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Lord Fraser of Carmyllie moved Amendment No. 8:

Page 29, line 6, after ("liable") insert (", by reason of having appointed or nominated him,").

The noble and learned Lord said: My Lords, noble Lords will be aware that Clause 74 introduces limited immunity for arbitral institutions. The purpose of subsection (2) is to prevent litigious parties who are prevented from suing an abitrator by virtue of the immunity conferred by Clause 29 from turning to the institution which appointed or nominated him.

As drafted, the clause could be interpreted to have a rather wider effect than we envisaged. The effect of the amendment is to limit the scope of the clause. We had in mind that the institution should be protected from the consequences of anything done or not done by the arbitrator simply because it had appointed or nominated him. The clause is not intended to protect the institution in a range of other circumstances. I beg to move.

On Question, amendment agreed to.

Clause 80 [Notice and other requirements in connection with legal proceedings]:

Lord Fraser of Carmyllie moved Amendment No. 9:

Page 31, line 23, after ("periods,") insert ("the extending or abridging of periods,").

The noble and learned Lord said: My Lords, the purpose of this clause is to tie together the rules of court and those provisions of the Bill which refer to legal proceedings. Certain provisions of the Bill require an application or appeal to be made to the court within a specified time. Subsection (5) makes it clear that the rules of court in relation to the reckoning of periods and the consequences of not taking a step within the period prescribed by the rules apply in such cases. The subsection also needs to cover rules of court on the extension and abridgement of periods of time. I beg to move.

On Question, amendment agreed to.

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Clause 81 [Saving for certain matters governed by common law]:

Lord Fraser of Carmyllie moved Amendment No. 10:

Page 31, line 38, at end insert (", in particular, any rule of law as to--
(a) matters which are not capable of settlement by arbitration;
(b) the effect of an oral arbitration agreement; or
(c) the refusal of recognition or enforcement of an arbitral award on grounds of public policy.").

The noble and learned Lord said: My Lords, in speaking to Amendment No. 10, I wish to speak also to Amendment No. 11. These are simple amendments which are designed to change the particular rules of law which it has been decided are worthy of mention. I beg to move.

On Question, amendment agreed to.

Lord Fraser of Carmyllie moved Amendment No. 11:

Page 31, line 39, leave out subsection (2).

On Question, amendment agreed to.

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

Lord Hacking moved Amendment No. 12:

Leave out Clause 85.

The noble Lord said: My Lords, in addressing your Lordships on Amendment No. 12, I wish also to address Amendments Nos. 13, 14 and 15. As will be recalled from Committee, all four amendments concern the same issue. It can be simply stated: should there be a single arbitration law which is equally applicable to domestic and international arbitrations or, as now, should there be a domestic arbitration law and a separate international arbitration law? It arises in three respects: first upon the court's power to stay proceedings; secondly upon the parties' rights to go to the Court on a preliminary point of law; and thirdly upon the parties' rights to go to the Court on a question of law.

The Minister will remember the arguments that I have been advancing while the Bill has been in the House and the words which I addressed to your Lordships at Second Reading, and in Committee. The starting position is that there is no logic in having two different forms of arbitration law. I cited to my noble and learned friend the situation where an international English-based construction company is in an arbitral dispute with another English-based international construction company. In that situation the two companies in arbitration would be covered by domestic arbitration law. But the English construction industry is successful and is involved in many contracts throughout Europe and the world. Therefore, the scenario can easily arise with an arbitration clause between an English-based construction company and an overseas-based construction company. That complexity can be furthered when there are two English-based international construction companies and one foreign one. There is no logic why there should be two forms of arbitration law in such disputes.

I am sorry that the noble Lord, Lord Lester, is not here since there is also the difficulty that in the Bill we may be contravening European law. We are not giving

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the same rights to nationals of other member states as we give to nationals of our own member state in the European Union. As noble Lords will recall, I previously advanced the argument that the matter should be addressed while the Bill is passing through the Houses of Parliament. Indeed it should be addressed while the Bill is before your Lordships.

The use of statutory instruments does not have a happy history in arbitration matters or other statutes. In reality, what happens is that, when a matter is left for a statutory instrument to be placed before Parliament at a later stage, it goes to the bottom drawer of the arbitration reform desk or the commercial consumers desk in one of the departments of state and is laid aside. I remind noble Lords of what happened last time in an arbitration matter where a right of statutory instrument was vested in the Minister to abolish the special category cases. After a few years it became plain that there was no justification for keeping the special category disputes. There was an intention to introduce a statutory instrument under the 1979 Act, but nothing was done. Seventeen years have gone by without the statutory instrument ever being introduced. I remember the Bill being in your Lordships' House in 1979, when the specific intention was to review the position within three years. But nothing was done for 17 years. That is why I say that the use of the statutory instrument is not satisfactory. In any event, it is a matter of primary law and should be dealt with by your Lordships, who should decide whether there should be a separate regime for domestic and international arbitrations.

I wish to go further and issue a specific invitation to my noble and learned friend. Will he be kind enough to agree to enter into a consultation period between now and Third Reading? I am very sorry that the noble and learned Lord, Lord Mustill, is not in his place and cannot speak on the results of his inquiries. It so happens that on the very night of the Committee stage the noble and learned Lord, Lord Mustill, in his much more revered position as President of the Chartered Institute of Arbitrators (an organisation about which I believe the noble Lord, Lord Peston, now knows) and I went as guests to a dinner there. Both of us made inquiries as to whether there was any opposition to having our arbitration law applying equally between domestic and international arbitrations. Certainly my inquiries, and I understand his also, produced the result that there was no opposition.

As my noble and learned friend will recall, this particular issue did not go out to consultation under Lord Justice Saville's committee. However, the committee applied its mind to the matter in Chapter 3 of its report in February this year. The committee found no justification. It examined the particular arguments advanced in favour of keeping the distinction and found them not to be well founded. I ask my noble and learned friend to take that matter also into account.

My noble and learned friend may be concerned about the impact of my amendment on current law, in so far as it might deprive parties of rights that they now have, and will not have if the Bill becomes law with the abolition of the distinction between domestic and arbitration law. Perhaps he will be kind enough to

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examine the facts. The facts concerning domestic arbitration are that, currently, under our law it is not possible to contract out of the three procedures I identified to the House. There is no valid domestic arbitration agreement that has the contracting out provisions. Under current law those involved in domestic arbitration are not entitled to contract out. As for depriving parties in the future, the same logic applies. The process in which the power of the courts is removed (and I shall deal in a moment with the stay of arbitration) under preliminary points of law and questions of law is a positive process in which the parties have to agree to contract out. Therefore, if that right does not already exist in agreements, no rights are being taken away from anybody.

I therefore ask the Minister to look at the logic of the position, and at the logic of my proposal that he should carry out a consultation process between now and Third Reading. I suggest that that allows plenty of time. No large group of persons would be at a disadvantage if this measure were to be brought forward. For all the reasons advanced, I venture to think that he would find no substantive opposition to this proposal. He would therefore be able at Third Reading to advise the House, following a consultation period, that the distinction is no longer sensible. In doing so, he would give our arbitration law the appearance of good sense, and make it marketable to the international community. That is of great importance. I beg to move.

3.45 p.m.

Lord Fraser of Carmyllie: My Lords, some noble Lords may recollect that I gave an undertaking in Committee to reflect further on the question as to whether we should remove the special provisions on domestic arbitrations from the Bill now, or wait until we are able to consult those who would be affected.

I accept that my noble friend's arguments are finely balanced. However, taking all factors into account, I am still of the view that caution is necessary and we should wait to carry out a consultation exercise. Both noble and learned Lords, Lord Mustill and Lord Donaldson, urged caution when we last debated the issue. Notwithstanding what my noble friend said about informal consultation at a dinner which I did not attend, I believe that they are right to urge such caution.

I am concerned particularly about the impact that a move to exclude the special provisions for domestic arbitration might have on small firms. I believe it right that we should give them an opportunity to put forward their views. My noble friend should be aware that if we move now, without warning, we should deprive domestic parties of the protection they now enjoy whenever a dispute arises following the enactment of this Bill regardless of when the arbitration agreement was made. That is the effect of Clause 84. I have reservations about doing that as we could well lay ourselves open to criticism from the users of arbitration.

I note also the comments that my noble friend made in Committee and repeated this afternoon about the length of time it has taken to remove the special provisions for arbitration agreements in the insurance

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and other industries. I assure him that we do not intend to follow this model for the special provisions for domestic arbitration agreements.

We intend to act swiftly to consult those with an interest once the order-making power in Clause 88 is available. I regret to say that I cannot properly agree to my noble friend's suggestion that the consultation period should be limited to the period that will elapse between this Report stage and Third Reading, which may be as little as 10 days. We have to allow for a greater period than that.

Although I am unable to agree with the proposal that he put forward, my noble friend may find it helpful to know that I intend to remove the distinction so far as consumer arbitration agreements are concerned. Noble Lords will be aware that the definition of "domestic" set out in Clause 85 is common to both consumer and other arbitration agreements. The House will know that, unlike small businesses, consumers already enjoy a measure of protection when they enter into arbitration agreements. For that reason I am able to act now to remove the distinction. In doing so, we shall not reduce the measure of protection that consumers enjoy at the moment.

What I have in mind is to amend the provisions of Clauses 89 to 93, both to decouple them from the definition of "domestic" in Clause 85 and to make them more user friendly. In particular, my aim is to remove the overlap between the clauses as drafted and the unfair terms in consumer contracts regulations. I regret that I have not been able to bring forward those amendments for this stage. However, I will be bringing forward an amendment within this rather narrower ambit at Third Reading. With that explanation, I hope my noble friend will feel he can withdraw his amendment.

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