Official Report: Minutes of Evidence

The Chairperson (Ms Bunting): I welcome from the Department of Justice Andrew Dawson, deputy director of the civil justice and judicial policy division; Jane Maguire, head of the civil and family courts branch; and Andrew Robinson, who is also from the civil and family courts branch. Andrew and I know each other from a previous life. It is good to have you with us today, folks. Thank you for taking the time.

I invite you to give your presentation. Doubtless we will then have questions for you. I appreciate that the information is in your paper, but, for the record and because the session is being reported by Hansard, I would be grateful if, as you go through your presentation, you could indicate the changes that were made to the Bill and the essential differences between the Bill that is before Parliament now and the one that fell. Thank you.

Mr Andrew Dawson (Department of Justice): Thank you very much for the opportunity to discuss the legislative consent memorandum (LCM). As you mentioned, Chair, the Bill was introduced in the House of Lords in July and is scheduled for its Report Stage in the Lords next week. This is the second time that the Bill has been introduced in Parliament. It was first introduced last year under the previous Government but did not complete its passage owing to the dissolution of Parliament for the general election.

The Bill amends the Arbitration Act 1996 to give effect to recommendations from the Law Commission of England and Wales. The 1996 Act also governs arbitration in this jurisdiction, so the Bill extends to Northern Ireland. Andrew and Jane will speak shortly to the changes that were made to the Bill between the previous parliamentary session and this one. As I understand it, the two Bills are extremely similar in scope and nature, but Andrew and Jane will be able to respond better to that question.

By way of background, in March 2021, the Ministry of Justice (MOJ) asked the Law Commission of England and Wales to review the 1996 Act to ensure that it remained fit for purpose and continued to promote the UK's position as an international leader in the field of arbitration. It is estimated that the sector is worth at least £2·5 billion to the UK economy each year. We do not have a breakdown of what that means specifically for the Northern Ireland economy.

The Law Commission of England and Wales began its review in January 2022 and carried out two public consultations, one in September 2022 and a further one in March 2023. As part of its consideration, the commission engaged with a number of key stakeholders in this jurisdiction and received a Northern Ireland perspective from Mr Justice Scoffield, the chair of the Northern Ireland Law Commission. The final report of the Law Commission of England and Wales was published, together with the draft Bill, in September 2023. The then Government agreed to implement all of the commission's recommendations. The Law Commission's report reflected the view of stakeholders and practitioners that the 1996 Act generally works well and that substantial reform is not required. The Bill therefore makes targeted reforms.

The law regulating arbitration is specialised, so the Bill's provisions are fairly technical and, in large part, are designed to address and provide greater clarity on matters arising from case law and practice. We have provided a clause-by-clause breakdown in the briefing paper, but, in summary, the Bill's key aims and initiatives are to clarify the law that governs the arbitration process for international arbitration agreements; to codify the duty on arbitrators to disclose potential conflicts of interest; to strengthen arbitrator immunity to ensure the impartiality of arbitrators; to enable arbitrators to dispose summarily of issues that have no real prospect of success; and to strengthen court orders in support of arbitration proceedings.

The Department's view is that there are no issues specific to Northern Ireland that require a different approach to be taken from that taken in England and Wales. If the Bill did not extend to Northern Ireland, it would mean that arbitration here would be governed by slightly different procedures and that parties to arbitration proceedings would not derive the same benefits from the improved and updated legal framework. That is a brief outline of the Bill.

I will take a minute to discuss the legislative consent process. The Bill was first introduced in Westminster in November 2023, when the Assembly was not sitting. By the time that the institutions were restored in February 2024, the Bill's first iteration had already completed several parliamentary stages. Unfortunately, we have not been able to engage with the Committee until now on the current Bill.

The Bill was reintroduced on 18 July, when the Assembly was in summer recess, but, even after that, an issue needed to be sorted out between us and the Department for the Economy. There was a potential issue, which turned out not to be an issue, to do with a question that has now been answered about the application of the 1996 Act to the Labour Relations Agency (LRA) employment arbitration scheme. DFE needed to consider the implications of the Bill for that scheme. I am pleased to say that it has concluded that the Bill will have minimal impact on the LRA scheme, and, accordingly, it is content for the legislative consent process to be progressed.

Unfortunately, that issue took some time to resolve, meaning that our timetable is, as ever, particularly challenging. The MOJ has, however, helpfully agreed to extend the deadline for obtaining legislative consent until the final amending stage in the House of Commons, which, slightly unusually, is the second House to consider the Bill. That buys us some more time. We think that obtaining legislative consent within that timescale is achievable, but it will be tight. We are planning or, certainly, hoping for the Executive to consider the matter at their meeting on 7 November so that, subject to Executive approval, the legislative consent motion can be tabled. We will, of course, assist the Committee with its scrutiny in any way that we can. Again unfortunately, the Bill timetabling is not within our control. For comfort, it is therefore probably preferable to obtain the Assembly's legislative consent prior to the Christmas recess, if that is at all possible. Doing that will be challenging but is achievable.

We are grateful that the Committee added this item to its agenda today. That has been really helpful. That concludes my introductory remarks. I am now happy to answer any questions

The Chairperson (Ms Bunting): Thank you, Andrew. Do Andrew or Jane want to come in on the specific differences between the current Bill and the previous one?

Ms Jane Maguire (Department of Justice): The differences are not really that great. The main one is that the current Bill has picked up on an amendment that was made to the original Bill in the House of Lords. It relates to clause 1, which deals with the law that is applicable to arbitration agreements. The Bill replaces the common law position with a new statutory rule (SR) to provide that the law governing the arbitration agreement, which is distinct from the law that will govern the contract — the subject of the arbitration — between the parties will be the law of the seat where the arbitration is taking place, unless the parties have expressly agreed otherwise. The Bill as reintroduced makes it clear that that provision will not apply to arbitration agreements that are derived from standing offers to arbitrate, which may be contained in treaties and legislation relating to state foreign investment, because those are usually governed by international law. It was therefore agreed that that provision would not apply. It is a technical matter.

Other than that, the Bill corrects a minor drafting error that was picked up on in relation to the 1996 Act. An incorrect consequential amendment had been made. That is just a minor and technical point.

The Chairperson (Ms Bunting): It is just clarification on international issues and changes to keep the Bill right.

Ms Maguire: Yes.

Miss Hargey: The Bill is technical, and I do not understand everything. I can see the importance of the duty on arbitrators to disclose potential conflicts of interest. Are you looking to strengthen and codify the existing duty, or are changes being made to what is already in place?

Ms Maguire: You refer to clause 2. That clause will codify the common law position, which is the position as set out by the Supreme Court, namely that arbitrators have a continuing duty to disclose any circumstances that might reasonably give rise to doubts about their impartiality. That duty is based on what an arbitrator ought reasonably to have known. I think that some case law had left unresolved the question of whether that duty was to be based on actual knowledge. The new statutory provision will —

Miss Hargey: Strengthen that.

Ms Maguire: — clarify what they ought reasonably to be aware of.

Miss Hargey: Regarding the introduction of provisions for arbitrators to dismiss legal claims on a lack of merit, is there a review mechanism or process that you are aware of, should a case be disputed?

Ms Maguire: Which clause it that?

Miss Hargey: The Bill refers to introducing provisions for arbitrators.

Dr Andrew Robinson (Department of Justice): That is clause 7. There is an express power. Arbitrators can make an award on a summary basis, but it is not necessarily mandatory, so parties can agree to disapply that in the original contract. The amendment to the 1996 Act also outlines how arbitrators can exercise that power only on an application from one of the parties. Arbitrators should not be able to do that off their own bat. One of the parties would have to apply for that power. There is no specific procedure for that. It is decided very much on a case-by-case basis how an arbitrator —.

Miss Hargey: In enacting that provision, is there is a clear framework within which the arbitrator has to work?

Dr Robinson: Arbitration institutions have their own procedures, so that would very much depend on which institution, if you were to go down the institutional arbitration route, is able to deal with the matter. Most institutions will have rules about doing that, however. I think that the Law Commission did not want to prescribe exactly how the procedure would work. It allows for a bit more flexibility than you would get, say, if you were going through litigation instead.

Miss Hargey: There are no massive changes between the two Bills. Is there likely to be anything further between now and getting Executive agreement? Are there any other big amendments or anything to come that will change the scope of what is in front of us?

Mr Dawson: For our money, I would not expect there to be any further changes for Northern Ireland, but we will watch carefully to see what happens as the Bill progresses through Westminster.

Miss Hargey: Is there anything in its progress that alarms you at the moment?

Mr Dawson: It is hard to say, but, given the technical nature of the Bill, that is unlikely. We will, however, keep a careful eye on the Bill. If there are any major developments, we will keep you posted on them.

Miss Hargey: OK.

Dr Robinson: The Bill has had two good airings in the House of Lords. The process has been quite technical, so MOJ is not expecting any more developments at this stage.

Ms Maguire: There is wide support for the Bill.

Miss Hargey: That is grand. Thank you.

Mr Dickson: I have an interest to declare. In a former career, I was the arbitration secretary in the Labour Relations Agency.

Miss Hargey: You could have told us all about that. [Laughter.]

Dr Robinson: You should be on this side of the table.

Ms Ferguson: You mentioned the Labour Relations Agency. Who and where are the arbitrators? What organisations provide that service? What is the scale and size of it? You could probably answer that, Stewart, but I will ask the officials.

Mr Dawson: I will make a start on that, anyway. Typically, arbitrators are experienced professionals chosen for that role depending on the subject matter that is at the core of the dispute. They are not required to be legally qualified, but a lot of them are lawyers; they may be solicitors, barristers or retired judges. They can also be specialists in areas such as construction or engineering, including chartered engineers.

There is specific training and accreditation in arbitration. The Chartered Institute of Arbitrators offers the designation of "chartered arbitrator" to qualified individuals. Further to that, I understand that arbitration agreements or clauses in a contract between parties can stipulate that an arbitrator or panel of arbitrators should have specific experience or qualifications. They can also select arbitrators from a panel maintained by one of various arbitration institutions. That could be the London Court of International Arbitration, the Chartered Institute of Arbitrators or the International Chamber of Commerce.

Locally, they mostly are lawyers, but they do not have to be lawyers. There is quite a range.

Miss Hargey: Do we know what the number and scale is in the North compared with GB and down South?

Mr Dawson: We do not. No official statistics are kept on that. Unfortunately, we do not know the extent of that, but I suspect that it is a growing business. Arbitration is very much the road that parties with a dispute are encouraged to go down as a form of alternative dispute resolution. Whilst I do not know the number, I think that it is growing.

Ms Maguire: I think that it is — sorry.

Mr Dickson: Sorry. By way of information, arbitrators who fall under the responsibility of the Labour Relations Agency are named and identified in its annual report. The legislation applies to other organisations in Northern Ireland, but you would have to gather the information elsewhere. It is not just lawyers; trade union officials and a range of other people qualify.

Ms Maguire: That includes engineers. Arbitration is used particularly in relation to commercial construction contracts — highly specialised areas. It is typically used in that sort of area.

Miss Hargey: I assume that there was extensive consultation with that range of stakeholders in construction, labour relations and so on at the outset.

Ms Maguire: The review carried out by the Law Commission in England and Wales, which is where the Bill came from, had, I think, two consultation phases. There was a large number of responses to those consultations, so there has been extensive engagement with the sector. That includes some engagement with key stakeholders in Northern Ireland on behalf of the Law Commission and through Mr Justice Scoffield, who is the chair of the Law Commission in Northern Ireland.

The Chairperson (Ms Bunting): OK. I have a couple of points. Bearing in mind what Jane outlined about the distinctions between the previous Bill and this one, it is not necessary to go back to the Law Society and the Federation of Small Businesses. We consulted them on the matter previously, but, bearing in mind the technical nature of the change, I do not think that we have to go back to them.

I have a couple of questions for the Committee. Are members content to note the Department's briefing and for the LCM on the Arbitration Bill to be laid before the Assembly as soon as possible?

The Chairperson (Ms Bunting): Are members also content to forward the briefing to the Committee for Finance and the Committee for the Economy, as a number of clauses in the Bill touch on their responsibilities?

The Chairperson (Ms Bunting): That is great. Thank you very much.

Folks, thank you very much for taking the time to come to the Committee. It is greatly appreciated.

Mr Dawson: Thank you.

Ms Maguire: Thank you.

Dr Robinson: Thank you.

The Chairperson (Ms Bunting): It is lovely when these things are uncontroversial, is it not? Thank you.