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Lord Wedderburn of Charlton moved Amendment No. 3:

Page 6, line 12, at end insert--
("( ) Save as provided by an order made under this section, nothing in this section shall affect the competence of a court to entertain proceedings for judicial review or to refer a question to the European Court of Justice.").

The noble Lord said: Perhaps contrary to the view that some of your Lordships have gathered, this is an important Bill which is coming to be seen as important by employers and trade unions. Our amendment is an attempt to face what is an inevitable problem if one creates two different procedures and avenues in law through which one can approach legal remedies for the same matter, as we saw in Committee. The important part of the Bill is that which sets up an ACAS scheme under an order and under the Act whereby those employees who opt for arbitration in agreement with the employer accept the arbitration award by the ACAS

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arbitrator as binding in place of their rights in industrial tribunals--or employment tribunals, as I shall have to call them after the Bill is passed.

Our amendment puts into clear words the remedy which has sometimes sub silentio been present in debates about the employee who goes to the arbitrator and finds that there is something wrong with the arbitration. I include fundamental mistakes of law, the mistakes which go to a perverse view of the facts in the debate that has been going on for a long time.

Looking at our Committee stage, in so far as one can understand discussion of the amendments from the idiosyncratic groupings, it is clear that it is in line with the debate which has been going on since 1994, the year of the Green Paper of a previous government on the reform of aspects of industrial tribunals, including the parallel course through arbitration instead of opting for industrial tribunals.

I mention the debate because most of it has not been in this House or the other place but in circles such as academic groups which have what might be called an alternative dispute resolution movement in various areas of the law. Many interesting publications have emerged from them. But in this area the department had a particular exchange with two of the leaders in the field--Professors Clark and Lewis of Southampton University--who strongly supported the view taken by ACAS that there should be no appeal on points of law from the arbitrator's award. The rule that there should be no appeal on points of law in the arbitrator's award does not appear in the Bill. It is somewhat strange, because it appears only in an informal memorandum of ACAS. It may be said that the employee accepts that when he agrees to go to arbitration instead of a tribunal. However, it would be useful to have the precise juridical character of that rule spelt out which, reading through the Committee stage, I was surprised to find had not been done.

Professors Lewis and Clark, in the course of arguing with the department that there should be no appeal on points of law, made a most interesting general point. They were asked what they thought should be done with perverse decisions by arbitrators. Of course, we all know that that does not imply any wrongdoing. A perverse decision is one where the arbitrator has got it so wrong as to meet one of Lord Diplock's three areas, to which I shall turn in a moment. But something should be done about it.

It was said, of course, as regards perverse decisions that they could be challenged through the process of judicial review. My noble friend Lady Turner and I took the view that judicial review, in the normal way, was not what we recommended. In your Lordships' Committee, we recommended that the matter should go, on a parallel type of procedure, to the Employment Appeal Tribunal. As I understand the record, that was rejected. It was rejected both by my noble and learned friend Lord Archer and by the Government. Obviously, we accept that. But once that was done the underlying text appeared to be that judicial review would apply subject, perhaps, to some modifications required by this particular subject matter.

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Noble Lords will see that we have included in the amendment a power to make amendment by order under the section and we repeat those words. In our view, it is important to state on the face of the Bill the centrality of judicial review as a remedy, where the arbitrator gets it wrong to that degree.

I shall put on record the three areas which Lord Diplock defined in the Council of Civil Service Unions case in 1984, which he called the three areas where judicial review would lie: illegality, irrationality and procedural impropriety. The decision maker must understand correctly the law that regulates his decision-making power and give effect to it and if he does not, that is where the illegality may arise. I shall return to that point in a few moments.

The second point, the type of unreasonableness which is sometimes referred to as Wednesbury unreasonableness in the light of the famous Court of Appeal decision of that name. In Committee we were fortunate enough to find that my noble and learned friend not only knows about Wednesbury but he comes from Wednesbury. We have deep authority for every word he said. I do not disagree with his account and I think that he was agreeing with us that those were the areas of judicial review in modern law.

At that point in this debate, which has gone on now for some three to four years, one must surely say that it would be really rather negligent to leave the record blank and to have the remedy inserted only impliedly. We want to say quite clearly that judicial review is the central remedy. We have included also in our amendment any problem relating to references to the European Court of Justice. Obviously, our law could not create obstacles to such references and so that is really a less interesting part of the amendment.

But what is it that ACAS wants to put into the law? We have heard very little about that. We know that ACAS wants a memorandum, semi-confidential I believe, saying that there should be no appeal on the law. Does that include all the areas of illegality referred to in Lord Diplock's speech in 1984?

A worker who talks to his employer or manager and they agree, "All right, we won't go to the tribunal as that process is rather slow in this area. We will go to an arbitrator and we agree that his decision be the end of the matter". The worker is therefore putting into the hands of the arbitrator a certain area of discretion; but he is not putting into the hands of the arbitrator an unlimited discretion. Any limitations upon the arbitrator's discretion which is narrower than the rules on judicial review would be a most extraordinary type of insertion into a Bill concerned with industrial relations.

There is absolutely no reason at all why working people should be subjected to narrow limits on their rights in this matter with regard to the arbitrators, narrower than the rights that they would have if they went to the tribunals. I am not sure what view my noble and learned friend will take but if the Government try to narrow the rights on "appeal"--and I use the word "appeal" in quotation marks because judicial review is not technically an appeal--on which a further view can be taken of the arbitrator's award, then the scheme is dead in the water before it starts. We shall hear from

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my noble friends who have experience in that area but I am sure they will agree that no trade union official will agree to take his member to the arbitrator rather than to the tribunal, albeit I accept that in most parts of the country it may be that the arbitration procedure is quicker than taking the matter to a tribunal.

Lord Archer of Sandwell: My Lords, has it occurred to my noble friend that working people and trade unions may actually welcome limiting rights of appeal because they see the advantage of finality?

Lord Wedderburn of Charlton: My Lords, my noble and learned friend must take his evidence where he finds it. My evidence so far indicates that for a very long time most people have been used to having rights of appeal from the tribunals to the EAT and, perhaps he thinks unfortunately, to the Court of Appeal and even to the House of Lords. I am not in favour of appeals for appeals' sake. However, the character of our employment law has within it, and has had within it since 1971, the notion that if you think that the first-tier adjudicator has got it wrong at least you have a right to go somewhere to have it set right. As I understand it, my noble and learned friend is saying that however wrong the arbitrator may be, there is no appeal at all.

My noble and learned friend will have the opportunity to make his case and it may be that that is not what he is saying. But I repeat the central point which must not be lost. If by amendment or by order this system of parallel justice--tribunals and arbitrators--is to cut off appeal at the arbitrator level in such a way that it is in a major sense more limited than the tribunals, then the number of people who use it will be very small and, as word goes round, even fewer people will use it year by year.

That is why my noble friend and I have tabled the amendment. We do that not because we are against the arbitration system but because we believe that it is an important and useful helpmate, as it were, of the tribunals. I have said already that I accept that in some areas tribunals are slow and have a long waiting list; but there cannot be an arbitration system which cuts down rights when there is a parallel procedure which offers rights. People are not that silly. Employers are not that silly. Let us not forget that a very large number of appeals to the EAT is from employers. We shall see what view they take.

I conclude with an example which is extremely recent. The ACAS memorandum first says that because of the non-legalistic nature of many unfair dismissal disputes, legal experience is not considered necessary for an arbitrator. I found that odd because, when we come to the end of the memorandum, paragraph 11 says:

    "Any compensation awarded would be subject to the same limits as tribunal awards. In awarding compensation the arbitrator would have regard to the amount of loss incurred, both actual and future and take into account any monies already paid. The award would be legally enforceable".

If the amounts are to be subject to the same limits as tribunal awards, it is very difficult to see how the arbitrator needs no legal experience. I refer noble Lords

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to the decision of your Lordships' Judicial Committee only a month ago in the case of Tracey v. Crosville Wales [1997] 3 WLR 800 H.L. This has been a complex matter for some years of which the essence is as follows--and I am sure that the Minister will agree that there is some importance in the matter. When workers take industrial action, if they are dealt with by the employer differently in different groups, they may open the door which is usually shut to them for accession to the jurisdiction of the employment tribunal.

It was one of those cases where some strikers were re-engaged and some were not. The difficult question in case law has always been whether, in awarding compensation for those who have been, if you like, victimised, any reduction should be made by reason of the way that they conducted themselves in the industrial dispute. Reductions of compensation are of course a very difficult and important area. Any ACAS arbitrator would have to know his or her stuff on compensation and reductions. In this particular case, the House of Lords decided that no such reduction could be made.

It is difficult to give an impression of the complexity of the case, but I am sure that some noble Lords have some knowledge of it. Indeed, if noble Lords read the speeches, they will realise just what a difficult task an ACAS arbitrator would have to accomplish in order to get the sum precisely right. He or she would have to get the compensation right in global terms, and would then have to get it right according to the rules of law--because those are the rules of the tribunals--as to how much should be deducted, if anything at all. In this case it was not.

I am not suggesting that arbitrators are unable to face such cases; I am saying that the information that we have in front of us does not suggest that the arbitrators who might be appointed will always be able to deal with that kind of case and its legal complexities. I say "always" because this string of procedures, parallel one to the other, is there for the option of the employer and employee who can come to an agreement to take their dispute to the arbitrator.

We have tabled the amendment for that reason; namely, that judicial review is a well-known phenomenon. Small adjustments may be necessary as, for example, are included in the amendment. However, the amendment would not complicate matters. On the contrary, it would facilitate the remedy. The procedures of judicial review are now well-known and that makes it more likely that a system of arbitration would be more free from uncertainties and, indeed, might improve the machinery for remedying unfair dismissal. I beg to move.

7 p.m.

Baroness Turner of Camden: My Lords, I rise to express my support for my noble friend's amendment to which I have attached my name. I believe that I am not alone in feeling a little concerned about a process which, at the end of it, appears to have no right of appeal. I can well understand why my noble and learned friend has sought to introduce a fast-track procedure for dealing

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with straightforward unfair dismissal cases. The intention is wholly good and he deserves commendation for it.

However, we all know that dismissal is a traumatic experience. Unfortunately, it has happened to far too many people in recent years--people who at one time would have thought that they had "jobs for life"; indeed, people who thought, perhaps, that they would never have to face the trauma of unemployment and who are quite often unprepared to deal with it. Such a dismissed employee could be offered a choice of procedures in the following terms: he could either go down the arbitration route, which is fast track and he will probably not have long to wait to get his case heard. He will not be able to appeal, but he must remember that his employer will not be able to either. Alternatively, he could go to an employment tribunal where he will have the right of appeal right through the court system and even eventually to Europe. However, he will have to wait a long time because there is a backlog of cases and his employer could appeal even if he wins; and it might be quite a long time before he gets any money out of it.

Of course, trade unions may not give that kind of advice, but such advice might come the way of people who are not represented by unions. In such circumstances, the former employee could well choose arbitration. In most cases, that could well be the right decision. But, rarely, there may be a case that starts off looking as though it is simple but which becomes more complex along the way, perhaps introducing some element of gender discrimination or another problem which means that it would have been better dealt with through the ordinary court procedures.

The amendment that we have tabled would provide a fail-safe mechanism, should that happen. It is likely to be rare, but the employee would have the protection of a way out of arbitration and into the court system where that occurs. We have been referred to the Arbitration Act 1996 and specifically, I imagine, to Clauses 68 and 69. However, on reading the clauses, it seems to me that they are quite restrictive. Clause 68 allows for challenging the award where there has been a serious irregularity and that is spelt out in some detail. Clause 69 refers to an appeal on a point of law which could only be brought, as far as I can read, with the agreement of all the other parties to the proceedings, or with the leave of the court.

As I said, those provisions are really rather restrictive. In my view, they were probably meant to deal with commercial disputes and not employment law at all. Such provision is not necessarily suitable for the kind of cases that we are concerned about here, where people are facing the trauma of unemployment following dismissal. I hope that my noble friend, and perhaps the Government, will look with a degree of acceptance on what we are trying to do by way of the amendment.

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