MODERN TRENDS IN COMMERCIAL LAW AND PRACTICE*

DOIhttp://doi.org/10.1111/j.1468-2230.1978.tb00783.x
AuthorMichael Kerr
Published date01 January 1978
Date01 January 1978
THE
MODERN
LAW
REVIEW
Volume
41
January
1978
No.
1
MODERN
TRENDS
IN
COMMERCIAL
LAW
AND
PRACTICE*
BACKGROUND
To
see
the present position in perspective, one must first briefly
look back. The foundation of our commercial law was laid in the
nineteenth century; in shipping and marine insurance already largely
in
the eighteenth. For well over
a
100
years
this
country has been
the leading forum for the resolution of commercial disputes. Originally
this
was
due to our paramount position
in
international trade. Lloyds
was the centre for insurance. The Baltic Exchange became the world
centre for the chartering of ships, and London, Liverpool and
Manchester the market places for every
type
of commodity sold on
a
"
spot
"
or
"
future
"
basis. Another reason was the reputation of
our administration of justice and of our merchants, first
as
traders
and then also as arbitrators. International trade became increasingly
geared to English standard forms of contract, in particular charter-
parties negotiated on the Baltic, insurance policies covering the ships
and their cargoes, and commodity contracts recommended by the
numerous trade associations which grew up in every field. Ship-
owners formed themselvs into mutual Protection and Indemnity
Associations, commonly
known
as
''
Clubs," with world-wide member-
ship. English was the
lingua
frunca.
Most standard contracts in
common use were governed
by
English law, and by the middle
of
the
nineteenth century many of them included arbitration clauses. Arbitra-
tion
law
is a vital part
of
our commercial law and an important by-
product of our international trade.
Before dealing with trends in the substantive law, it is necessary
to say something about the practice. Speed and efficiency in the
resolution of disputes are at least as important to the commercial
community as the quality
of
individual decisions.
I
therefore begin
with a brief reference to the relationship between arbitration and the
courts and to the Commercial Court
in
particular.
THE
COURTS
AND
ARBITRATION
The relationship between litigation and arbitration in this country
has always been somewhat ambivalent, and there are
signs
that the
*
This paper was given
as
the Sixth Chorley Lecture at the London School
of
Economics
on
June
22,
1977;
it has been revised to meet subsequent developments
as far as was practicable.
1
VOL.
41
(1)
1
2
THE
MODERN
LAW
REVIEW
[Vol.
41
lines of demarcation may have to be re-examined. Since freedom
of
contract is one of the comer-stones of our law, subject only to
illegality and the
minor
restraint of our rules of public policy, our
courts have always respected arbitration as the parties’ forum
of
choice. On the other hand, agreements designed to oust the jurisdic-
tion
of
the courts are contrary to public policy. The fust test came
with the famous decision of the House
of
Lords in
Scott
v.
Avery
over
125
years ago. The issue was whether an arbitration clause, since
then known as a
“Scott
v.
Avery
clause,”
was contrary to public
policy and therefore invalid, because
it
provided that neither party
cauld sue on a contract unless and until the dispute had first been
referred to and decided by arbitration. After taking the advice of no
less than
11
puisne judges, the House of Lords accepted the bare
majority view that the clause was valid. But it only did
so
on the
somewhat legalistic ground that such a provision did not finally oust
the jurisdiction of the courts, since it left to the parties the right to
go
to the courts after the dispute had been referred to arbitration and
become the subject-matter
of
an arbitral award.
This
remains the
law, but the philosophy
of
the compromise can only be understood in
the light of the control exercised by the courts over issues
of
law in
arbitrations. This
is
the unusual feature
of
our system and
of
some
of the countries to which it has been exported (but not the United
States), that the courts retain the final say on issues of law by means
of the “Special Case” procedure, which has been part of our law
for over
100
years.
Either party may request the arbitral tribunal
to state a case for the opinion of the court on any material and
substantial point
of
law arising in the arbitration.
If
the tribunal
refuses, it
can
be ordered to do
so
by the court.
The courts will finally decide the point
or
points of law involved,
in the first instance in the Queen’s Bench Division,
in
commercial
cases in the Commercial Court, and then with rights
of
appeal up to
the House
of
Lords
in
the usuaI way. In this way decisions on Special
Cases
stated by arbitrators have contributed immensely to the develop-
ment
of
our commercial law.
An
agreement which purports to
exclude this procedure is unenforceable
on
grounds of public policy
in England and Wales, though permissible in Scotland.2 However,
the Special
Case
procedure
is
intrinsically unsatisfactory
in
many
ways, and it is also open to abuse by parties who merely wish to gain
time and to put difficulties in the way
of
the other side. It is being
increasingly criticised, and
I
shall have to return
to
this point later.
THE
COMMERCIAL COURT
The creation of the Commercial Court in
1895
is a landmark in our
commercial law.3 The judges
of
the Queen’s Bench recognised that
1
(1856)
5
H.L.
811.
2
See
ss.
3
and
5
of
the
Administration
of
Justice Act (Scotland) 1973. The
anomaly
is
perhaps explicable
on
the
ground that there had previously never been
any Special Case procedure in Scotland.
3
For details
of
the history
see
Mathew’s
Practice
of
the
Commercial
Court
(2nd ed., 1967) by Anthony Colman, Q.C.

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