Lord Justice Saville, former head of the Commercial Court and a former chair of the Department of Trade and Industry's advisory committee on arbitration, has been appointed a Lord of Appeal in Ordinary.
He replaces another commercial lawyer, Lord Mustill, who retired in April.
Saville is regarded by commercial practitioners as a gifted lawyer who is not afraid to speak his mind. In 1993 he caused a stir by attacking the "grave injustice" caused by a lack of judges in the Commercial Court.
Peter Scott QC, the head of leading commercial chambers Fountain Court, said: "His appointment to the House of Lords confirms him as one of the outstanding judges of his generation. He is well respected by the legal profession, particularly in the commercial field.
"He is responsible in large measure for the new arbitration Act, which will significantly improve the process of arbitration and encourage the use of legal services in London.
"His analytical ability in complex legal problems will make him a valuable member of the House of Lords."
Saville's successor in the Court of Appeal is due to be announced by the end of July.