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Baroness Dean of Thornton-le-Fylde: My Lords, I am most grateful, we must have the record straight. I should point out that TUPE does not cover pensions.

Earl Howe: Indeed, my Lords; I was about to say that the noble Baroness was perfectly right to say that pensions are not covered by TUPE. However, as she said, bidders will be required to offer staff a broadly comparable pension scheme, certified by the Government Actuary. The noble Baroness also asked what we meant by the phrase "broadly comparable". The Government Actuary will examine the buyer's pension scheme to ensure that, from an actuarial standpoint, it is broadly comparable. Of course, the Government Actuary is experienced in assessing such proposals. The assessment includes a comparison of the level of contributions and ensures that any increase in contributions is offset by compensation elsewhere in the package, for example, a salary rise. As regards TUPE, I must point out that staff cannot be worse off solely as a result of the transfer. That is the strongest protection that anyone could sensibly give.

HMSO has operated on a commercial basis from within government for many years. Its customers are perfectly well used to market testing its services and entering into formal agreements with it. Privatisation will not change that and the new business will be under the same imperatives to provide the best possible service and to keep all its customers satisfied. However, it will allow the business to capitalise fully on its reputation for quality and reliability and thus safeguard the future of a distinguished organisation.

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The fundamental point which I must reiterate is that HMSO is in decline in the public sector. As long ago as June 1994, the then chief executive warned that up to 30 per cent. of the then current jobs would have to be lost. It is worth repeating what he also said; namely, that staffing levels critically depend upon the level of business that is won. But, as I have indicated, HMSO's core market is shrinking. To allow it unfettered freedom to seek new market opportunities underwritten by the public purse would be unfair to private sector businesses. But without such opportunities there is a real risk of a downward spiral in HMSO's fortunes with all that that means in terms of job losses despite HMSO's outstanding reputation and the undoubted dedication of its staff.

Retaining HMSO in government would only do one thing; it would jeopardise the future of the business and its staff and do them a gross disservice. That is not a route which commends itself to Her Majesty's Government. Privatisation is the only means of securing the best interests not only of the business and its staff but also of its customers and therefore the taxpayer too. I commend the Government's plans to the House.

On Question, Motion agreed to.

Arbitration Bill [H.L.]

7 p.m.

The Minister of State, Department of Trade and Industry (Lord Fraser of Carmyllie): My Lords, I beg to move that this Bill be now read a second time.

This Bill represents the culmination of a great deal of work by a large number of people over several years. I will not delve too deeply into the history of the Bill but it was back in 1989 that the noble and learned Lord, Lord Mustill, in his capacity as chairman of the DTI's Advisory Committee on Arbitration Law, first recommended that the law on arbitration needed an overhaul. Work on a new Bill started first in the private sector and was taken over by my department in 1992. In February 1994 we issued a text for consultation which aimed to consolidate existing legislation with only relatively minor amendments. The message which came back was that a bolder approach was needed.

In November last year Lord Justice Saville took over the chairmanship of the advisory committee and accepted the challenge of working with my department and Parliamentary Counsel in preparing a text which more closely reflected the needs of the business and arbitration communities. I know that he has devoted countless long hours to work on the Bill over and above his judicial commitments. We owe him and members of his committee a special debt of gratitude. I should also like to thank the noble and learned Lords, Lord Mustill and Lord Steyn, the predecessors as chairman of the Advisory Committee, for their immensely valuable contributions.

Noble Lords may find it helpful if I outline some of the thinking behind the Bill. If noble Lords have read the definitive textbook on arbitration law by the noble

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and learned Lord, Lord Mustill and Mr. Stewart Boyd QC, they will have come across in the first few pages the following words:

    "Anyone coming for the first time into contact with an English arbitration, and wishing to acquaint himself with the relevant principles of law, might reasonably look to the current Arbitration Acts (those of 1950, 1975 and 1979) for a coherent exposition of the central principles of arbitration law. If so, he would be disappointed".

Those noble Lords who have looked at these Acts will readily agree. The very fact that the law is spread over three statutes is unhelpful and the language used is far from accessible to the layman. However, the problem goes deeper than that. The statutes do not seek to present a coherent picture but represent legislative reaction to particular issues as they have come up from time to time. We are simply failing in our duty to the business community to assist companies to resolve their disputes with the minimum of difficulty. I believe this Bill will bring about a significant improvement.

Our objective has been to set out a comprehensive and coherent statement of the principles and practice of arbitration in England, Wales and Northern Ireland. The Bill combines a restatement of the current statute law with codification of the more important principles of arbitration law developed through case law. It means that business people will have set out for them in a single document the key aspects of arbitration law in England, Wales and Northern Ireland. Without this Bill the present unsatisfactory situation could also have had serious repercussions for the future of London as a world centre for the arbitration of international commercial disputes. The business of arbitration is highly mobile in an international sense. A number of other countries have been making efforts to make their legislation more accessible to the business user. We must do the same if we are to safeguard the future competitiveness of London as a world arbitration centre.

Those noble Lords who have had an opportunity to take a look at the text will have been struck by the way it is presented. It follows a logical sequence. The language is clear and simple. Above all it is based on the proposition that arbitration is a valid alternative to litigation as a means of resolving those disputes which inevitably arise in trade and business. This is a significant step forward from the present position.

The principle of party autonomy is central to the Bill. The parties who are in dispute are able to decide how the arbitration should be conducted. The flexibility and control which this freedom gives to the parties is of critical importance. Having said that, the freedom is not absolute. There are a small number of provisions which for reasons of public policy cannot be overridden. We thought it right when looking at the current law on arbitration to propose to the House certain changes. These are designed to improve the attractiveness of arbitration to potential users. What they want is a system which is speedy and cost-effective, is final and fair at the same time.

We started from the principle that if parties have chosen arbitration rather than the courts to resolve their dispute, this decision must be respected. We propose

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therefore to curtail the ability of the court to intervene in the arbitral process except where the assistance of the court is clearly necessary to move the arbitration forward or where there has been a manifest injustice. It is thus a deregulatory measure in that we are freeing up the process from unwarranted reference to the courts or unwanted interference by them. Intervention by the courts slows down the whole process, which inevitably adds to costs.

In framing the Bill we have tried as far as possible to reflect the format and provisions of the Model Law on Commercial Arbitration developed by the United Nations Commission on International Trade Law, which is well known by its acronym of UNCITRAL. The noble and learned Lord, Lord Mustill, recommended in the report I mentioned at the start of my speech that it would be problematic to import that model law wholesale into the law of England and Wales. At the same time we accepted his advice that any new statute should incorporate as far as possible the structure and language of the model law.

Having outlined briefly the main principles on which the Bill is based it might be helpful if I mention some of the more important clauses. Clause 1 is important in that it sets out right at the start of the text the principles on which the Bill is based. Clause 2 is equally important in that it defines the scope of the Bill.

I would particularly draw your Lordships' attention to Clause 29. It confers immunity from suit upon arbitrators except where they act in bad faith. This is a new statutory provision. There has been considerable doubt whether, and if so to what extent, the immunity of arbitrators can be relied upon at English common law and we propose to put the matter beyond question. Your Lordships will see from Clause 74 that we intend also to extend limited immunity to arbitral and other institutions. Clause 33 provides a check and a balance on the powers of the arbitrators set out elsewhere in the Bill. Arbitrators must have their obligations under this clause at the forefront of their minds throughout the arbitration.

Clauses 34 and 38 break new ground in arbitration statute law by providing a non-exhaustive list of matters which the tribunal can decide and powers exercisable by the tribunal in the absence of agreement by the parties.

Clauses 46 to 58 deal with various aspects of the award of the tribunal. I draw your Lordships' attention to two changes we propose here. The first concerns Clause 49. At present a tribunal has the power only to award simple interest. We propose that the tribunal shall be able to award compound interest and simple interest at rates other than the judgment debt rate. The second concerns Clause 52, where we propose that the tribunal should be under an obligation to state the reasons for the award it has made. I contend that it is a basic rule of justice that those charged with determining the rights and obligations of others should give reasons for their decisions.

Clauses 59 to 65 deal with how costs of the arbitration are to be met. We have adopted the principle of "reasonableness". Only such costs as are

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reasonable can be recovered. Clause 65 contains a new power to enable the tribunal to limit the recoverable costs of the arbitration. That is in keeping with our aim of making arbitration a cost-effective way of resolving disputes.

Clauses 66 to 71 cover the powers of the court in relation to the award. Clause 69 tightens the criteria which must be met before the court can grant leave to appeal on a point of law arising out of the award. At the same time we have removed from the Bill the restrictions placed upon the "special categories", as they have come to be known, to exclude the jurisdiction of the court.

Your Lordships will see from Clause 84 that we propose to make the new Act apply to all arbitration proceedings commenced on or after the day it comes into force regardless of when the arbitration agreement was made. That follows the precedent of previous Acts.

Part II provides for domestic arbitration agreements, and to make the Bill comprehensive we have restated at Clauses 89 to 93, without making any changes of law, the provisions of the Consumer Arbitration Agreements Act 1988.

Part III restates the New York convention of 1958 on the recognition and enforcement of foreign arbitral awards. That was given effect in our statute law by the Arbitration Act 1975.

I hope that that brief summary of the contents of the Bill has given your Lordships something of the flavour of the Bill. It will be apparent to all that it is a highly technical and complex draft. At the same time, I believe it to be a vital and important part of our commercial law.

Your Lordships will have observed that there is a Motion in my name, which will follow the conclusion of this Second Reading debate, that the Bill should be committed to a Special Public Bill Committee. The purpose of the proposal is to allow further views to be sought and to give your Lordships the opportunity to examine the matters carefully. I understand that a number of your Lordships have reservations about that. Perhaps we can leave that issue until the conclusion of the substance of the Bill in the Second Reading debate. However, may I indicate that if the Motion were to be agreed to, this would be the first time that the procedure has been used for a Bill other than those arising from recommendations of the Law Commission, a development which was recommended by the Procedure Committee and endorsed by your Lordships.

At this point in our proceedings I am concerned principally that UK competitiveness--not only of the arbitration community but of the business community generally--depends on our getting our arbitration law right. In the list of those to speak in this Second Reading debate there are experts in this matter. I look forward with the greatest of interest to those contributions and any observations that might be made on the procedure that we have it in mind to follow after the Second Reading.

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Moved, That the Bill be now read a second time.--(Lord Fraser of Carmyllie.)

7.15 p.m.

Lord Lester of Herne Hill: My Lords, this is an admirable, much-needed Bill. It is well designed and well drafted in a refreshingly lucid and open style, after full and effective consultation during a long period of gestation. The Bill's outstanding qualities are a tribute to the dedicated work done by an extraordinarily talented and experienced departmental advisory committee on arbitration law under the chairmanship of Lord Justice Saville and his predecessors, the noble and learned Lords, Lord Mustill and Lord Steyn, working in close partnership with the Department of Trade and Industry. I most warmly congratulate the noble and learned Lord the Minister and his advisers on sponsoring the Bill. I am delighted that the Government have heeded the powerful plea of the noble and learned Lord, Lord Wilberforce, made during the gracious Speech to introduce a measure which is readable, sensible and up to date. It will surely travel through the legislative process, by whatever procedure, speedily, free of friction, moving on oiled castors.

Since five noble and learned, and expert, noble Lords will participate in the debate, I shall be brief, even by the standards of an utter barrister.

The three general principles on which the Bill is rightly founded are of fundamental importance: first, to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense; secondly, to leave the parties free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest; and, thirdly, where an arbitration takes place in accordance with Part I of the Bill, confining judicial intervention to the circumstances prescribed in that part of the Bill. I welcome the fact that the general principles are set forth in Clause 1 as a useful aid to the proper understanding and interpretation of the Bill as a whole. They are principles which will surely enjoy universal support.

Speaking entirely for myself, and without having heard other noble Lords, I welcome the fact that the Bill may be considered by a Special Public Bill Committee so as to allow evidence to be taken from experts on what is an important and complex Bill. However, I appreciate that the Bill has had a very long period of gestation and a huge amount of evidence will already have been taken into account.

I have one question about the first general principle. It refers to an impartial tribunal. However, unlike the guarantee in Article 6 of the European Convention on Human Rights, it does not refer to an independent and impartial tribunal. I wonder whether that is right, and I have written to the noble and learned Lord the Minister seeking clarification.

I realise that most arbitrations under the Bill will be consensual arbitrations to which Article 6 of the Convention would not normally apply directly. I realise that the concept of independence overlaps to a substantial extent with the concept of impartiality. I also

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realise that an award may be challenged before the independent and impartial courts in the circumstances prescribed by Clauses 67 to 71. My query relates principally to statutory arbitrations under Part II which may be compulsory in nature.

Where a statutory arbitration is compulsory and not consensual, it is clear from the case law that Article 6 of the Convention applies directly and that the arbitration tribunal must be independent as well as impartial. It must be independent of the executive and also of the parties. Its awards must be given effect by the Crown. I should therefore be grateful for guidance from the Minister as to the manner in which the first general principle, read with the provisions governing statutory compulsory arbitrations, complies with the guarantee of independence in Article 6 of the convention.

The arbitral process--the process by which a dispute is determined judicially and with binding effect by an arbitration tribunal instead of by a court of law--is of great importance and great value to the commercial community. The City of London is the natural home for international arbitration. We take justifiable pride in the integrity, efficiency and accessibility of the financial and legal services provided by the City of London. We also have the great benefit of judges, arbitrators, advocates and solicitors of outstandingly high quality. It must be in our national interests, as well as in the interests of the commercial community, that we make the very best use of those considerable assets.

Commercial arbitration is a consensual process. Foreign users of arbitration will choose this country as the forum only if they like the system and the way it works. I agree with the Minister that if London is to remain one of the pre-eminent centres for international commercial arbitration, in the face of strong competition from other countries, it is essential that the legal framework is simple, straightforward and user-friendly, serving the interests of the parties to commercial disputes.

I have consulted the Commercial Bar Association (COMBAR), which represents some 700 members of the Bar of England and Wales who specialise in commercial law, to discover their views about the Bill. I have done so because their members have vast experience, mainly as advocates, but also sometimes as arbitrators of a wide variety of commercial and other arbitrations. I am particularly grateful to Mr. Michael Collins QC, who chaired a COMBAR working party during the consultation process.

The members of COMBAR have no doubt of the pressing need for a new Arbitration Act. Many who have in the past written English arbitration into their contracts have become disenchanted with the cost, complexity and delay inherent in all but the simplest of arbitrations in England. If we are to remain one of the pre-eminent centres for international arbitration, a simpler, more straightforward, more user-friendly system has to be introduced as a matter of urgency.

COMBAR believes, and I agree with it, that the Bill will in large measure achieve those objectives. That is because in a number of areas much needed reforms have

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been introduced and many anomalies that exist in the present law have been eradicated. It is because the logical structure of the model law has been adopted, while preserving the more important features of the present system which differentiate the English law of arbitration from its international counterparts. It is because the style and language employed are user-friendly and are designed to be understood by those unfamiliar with English arbitration law, and not only the regular user. It is because, in the words of the Minister, party autonomy has been given greater emphasis and importance than is the case under the existing law; and the supporting role of the courts has been limited only to those areas where it is really necessary that they become involved.

The enactment of the Bill is likely to bring much more business to London, provided always that those who operate within its framework ensure that the costs of arbitration are justifiable and competitive. The Bill will enable London to continue to be one of the principal international centres for arbitration and it will enhance its reputation. It may well become a model to be followed in other countries.

The Bill has been 10 years in gestation. It combines the best of our existing arbitration law with a number of innovative and far-reaching reforms. Practically every other major arbitration centre has recently reviewed, or is in the process of reviewing, its arbitration law. I believe that the combined effects of consolidation and innovation have been gathered together in the Bill in a logical and comprehensible form, in harmony with the cogent recommendations recently made by the noble and learned Lord, Lord Woolf, in his report entitled: Access to Justice. It is truly a Bill designed to take English arbitration into the 21st century. It deserves wholehearted support.

There is, however, one further point which relates back to the earlier debate on the future of HMSO and public access to parliamentary material which I think is relevant. In a number of Questions I have pressed the Government and the authorities of the House to promote widespread public access to parliamentary material covered by parliamentary copyright, including Bills such as the present one. As it happens, Lord Justice Saville spoke to me this morning and told me that the House authorities had refused his request that this Bill should be put on the Internet. He has authorised me to express his disappointment about that. I respectfully and strongly agree with him. The Bill is designed to make this part of the law more accessible and to encourage those abroad to arbitrate their disputes here. It is something which should surely be available to all by the most efficient, modern and cheapest means. Indeed, Lord Justice Saville finds it difficult to understand--and I share his mystification--how in a democratic society this (or indeed any piece of proposed legislation) should not be made available on the Internet.

The draft Bill has attracted worldwide interest and support which can do nothing but good for our country. But, in the words of the learned Lord Justice Saville,

    "the same cannot be said for a failure to make it available by electronic means to all who would like to see it".

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It is absurd that it is available without charge, as I understand it, in printed form, but not available by electronic means, I suppose for Treasury-driven reasons. I very much hope that the powers that be might reconsider their decision. I fully appreciate that it has wider implications. I have unqualified support for the Bill but I hope that it may be the first Bill to be put on the Internet and made widely available to an admiring world.

7.27 p.m.

Lord Donaldson of Lymington: My Lords, in warmly welcoming the Bill, perhaps I should declare my interest as an occasional arbitrator and a past president of the Chartered Institute of Arbitrators.

The Bill is an extremely important measure for a number of reasons. The administration of civil justice in this country is in the hands of a partnership between the public sector--the courts--and the private sector provided by arbitration. At least since the Second World War, that partnership has been wholly amicable and has been based upon mutual respect. The plain fact is that each sector requires the other. The capacity of the courts to deal with large numbers of civil disputes is distinctly limited. Without arbitration, the whole system would grind to a halt. On the other hand, arbitrators need the assistance of the courts for some purposes such as resolving disputes as to their appointment and the enforcement of their awards.

As has been pointed out, the Bill modernises and clarifies the law relating to arbitration. In addition, so far as possible it harmonises our law with the provisions of the UNCITRAL model law and emphasises the right of disputants to agree on how the arbitration should be conducted, and whether or not that accords with normal procedures. Both those features are of extreme importance, not only in themselves but in encouraging foreigners to use English arbitration for the resolution of international commercial disputes. This is and has been for some years a major export service industry which makes a significant contribution to our balance of payments. Much draft legislation coming before this House is, I am ashamed to say, ill thought out and requires extensive revision. Not so this Bill. It is based upon the detailed advice of an extremely expert advisory committee, chaired by my noble and learned friends Lord Mustill and Lord Steyn successively in earlier in times and currently by Lord Justice Saville. All those concerned, including in particular those I have named, are vastly experienced in commercial arbitration and arbitration generally.

I echo the tributes paid by the noble and learned Lord the Minister to all that they have done and all that members of the advisory committee have done. May I also pay special tribute to the extent to which the Bill is logically arranged and expressed in plain English. It is a joy to read. It also contains a notable innovation in that it employs bracketed cross-references between sections. I wish that the same practice had been adopted by the draftsman of the Industrial Relations Act 1971. At one stage I was completely puzzled as to how a particular section in Part I fitted into the scheme of the

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Act. With gross irregularity, which I have never before revealed in public, I rang up the Department of Employment and asked them to search their wastepaper baskets to see whether they could find instructions to parliamentary counsel. They came up with the answer, whether from the wastepaper basket or not, and referred me to a section some 50 or 60 sections later and in a different part of the Act, suggesting that I might like to read the two sections together. When I did so, all was perfectly plain. If only it had had a bracketed cross-reference I should not have been forced into such an impropriety.

That is not to say that the Bill may not be capable of small improvements in Committee. But I emphasise that they would be very small indeed in the light of the enormous amount of work that has already gone into this Bill, and in the light of the expertise of the advisory committee and the context its members have with everybody who works in this industry. In those circumstances, I beg leave to doubt whether the right course is to send this Bill to a Special Public Bill Committee which would inevitably duplicate a vast amount of the work already undertaken by the advisory committee and possibly risk creating confusion where no confusion presently exists.

I said that one or two small amendments may be needed. I should like to mention one area which I think needs some slight further consideration. It turns on three clauses of the Bill: Clause 48, which gives arbitrators very wide powers to make declaratory awards and awards rectifying documents--powers which are in themselves very welcome; Clause 51, which provides for the arbitrator to make an agreed award when the parties settle their differences--again, a very welcome provision; and Clause 66, which enables the parties to obtain a judgment in terms of the award, subject only to obtaining leave--again, a provision with which I have no quarrel. While those powers in general terms are essential, one does want to look a little closely at the way in which they might be used.

I do not think that it should be possible to obtain a declaratory award as to the status of the parties--for example, whether X is married to Y or not; or whether A has a right of abode in the United Kingdom. It is perfectly true that if you had an award in those terms, there is little doubt that the courts would refuse leave to turn it into a judgment.

In the field of rectification, the matter is a little less simple. Perhaps it is because I have a potentially criminal mind, restrained only by my professional upbringing, but it seems to me that there are intriguing possibilities for tax evasion using the machinery of an agreed award of rectification of contractual documents coupled with a judgment to the like effect. Both the arbitrator and the court might well be unaware that rectification was being used fraudulently as a means of creating an amended and backdated document which was more taxpayer friendly than the original. I am sure that some very small amendment could safeguard that position, and I understand that one is already under consideration.

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May I repeat my warm welcome to this Bill and again express the hope that it will not be thrown back into the maelstrom of consultation.

7.35 p.m.

Lord Hacking: My Lords, it was first brought home to me that there was a need to reform English arbitration law when I was in New York in the late 1970s. One day, in conversation with an American lawyer colleague, I received the comment that it was deemed to be an act of professional negligence in New York, and certainly in his practice, to include in a contract an English arbitration clause. So I remember very well being lucky in the ballot and opening a short debate here in May 1978 on the problems that were then adversely affecting the conduct of English arbitration proceedings. It is therefore very nice to speak after the noble and learned Lord, Lord Donaldson, who was then the presiding judge of the commercial court and chairman of the commercial court committee and who was the producer of such an excellent report in July 1978. That report was the forerunner of the Arbitration Act 1979, which was really the first step in our present arbitration law reform. It was interesting today to examine the contents of that report and to be reminded of the thoughts then upon arbitration reform.

It is also interesting to note that among the representatives of the Bar there was a Mr. M. J. Mustill QC, who was then a member of the noble and learned Lord's committee.

The gestation of further arbitration reform, and this Bill, has taken a little time--10 years, dating back to the DAC committee, or just over 17 years, dating back to the Second Reading of the Arbitration Bill, as it then was in 1979, on 12th December 1978. I do not complain about the delay; we are all very grateful for its arrival, and we acknowledge the large amount of work that has been done by a lot of people in bringing it before the House. It is therefore very nice to be able to express thanks to members of the DAC committee, to Mr. Arthur Marriott and his group and to the current chairmen of the DAC committee, Lord Justice Saville, in their presence, all of whom have done us the honour of coming to hear our debate this afternoon.

I pay particular tribute to the courage of the DAC committee in redrafting the whole Bill after its first airing in King's College in July 1994--an occasion on which I believe I made myself slightly unpopular, though I hope only temporarily.

There is much in this Bill to be commended: the quality and clarity of the drafting, I agree with the noble and learned Lord, is a joy to read. In the quality of its drafting I believe it measures up to some of the great statutes at the end of the 19th century, the Bills of Exchange Act 1882 or the Sale of Goods Act 1893. It is splendid to read the clear statements of principle in Clause 1 of the Bill, where we find the words at the very beginning of the Bill setting out the clear principles under which our arbitration law is to be governed:

    "the object of arbitration is to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense";

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or to turn to the clear statement of principle in Clause 33 in relation to the conduct of arbitration proceedings:

    "The tribunal shall ... act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent";

or, turning to Clause 40 of the Bill:

    "The parties shall do all things necessary for the proper and expeditious conduct of the arbitral proceedings".

It is good, too, to find the freedom in which arbitration tribunals are entitled to conduct proceedings before them. I refer to Clause 34(2)(f) of the Bill, where the arbitral tribunal is stated to be free,

    "to apply strict rules of evidence (or any other rules) as to the admissibility, relevance or weight of any material (oral, written or other) sought to be tendered on any matters of fact or opinion, and the time, manner and form in which such material should be exchanged and presented".

It is good too that the treatment of the special category arbitrations has now been dropped. It was only intended as a temporary measure for two or three years and its time is rightly up. It is also good to find other good provisions in the Bill: the parties' rights to consolidate proceedings (Clause 35); and the new rights to award interest (Clause 49). The Bill has even changed those rather unfortunate words about the arbitrator "misconducting himself or the proceedings", when he had only committed technical misconduct which enabled certain steps to be taken against him under Section 23 of the Act. So now, in Clause 68, the much happier word "irregularity" is used. That in fact was the word recommended by the noble and learned Lord, Lord Donaldson, 17½ years ago in his Commercial Committee report.

But all is not perfect in the garden. To a degree, the drafting of the Bill has been overworked. The Bill has certainly grown in length. Part I of the Arbitration Act 1950 contains 34 sections or clauses; Part I of the draft Bill, which was presented to the conference in King's College in July 1995, contains 69 clauses; and Parts I and II of this Bill, which cover the same area, contain 101 clauses. Also, in places, it has succumbed to the particularity of drafting, which is the bane of so much parliamentary drafting. I shall first give a very slight example in Clause 24(4). In the draft Bill, Clause 21(4)--the part of the Bill that deals with the removal of the arbitrator--reads:

    "Where the court removes an arbitrator it may give such directions as it thinks fit with respect to his entitlement (if any) to fees or expenses".

But when that clause came into the Bill--that is to say into Clause 24(4)--we find superfluous words being added at the end:

    "or the repayment of any fees or expenses already paid".

That example of overdrafting is not so harmful, but it becomes more harmful when one deals with the issue of costs. In the draft Bill on the issue of costs the following phrases are to be found. In Clause 47(1) of the draft Bill:

    "The parties are free to agree on the powers of the tribunal as regards the award of costs".

In Clause 47(4):

    "The tribunal shall determine the costs of the arbitration and decide which of the parties should bear the costs or in what proportion the costs should be borne by the parties".

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However, when one looks at the Bill as it is now before the House, there is a greater particularity of drafting, which I believe has unfortunate consequences. It says in Clause 61(2):

    "the tribunal shall award costs on the general principle that costs should follow the event except where it appears to the tribunal that in the circumstances this is not appropriate in relation to the whole or part of the costs".

The court's rule of costs following the event is not always a fair rule. Sometimes decisions are made marginally one way or the other and, even though the plaintiff may be found to be 51 per cent. right and the defendant to be 49 per cent. wrong, the court's rule following the event visits on the defendant the full burden of costs. Therefore, it is unfortunate that the arbitrators should have to start by following a rule which is not fair. I believe also that it is an error that their discretion should be thus fettered.

The matter becomes more serious when one examines the issue of security of costs. There can be seen in the draft Bill of last July in Clause 37(3) the following words:

    "The tribunal may order a claimant (or counter-claimant) to provide security, of such description and on such terms as it may direct, for the legal or other costs of any party (including the fees and expenses of the arbitrators)".

However, when one comes to the matter of security of costs in the Bill, one finds in Clause 38(3) the following words:

    "The tribunal may order a party to provide security for the costs of the arbitration wherever the court would have power (in proceedings before the court) to order a party to provide security for costs".

What does that mean? One has then to look at Order 23, Rule I of the Supreme Court Practice, where on application for costs the plaintiff is found to be ordinarily resident out of the jurisdiction that is a ground for granting an order for security for costs. That is precisely the device which is used hostilely against a foreign plaintiff who may have a perfectly good case against an English defendant. Will not that measure alone deter overseas parties from coming to England or seeking an English arbitration seat for their arbitration?

I make one final plea, which relates to the different treatment in the Bill of domestic and international arbitrations. It relates to the stay of arbitration proceedings and the right to contract out by an exclusion agreement from court intervention upon determination of preliminary points of law under Clause 45 and appeals on points of law under Clause 69. The distinction only came about when we put into force in United Kingdom law the New York Convention on Recognition and Enforcement of Foreign Arbitration Awards of 1958. We did that in the Arbitration Act of 1975. Then in the Arbitration Act of 1979 it was thought that the distinction should be extended to exclusion clauses. But at that time we were working our way through new arbitration reforms and the feeling was that, certainly for the present, we should leave domestic arbitrations and special category arbitrations still under the umbrella of the English courts.

But the question is whether that is any longer wise or sensible. Apart from any issue relating to breaches of Community law, what is the logic of that distinction,

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with one set of rights for one category of parties and another set of rights for another category of parties? Perhaps I may take an example. In the United Kingdom, we have some very fine construction companies, one of whom so beautifully restored the canopy above us. Why should those companies be subject to one set of rules in a dispute with another English construction company and a different set of rules in a dispute with a European construction company? I venture to suggest that that is a matter at which the Special Public Bill Committee should look. I am very happy to commend the Bill to your Lordships but I ask the House to be ready to make a few amendments to it.

7.48 p.m.

Lord Roskill: My Lords, like my noble and learned friend Lord Donaldson of Lymington, I ought perhaps to begin by declaring an interest. Since I retired, from time to time I have acted both in this country and abroad as an arbitrator. While I was still a Lord of Appeal in Ordinary, at the request of a number of solicitors, I was made chairman of a body which they set up called the London International Arbitration Trust, whose purpose was to continue to attract work to London.

Having said that, perhaps I may respectfully echo every word of compliment that has been said to the noble and learned Lord the Minister for introducing the Bill and to my noble and learned friends Lord Mustill, Lord Steyn and Lord Justice Saville for the work that they have put in in producing a Bill which, if I may say so, is a masterpiece of drafting clarity and a model for future draftsmen. If only, in the past, what Lord Justice Harman once called "the marsh gas of Rent Acts" had been drafted with such skill, or some of the finance Acts had been drafted that way now, some of us would have had less trouble in trying to interpret the meaning of parliamentary language.

That said, perhaps I may raise one question of principle that has not yet been touched on. The Bill covers so much that it seems ungracious to criticise one omission. But I venture to suggest that it is an extremely serious omission; that is, the issue of confidentiality of everything to do with what happens relating to arbitration and awards.

Until recently I do not believe anybody would have thought of questioning in an English court the duty of confidentiality imposed by implication in contract upon arbitrators, umpires, counsel, solicitors and indeed the parties and witnesses. But two decisions were recently made in Australia. It is not for anybody in this country to criticise those decisions, but they are decisions which query the applicability of confidentiality.

Privacy and confidentiality have been assumed as a general principle in English commercial arbitrations for many years. Perhaps I may venture to quote words used recently by no less an authority than the former Warden of All Souls College Oxford, Sir Patrick Neill, in his Bernstein Lecture, when he said,

    "it would be difficult to conceive of any greater threat to the success of English arbitration than the removal of the general principles of confidentiality and privacy".

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I know that this issue has been considered by the committee of Lord Justice Saville, which decided in its wisdom to leave it alone. I respectfully question whether, in the light of those Australian decisions, that is wise. I quite see the difficulties. But surely it would be better to add to the statements of general principle, which are so clearly set out in the Bill, a general statement of principle that, unless the parties otherwise agree, the principles of confidentiality as long understood in English arbitration, should apply to all arbitrations to which this Act applies.

I realise that that is general language. I am not attempting to draft specifically--it would be silly to try to do that on one's feet in a Second Reading debate. But the problem exists and I am nervous that, unless it is dealt with, someone will come along afterwards and invite the courts to waive the issue of confidentiality because those Australian cases should be applied here.

Those of us who have dealt with a number of highly confidential arbitrations in recent years cannot fail to be conscious of the importance of confidentiality. Many of us have been involved in cases, the result of which could affect share prices, commodity prices and heaven knows what. I venture to add that my own six years' experience as chairman of the Take-over Panel Appeal Committee led me to realise the crucial importance of observing utmost secrecy and confidentiality.

Your Lordships may remember the old hymn warning Christians to beware of the hordes of Midian who prowl and prowl around. The hordes who now prowl around looking for leaks and hints do not necessarily come from Midian any longer, but they are and can be a great danger. They can give rise to leaks, suggestions of insider-dealing and all sorts of problems. This is an issue of principle which should be faced whether the Bill goes to the suggested committee or the Committee stage takes place on the Floor of the House.

Once again I venture to say that everybody concerned is to be congratulated. I hope it is not out of place-- I remembered this with a nasty shock when I was reading the Bill over the past two or three days--to say that it is 61 years since I was first involved in an arbitration as a newly-called barrister. So far as I remember, the fee was one guinea. It would be rather different nowadays but the arbitration was very short.

I make my comments in the light of my experience of arbitration work as a barrister, as a judge in charge of the commercial list and, since I retired, as an arbitrator and in other capacities. If it were said, on the question of confidentiality, that there is no precedent for this, I would venture to invite your Lordships to recall that this Bill preserves in the second schedule the provision for a judicial arbitrator. That was introduced in 1970 or perhaps a little before.

People today may not be aware of what led to that provision. Lord Goddard, when he was Lord Chancellor, with the enthusiastic approval of the then Lord Chief Justice, Lord Parker, and the then commercial judges, of whom I was one, were faced with criticism from the City that they would not use the Commercial Court because of the necessity of disclosing commercial

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confidential information. Lord Gardiner suggested that provision should be made for the commercial judge to sit in private, in camera. That passed through your Lordships' House but failed in another place. The then Opposition managed to knock it out on a majority of those who thought that no court ought ever to sit in private.

The present provision was a substitute. It has been little used because of the difficulty which successive Lord Chief Justices have had in finding a judge to release to conduct arbitrations. But the principle of confidentiality lies behind the provision. It was accepted by Parliament then and there is no reason, whatever words are used, why it should not be used now.

7.57 p.m.

Lord Byron: My Lords, I ought also to declare an interest. I have once or twice been appointed as an arbitrator myself, though primarily my interest in the Bill is as a practising solicitor in the field of international trade.

A few months ago I was in Italy trying to settle a dispute between my German client and an Italian company. If one asks what an English solicitor was doing in a dispute between a German and Italian company, your Lordships may not be surprised to learn that the contract was in the English language; it was subject to English law and also to London arbitration. Having successfully concluded a settlement, we all retired to a restaurant and began discussing the role of English law and English arbitration.

My German client said, "I suppose it is strange that we should still use London arbitration; after all, you don't build many ships now; you are no longer dominant in world trade and we do not buy many televisions or computers from you". My Italian opponent chipped in, "And we don't think much of your food either". However, they both agreed that when it came to the law and to our courts and arbitration systems, they both had a great deal of confidence in us. Lest your Lordships think that this story suggests complacency, I should add that they did not find everything in the garden rosy. There were aspects of our system which they did not like and there were familiar complaints about delay and expense which are never far beneath the surface.

The point of my story is to re-emphasise the central place that English arbitration has in the resolution of disputes, particularly in the international field. Not only is dispute resolution in the City of London a major industry and major earner of foreign currency, but it is also a vital lubricant to other forms of commerce.

There is no doubt that government have an important role in keeping the wheels well oiled. A few years ago many of us became concerned that congestion in the Commercial Court could jeopardise London's reputation. I am glad that that problem seems to have been remedied. I should like therefore to congratulate the Government on bringing forward the Bill and to thank my noble and learned friend on the Front Bench for the remarks he made in introducing it.

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However, it should not be forgotten that the Bill has its genesis as a private venture, although I have no doubt that it would not have reached this stage by now if it had not been taken over by the departmental advisory committee under the chairmanship of the noble and learned Lord, Lord Mustill. Indeed, I should like to pay a special tribute to the noble and learned Lord for everything that he has done, both in relation to this Bill and in relation to the cause of arbitration generally. I should also like to pay tribute to his successor on the departmental advisory committee, the noble and learned Lord, Lord Steyn, and in particular to the present chairman of that committee, Lord Justice Saville. I do not know whether there are many other precedents of a serving Lord Justice of Appeal taking a major role in drafting legislation; but all I can say is, if this is going to be the result, let us have it more often; that is, if the system and my noble and learned friend on the Woolsack will permit it.

A year or two ago I was asked to write an article for Lloyd's List newspaper on the then draft Arbitration Bill and I began by saying that Lord Justice Saville, who at that time was just about to take over chairmanship of the DAC, had an unenviable task. But there is no doubt that he and his committee have achieved a startling transformation from the earlier draft which, while admirable in many ways, was also in some respects a rather cumbersome consolidation Bill. This is now a model of clarity and contains a number of important changes and innovations in English arbitral law.

Although London is still the leading world centre for arbitration there are plenty of competitors only too anxious to attract arbitrations to their own jurisdictions. It is now more than 10 years since the UNCITRAL Model Law was introduced and adopted by a number of countries without this country doing anything to improve its statutory framework except for the odd change here and there. It has been widely perceived in the commercial and legal communities where arbitration is used that unless something was done fairly quickly London's position could be seriously eroded.

Turning to the Bill itself, as has already been said, the great theme running through it is the principle of party autonomy. But party autonomy is all very well when the parties have either agreed expressly or by the incorporation of a set of standard terms as to how a particular matter should be dealt with. In reality there are a great many instances where that is not the case and once an arbitration has started it is often difficult for the parties to agree on anything at all. Indeed, the extent to which arbitration inevitably becomes a process similar to litigation is a point often overlooked or misunderstood by academic commentators. Because arbitration is consensual in origin it seems to be imagined that the whole process takes place in an atmosphere of co-operation, where agreements are easy to obtain. In reality arbitrations can become a pitched battle where agreement, even on relatively straightforward matters, is difficult to obtain.

The great balancing act which this Bill has had to perform is between those who wish to exclude the courts from all aspects of arbitration procedure and those who would like to preserve a significant measure of court

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supervision. Generally I believe that this Bill has got that balancing act about right. When it comes to the question of appeal the so-called Nema guidelines have been enacted, although there seems to have been some further tightening of the appeal process. I am a little troubled by the additional provision in Clause 69(3)(d) that,

    "despite the agreement of the parties to resolve the matter by arbitration, it is just and proper in all the circumstances for the court to determine the question".

One can well understand the thinking behind those words, but I wonder whether it is sensible to introduce a new and rather subjective concept into what is otherwise well trodden ground.

I do not think this is the right time to raise particular hobby horses of our own. It is a quite radical Bill. It contains a great many changes to the way we do things at present. Some of those changes are very obvious; some of them are quite subtle. Above all it allows the parties to agree to almost any procedure they like without interference from the courts. I doubt whether it has been widely appreciated quite how far reaching this may be. I assume that the parties will be deemed to have agreed to something if they have agreed to arbitrate pursuant to a set of rules which contain that provision. I suspect that every arbitral body will now wish to reconsider its own rules. I am sure that once the Bill has been enacted all arbitral bodies will do that to see what special rules or special powers may be suitable for their particular users. While this has great benefits in terms of flexibility, those who seek to arbitrate will need to take care that they know exactly what they are letting themselves in for.

There is one point I would like to make in relation to what is, I think everyone agrees, a quite exceptionally good Bill. It relates to the question of a sole arbitrator. English law has always provided that a simple reference to "Arbitration London"--that is by no means unusual--is deemed to be a reference to a sole arbitrator. This provision seems to have been kept in Clause 15 of the Bill. I know that two organisations with which I am involved--the British Maritime Law Association and the London Maritime Arbitrators Association--made submissions suggesting that a simple reference to arbitration should be deemed to be a reference to three arbitrators. This is the approach in Article 10 of the model law. While I am not an uncritical fan of the model law I think that on this occasion the model law is to be preferred. I wonder why the various representations on that point could not be accepted.

Finally, I should like to echo what was said by the noble and learned Lord, Lord Roskill, in relation to confidentiality. Sometimes people try to compare litigating in the commercial court and arbitrating and they wonder what is the advantage, one over the other. But the one point which is always mentioned in relation to arbitration--perhaps it is the only point on which everyone is agreed that arbitration has a potential benefit--is confidentiality. It is quite arguable that arbitration would almost be lost or would go out of the window--people would not bother with it--if confidentiality was lost. I am not sure what the right

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answer is here but I would echo the words of the noble and learned Lord that if there is any doubt about it the matter should be revisited.

This is undoubtedly an excellent Bill. I welcome it. I hope it has a speedy passage toward the statute book.

8.7 p.m.

Lord Wilberforce: My Lords, I should not have thought of troubling your Lordships in the presence of so many much brighter luminaries than myself with any observations on this Bill were it not that I owe the Government a debt of gratitude. The Bill was not in the Queen's Speech for the legislative programme of this Session and I did, as the noble Lord, Lord Lester, was kind enough to mention, suggest in the debate on the Address that this was an important Bill for which the Government might, one hoped, find a place in their programme. I am therefore more than delighted that so soon after the start of the Session, in prime time as one may say, this Bill has been brought forward with the support of the Government and of the noble and learned Lord.

It is indeed, as has been said by many noble Lords, an important Bill from two aspects. I venture to restate them in the hope of attracting the interest of the noble Lord, Lord Peston, whom I know, as an economist, is somewhat less than enthusiastic about purely dry legal instruments. There is first the point that it is an essential piece in our legal system and must be capable of being used not only by lawyers in the interests of lawyers but by laymen. Many laymen have to participate in arbitrations and many arbitrations are conducted by people who are not lawyers. It is therefore absolutely essential that any arbitration law should be user friendly to the maximum extent. I noticed that the noble Lord, Lord Peston, nodded his head when emphasis was placed by one of your Lordships on the extreme readability and intelligibility of the Bill.

The second aspect has already been touched on very brilliantly by the noble Lord, Lord Byron, who has just spoken, and that is the need for a good arbitration system to be there in the way of lubricating trade. It is an extraordinary fact, referred to by the noble Lord, that with an out-of-date, cumbrous, defective and piecemeal arbitration law such as we have--it was improved in 1979, but these points remain valid--so many people with no connection with this country at all should have been willing to entrust their disputes to settlement by arbitration in this country. That tendency is undoubtedly bound to be increased by this Bill if, as I believe it does, it complies with the wishes of traders, using that word in its very widest sense, and businessmen generally through placing such emphasis as it does on the will of the parties.

That runs throughout the Bill. It is stated in Clause 1 at the beginning as one of the objectives of the Bill. All the way through the Bill one finds references to "unless the parties otherwise agree" or "as the parties otherwise agree". Nobody can say that this Bill does not give maximum effect, in spite of a few mandatory provisions, to the will of the parties.

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Since I so heartily welcome this Bill and agree with its provisions, I do not propose to comment in any detail on it. I would like to dwell for a moment on one point to which I personally attach some importance. That is the relation between arbitration and the courts. I have never taken the view that arbitration is a kind of annex, appendix or poor relation to court proceedings. I have always wished to see arbitration, as far as possible, and subject to statutory guidelines no doubt, regarded as a freestanding system, free to settle its own procedure and free to develop its own substantive law--yes, its substantive law. I have always hoped to see arbitration law moving in that direction. That is not the position generally which has been taken by English law, which adopts a broadly supervisory attitude, giving substantial powers to the court of correction and otherwise, and not really defining with any exactitude the relative positions of the arbitrators and the courts.

Other countries adopt a different attitude and so does the UNCITRAL model law. The difference between our system and that of others has been and is, I believe, quite a substantial deterrent to people to sending arbitrations here. The noble Lord's Italian and German friends brought that point out very well.

How then does this Bill stand in that respect? After reading the debates and the various drafts that have been moving from one point to another, I find that on the whole, although not going quite as far as I should personally like, it has moved very substantially in this direction. It has given to the court only those essential powers which I believe the court should have; that is, rendering assistance when the arbitrators cannot act in the way of enforcement or procedural steps, or, alternatively, in the direction of correcting very fundamental errors.

What this Bill does is stated in Clause 1, the objective clause. It states that, in matters governed by Part I no intervention except as provided shall be made by the court. In effect that reflects Article 5 of the model law and excludes any further reliance on common law. The body of the Bill in Part I continues to give paramountcy to the will of the parties unless they otherwise agree. Clause 34 is extremely valuable and gives effect to the best institutional practices. Other examples are easy to find.

The problem of exclusion clauses and special categories, which I need not expand in this company, has been very adroitly solved by the Bill. It might perhaps have been a little less complex and prescriptive, but in general I believe that the Bill is well balanced, very intelligible and reflective of modern needs.

There is one other point I wish to make which relates to the matter raised by my noble and learned friend Lord Donaldson of Lymington. Many noble Lords have commented on the vast amount of research work and inquiry which has been done in this country since the monumental report of my noble and learned friend Lord Mustill in 1989. The noble and learned Lord knows about this perfectly well without my having to enumerate it. The department has worked very hard, with the assistance of all those people to whom tribute has been justly paid.

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But the matter does not even stop there. My noble and learned friend Lord Mustill and I were both present, in different capacities, in Vienna about 10 years ago when the UNCITRAL model law was being drawn up in its final stages. That had been preceded by years of deliberation and consultation all around the international world, with British lawyers, including my noble and learned friend, being consulted. So the history goes back even further than the report of my noble and learned friend in 1989. It goes back more than a decade. We have all the benefit of that behind us. We must not lose that benefit by reopening difficult questions.

It was with a little misgiving that I saw on the Order Paper the Motion in the name of the noble and learned Lord to commit this matter to a Special Public Bill Committee, which would involve the taking of evidence and the opening of many questions which have been settled with difficulty, but still settled. With the utmost deference, I venture to suggest to the noble and learned Lord that he might, if other speakers from these Benches agree with what I said and with what the noble Lord has said, be willing to defer his Motion on the Order Paper for a little further consideration. One day next week perhaps he could then come forward with a Motion, either in the form of that on the Order Paper or in the form of a normal Motion that the Bill be committed to a Committee of the Whole House. This is rather a different case to that of Law Commission Bills which come from a non-governmental body. This Bill has been under consideration by a powerful department of state with all the resources available to it. Since the Bill has got very great agreement in most laudatory terms, with only a few unweighty points, which could perfectly well be dealt with on the Floor of this House, the noble and learned Lord might think it wise to give further consideration to that particular part of today's proceedings. Of course, I heartily support the Second Reading of the Bill.

8.17 p.m.

Lord Noel-Buxton: My Lords, I give strong support to the Bill. As a commercial solicitor, although not currently in practice, I have had considerable experience of litigation. Litigation as a way of resolving disputes is often unfair, very slow and cost-ineffective. I have recently taken an interest in arbitration as an alternative to litigation. In my view arbitration can indeed be a fairer, more speedy and more cost-effective way of resolving disputes. A Bill to improve arbitration as an option in dispute resolution in these respects deserves strong support accordingly.

I would like to see arbitration recognised by the entire business world as a viable alternative to litigation. Arbitration can provide a cheap, speedy and cost-effective method of resolving disputes. Further, arbitration is private. It is particularly suited where a dispute arises between parties who have a continuing relationship which neither wishes to prejudice.

More generally, it must surely be desirable, if London in particular is to continue to be a leading centre for arbitration, even for disputes which have no other connection with London, and is to maintain its position

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as an important financial and commercial centre, that England and Wales have an arbitration law suited to modern conditions and to the international needs of businessmen.

I welcome the Bill because it addresses the matters to which I refer. The Bill will streamline the arbitration procedure by further restricting the ability of a party to prolong proceedings by seeking a recourse to the courts both during the hearing and after the award has been given. The Bill extends the autonomy of the parties in establishing an arbitration procedure suited to their needs. It clarifies many important technical issues of law previously unresolved and it provides a more user-friendly code which for the first time makes arbitration both accessible and understandable.

The Bill would also bring the laws of England and Wales closer to the laws of those countries, including Scotland, which have adopted the United Nations model law on arbitration. The Bill deals with a form of dispute resolution founded on the agreement of those concerned. That the agreement itself should form the main basis of the general principles of any statutory framework has been recognised by the draftsman. It is the basis, after all, of the United Nations model law. However, like most general principles, that concept--the so-called party autonomy or contractual, as contrasted with the juridical, theory of arbitration--is easier to state in the abstract than to apply to specific legislation.

In my view, the Bill in general well states the party autonomy concept in specific legislative terms without going too far. I am pleased to note that in the Bill before your Lordships today Clause 34(1) now reads:

    "It shall be for the tribunal to decide all procedural and evidential matters",

albeit that that is qualified by the words,

    "subject to the right of the parties to agree any matter"

whatever that may mean in practice. I believe that tribunals should be in charge in these matters and not the parties as seemed to be contemplated in an earlier draft of the subsection.

I like the tenor of Clause 5 headed "Agreements to be in writing", which seeks in effect to expand the usual meaning of the phrase "in writing" and the definition of arbitration agreements in Clause 6. I suspect, however, that the exact wording of those clauses--and, indeed, of others in the Bill--will be considered in detail at later stages, but not in too much detail because, as many noble Lords have said, the drafting is impeccable.

As I understand it, an agreement is in writing if it is inter alia evidenced in writing, which includes it being recorded by any means. Would a tape recording of a meeting between the parties, recorded by one party with the acquiescence of but without the formal authority of the other or others, during which it was orally agreed to include an arbitration clause in common form, be a sufficient agreement in writing? Would Clause 5(4) bite? Would the word "submit" or a phrase something like "submit any dispute to arbitration" have to be uttered to fall within Clause 6? I wonder.

I also like the substitution of the phrase "is obviously wrong" in Clause 69(3)(c) which deals with an appeal on point of law for the phrase,

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    "has in all probability reached the wrong conclusion on the question of law",

contained in the previous draft. If the contractual theory of arbitration is to be substantially followed, any right to appeal to the court should indeed be subject to robust restriction.

Turning away from the specifics of the Bill, I should like to see arbitration become far more widespread as a means of dispute resolution. Although I have no direct experience of arbitration, I understand that it is widely adopted only in relation to building contracts, maritime matters and certain other rather specialised contractual arrangements. In my experience, it is not adopted in England and Wales in the fields of intellectual property, insolvency, or for general company or commercial disputes in relation to warranties and indemnities given in connection with the sale and purchase of shares in companies.

When I was in practice in the company, commercial and intellectual property fields, I must confess that I tended to advise clients not to include an arbitration clause in their contracts. I feared that any time and money spent on pursuing arbitration would more likely than not be a waste of time and money because the party against whom a tribunal found would only appeal to the court, so one might as well start with the court.

I believe that that perception of arbitration by many lawyers, somewhat misconceived as it is already, would be much less tenable if this Bill became law substantially as drafted. If commercial lawyers in particular recognised the undoubted merits of arbitration as an option--an option that I hope will be enhanced by the passage of the Bill into law--perhaps they will more frequently draw their clients' attention to arbitration as a potentially quicker and cheaper private route to commercial dispute resolution than that afforded by litigation.

If arbitration clauses were more widely included in contracts or if arbitration agreements were more widely entered into when a dispute arises, surely much of the pressure on the commercial court in particular could be released and one might even see more win/win resolutions in commercial disputes effected in private behind closed doors rather than the inevitable win/lose resolution of disputes fought out in open court. As I said, I welcome the Bill and give it my strong general support.

8.27 p.m.

Lord Mustill: My Lords, in offering a hearty welcome to the Bill, I will not occupy time by repeating what has already been said so cogently by the noble and learned Lord the Minister and the noble Lords who have followed. I will simply emphasise two points, add two acknowledgments and make one disclaimer.

The first point is that England must have a new Arbitration Act. Literally for centuries the arbitration statutes of England and Wales led the world. Paradoxically, one of their strengths was their incompleteness, which left room for the development of flexible and diverse procedures, and allowed the judges

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to respond to practical problems in the interstices of the Acts. So far so good, but as with all judge-made law you need skill and experience to find it, and to understand it when found. By now the judge-made law has become so voluminous as to be almost impenetrable to anyone except the specialist English lawyer. That is splendid for the authors of textbooks, but not for anyone else. English arbitration law is, I believe, basically sound, but it needs to be made accessible to its users, including its very substantial foreign client base. That can be done only by a complete springclean in the shape of a comprehensive new Act.

There is another reason why we must have a new Act. Throughout the long debates on the development of the UNCITRAL model law, at which I had the honour to be one of those speaking for the United Kingdom and to which my noble and learned friend Lord Wilberforce added his unique authority, it was the consistent stance of the United Kingdom that the project was worthy of full support. That view was honestly held and remains so today. For countries with no established and elaborated fund of arbitration law and practice, the model law offers an excellent means of obtaining a ready-made and internationally recognised partial code of arbitration law. But for reasons unnecessary now to describe, the departmental advisory committee felt that it was not appropriate for the UK, and recommended that there should not be a simple enactment of the model law for England and Wales, but that instead there should be a comprehensive new statute, reflecting the existing law of England, but nevertheless following as closely as possible the shape and language of the model law.

That proposal, put forward seven years ago, was intended as a package, but for rather a long time it seemed that only half of the package would be adopted, and that the UK, having supported the model law publicly, would neither enact it nor put anything in its place. To some foreign observers that seemed, if not an example of perfide Albion, at least a display of the Luddite tendency which critics have liked to attribute to our arbitration law. That could not be allowed to continue, and, more importantly, this country simply could not afford to leave its statute law in a condition which was acknowledged to be out of date and which was rapidly being overtaken by new laws in other countries.

Happily we are, I hope, well on the way towards a new Act of the kind contemplated by the departmental committee. That leads to my second point; namely, that we must have this Arbitration Act. It is a quite outstanding piece of draftsmanship, and an outstanding work of scholarship. True, it is long, but it is ambitious and all-embracing, in marked contrast to the meagre and inadequate legislation which it is designed to supplant; and also in contrast with the model law which, for all its merits, covers only some of the legal aspects of arbitration. It is not surprising that the Bill is more elaborate than both.

The Bill combines thoroughness and accuracy in all its contents, with remarkable felicity and clarity of expression. For the first time, a user or potential user, whether in England or abroad, will be able to take up the statute and find what he needs to know about the

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structures and methods of English arbitration law. Anyone familiar with the model law will, I believe, be completely at home with the new text.

Moreover, the Bill is the fruit of what must be an unprecedented degree of public consultation, at least in the field of international commercial law. It is a consultation which has extended far beyond our geographical boundaries. I would respectfully congratulate the Minister and his department on having enterprised and carried through that onerous task. After that consultation, we must now forge ahead. That is not to say that I agree with everything in the Bill. I do not, but will rest content to follow what I believe to be the majority opinions of those who really matter; namely, the users.

I earnestly hope that any noble Lords who may have substantial rather than technical reservations on certain aspects of the Bill will feel able to submerge their own opinions in the interests of bringing this excellent work speedily to the statute book.

As a member of the Procedure Committee of this House, a keen proponent of the procedure by Special Bill Committee, I should think it inappropriate to express a personal opinion on the species of Committee to which the Bill should be remitted, beyond respectfully agreeing with previous speakers that the matter could profitably be given another look.

No doubt changes will be made consequent upon the debates in Committee, but I should be surprised and disappointed if there were any resulting amendments of major effect. At all events, I believe that the philosophy, shape, language, and substance of the Bill are basically sound, and I hope that the House will give it a following wind of gale force strength.

It remains to add two names to those whose contributions have already been generously acknowledged. As the Minister has said, the Bill is the fruit of consecutive efforts by both the private and the public sector. They were not without their squalls and shoals, but those have been successfully navigated. The first stage of this distinctly unusual process would never have happened without the energy, hard work and financial support of Mr. Arthur Marriott and his working group, to whom tribute has already been paid. I should like in particular to stress the contribution of Mr. Basil Eckersley of counsel who produced for that group an impressive draft Bill. In the event, that draft did not go forward, but it encouraged all future workers by showing that the job proposed by the departmental committee could be done and done well.

Finally, I know that all those involved in the great efforts made after Mr. Marriott's group had handed over the baton would like the House to be aware of the invaluable assistance given to those already mentioned by Mr. Toby Landau of counsel, whose encyclopaedic grasp of this complex subject has excited the respect of all.

I add one disclaimer. I am proud to be the current president of the Chartered Institute of Arbitrators. It has a very large membership, and encompasses a wide variety of views, often vigorously expressed. I have no

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mandate to speak for the institute. The views offered are my own. I warmly welcome the Bill, and congratulate all those concerned in it.

8.35 p.m.

Lord Ackner: My Lords, I too, like some of my retired judicial brothers, must start with a disclosure, although I do it with no diffidence at all, but with marked enthusiasm. I am engaged in a number of arbitrations. I shall be sitting as an arbitrator next week. I am involved in a new organisation called the City Disputes Panel which involves arbitration and evaluation, which is a new process, by a number of judicial figures, supported by experts from the City.

I am aware that the noble Lord, Lord Peston, has some ammunition saved up on the basis that that is a very attractive way of keeping the wolf from the door, but I should like to say that I enjoy it for other reasons. For 14 years, until I retired, I listened to no witnesses. All my work was then appellate work. There was only one exception during that 14-year period when I was sitting in the Court of Appeal (Criminal Division), chaired by a very senior judge. We had, rather inadvisedly, allowed in fresh evidence. As I listened to the unimpressive material then being provided by the witness, I received a note from the very experienced presiding judge, which read:

    "Isn't it nice to hear a real live liar again?"

The speakers' list discloses that there could be provided a full complement for the Appellate Committee. We have, including myself, four Law Lords, present and past, and the benefit of the former Master of the Rolls. Therefore I could quite properly merely say, "I agree, and have nothing to add". Certainly as the judicial long stop on this list I should avoid causing your Lordships to stop long on my behalf, but I should like to make one or two short points.

My noble and learned friend Lord Wilberforce has referred to the readability of the Bill. That is terribly important, because there are many, many lay arbitrators in the domestic field in this country. That is particularly so with regard to the construction and the commercial real estate industry. For them to have available the relevant law, easily assimilable, is a tremendous advantage. Of course it will add to our invisible earnings by making this readable by those from overseas who had difficulty in the past. That is a great advantage, but that is not the sole advantage.

Clause 1 sets out the three principles. I suggest that the draftsman and those involved in the Bill have ensured that those three principles are realisable by the provisions they have made in the Bill. Unnecessary delay should be avoided, and they have set out a number of provisions which prevent technical points or delay through failure to comply with orders any longer holding up proceedings.

Expense, which they wish to keep down, can be achieved effectively in an arbitration only by speeding up the process and if more autonomy is given to the arbitrator. If there is a greater degree of interactivity between the parties, their legal advisers and the arbitrators the speeding up will occur. Short time limits

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can be laid down and enforced. In an international commercial arbitration in which I was involved the parties agreed that they would each have only one day during which they would call or cross-examine the witnesses and make their speeches. Courteously, they allowed one day for the tribunal to ask its questions. We on the tribunal did not need to ask any questions but they needed longer time and they had the extra day which had been allocated to us. The whole hearing was over in three days.

I wish to add the following to the tributes which have been paid. First, the parliamentary draftsman, Mr. Geoffrey Sellers, has played an enormous part in making the Bill as accessible and intelligible as he has. There are two others involved; Professor Uff, QC, and Dr. Julian Lew were instrumental in arranging a highly successful conference recently when views in regard to the draft were discussed at length. A great deal was achieved.

Finally, I take the same view as that which has been put forward by my noble and learned friends Lord Donaldson and Lord Wilberforce; that, in view of the near unanimity on a Bill whose clarity has been praised to the rooftops, to allocate it to the Public Bill procedure would involve a great waste of time and may breathe into the discussion complications which should not exist and which would not occur if the matter were taken on the Floor of the House.

8.43 p.m.

Lord Peston: My Lords, I have the distinction, or lack of distinction, of being the only non-lawyer taking part in your Lordships' debate. Furthermore, I have no interests to declare. I say that with regret because, having listened to the noble and learned Lord, Lord Ackner, I gather that there is quite a decent income to be earned in this area of activity.

My heart sank when I was told that this was a DTI Bill and that it was my responsibility to deal with it for the Opposition. However, I was mistaken in my view. I have done a lot of work in preparation for the Bill and I have become fascinated by the subject of arbitration. I hasten to add that at this late hour I shall not cover everything that now exercises my mind on the subject. I shall return to many of the topics in which I have become interested when your Lordships sit as a Committee.

I have learnt a great deal in preparing for the debate. I must confess that until recently I had never heard of the Chartered Institute of Arbitrators. Since we have the current president and the former president with us tonight I must apologise to them and to their chartered institute. I did not know at all of the existence of what my advisers have referred to as the arbitral institutions or of something called the arbitral community. I can go further. I had never seen the word "arbitral" until the end of last year and tonight is the first time the word has ever passed my lips. I have to say that it is not a word I like and I am not sure that once we have finished the Bill I shall ever allow it to pass my lips again.

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There is an economic side to all this; there is a large amount of high-powered mathematical economic analysis of principles of fair division, for example, as well as of the likely outcome of different formal arbitration procedures. Unhappily, I know of little empirical research by economist lawyers or others on actual arbitration perhaps because the relevant data are not easily available or not in the public domain.

I take most seriously the point made by the noble and learned Lord, Lord Roskill, on confidentiality. I shall reflect on it. More generally, I favour openness as a principle here and elsewhere. However we sit as a Committee, I hope that we can return to that matter. I agree, and I said, "Hear, hear", when it was remarked by the noble and learned Lord, Lord Donaldson, that the Bill is a model of clarity. I and other noble Lords approve of that. I am also a trifle worried because from many years' experience I have learnt that whenever something seems to be clear beyond doubt I should pause and wonder whether I have really understood what I have read.

Perhaps I may give an example. Clause 24 refers to the power of the court to remove the arbitrator. Subsection (1)(a) refers to the ground,

    "that circumstances exist that give rise to justifiable doubts as to his impartiality",

paragraph (b) to the ground,

    "that he does not possess the qualifications required by the arbitration agreement",

and paragraph (c) to the ground,

    "that he is physically or mentally incapable of conducting the proceedings".

It is curious that the statement that the tribunal shall act fairly and impartially comes later in the Bill. It is odd that the requirement appears later than the conditions under which one makes use of the requirement. As a layman, I am concerned by the fact that, for example, the word "impartially" is not defined in the Bill.

The noble Lord, Lord Lester, referred to independence which, as he says, is not mentioned in the Bill. As a layman, it seems to me that what matters is impartiality, which lies at the heart of the Bill. I would have argued to the noble Lord, Lord Lester, that independence is logically a possible means to that end of impartiality but I cannot see it as an end in its own right. However, I have learnt from experience of many other Bills in your Lordships' House that the legal community uses language in its own peculiar way. Therefore, there may be some meaning as to what the noble Lord, Lord Lester, said about independence and our need to clarify what is meant by "impartiality". I say that in preparation for making a more general remark about how we will handle the Committee stage of the Bill in your Lordships' House. Until tonight I was unaware that there was any objection to our proceeding by way of a Public Bill Committee. As someone who would expect to sit on that Committee, it had not occurred to me that it would lead to delay. Quite the contrary; I had thought that it would operate expeditiously and quickly. Speaking as a busy person who must also earn his living, I would regard that as an absolute prerequisite of how we carry on.

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Given the distinction of the noble and learned Lords who have expressed doubts on the matter, however, I have become somewhat concerned. I believe that what the Minister proposes to put forward is right but perhaps we ought to follow what was said by the noble and learned Lord, Lord Wilberforce, and not necessarily make up our minds tonight. I do not know but my immediate response is to say that there is no problem. However, the thought of not going along the lines of the noble and learned Lord, Lord Wilberforce, in particular, would, to put it mildly, trouble me. Therefore, I shall listen with interest to the Minister's reply. I should add that the central issue is the point which everybody has made; namely, that we must get a move on and deal with the matter one way or another.

En passant, something which intrigues me is that I have discovered--several noble Lords have pointed this out--that a great deal of arbitration work is carried out by non-lawyers. Lawyers seem to be in the minority in the arbitration field. In the construction industry, which seems to be one of the main sources of work in that sphere, the majority of arbitrators are people like surveyors and architects. They are appointed by the president of the Royal Institution of Chartered Surveyors and other such organisations which carry out that kind of work. Therefore, we must not think of this Bill as being a bonanza for lawyers or as being entirely a matter for lawyers. In fact, as the Minister emphasised, we wish to see disputes resolved with a minimum of difficulty--I echo his words--and to see arbitration as a valid alternative to litigation. I would go further and say that we should see it as a preferred alternative to litigation. I take that to be very much at the heart of the Bill.

I dwell on that partly because of the views of the departmental advisory committee on arbitration law which has been referred to with approval by noble Lords. The members of that committee have been referred to as people of great distinction. I am sure they are. I do not wish to make any defamatory remarks about them either as individuals or jointly. But looking at the list of members I have before me, I am staggered to see that the majority are lawyers. There are other members whose provenance I do not know; therefore, they may also be lawyers. This is an area in which we all agree lawyers are not of the essence. And yet the department's advisory committee whose members helped to prepare the Bill contains a small minority of people who are not lawyers. I do not believe that that is right. When the Minister reappoints members to the committee, perhaps he will consider a broader range of people. I could recommend one or two intelligent, sensible economists whom he might wish to appoint to the committee.

I turn now to one or two points of detail. I am intrigued by and very interested in the clause of the Bill which deals with consumer arbitration agreements. Quite separate from that, my advice has been that within the county court there is something called small claims arbitration. Until recently, those claims were limited to £1,000 or less but I believe that that has now been raised to £3,000 or less.

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I am sure that I am right to say that those county court arbitrations are exempt from the operation of the Bill. That is in Clause 94. I am very keen on small claims work. Therefore, it seems to me that we should remember that much of the small claims work is a model of how we should proceed more generally. When we sit as a Committee, I should like to look at Clause 89 which deals with consumer arbitration. As an economist and someone who believes that the consumer is paramount in everything, I am surprised to see that in the Bill the consumer is defined negatively as someone who is not a business and who is involved with goods of a type ordinarily supplied for private use or consumption. I wish to have that matter clarified.

I echo all the laudatory remarks made about the people who have helped with the Bill. I shall not repeat all the names. Many are people known to me; they are all first class. However, perhaps I may be my usual acid self and observe that the committee of the noble and learned Lord, Lord Mustill, reported in 1989. It seems to me that it has taken a long time between his committee telling us what to do and reaching the present situation. By any standards, seven years is a long time. I certainly wish to see this legislation reach the statute book in 1996. It would be dreadful if there was a drift from seven years to eight years before its enactment.

I believe that we should proceed expeditiously. There are some changes that we may wish to make in Committee but we do not wish to undermine the fundamental structure of the Bill. As I say, we wish to see the Bill speedily reach the statute book. All of those who take part in the proceedings on the Bill will take the matter seriously. But, speaking for the Official Opposition, I shall do nothing that would delay the Bill and prevent it becoming law during this Session of Parliament.

8.56 p.m.

Lord Fraser of Carmyllie: My Lords, I reflect somewhat ruefully that when I once had responsibility for the activities of some of the draftsmen, I can never recollect an occasion when the drafting of a Bill was approved of in such a magnificent form and which secured the approval of so many distinguished judges. Nevertheless, as the departmental Minister responsible for this Bill in your Lordships' House, I am delighted that there has been such a universal degree of approval for the fashion in which the Bill has been drafted. I am particularly grateful to the noble and learned Lord, Lord Ackner. A number of people were rightly complimented on their contributions, but it was good of the noble and learned Lord to mention the way in which parliamentary counsel finally drew the Bill together in such an acceptable form. I have no doubt that those who have contributed to the drafting will be particularly flattered that my noble friend Lord Hacking should go so far as to compare it with the great statutes, with which we are all familiar, of the 19th century.

The noble Lord, Lord Hacking, made a number of comments about some over-drafting. In July, a draft was put out for consultation. We made a number of changes subsequently in response to the points made then.

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I am delighted that, having engaged in some study of this matter, the noble Lord, Lord Peston, who has singled himself out as being the only non-lawyer to contribute to the debate, has become so intrigued by it. It is an extremely important subject and the way that it is set out in the Bill lends itself to an appreciation of just what is at issue.

I shall try to deal with a number of the points raised but I hope that I shall be forgiven if I do not seek to answer them all. Clearly, a number of the points were raised as pointers or markers as to what noble Lords may wish to discuss during later stages of the Bill.

A very important point was raised early by the noble Lord, Lord Lester. He referred to the provisions dealing with statutory arbitrations and the obligations which we undoubtedly have under Article 6 of the European Convention which refers to a right to a hearing before an independent and impartial tribunal.

As the noble Lord noted, the Bill requires the tribunal here to be impartial but not, on the face of it, to be both independent and impartial. I shall briefly outline the thinking on that point before considering the case of statutory arbitrations.

The recommendation to include impartiality alone was made by the departmental advisory committee on arbitration law after careful consideration of the issue. It reached the conclusion that lack of independence, unless it gives rise to doubts about the impartiality of the arbitrator, is of no significance. Independence is a difficult concept to define precisely and there are considerable doubts as to its exact meaning. In countries such as the United States and Sweden, parties have used that vagueness to mount endless arguments on the point. Almost any connection, however remote, has been put forward to challenge the independence of the arbitrator.

Furthermore, in the small world of arbitration, it may be difficult to find arbitrators who have no connection with anyone else involved. Indeed, the parties may want an arbitrator who has close links with their industry for the knowledge and expertise that they can bring to bear on the dispute. It is undoubtedly correct to say that it is vital for the tribunal to be utterly impartial. If there is any suggestion that a connection of some kind exists between an arbitrator and a party which raises doubts on that point, then the requirement for impartiality will not be met.

I turn now to the more specific issue of statutory arbitrations. With respect, I would question whether Article 6 applies in all such cases. There are many cases where, although the provision for arbitration is set out in primary or secondary legislation, the state is not involved in settling the dispute. One example is arbitration under the Agricultural Tenancies Act and, indeed, there are many more. I would suggest that Article 6 may not be relevant in that respect. If, however, the dispute is between the Executive and a party, then I more clearly see the argument that Article 6 might apply. However, much will depend on the particular wording of the provision in question, which is what will normally govern the appointment.

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The Bill is only applied to statutory arbitrations for certain purposes. I conclude then that there should not be a problem with the Bill itself. However, I was most grateful to the noble Lord for his courtesy in warning me of his intention to raise the point. Indeed, before we reach the Committee stage, the noble Lord may wish to expand on his thinking to me.

The noble and learned Lord, Lord Roskill, raised a point which was echoed by my noble friend Lord Byron, on the lack of provision within the Bill on confidentiality. I am aware of the Australian cases to which he made reference. I have to tell the noble and learned Lord, if he did not already know, that that is also a question which the advisory committee wrestled with at some length. The committee's advice ultimately was that the Bill should not attempt to codify the common law on such matters. We were content to accept that advice. Confidentiality--and, indeed, privacy--are highly complex issues. It would be difficult to get it right and all too easy to get it wrong. Rather than meeting our objective of improving arbitration as a method of resolving disputes, we would run the risk of creating new problems and adding to litigation.

While I would accept that it is desirable to give a statutory framework to the general principles which have developed on the matter and which have been upheld by the courts, the dangers of so doing are also significant. We would have to ensure that the provisions were comprehensive. The exceptions to the general requirement for confidentiality are numerous and partly open to question. I shall give your Lordships just two examples: arbitration awards become public in legal proceedings or abroad under the New York Convention; equally, there are important exceptions to privacy. I am convinced that the better way forward would be to leave it to the courts to develop the matter on a case-by-case basis, rather than run the risk of hindering the development of arbitration here by an inadequate statutory provision.

Perhaps I may deal with a number of other points raised during the debate. My noble friend Lord Noel-Buxton expressed his concern about the agreement in writing. I recognise that we have adopted a wide definition here. However, our object was to ensure, in what is essentially, as my noble friend correctly identified, a consensual matter, that there was sufficient to identify what the parties have agreed. We have no interest in importing the formalism which has sometimes arisen with requirements for writing.

My noble friend Lord Hacking raised the matter of the distinction between domestic and international matters. Perhaps I may point out to my noble friend that Clause 88 would provide the opportunity for that distinction to be removed, possibly along the lines that he suggested. However, as I am sure he is aware, I must remind my noble friend that there are a number of implications. Before taking such a step, we would intend to consult.

I turn now to a rather different point; namely, publication on the Internet. If the noble Lord, Lord Lester, is not aware of the fact, perhaps I may

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advise him that the issue of electronic publishing of parliamentary material more generally is under active consideration, not only in your Lordships' House but also in another place. I am sure that the noble Lord will recognise that the broader policy issues are complex. However, they are being considered as a matter of urgency. Until such time as that work is complete, in our view it would not be appropriate to approach the matter in a piecemeal or ad hoc fashion.

As I have indicated, there seem to me to be a number of other points raised during the debate to which I could respond, but which are probably better left to a later stage. I only wish to conclude on the substance of the Second Reading debate by thanking your Lordships for the erudite contributions which have been made. It is a long and complex Bill, but I doubt whether--and certainly not in my time--such a complicated Bill has ever received such a warm welcome at the point of its introduction.

I should like briefly to deal with what should be the next stage--

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