Arbitrating Disputes in Scotland

By Victoria Muntean

Despite having played a major role in the Scottish dispute settlement system for hundreds of years, arbitration in Scotland was offered a codified system of rules only in 2010 with the enactment of the Arbitration (Scotland) Act 2010. The statue sought to offer practitioners an unrivalled set of rules in aiding them to solve both commercial and non-commercial dispute arising out of modern settings whether home or abroad.

Arbitral proceedings in Scotland are facilitated by the Scottish Arbitration Centre[1] in the Scottish capital of Edinburgh. Moreover, there are specialised institutions such as the  International Centre for Energy Arbitration (ICEA). ICEA was established  in 2013 jointly by  the Centre for Energy Petroleum Mineral Law and Policy at the University of Dundee and the Scottish Arbitration Centre.[2] Albeit not an arbitral institution, ICEA was founded to promote arbitration for energy disputes in Scotland whilst acting as a research body investigating trends and attitude vis a vis disputes in the energy industry.

Importantly, the Scottish arbitration system is distinct and separate from that in England and Wales and arbitral awards made by Scottish tribunals cannot be appealed to the UK Supreme Court.[3] Still English case law on the matter was recognised to be of assistance in so far as the 2010 Act was modelled on English provisions.[4] A key distinction from its English counterpart[5] is the separation of procedural issues from issues of law. Arbitration proceedings in Scotland are governed by the Scottish Arbitration Rules set out in schedule 1 of the Act.[6] These also provide for enforcement and appeal of awards. Indeed, neutrality, namely in the energy sector, was identified as a key procedural factor for the parties when considering the most appropriate dispute settlement mechanism.[7] Scotland had adopted the UNCITRAL Model Law on International Commercial Arbitration with respect to international arbitration proceedings[8] yet the 2010 Act repealed these earlier provisions creating a ‘comprehensive integrated arbitral regime premised on Model-Law principles.’[9] Naturally, foreign awards can be made final and enforceable by Scottish courts in line with the 1958 New York Convention[10] as adopted and ratified by the United Kingdom.[11]

The 2010 Act purported among others to attract business in their choice of Scotland as the seat of arbitration. A certain positive stimulation in this respect has been recorded, namely in the field of construction and renewable energy disputes[12] with the statutory confidentiality obligation being identified as the key benefits brought by Act.[13]  Others, however, have argued that the Act failed to deliver on its promise of transforming Scotland into a major player on the international arbitration arena[14] and the emphasis on confidentiality has been described in fact as counterproductive.

As confidentiality  is strictly observed during proceedings, on appeal the identity of the parties is kept anonymous and it is even possible to persuade the courts to restrain from publishing the judgement altogether.[15] Such lack of transparency and unavailability of court decisions make it near impossible to establish a track record of arbitration in Scotland and discourages parties from choosing Scotland over Stockholm, Paris or Singapore, because they cannot ascertain the courts approach to arbitration.[16] Conversely, an implied confidentiality approach as adopted in England and Wales would allow for the promotion of Scotland’s reputation. Still, some of the advantages of arbitrating in Scotland are the following: it is an English-speaking jurisdiction yet separate and neural from England and Wales, allowing restricted and limited grounds for appeal, and founded on principles fundamentally amicable towards arbitration such as impartiality and fairness, party autonomy, and non-interference by courts.[17]

The latter principle is synonym to a limitation of courts’ jurisdiction with respect to arbitration, which was in fact seen as a key strength of arbitration in Scotland. A “hands off” approach is effectively a quintessential reason why commercial entities and individuals favour arbitration as a method of solving disputes. Moreover, following the logic that arbitration is based on the fundamental principles of contract law only limited issues  cannot be arbitrate, namely criminal matters of public interest, as well as winding up of companies.[18] These are indicative of the fact that historically Scottish courts have had a positive relationship towards arbitration and the intention of the parties to settle their disputes via non-court proceedings has been strictly respected.

Thus, Section 12 of the Act provides that it is within the jurisdiction of the court to enforce an award duly made by an arbitral tribunal as if it were a final court award.[19] However, the court will refrain from doing so if the award is being appealed or under correction,[20] or if the court is satisfied that the tribunal acted ultra vires in so far as it lacked jurisdiction.[21] It was submitted that for a petitioner willing to persuade the court to set aside an award on grounds of legal error a stringent test must be satisfied[22] as the court is required to find an obvious intellectual aberration on the part of the arbitrator before setting aside an award.[23]

Similar rules apply with respect to international awards,[24] but specific rules may apply  with respect to awards made by courts within states party to the New York Convention.[25] To this end, Section 20(2) lists grounds for refusal of enforcing an award made in respect with the New York Convention, among which the contradiction of public policy. However, no cases have been identified where a foreign award was refused enforcement by a Sottish court on grounds of public policy.

As opposed to voiced concerns that the statutory duty of confidentiality is detrimental to the promotion of international arbitration in Scotland one could equally argue that as there is no track record proving that the Act achieved its purpose neither there is sound evidence disproving it. Therefore, one could safely conclude that there is an industry-wide interest in promoting Scotland as a locus of and for international arbitration. Indeed, efforts are being made to increasing Scotland’s visibility as a hub of international arbitration and the Scottish Arbitration Centre hosting the 25th International Council for Commercial Arbitration Congress in Edinburgh in 2021 goes to prove that.[26]

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[1] Scottish Arbitration Centre. https://scottisharbitrationcentre.org/

[2] International Centre for Energy Arbitration. http://energyarbitration.org/

[3] Justice Committee: Alternative Dispute Resolution. Written submission from the Scottish Arbitration Centre. January, 2018. Available at: https://www.parliament.scot/S5_JusticeCommittee/Inquiries/ADR-ScottishArbitrationCentre.pdf

[4] Heart of Midlothian Football Club Plc v Scottish Professional Football League Ltd [2020] CSOH 68, Lord Clark [740-1]

[5] Arbitration Act 1996

[6] Arbitration (Scotland) Act 2010

[7] ICEA. Dispute Resolution in the Energy Sector Initial Report. Available at: https://www.scottisharbitrationcentre.org/wp-content/uploads/2015/05/ICEA-Dispute-Resolution-in-the-Energy-Sector-Initial-Report-Square-Booklet-Web-version.pdf

[8] Section 66 and Schedule 7, Law Reform (Miscellaneous Provisions) (Scotland) Act 1990

[9] J Dingwall, ‘International Arbitration in Scotland: A Bold, New Future’ in International Arbitration Law Review 2010 13(4) 138-147, 140

[10] Sections18 and 19, Arbitration (Scotland) Act 2010

[11] Given that Scotland is a constituent part of the United Kingdom it has no power to adopt international treaties, despite being a sperate jurisdiction with an independent legislature and court system. See IBA Arbitration Committee: Scotland Arbitration Guide, (International Bar Association, 2018). Available at: https://www.ibanet.org/Document/Default.aspx?DocumentUid=F5C2156C-1F51-4015-9FF2-B42439C4A6C2

[12] Ibid.

[13] Ibid.

[14] J Hamilton, Arbitration – A Law of Unintended Consequences. 2019, Oct. Law Society of Scotland. Available at: https://www.lawscot.org.uk/members/journal/issues/vol-64-issue-10/arbitration-a-law-of-unintended-consequences/

[15] Rule 36 D, Schedule 1, Arbitration (Scotland) Act 2010

[16] Supra note 13.

[17] Section 1, Arbitration (Scotland) Act 2010

[18] R Wilson and V Allan, CMS Expert Guide to International Arbitration: Scotland. Published: 02 June 2020. Available at: https://cms.law/en/int/expert-guides/cms-expert-guide-to-international-arbitration/scotland

[19] Section 12(1) Arbitration (Scotland) Act 2020

[20] Section 12(2) Ibid.

[21] Section 12(3) Ibid.

[22] Arbitration Application No.2 of 2016 [2017] CSOH 23

[23] Arbitration Appeal (No.1 of 2019) [2019] CSOH 60

[24] Section 12(6) Arbitration (Scotland) Act 2020

[25] Sections 18 – 22 Ibid

[26] https://icca2020.scot/