Litigation: an evolving scene

The way in which civil litigation and disputes are dealt with in Scotland has changed fundamentally in recent years. Such change is evident in the structural reform of the court system encapsulated in the Courts Reform (Scotland) Act 2014, the growth of alternative dispute resolution (ADR) providing an alternative form of resolution to the traditional court system, and the development of forums that provide an alternative form of redress to that available in the civil courts. These changes have occurred against the backdrop of the financial crash in 2008, the continued squeeze on the civil legal aid budget, and political uncertainty as to the future direction of Scotland and the United Kingdom.

Civil Justice Statistics in Scotland report

While one can debate the impact such changes are having on civil dispute resolution in Scotland, what is not in doubt is that there has been a marked reduction in the number of civil claims being litigated in the Scottish courts. It had been apparent to practitioners for some time that businesses and consumers had become less inclined to litigate than had been the case prior to the financial crash, although it was difficult to assess the extent of this reduction.

The Civil Justice Statistics in Scotland report published by the Scottish Government on 28 August 2018 resolves this difficulty. The report details in stark terms the reduction in civil business in the sheriff courts and the Court of Session in the previous decade. It confirms an overall reduction in volume of 44%, with the number of civil cases initiated annually in the Scottish courts falling from 131,600 to 73,600.

It is tempting, and indeed perhaps comforting, to rationalise this reduction as a by-product of the financial crash and political turmoil, which will correct itself over time as economic conditions improve and the political situation stabilises. While there is some force in this, I suggest there are additional factors at work that point to there being a systemic shift in civil dispute resolution away from the civil courts.

It is instructive to consider some of the factors influencing where we currently are and how the market is developing, before turning to consider what insight, if any, this provides as to the future of dispute resolution in Scotland.

Courts reform and the efficiency drive

I have already mentioned the reforms introduced by the 2014 Act. It is difficult to overstate the significance of these reforms and their impact on civil litigation in the Scottish courts. While I do not propose to comment in detail on the changes brought about by this legislation, its purpose to modernise and enhance the efficiency of the Scottish civil justice system is self-evident. It is apparent in reforms such as the creation of the Personal Injury Court with its Scotland-wide jurisdiction, the extension of the exclusive jurisdiction of the sheriff court to monetary claims that do not exceed £100,000, and the creation of the role of summary sheriff, that fiscal efficiency was a key driver of the reforms. The Scottish Government would no doubt also contend that access to justice and the efficient delivery of civil justice were central aims of the reforms.

Housing and property: a dedicated tribunal

From 1 December 2017, responsibility for dealing with civil disputes relating to the private rented sector transferred from the sheriff court to the First-tier Tribunal for Scotland (Housing & Property Chamber). The tribunal deals with a range of landlord-tenant issues including applications for eviction and repossession orders as well as rent arrears. The delivery of cost-effective and efficient justice was an important consideration in creating this specialist tribunal, although whether such laudable aims have been achieved is a separate debate.

Reach of the regulators

Despite some of the messaging around the Brexit debate and the United Kingdom’s ability to reduce regulation post-Brexit, we live in an increasingly regulated society, the most recent examples being in the data and privacy arena. We have seen, in recent years, an extension of the power of regulators such as the Information Commissioner and Ofcom, and their willingness to use these powers to investigate and deal with complaints. It seems reasonable to assume this will continue, particularly around consumer protection. Such regulators offer ADR processes that are easily accessible and free to use.

The Financial Ombudsman Service (FOS) offers a further example of ADR to the civil courts. It deals primarily with consumer complaints about financial services and products. The service is free to use and does not require legal knowledge or expertise. FOS has the power to award compensation up to a maximum of £150,000, although there is an ongoing consultation on increasing the maximum award to £350,000. Significantly, from 1 April 2019 the jurisdiction of FOS will be extended to cover SMEs with a turnover of up to £6.5 million – an additional 210,000 SMEs in the UK.

The financial services industry is also proposing to introduce a voluntary ombudsman scheme to deal with complaints from businesses with a turnover of between £6.5 million and £10 million, with a maximum binding award of £600,000. These are potentially far-reaching and radical reforms that if implemented will provide an attractive alternative forum for resolving qualifying claims.

Alternative dispute resolution: how popular?

ADR services such as mediation, adjudication and arbitration have been features of civil litigation practice for several decades. With the exception of the adjudication process in construction disputes, ADR tends to be viewed as a niche service ideal for dealing with disputes where confidentiality and early resolution are paramount. It does not tend to be seen as a real alternative or threat to the primacy of the civil courts in determining disputes. The confidential nature of ADR and the resulting absence of publicly available statistics to record its use makes it extremely difficult to assess the frequency with which it is used. Anecdotally, we appear to have seen in recent years an increasing interest in and use of ADR processes such as mediation and arbitration in Scotland.

Arbitration: a developing expertise

The Arbitration (Scotland) Act 2010, with its adoption of an intelligible and accessible set of rules, has brought clarity and certainty to the arbitration process, making it a more attractive option. Confidentiality, speed, technical expertise and recoverability of actual costs are increasingly seen as important considerations in encouraging parties to use this alternative process. The work of the Scottish Arbitration Centre in promoting Scotland as a forum for domestic and international arbitration is also helping to develop this market.

The pressure for mediation

There is no requirement in Scotland to refer a dispute to mediation before, or indeed after, litigation has commenced. Unlike in England & Wales, where a party can be penalised in costs for refusing to go to mediation, there is no similar sanction available in Scotland. The traditional view of parties being entitled to litigate remains prevalent among court practitioners. 

We do, however, see in both the procedures of the Commercial Court in the Court of Session and the entitlement of a sheriff in simple procedure to send parties to ADR prior to assigning a full hearing, that the use of mediation as a resolution option is increasing.

Mediation was the focus of a report on ADR by the Justice Committee of the Scottish Parliament published on 1 October 2018. The report, I won’t see you in court: alternative dispute resolution in Scotland, contains a number of recommendations to encourage the use of ADR. While the committee fell short of recommending mandatory participation in ADR, it did emphasise the need to ensure that ADR is adopted more widely as an alternative to court. The committee’s recommendations include a pilot exercise requiring parties to attend mandatory dispute resolution information meetings, and possible legislation similar to the Irish Mediation Act. While there is no guarantee that the recommendations will be adopted by the Scottish Government, they are consistent with its aim to improve access to justice while driving increased efficiency through the Scottish justice system.

Future trends

It seems inevitable that the fiscal pressure on delivering civil justice and the need to get more for less will persist, increasing the focus on cost-effective solutions while seeking to improve access to justice. Technology and the impact of online dispute resolution services will also be a significant factor. In terms of what this may mean in practice, with the usual caveat that applies to any forecast, we are likely to see the following trends in dispute resolution in Scotland going forward:

• continued reliance on courts as the primary arbiter of civil disputes, albeit with a narrower jurisdiction and a greater degree of specialisation;
• increasing use of ADR processes such as arbitration, and the development of less formal resolution processes such as the conflict avoidance processes being developed by RICS;
• wider adoption of mediation in civil proceedings pursued in the Scottish courts. This is largely predicated on a reform of the civil court rules to encourage the use of mediation, with parties who refuse to participate being potentially penalised in expenses;
• extension of the jurisdiction of the First-tier Tribunal for Scotland (Housing & Property Chamber) beyond private sector landlord and tenant disputes; and
• growing importance of statutory bodies such as FOS and private sector organisations such as the RICS, the Scottish Arbitration Centre and the Chartered Institute of Arbitrators in facilitating dispute resolution. 

As for litigation practitioners, there will always be a place for adversarial resolution of disputes through either the courts or other forums. As a result, court craft and skills will continue to be important regardless of these predictions coming true. The move towards earlier and more informal dispute resolution will, however, require practitioners to broaden their skillsets – including both hard and soft skills. Fear not, however, for the analytical and evaluative skills that litigation practitioners have developed are essential to effective informal dispute resolution. Practitioners should be well placed to adapt to the changes impacting the market.