Arbitration Bill [HL]

Committee

Clauses 1 to 4 agreed.

Amendment 1

Moved by

1: After Clause 4, insert the following new Clause— “Safeguarding against fraud and corruptionIn section 33 of the Arbitration Act 1996 (general duty of the tribunal), after subsection (1)(b) insert—“(c) safeguard the arbitration proceedings against fraud and corruption.””

My Lords, before I address my amendment, I would like to express to your Lordships complete support for this Bill. I had the honour to be a member of the Special Public Bill Committee, so ably chaired by the noble and learned Lord, Lord Thomas. I sat through all the hearings and then sat with my co-members of the committee throughout our deliberations.

Perhaps I can do no better in expressing my support for the Bill than to quote from the Explanatory Notes. Paragraph 6 reads as follows:

“The intent of the Bill is to further the principle found in section 1 of the Arbitration Act 1996: to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense. Thereby, the aim is to fulfil the policy objective of ensuring that the Act is fit for purpose and that it continues to promote the UK as a leading destination for arbitrations”.

I now move to my amendment and, as I do so, I express thanks to my learned friend—or rather, my noble friend—the Minister. Unfortunately, he does not take the “learned” with his name, although he is very learned. I am very grateful to him for his letter to me of 15 August on the corruption issue. I have read the entire contents of that letter and express gratitude without reserve, but I am afraid to tell your Lordships—for reasons that I will now develop—that the reply in this letter is not complete.

First, we must look at the extent of corruption and I am afraid that it is bad news. There is the Nigeria case and the judgment of Mr Justice Robin Knowles on 23 October 2023; nobody in this Committee knows more about that case than the noble Lord, Lord Wolfson of Tredegar, KC, who took the role of a senior counsel throughout the long hearings before Mr Justice Knowles. The fact is, however, that in the arbitration proceedings resulting in that case, there were two very distinguished English arbitrators—former judges of the High Court—who made a very large award of $11 billion. Because of the corruption that was found by Mr Justice Robin Knowles, that very large award had to be set aside in its entirety.

Facing all of this, I am offering a very simple measure, which will show the international community that corruption or fraud in all arbitrations where the seat is England is quite unacceptable. It will not stop corruption in arbitration, but it will place, as it were, a firm flag in the ground. How will it work? What should the arbitral tribunal do? If I was sitting as a chairman of an arbitral tribunal, or as a sole arbitrator, at the commencement of the arbitration—when traditionally the tribunal draws together all the parties and counsels to settle the terms of the proposed arbitration—I would say to the counsel in the hearing and the parties involved in the dispute that there should be no taint of corruption and fraud. I know this from my days as a counsel and solicitor. When a counsel or solicitor takes instruction from a client and prepares witness statements, there is plenty of opportunity to smoke out potential acts of corruption and fraud. I suggest that this should be addressed now and not in some distant opportunity for arbitral reform.

As I said at Second Reading, I have been involved in arbitration law reform for a very long time—since 1978, 46 years ago. Looking at the time between the 1979 Act, for which I had a lot of responsibilities, and the 1996 Act, in which I also had responsibility, that is a period of 17 years. The period between the 1996 Act and now is 28 years. It is essential that we address the issue now in this Bill.

I know the Minister is rightly anxious to get this Bill without delay on to the statute book, and I commend him strongly for that. However, there will not be any significant delay. One of the Whips is moving their hand; I was wondering if that was addressed to me, but apparently it is not. The reason there would not be a significant delay is because of what I envisage, if the Minister will assist. This very simple amendment should be sent before all the bodies that appeared before the Committee chaired by the noble and learned Lord, Lord Thomas. Each of those parties—the Chartered Institute of Arbitrators, the London Court of International Arbitration, the ICC and so forth—should have an opportunity to express their views. Following the request from the noble and learned Lord, Lord Bellamy, when he was the Minister, letters were sent out and received in reply from the main institutes on the issue of corruption, but that was a wide remit. This is a very precise and small remit—namely, the wording of my amendment.

It will not be possible, unfortunately, for the Committee chaired by the noble and learned Lord, Lord Thomas, to meet again. However, answers can be easily obtained if my noble friend the Minister would kindly help. The House would then know the answers, within a month of responses being received, on the drafting of my amendment. Above all, I ask my noble friend the Minister to have an open mind. As far as we know, unlike last time, this Government are not under pressure as there is no danger of a sudden Dissolution, so there is time to make proper inquiries so that this very important amendment is included in the Bill. I beg to move.

My Lords, I declare an interest in that, since retiring from the Appellate Committee of your Lordships’ House, I have practised as an arbitrator. More to the point, I was the presiding arbitrator in the Nigerian case to which the noble Lord referred. Of course, no one could object to the sentiment behind the noble Lord’s amendment—we all disapprove of bribery and corruption—but the question your Lordships have to think about is: what does that mean we arbitrators are supposed to do in practice?

Take, for example, the Nigerian case to which the noble Lord referred. It was a claim for breach of contract against the Government of Nigeria: they were supposed to supply the claimants with quantities of gas over a very long period, but they did not do so. The question was: was that a breach of contract? If it was, what were the damages to be? No objection was made on the validity of the contract. We heard the arguments about whether there had been a breach, and we decided there had. Eventually, at another hearing, we went into the question of what damages had to be paid. Arguments were again brought, with expert witnesses on both sides, and we came to the conclusion that it was a large figure, because the gas was due to have been supplied over a period of 25 years and it all added up. That was the rub.

As the noble Lord said, at the hearing before Mr Justice Knowles it turned out that there had been some bribery and corruption in obtaining the contract and in the conduct of the litigation. None of this was known to us. So the question is: what ought we to have done? Should we have said to the parties at the beginning, “By the way, can you please assure us that there has been no bribery and corruption?” It seems an extraordinary ritual that we would have had to go through, and it would have to be the case in every arbitration.

Arbitration is a consensual arrangement. The parties have agreed that each of them will come before a tribunal, that each will present his case and that the tribunal will decide on the basis of the arguments the parties present. Is it consistent with that form of decision-making that the tribunal should attempt to dig away at a point on which the parties have not relied? Of course, if one of the parties suspects that there has been bribery and corruption on the other side, so to speak, that would enable it to resist the application, it would no doubt do so. But, in a case in which neither party raises this point, it is difficult to see what the arbitrators can do.

My Lords, I entirely endorse what my noble and learned friend Lord Hoffmann has said, but I would like to say a word about the procedure that the noble Lord, Lord Hacking, has invited the Minister to adopt. Surely the stage of conferring with people as to what they think about this amendment has passed. This matter could have been raised in the Committee of the noble and learned Lord, Lord Thomas —it was not, of course—but now it is a matter for this Committee to decide whether or not to accept the amendment. It is as simple as that. With great respect, I think it is a matter for the Committee and not for anybody else now. I agree with my noble and learned friend Lord Hoffmann that this amendment should not be accepted.

My Lords, I agree with both the noble and learned Lords, Lord Hope and Lord Hoffmann, that this amendment ought not to be accepted. However, it seems to me, as the noble and learned Lord, Lord Hoffmann, said, that everyone agrees with the sentiment behind what the noble Lord, Lord Hacking, has proposed.

I had thought that we had agreed how to deal with this matter when the then Minister dealt with it at a hearing of the Special Public Bill Committee. I raised this point by way of an amendment to the old Arbitration Act. The Minister agreed, in response to that, that he would write to the arbitral institutions and we would see what the best practice was. I had assumed that all that would be made public, and I am entirely at a loss to understand why the letters that were written and the responses have not been made public. It would be extremely helpful to have all this information put into the public domain to show, for the benefit of London, what was being done to address this point. As I understand it, these were documents written by the Minister in his capacity of trying to deal with a problem that had arisen and was discussed in this House. It would be very helpful to have a discussion and look into the matter in detail. If something needs to be done—more than is being done—we can return to it. Certainly, we ought not to delay the Bill by this amendment.

My Lords, in our Second Reading debate on 30 July, I asked the Minister to respond about these consultations that had taken place, which he did in a letter on, I think, 15 August. He set out in some detail the various ways in which the existing system deals with corruption.

It would be beneficial, as the noble and learned Lord has just pointed out, if the documents which the Minister was summarising were themselves made public, with the consent of the relevant organisations, because there is a lot of detail here that needs to be discussed. Indeed, the remarks of the noble and learned Lord, Lord Hoffmann, illustrate that we cannot proceed on the matter of this amendment without some pretty extensive discussion about how it could work and how it affects the role of the arbitrator. Although I am very sympathetic to the amendment, to try to introduce it at this stage would be an unnecessary delay to a Bill that has had quite a lot of delays already, not least because of the general election. That would be an unfortunate consequence.

The most reassuring thing in the Minister’s letter is the reminder that the case to which the noble and learned Lord, Lord Hoffmann, referred, and in which he was directly involved, was of course dealt with in the High Court. The High Court set aside the results of the arbitration, having discovered the corruption that had occurred. This is a demonstration that, even without new statutory provision, our system can deal with corruption of this kind. It is still there, however. There is a lot of corruption about and it is quite likely that it will emerge or be present in matters that are the subject of arbitration, particularly between states and very large commercial undertakings.

I therefore do not think that we should be content simply to set aside the amendment that the noble Lord, Lord Hacking, has introduced, but I do not think that we should attempt to insert it into the Bill at this stage. We should seek to establish whether both the substance of the law and our ability to enforce it would be improved by new statutory provision, and I am not yet persuaded that that is so. We strongly support the Bill and do not want to see its progress delayed.

My Lords, in relation to the intervention of the noble and learned Lord, Lord Thomas, your Lordships will recall that on 27 March this year, when I was then the Minister in charge of the Bill, I said that I had written to the Chartered Institute of Arbitrators, the ICC, the LCIA, the London Maritime Arbitrators Association, GAFTA, the Law Society and the Bar Council to ask them

“what measures they have in place to mitigate the risk of corruption in arbitration, whether more should be done in the sector to mitigate corruption in arbitration”,

and any suggestions they had as to

“the best way to proceed and how the Ministry … could support the sector’s efforts”.—[Official Report, 27/3/24; col. 12.]

Before I had a chance to review or indeed see any of those replies, Parliament was dissolved, so I still do not know what the replies were. I understand from the Minister in a call this morning that there is some glitch in relation to the convention about what documents an incoming Government could see if those documents arose under the previous Government. I would have thought that this was an area where continuity between the Governments, transparency and a common approach were essential and necessary. I very much hope that in the meantime, any technical glitch about the change of Government should not interfere with the tackling of this problem.

As has been pointed out, the Minister in his letter of 15 August summarised the responses in some detail, but the question remains, as has been raised by two noble Lords—the noble and learned Lord, Lord Thomas, and the noble Lord, Lord Beith—as to whether those responses should be made public, with the co-operation, of course, of the institutions concerned, from the point of view of establishing and reinforcing the reputation of the City of London and, in particular, reassuring those who wish to arbitrate in this country that the question of corruption is being addressed.

My Lords, I associate myself with the wonderful words of the three noble and learned Lords and I share the concern of the noble Lord, Lord Hacking, but when I was reading theology, my then—wonderful—professor of theology said that the only way you know whether you have resolved a theological conundrum is to try to find some practical solution to your particular difficulty.

My greatest concern with the amendment is this. It talks about safeguarding the arbitration proceedings against fraud and corruption. Probably Queen Elizabeth I would have said to such a suggestion what she said to the troops at Tilbury:

“I have no desire to make windows into men’s souls”.

How do you safeguard proceedings against corruption? Corruption is in the hearts and minds of people. How do you do it? I cannot find a real, practical solution. Therefore, on those grounds, although the amendment is well intentioned, I think the burden it would put on the proceedings of arbitration is far too great, so please may we not have a desire to make windows in people’s hearts.