HL Deb 18 January 1979 vol 397 cc1198-206

House again in Committee on Amendment No. 9.

4.49 p.m.

Lord HAILSHAM of SAINT MARY-LEBONE

I think we are in the position of having heard the noble Lord, Lord Hacking, move his Amendment, and we are looking forward eagerly to the noble and learned Lord the Lord Chancellor.

The LORD CHANCELLOR

I am sorry the noble and learned Lord has been so frustrated and has been denied the pleasure of putting up with me so repeatedly. I think we are considering Amendments Nos. 9 and 10 together. These Amendments would empower the court, under Clause 1(5), to require an arbitrator or an umpire to give his findings of fact in addition to the reasons for his award. Clause 1(5) empowers the court, on the application of a party, to order the arbitrator or umpire to state the reasons for his award in sufficient detail to enable the court, should an appeal be brought under Clause 1, to consider any question of law arising out of the award. Such reasons would, I should have thought, necessarily include the relevant findings of fact; and, in my view, not only would this Amendment be otiose but, in involving a distinction between facts and reasons—not always easy to draw—could well cause confusion and, I think, add to the burden of arbitrators. Looking at the matter realistically, I think that what is suggested would be potentially more a source of trouble than of enlightenment.

Lord HACKING

I came to your Lordships' House trying to be a source of enlightenment and not of trouble. I should be grateful, however, if the noble and learned Lord, having heard my submissions, would take an opportunity to consider them further; but at this stage I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

(Amendment No. 10 not moved.]

4.51 p.m.

On Question, Whether Clause 1 shall stand part of the Bill?

Lord HAILSHAM of SAINT MARY-LEBONE

I wanted to say only one or two rather short things about Clause 1. The first was to ask the opinion of the noble and learned Lord the Lord Chancellor upon a matter raised on Second Reading. This is the bone which, I hope not fiercely but in the most emollient form, I am raising with my noble and learned friend on the Cross-Benches. At columns 461 and 462 of the report of Second Reading debate on 12th December, my noble and learned friend Lord Diplock—interrupting my peroration, I am sorry to say—said: We are not abolishing the case stated procedure as far as domestic arbitrations are concerned. The jurisdictions to which the noble and learned Lord"— that is, me—" is referring are domestic". My noble and learned friend is such a tremendous expert on this subject, apart from being president of the Institute of Arbitrators, that I was shaken to the core when I received this intervention because it happened not to coincide with my own reading of the Act. I was so intimidated by my noble and learned friend that although I expressed mild surprise at his statement I did not venture to contradict him. But my own reading of the Act continues to be somewhat different from his. My own reading is that section 21 of the principal Act is repealed and that what the Bill is doing is to substitute the new appeal procedure for the old case-stated procedure for domestic arbitrations principally. As this was my reading of it—and is now my reading of it—and as my noble and learned friend is such a tremendous authority, I think the matter must be made clear beyond peradventure. That is the first point.

The second thing is really in slight amplification of what I said in answer to the Amendment of the noble Lord, Lord Lloyd of Kilgerran, the first Amendment on the Marshalled List. I ventured to say to the noble Lord on Second Reading that this had been a debate of grandees. By that I meant that the people who had taken part in it were almost all people concerned with these enormous one-off arbitrations with construction contracts and the contracts which are, broadly speaking, those referred to in Clause 3 which enable the jurisdiction of the courts to be excluded; and the consequence was that the debate had overlooked the fact that by far the largest number of arbitrations in this country are domestic arbitrations. A very large number of them are arbitrations about the quality of goods which are sold and delivered and in which the arbitrator takes a good smell at the sample and at the bulk. He tells whether the sample and the bulk coincide or looks at the quality of the goods and decides whether they are of merchantable quality, or decides some question of expertise in which he really forms an opinion about the question in dispute based on his expert knowledge rather than on any judicial procedure that he may have to subject himself to.

I had the impression that the debate, therefore, had created a false impression. That conclusion has been very largely borne out by the volume of literature that I have received in the last week from various persons who expressed grave misgivings as to the effect of Clause 1, which is the clause under discussion. I think that those misgivings are without justification. I think they have overlooked the fact that all that is happening is that a less formal method of approaching the courts on questions of law is being substituted for the old case-stated procedure under Section 21 of the principal Act and that, if anything, the approach of the courts towards Clause 1 will be a little more reserved than in the past the courts have been towards the old Section 21; because, under the old Section 21, the courts on the whole—and I see that the Master of the Rolls is here and I hope he will forgive my saying this—have been rather freer in the past to order to case-stated in some of the older authorities to which we are all subject and they have been too ready perhaps to order cases stated when the effect has been really only to delay the effect of an award. My own reading of Clause 1, as I have read it and as I have ventured to expound it, is that, on the whole, it gives more power to the arbitrator, and that the courts, under Clause 1, will approach the question of interference with the arbitrator's discretion with greater reserve than in the past.

I should like the opinion of the noble and learned Lord the Lord Chancellor on this, because if I am wrong, obviously, some of the misgivings will remain. If I am right, I think that he could take the opportunity of allaying some of them and reassuring the various persons who I know have bombarded us with literature expressing the gravest doubts about the wisdom of this whole Bill, based, I think, upon a misreading of what Clause 1 is doing.

Lord DIPLOCK

My noble and learned friend Lord Hailsham, as always, is right, in that I spoke loosely in saying that the case-stated procedure was preserved. If I had been more accurate I would have said that the method of appealing to the court on a question of law is preserved although the form in which it is done is somewhat altered. That brings me to the matter in regard to Clause 1 which has caused a good deal of anxiety among arbitrators, anxiety which I think is misplaced. Obviously, it is the desire that, in cases where that is appropriate, reasoned awards should be given. But there are many hundreds, indeed, many thousands, of arbitrations, which I may describe generally as "holiday" arbitrations, where what the arbitrator does is look at the sample from the shipment and say: "These beans are not f.a.q. and I award for the diminution in value, so much."

To require him to give reasons in that sort of arbitration—and they are very common—is simply a waste of time and money. There are other cases where it is most unlikely that anyone would possibly want to have reasons if that is going to cost more money because it is unlikely that there can be any question of law involved. What representations have been made to me, on all hands, I think, by arbitrators who are worried about the possibility that at greater expense they have to give reasoned awards in all sorts of cases is that they would like to be told that before making their awards whether or not (and to what extent) reasons are required. Otherwise, without that warning—and this is the point put to me by perhaps the most experienced commercial arbitrator in London: "If we are not given warning in time but, a couple of months afterwards, we are then asked to give reasons, by that time we have probably put away the papers and dismissed the case from our minds."

The reason why I rose—as it turned out a little too late—on Amendment No. 2, proposed by the noble Lord, Lord Lloyd of Kilgerran, was that, with great respect, I think he had put forward an Amendment which in principle I would approve and commend to the noble and learned Lord the Lord Chancellor for consideration, but he had put it in the wrong place. The Amendment should have gone not to subsection (2) but to subsection (5), so that it would be made a condition precedent to an application to the court to get the arbitrator to state further reasons that notice be given him before the end of the hearing that the type of reasons were wanted that might be necessary if the case went to appeal.

That is how I understood the Amendment which the arbitrators on all hands were urging should be included in the Bill. I should like to commend it particularly to the noble and learned Lord the Lord Chancellor for consideration before the Report stage. I would not, if I may say so without any disrespect, simply be tied to the wording which was, as I think, put in the wrong place in Amendment No. 2. It is a fairly simple Amendment to make it clear that it should be a condition precedent to applying for further reasons that the arbitrator should be told before the end of the hearing that reasons were wanted.

Lord DENNING

May I just endorse what my noble and learned friend has said. It seems to me very important that the arbitrator should know before the end of the hearing that he has to give reasons. If so, he can keep everything in his mind and take notes and give reasons straight away. Otherwise the matter might wait 2 or 3 months before he returns to the case again. The proposal which has just been made by my noble and learned friend is a good improvement to the Bill.

The LORD CHANCELLOR

The noble and learned Lord, Lord Diplock, will now know what a dangerous thing it is to interrupt the noble and learned Lord, Lord Hailsham of Saint Mary-lebone, when he is making his peroration. That bone has now been satisfactorily picked and I hope that the noble and learned Lord's pride now feels fully restored in the face of the earlier disagreement that the noble and learned Lord, Lord Diplock, expressed. He has confessed that in the haste of dealing quickly with the point he may not have put it as accurately as he would have liked.

On the matter of the general proposition that reasons should be expected and be the practice of arbitrators, I think it is a good basic proposition that that should be done. Indeed, in all arbitrations outside this country reasons are always given. At least, I think so. In a case such as that of the beans cited by the noble and learned Lord, Lord Diplock, the statement of fact there so fully embodies all the reasons that one would not expect any requirement that reasons should be given in that case.

I understand the anxiety that has been expressed about this. I am certainly very willing to look at Report stage at the proposition that there should be provision for notice to be given to the arbitrator that he will be asked to give reasons before the conclusion of the arbitration. As the noble and learned Lord, Lord Denning, has said, it is very convenient that he should be forewarned about that and not be asked at a later point in time when the facts would not be so clearly in his mind.

I do not think that, even in respect of small arbitrations, the requirement that reasons be given need be either a delaying factor or oppressive. The practice has now become pretty general in this country that in the various stages of the giving of judgments reasons should also accompany the judgment. I cannot assure the noble and learned Lord more than that. I only hope I am right and it will not prove oppressive in the large number of small arbitrations.

5.5 p.m.

Lord HACKING

May I venture to put a few words to this Committee? My Amendments are directed towards the reform of English arbitration law as our arbitration law affects parties to international contracts who wish to use London as the forum for their arbitration. Therefore I stand today in this Committee with some trepidation, to make some observations on the English law of arbitration, in front of such a distinguished forum, including the noble and learned Lord the Master of the Rolls. I do so to express the concern that there may still be means by which arbitration proceedings can be open to abuse even after the passing of this Bill, as they have been abused under Section 21.

In order to develop this point, I am going to be even braver and take a small thread through English arbitration law in the hope that it will not be snapped before it reaches the end of its journey. It is recognised in both the Bill and the Commercial Court committee Report that the powers of the Courts to intervene in the conduct of arbitration proceedings rest partially on statutory power, which is vested primarily in the 1950 Act, and partly upon inherent powers derived from common law. One can take the two examples from Clause 1(1) of the Bill; namely, the case stated procedure, which has its authority in Section 21 of the 1950 Act, and in the power to set aside an award for errors on its face which rests in common law.

The Arbitration Act was a consolidation Act and made no attempt to state the law of arbitration or was not, in the words of my American colleagues, a "Restatement of the Law of Arbitration". The result is that some sections of the Act give power to the courts both to intervene and to give orders once seized of the matter. I refer for example, to Section 23 of the Act where the court is given both the power to intervene and also the power to give orders after its intervention.

Other sections of the Act just give power to the courts to make orders after they have exercised their inherent jurisdiction under common law to be seized of the matter. I refer, for example, to powers under Section 22 of the 1950 Act. My concern is that the Bill, in setting up this new appeal procedure—and indeed in the reference procedure under Clause 2—is limiting itself only to repealing two out of a number of inherent statutory powers which the court possesses. Hence some parties, if they are so minded (if the Bill becomes law in its present form) will seek to abuse other powers of the courts in order to defeat the main purport of the Bill.

This is fairly strong language so may I analyse the point further. I can best do it by listing such present inherent powers of the courts that I have been able to ascertain. First of all is the setting aside of an award for error on its face. This is dealt with in Clause 1(1). Secondly, there is the power of remitting awards under Section 22 when an arbitrator has admitted a mistake which cannot be rectified under Section 17 of the Act. That is more than a simple clerical error arising out of an accidental slip, for example, if an arbitrator misread an important document or forgot that document's existence before making his award. It should be noted that an arbitrator is functus officio once he has made his award. Therefore, he himself cannot exercise any power to put matters right. For that reason, the court has to exercise its inherent jurisdiction.

Thirdly to exercise jurisdiction when there has been a discovery of fresh evidence—again the arbitrator acts as functus officio once the matter has passed from him in giving his award. Fourthly, when an arbitrator has acted without, or in excess of, authority—the court has an inherent Jurisdiction to intervene. Fifthly, as a kind of combination of common law and statutory power, there is the misconduct provision, which was originally under common law and now falls under statute under Section 23. It was with a wry smile that I read the editor of Russell's comment that Section 23 is a declaratory clause although somewhat in disguise. Specifically, the concern is that the misconduct provision—and I refer to misconduct in the conduct of proceedings rather than misconduct on the part of the arbitrator himself—and possibly Section 22, could be used as a means of avoiding the new provisions and forcing arbitration proceedings back again into the court, or, more importantly—this is where my concern comes to bear—it could be thought to be capable of so doing.

There would still be parties who could find benefit in abusing the system. It is no use shutting the front door, if I may use a trite example, if the back door is still left open. I merely ask this question—we shall not be able to consider it further here but I hope that my observations will be read: would it not be appropriate to bring all the inherent powers of the courts under this Act and to amend Section 23 for all arbitrations (in the terms of my Amendment which is to be taken later!) so that it cannot be used as a vehicle for abuse?

Baroness DAVID

We now have clearance for the Statement and I beg to move that the House do now resume.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.