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Lord McCarthy: My Lords, in putting my name to the amendment I wanted to make it clear, as indeed my noble friends have done, that we are trying to improve the Bill. We want to see speedy, informal alternative methods of dispute resolution. We are trying to assist with the Bill, but we also believe that, if we do not

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modify it in some way, it could, without taking up an exaggerated position, conceivably end up in another Grunwick. Indeed, that could happen. I have come to a conclusion as to the reasons why the Government and ACAS seek to resist what we propose.

If noble Lords will allow me, I should like to speak tonight very much to ACAS. Indeed, some of my best friends are in ACAS. They have employed me since they began. I want to explore how ACAS has thought this out and outline why I believe that it is wrong. We do not want merely speedy, informal alternative systems. I suggest that we must have roughly similar justice. That is what the Government have not thought through.

Why do we have to have roughly similar justice? Why could we not have arbitration with no appeal to law in particular? The arbitration system could proceed in a completely different way, using different criteria, different levels of settlement with different levels of substantive evidence and different results under the law. Why could it not be like that? It seems to me that ACAS is rather hoping that it might be like that because it would be simpler.

I can think of five reasons why it cannot be like that. First, the parties would be watching the system. If, as a result of research or by comparing success rates--because they will get them--or if by bush telegraph or general impressions, it comes to be thought among employers that there is, overall, a significantly higher rate of success and better justice from the workers' point of view, they will not go to arbitration. Similarly, if trade unionists or if the lawyers who advise the non-unionists--they do it very often for nothing--come to the conclusion that you cannot get as much out of arbitrators or that there are certain circumstances and certain cases which do not work, they will not recommend that anybody goes. The system must work and so it must provide not just speed, not just informality, but roughly similar justice. The parties will be watching and comparing.

Secondly, I have been talking now to my friends who are arbitrators. The arbitrators will be watching. They will want to know, roughly speaking, whether they are in line with the law. I ask any of those who might get such a task for not much remuneration: why should you put yourself in the position morally, equably, and in terms of your functions, that you produce very different results from the law? If those people want to know how they can keep in with the law or if they can get roughly similar justice, then they will need a very great deal of information. I am not saying they have to be legally qualified but, by God! they have to know their way about. There are many, many examples of things they have to know about. For example, they have to know all about the different legal principles and applications of cases which tell you how you select people for redundancy. What is unfair selection for redundancy? It is very complicated as to how far you can go and get away with it as an employer. You have to do something about that, and if any question arises of sex discrimination you must detect it because the Government say you have got to take out sex discrimination. It is not simply a matter of knowing

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about direct discrimination; you have to know how to test for indirect discrimination. That is extremely complicated and difficult.

The difficulty so often in cases of constructive dismissal is to know whether the employer has struck at the root of the contract--whether trust and confidence has been destroyed. That is extraordinarily difficult to detect. It is all right in a tribunal: you have two side members and a qualified chairman. But if arbitrators are afraid that they will not be broadly in line with the principles of the law they are going to have a difficult problem. Most difficult of all perhaps is what I call natural justice denied. Natural justice is not all that important in arbitration. In arbitration you have to decide what you think is the substance of the case. Whether the employer has gone through a reasonable range of responses, whether there has been proper investigation and whether there has been a right to appeal--these do not necessarily concern arbitrators. They want quick, sharp decisions which they think, on the whole, are fair. What is terribly important is that a large number of employers go to tribunals in circumstances where they could have dismissed fairly if they had not neglected one of what they regard as the arcane principles of natural justice. But the poor old arbitrators have to learn them. And there are simple tests. I do not believe that the parties will not be watching and that the arbitrators will not be watching. Therefore I do not think that ACAS cannot be watching. Somehow these poor devils have to be told how to keep in line with the substantive or procedural results of using industrial tribunals.

Also, as the noble Lord, Lord Wedderburn, said, they will have to know what is happening outside and they will have to know whether they are going to lay themselves open to any possibility of judicial review. I frankly do not know how they are going to manage it. There will have to be training. They will have to be kept up to date and that is going to be a difficult and hard task to follow through.

However, turning from the arbitrators and ACAS to the Government and this amendment, I say to the Government with all the force I can muster: we want this Bill; we like this Bill; but it is no good introducing it and thinking you can ignore the need for substantive equivalent justice. If you turn aside, if you think you are going to stop it by law you are going to stop the system itself, because people are watching, arbitrators are watching, ACAS are watching, workers are watching and the Government must watch as well.

7.15 p.m.

Lord Haskel: My Lords, it might be helpful if I explain the intention behind the Government's policy of offering arbitration as an alternative means for parties to resolve their disputes. Certainly, we take the view that it is better if employers and employees can settle their disputes voluntarily, either between themselves or with the assistance of a third party. But underpinning the system is the right of the individual to have recourse to an industrial tribunal. It is inevitable that there will be disputes which cannot be resolved in any other way. We

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accept that. A complex and difficult case such as my noble friend Lord Wedderburn mentioned could go to a tribunal. It may be suitable for arbitration. We accept that, but we see it as our role to offer parties to a dispute a range of alternative methods by which they might resolve their dispute. As noble Lords know, we wish to encourage parties to use any internal procedures that might be available. A dispute swiftly resolved through an internal procedure can often be to the advantage of all the parties.

We are also committed to the role of conciliation officers in helping people resolve their disputes and, in previous debates, I and other noble Lords have paid tribute to the role that they play.--

Lord Wedderburn of Charlton: My Lords, would my noble friend allow me to interrupt? I wonder if I have got it right. The most important thing he said was that cases of legal complexity of the kind that I cited in regard to compensation recently in the House of Lords--the case of Tracey v. Crosville Wales--may not be suitable for arbitration. However, who would stop the employer and the employee taking them to arbitration if they wished to do so?

Lord Haskel: My Lords, in the Bill there are many safeguards to ensure that employees have full and free advice. We are coming to an amendment which deals with that later. As noble Lords are aware, this Bill adds to the duties of the conciliation officers. It also contains a provision which we are debating for ACAS to prepare and provide an arbitration scheme for claims of unfair dismissal. These are some of the alternatives we wish to make available, and it is important to bear in mind that these are options which the parties enter into voluntarily. No one can be compelled to agree to use them and, as I mentioned, the right to have recourse to a tribunal underpins the system of employment rights. Arbitration is a method of resolving a dispute to which both parties will have agreed, and although they may still disagree about the dismissal itself they will have to agree to submit it to an arbitrator and to be bound by the arbitrator's decision. This agreement is but one of the features which distinguishes arbitration from a tribunal hearing.

My noble friend Lord McCarthy listed some of the points which may not be suitable for arbitration, and there will be others. For example, the arbitration will be private but it will be final. Agreement to be bound by the arbitrator's decision is also one of the reasons why the Government, ACAS and many of those who support an arbitration alternative, both employers and employees, consider the finality of the arbitrator's decision to be an essential part of the scheme. However, the arbitrator's decision can only carry credibility with the parties if they consider that it has been reached impartially and fairly and that they have had a chance for their views to be heard. That is why the Government and ACAS regard the provision of a safety valve to be important.

However, we do not think that we can rely upon judicial review applying to provide this safety valve. Our view is that it is by no means certain that judicial

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review will apply. Therefore in order to ensure that if there is something wrong, as my noble friend Lord Wedderburn put it, a safety valve will be provided, we propose to apply the provisions of Section 68 of the Arbitration Act 1996 which relates to serious irregularity, subject to discussion with ACAS, and with such modifications as are necessary to make them appropriate to a scheme for resolving an employment rights dispute.

My noble friend Lady Turner said that Section 68 may be more suitable for commercial disputes. The provisions will be modified to make them suitable for the kind of dispute that we are debating. Our difficulty in saying exactly what will apply now is that we do not yet have the scheme. It would be prudent to wait until we have a scheme proposed by ACAS before deciding whether and how the serious irregularity provision needs to be modified. I hope that this will satisfy my noble friend's concern.

My noble friend Lady Turner also spoke of referrals to the European Court of Justice. As I explained in Committee, while the Government wish to restrict the right of appeal on a point of law as much as possible to ensure maximum finality in the arbitration, we recognise that there might be circumstances in which a limited right of appeal on matters of European law may be required under European Community law principles. It may also be necessary to provide a procedure permitting the parties to refer to a court preliminary issues of law for determination.

Noble Lords will recall that the Government have put in observations on two cases before the European Court of Justice where the extent to which arbitral awards should be the subject of appeal on Community law is an issue that is being addressed currently. We are minded to wait until we have the European Court of Justice's decision on those cases before acting on this point.

However, I wish to confirm that once the European Court of Justice rules on the extent to which an appeal or reference needs to be provided in private arbitrations on a point of European Community law, we shall ensure that such arrangements as necessary apply to arbitration under the ACAS scheme. I hope that this will satisfy noble Lords.

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