and the appointment was not made within seven days.
I am advised that little would be achieved by this Amendment, and in any case it seems logical that where the court has removed an arbitrator or umpire then the court should have an unfettered power, on the application of a party to the arbitration agreement, to appoint a person to act as arbitrator or umpire in place of the person or persons removed by the court. My advice is that the Amendment would achieve no helpful purpose.

§ Lord HACKING
My Lords, the hour is late. I have heard the reply of the noble and learned Lord and I am quite happy to rest upon his reply and to withdraw the Amendment.

§ Amendment, by leave, withdrawn.