There is a long history of arbitration in Scotland. It is possible to find reported cases going back to the thirteenth century, and the process was used well before then. In the early days, Scottish Arbitration existed in two distinct forms: legalistic and equitable arbitration. An “arbiter” was expected to deal with matters formally and adhere strictly to the law. An “arbitrator” on the other hand, was permitted to handle things more informally and had power to decide things in an equitable manner.
Over time, legalistic arbitration came to dominate, and the term “arbiter” was used to describe the tribunal in every case. Eventually Scottish arbitration developed into a modern system with only minimal intervention from the legislature prior to 2010. However, by the 1990s arbitration had come to be viewed as expensive and cumbersome, and was rarely used, even it its traditional area of construction law.
The Arbitration (Scotland) Act 2010 completely overhauled and codified the law of arbitration in Scotland. Drawing on best practice from around the world, modelled closely on the Arbitration Act 1996 applicable in England and Wales, and brining a number of innovations to the table, the Scottish law of arbitration is now the equal of any other system. That is starting to pay dividends both in the use of arbitration domestically, and in the perception of Scotland as a place to seat international arbitration.
The 2010 Act is organised into operative sections laying out the framework of the law, and a schedule of rules “the Scottish Arbitration Rules” which apply to arbitrations seated in Scotland by default. Some of the rules (such as the duty to disclose any conflict of interest) are mandatory and apply regardless of any agreement to the contrary. However, many rules are “default” rules and can be varied by agreement, allowing parties to tailor the procedure to their needs if desired.
The default position, as with most sets of arbitral rules, is that the tribunal is the master of the procedure. However, if parties desire, they can specify within an agreement to arbitrate or by incorporating a bespoke set of rules, a time limit and format for any stage of the process, including the time frame for the final award.
Another characteristic of the Scottish regime is that the routes to challenge the tribunals award are limited. Whereas in the Scottish courts, as in the courts of many jurisdiction, a final determination at first instance can be appealed without leave, there is no such automatic right in arbitration on points of law, and indeed, parties are free to exclude legal error appeals by agreement. If such appeals have not been excluded, they can only proceed with the agreement of the parties, or with the leave of the court. This serves to limit the possibility of spurious challenges designed to halt the wheels of justice.
There are of course the usual safeguards, and challenges on the grounds of an excess of jurisdiction, or a serious irregularity can be brought without leave of the court. However, such challenges are subject to tough judicial scrutiny, and only succeed if truly merited.
Where there has been a challenge to an award, whether on a legal error point (where permitted) or on jurisdiction or serious irregularity grounds, one further level of appeal is permitted to the Inner House of the Court of Session. However, any such appeal requires the leave of the court, and that will only be granted if the proposed appeal would raise an important point of principle or practice, or if there is another compelling reason for the Inner House to consider the appeal. The decision of the court of first instance on whether to allow an appeal is final.
There is no further avenue of appeal, so in contrast to appeals from the Scottish courts (or those arising out of an English arbitration) appeals to the UK Supreme Court in London are not permitted in respect of any Scottish arbitration matter. Necessarily, this limits the potential cost and delay of the overall process.
Another peculiarity of the Scottish system is the position on confidentiality. Most jurisdictions do not cater for confidentiality within their arbitration legislation. The Scottish Rules provide for opt out confidentiality as a default position, providing that a breach of confidentiality is actionable, so that if a breach of confidentiality is reasonably apprehended it can be prevented through the courts; if there has been a partial breach, further breaches can be prevented, and if a breach causes loss that can be demonstrated, it can be recovered.
Whilst many jurisdictions do have implied confidentiality, that confidentiality can be lost if a challenge to the award is mounted in court. Scotland has catered for this possibility in its court rules, so that any court proceedings related to an arbitration are anonymised to protect the identity of the parties, the tribunal, and the confidential information comprising the subject matter of the arbitration.
Scotland has always been a stable legal jurisdiction with strong a tradition of independent and incorruptible courts. The fact that it is an English-speaking seat with a mixed legal system combining common law and civil law elements gives is a particular advantage as an arbitration destination. Common law practitioners will find its arbitration act instantly familiar, whilst civil law practitioners may be attracted to Scotland’s more continental approach to document recovery (and the time and cost savings that brings) and principle-based approach.
These elements combined with Scotland’s modern arbitration regime, and the allure of Scotland as a destination make it an attractive seat of arbitration. Later this year, Scotland will have the opportunity to showcase these advantages when the Scottish Arbitration Centre hosts the XXVth Congress of the International Council for Commercial Arbitration in Edinburgh. Visit www.ICCA2021.scot to find out more.
Brandon Malone is a solicitor advocate and arbitrator based in Edinburgh and London. He chairs the board of the Scottish Arbitration Centre.
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