HL Deb 02 April 1996 vol 571 cc151-9

3.36 p.m.

Lord Fraser of Carmyllie

My Lords, I have it in command from Her Majesty the Queen and His Royal Highness the Prince of Wales to acquaint the House that they, having been informed of the purport of the Arbitration Bill, have consented to place their prerogatives and interests, so far as they are affected by the Bill, at the disposal of Parliament, for the purposes of the Bill.

Bill read a third time.

Clause 85 [Modification of Part 1 in relation to domestic arbitration agreement]:

Lord Fraser of Carmyllie moved Amendment No. 1: Page 34, line 1, leave out from ("(2)") to end of line 2 and insert (""arbitration agreement" and "seat of the arbitration" have the same meaning as in Part I (see sections 3, 5(1) and 6)."). The noble and learned Lord said: My Lords, in moving Amendment No. 1, I shall speak also to Amendments Nos. 11 and 12. They are small, tidying-up amendments. The purpose of Clause 101 is to bring into Part II of the Bill the definition of certain terms which are used in Part I. It is largely redundant as the linkage is either already made in the text of Part II or a separate definition is provided. The clause can be omitted but it is necessary to make the linkage between Parts I and II for those terms which are not already covered. That is achieved by the amendments. I beg to move.

On Question, amendment agreed to.

Clause 88 [Power to repeal or amend sections 85 to 87]:

Lord Fraser of Carmyllie moved Amendment No. 2: Page 34, line 33, leave out subsection (2).

The noble and learned Lord said: In moving Amendment No. 2, I shall speak to the remaining amendments on the Marshalled List. I regret that having done so, I must take a moment or two longer to explain what we are doing. I indicated on Report that I would be bringing forward at Third Reading an amendment to Clauses 89 to 93, which provide for consumer arbitration agreements. The revised text is covered by Amendments Nos. 3, 4 and 5. Amendment No. 2 is paving in nature and the other amendments are consequential.

We decided at a late stage in the preparation of the Bill that it would benefit from the inclusion of provisions relating to consumer arbitration agreements. The Bill is more comprehensive as a result, and I have no doubt that we made the right decision. On reflection though, and in the light particularly of the comments made by my noble friend Lord Hacking, I believe that there is room for improvement in the way that the issue is treated in the Bill.

I wish to make it clear from the outset that, in proposing these changes, the protection which consumers enjoy under current legislation on consumer arbitration agreements is not intended to be watered down. Indeed, the reverse is the case; the rights of the consumer are strengthened in certain respects.

Noble Lords will be aware that the Bill as drafted restates for England and Wales and Northern Ireland the provisions of the Consumer Arbitration Agreements Act 1988. On reflection I now believe that, with two limited changes, it would be possible to rely on the Unfair Terms in Consumer Contracts Regulations 1994. That implements EC Council Directive 93/13 EEC on unfair terms in consumer contracts. Paragraph 1(q) of Schedule 3 to the regulations refers specifically to: excluding…the consumer's right to take legal action…by requiring [him] to take disputes exclusively to arbitration".

There are several advantages in that approach. It will remove the link with the definition of domestic arbitration agreement in Clause 85 of the Bill. The effect of that definition is that consumers in other member states do not have the same protection as UK nationals and, as my noble friend Lord Hacking has commented, this distinction raises questions in terms of EC law. Whatever the position on that, the difference is in any case undesirable. The Unfair Terms in Consumer Contracts Regulations, based as they are on a European Community Directive, accord the same rights to consumers throughout the European Economic Area.

Secondly, it remedies the unsatisfactory situation where we have two pieces of overlapping legislation—the Unfair Terms in Consumer Contracts Regulations 1994 and the Consumer Arbitration Agreements Act 1988. In the treatment of arbitration the two pieces of legislation overlap but are at the same time marginally but significantly different in certain key respects. This could be confusing for consumers and their advisers. Consumers need a clear and simple statement of their rights which they can access with the minimum of difficulty. The amendments before your Lordships focus on the 1994 regulations. At the same time we have strengthened the rights of consumers by incorporating the best features of the 1988 Act, which can therefore be repealed. This approach enables us to make a contribution to achieving clarity and simplicity in legislation which is an important feature of our work on deregulation. At the same time we are shortening the Bill by two clauses. I am pleased to be able to deal with this example of what I believe is called "double-banking".

Your Lordships will see that we intend to make all consumer arbitration agreements non-binding where the claim does not exceed a certain level. In the 1994 regulations terms in consumer arbitration agreements have to be shown to be unfair before the consumer is not bound by them. We have decided not to include a specific limit on the face of the Bill in the interests of flexibility. It will be seen that we have included an order-making power for this purpose. The intention for England and Wales and Northern Ireland is to follow but not to be bound by the limits set for small claims court based arbitration. Claims above the level set will of course be covered by the provisions of the 1994 regulations, so that if shown to be unfair will not be binding. I have also widened the definition of "consumer" slightly to keep it in line with the 1988 Act.

Noble Lords will wish to be aware that nothing in these provisions affects statutory arrangements for small claims arbitration; for example, in relation to England and Wales, the rules under Section 64 of the County Courts Act 1984. The effect of avoiding a term requiring the consumer to go to arbitration may be that his claim will be subject to such procedures but, although they have the same name, they are of course different in a number of respects. It is the case also of course that statutory arrangements incorporate certain safeguards.

I propose that these provisions of the Bill should apply to Scotland as well as to England and Wales and Northern Ireland. Your Lordships will be aware that Scotland has its own arbitration law and the rest of the Bill applies only to England and Wales and Northern Ireland. However, the Unfair Terms in Consumer Contracts Regulations apply throughout the United Kingdom and there is distinct merit in having common provisions for consumer arbitration agreements in this Bill. Otherwise there might be a risk of re-introducing confusion into an otherwise clear and straightforward system.

I apologise for taking a few moments to spell that out, but it is a complicated area and I believe that I should give an explanation of what the changes entail. I beg to move.

3.45 p.m.

Lord Hacking

My Lords, I thank the Minister for moving these amendments on two grounds. First, he has shortened the Arbitration Bill by two clauses. It is regrettable that he could not shorten it further but we are very grateful to him for that. Secondly, I am grateful to the Minister for meeting some of my anxieties in relation to the issue of domestic and international arbitration. My noble friend knows—and I shall return to it when we debate the Motion that the Bill do now pass—that I wish him to go further and to abolish altogether the distinction between domestic and international arbitration.

Lord Peston

My Lords, before we accept the amendments, I wish to make certain that nothing in these provisions in any way reduces the rights or position of the consumer. I believe that he said that, in fact, they strengthen the position. In case I was not listening sufficiently carefully, will the Minister confirm that not only is it the intention to do that, but that in reality, that is what will happen?

Lord Fraser of Carmyllie

My Lords, indeed, the noble Lord did hear me correctly. We were concerned that nothing should be watered down and our conclusion is that we have strengthened the rights of the consumer in certain respects.

On Question amendment agreed to.

Lord Fraser of Carmyllie moved Amendment No. 3: After Clause 88, insert the following new clause—

APPLICATION OF UNFAIR TERMS REGULATIONS TO CONSUMER ARBITRATION

AGREEMENTS

(".—(1) The following sections extend the application of the Unfair Terms in Consumer Contracts Regulations 1994 in relation to a term which constitutes an arbitration agreement.

For this purpose "arbitration agreement" means an agreement to submit to arbitration present or future disputes or differences (whether or not contractual).

(2) In those sections "the Regulations" means those regulations and includes any regulations amending or replacing those regulations.

(3) Those sections apply whatever the law applicable to the arbitration agreement.").

On Question, amendment agreed to.

Lord Fraser of Carmyllie moved Amendment No. 4: After Clause 88, insert the following new clause—

REGULATIONS APPLY WHERE CONSUMER IS A LEGAL PERSON

(". The Regulations apply where the consumer is a legal person as they apply where the consumer is a natural person.").

On Question, amendment agreed to.

Lord Fraser of Carmyllie moved Amendment No. 5: After Clause 88, insert the following new clause—

ARBITRATION AGREEMENT UNFAIR WHERE MODEST AMOUNT SOUGHT

(".—(1) A term which constitutes an arbitration agreement is unfair for the purposes of the Regulations so far as it relates to a claim for a pecuniary remedy which does not exceed the amount specified by order for the purposes of this section.

(2) Orders under this section may make different provision for different cases and for different purposes.

(3) The power to make orders under this section is exercisable—

  1. (a) for England and Wales, by the Secretary of State with the concurrence of the Lord Chancellor,
  2. (b) for Scotland, by the Secretary of State with the concurrence of the Lord Advocate, and
    3. 155
  3. (c) for Northern Ireland, by the Department of Economic Development for Northern Ireland with the concurrence of the Lord Chancellor.

(4) Any such order for England and Wales or Scotland shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.

(5) Any such order for Northern Ireland shall be a statutory rule for the purposes of the Statutory Rules (Northern Ireland) Order 1979 and shall be subject to negative resolution, within the meaning of section 41(6) of the Interpretation Act (Northern Ireland) 1954.").

On Question, amendment agreed to.

Clause 89 [Consumer arbitration agreements]:

Lord Fraser of Carmyllie moved Amendment No. 6: Leave out Clause 89.

On Question, amendment agreed to.

Clause 90 [Restriction on enforcement of certain consumer arbitration agreements]:

Lord Fraser of Carmyllie moved Amendment No. 7: Leave out Clause 90.

On Question, amendment agreed to.

Clause 91 [Exclusions from section 90]:

Lord Fraser of Carmyllie moved Amendment No. 8: Leave out Clause 91.

On Question, amendment agreed to.

Clause 92 [Causes of action to which restriction applies]:

Lord Fraser of Carmyllie moved Amendment No. 9: Leave out Clause 92.

On Question, amendment agreed to.

Clause 93 [Power to exclude cases where no detriment to consumer]:

Lord Fraser of Carmyllie moved Amendment No. 10: Leave out Clause 93.

On Question, amendment agreed to.

Clause 98 [Specific adaptations of provisions in relation to statutory arbitrations]:

Lord Fraser of Carmyllie moved Amendment No. 11: Page 38, line 21, after ("dispute") insert ("or difference").

On Question, amendment agreed to.

Clause 101 [Interpretation]:

Lord Fraser of Carmyllie moved Amendment No. 12: Leave out Clause 101.

On Question, amendment agreed to.

Clause 110 [Extent]:

Lord Fraser of Carmyllie moved Amendment No. 13: Page 42, line 2, at beginning insert ("Sections (Application of unfair terms regulations to consumer arbitration agreements), (Regulations apply where consumer is a legal person) and (Arbitration agreement unfair where modest amount sought) (consumer arbitration agreements) extend to Scotland and").

On Question, amendment agreed to.

Schedule 4 [Repeals]:

Lord Fraser of Carmyllie moved Amendment No. 14: Page 59, column 3, leave out lines 22 to 25 and insert ("The whole Act.").

On Question, amendment agreed to.

Lord Fraser of Carmyllie

My Lords, I beg to move that the Bill do now pass. At Second Reading the noble Lord, Lord Lester, indicated that he expected the Bill would travel through the legislative process: speedily, free of friction, moving on oiled castors".—[Official Report, 18/1/96; col. 764.] I am glad to say that that has proved to be the case, at least up until this point, and I would hope that its smooth passage continues.

That we have made such rapid and problem-free progress is due in no small measure to the support which noble Lords have given to the Bill at all stages. I am most grateful for that. I am particularly grateful to those noble Lords who participated in the Committee stage off the Floor of your Lordships' House and also to those who took the trouble at various stages to write to me on particular issues. As this was a technical, legal matter, it was of immense value to have advance warning of a number of the suggestions.

The noble Lord, Lord Peston, indicated on Second Reading that the debate was dominated by lawyers. He may feel that that pattern established on Second Reading continued. But I hope that he does not feel that his own contribution has gone unrecognised. I am certainly very grateful to him for the welcome support which he has given to the Bill. He did that very graciously and I am not surprised that to some extent, he was rather over-awed by the contributions of a number of very distinguished lawyers, including several practising arbitrators.

The fact that the Bill has been scrutinised carefully by a number of noble and learned Lords who bring to bear on the issues a wealth of experience of commercial litigation and arbitration gives me considerable confidence that we have got it right. Indeed, I have succeeded in doing a double this year. Not only did I secure the support of a number of noble and learned Lords on the issue of public interest immunity some weeks ago, but on this occasion also I have secured their support. That is of great value.

We have made a number of amendments to the Bill. I should like to stress the immense contribution made to the Bill by Lord Justice Saville. In thanking him, I should stress that none of the amendments that we have made has not met with his agreement and none represents major changes of policy. Most amendments were of a drafting nature and designed to improve the clarity of the Bill.

On Second Reading, a number of your Lordships praised the Bill for its clarity. Indeed, we took the utmost care in drafting it to ensure that it would be readily comprehensible to both business and other users. I trust that that will be one of its selling points. However, with such a complex and technical subject matter, it would be surprising if there were no ways in which the text could have been refined or improved.

Finally, I believe the Bill is in fine shape. I am convinced it will do much to further the cause of arbitration in this country. Those who find themselves in the unfortunate position of needing to resolve a dispute with another party want it sorted out with a minimum of fuss and expense. At the same time, they look for fairness and finality.

The Bill provides a comprehensive framework for settling disputes and meeting those criteria. I am sure it will enhance the competitiveness of both the arbitration community, particularly by helping to attract foreign arbitrations here, and the business community at large. I invite your Lordships' House to despatch the Bill, with oiled castors attached, for consideration in another place.

Moved, That the Bill do now pass.—(Lord Fraser of Carmyllie.)

Lord Peston

My Lords, I never use anybody else's clichés, so I would like to see the Bill simply despatched with alacrity. It is a Bill of which one can be extremely supportive, and I would like to echo the remarks of the Minister, especially his remarks about Lord Justice Saville, who did what I imagine was an intellectually back breaking job in preparing the groundwork for this Bill.

My difficulty was that I did not understand anything about the subject when I started and, in so far as I believe I now do understand the subject of arbitration, it is rather late to decide that we ought to start all over again so that I can make a more positive contribution. However, in due course, having worked at it, I found the subject absolutely fascinating, and I hope that I shall find some way to use my newly acquired knowledge in your Lordships' House on some other occasion, particularly if the noble Lord, Lord Hacking, finds ways of returning us to these matters.

Although the overwhelming interest in the matter rests with the lawyers—and an extraordinarily distinguished group of lawyers joined us on these matters—the reason for the Minister's and my involvement is that we are discussing real business; we are discussing things that are economically valuable to our country. There is a lot of money to be earned by what is called the arbitration community, and the whole point of having this legislation and the reason why we are equally supportive of it is to enable that community, as the Minister said, to compete effectively and efficiently and to bring the business to this country. I, for one, want very much to see this legislation on the statute book and see no reason to delay the matter any further. I hope that the Bill does now pass.

Lord Hacking

My Lords, could I begin by expressing personal pleasure that the noble Lord, Lord Peston, has intervened in this debate. The noble Lord spoke at Second Reading; he made a very short intervention in Committee and, after his short intervention, was corrected by the noble and learned Lord, Lord Wilberforce. The noble Lord then fell into silence until now, the Third Reading. Therefore, I am very glad that he has come back, and I am glad that he has come back with the confidence of knowing something about the subject.

I would like to thank my noble and learned friend the Minister for accommodating my concern over security for costs. I was very grateful that he came forward with his own amendment on that issue. I express my gratitude over that. However, I express sorrow at not being able to persuade the Minister on the issue of costs, and express even greater sorrow—I do not see the noble Lord, Lord Byron—that I did not get support from my fellow solicitor of the Supreme Court, the noble Lord, Lord Byron, on that issue. My noble and learned friend knows of my continuing concern over this distinction between domestic and international arbitration. I will not repeat the arguments that I put to your Lordships at Second Reading and at Committee and Report, but I would ask my noble and learned friend to continue to note those arguments, particularly the argument that I put forward at Report, where I sought to show to your Lordships that nobody would be disadvantaged in the domestic market by removing altogether this distinction between domestic and international arbitration.

Therefore, I live in hope—although I regret that it was not done as a primary matter as this Bill was passing through your Lordships' House—that my noble and learned friend will revisit the subject and will do so by introducing an appropriate statutory order to remove that distinction altogether. My noble and learned friend has indicated that he hopes to do that by the end of this year. May he take polite notice from me that I intend to put down a Starred Question before the Summer Recess to find out how his consultation process is going on that issue, and I intend again, if he may take notice of this, to put down another Starred Question after the Summer Recess to find out again how his consultation process is going.

It therefore falls upon me to join with my noble and learned friend and, indeed, with the noble Lord, Lord Peston, in paying tribute to the departmental advisory committee on arbitration law to Lord Justice Saville, who again has honoured us with his presence in the Chamber this afternoon, and also, as I am sure Lord Justice Saville would wish me to do, to his two successors, the noble and learned Lords, Lord Mustill and Lord Steyn, for their contribution to the work of that committee.

It has been a long journey. I do not know if my noble friend Lord Cullen of Ashbourne remembers—he is sitting right in front of me at the moment—the debate in which he participated in this House in May 1978, when he gave a good thrust forward for arbitration law reform. I do not know if the noble and learned Lord, Lord Hailsham, remembers participating in that debate in 1978 and, indeed, I do not know if the noble and learned Lord, Lord Hailsham, remembers that the first book that he ever wrote was on the subject of arbitration. The book, I believe, has now gone out of print, but perhaps the noble and learned Lord could be persuaded to revisit that subject. Now, some 18 years after the debate of 1978, your Lordships have reached the point of passing the Bill. Therefore, I wish it all speed and happiness through the other place and speed and happiness onto the statute book.

Lord Donaldson of Lymington

My Lords, I should like to join in the general congratulations with great confidence, without the slightest authority, on behalf of the judicial members and ex-judicial members of this House who joined in the various stages of this Bill, and congratulate the Government on achieving this stage in the proceedings.

Lord Justice Saville, undoubtedly, has been a driving force—not the only one, but a major driving force—and I join in the tributes to him. I can assure the Minister that I shall not be putting down any Starred Questions. I am not even sure that I know how to do it.

My final word is that I believe the Bill will have a wider effect than its mere terms because of the way it has been drafted. It is beautifully drafted in terms of clarity. I may be wrong, but I believe it is the first time we have ever seen an Act or Bill with parenthetical references by way of example. I look at Clause 40: "(see Sections 32 and 45)". I regard that as enormously valuable and I hope that it will be regarded as a precedent for other Bills that come before this House. May I once again congratulate all concerned and wish the Bill well.

On Question, Bill passed, and sent to the Commons.