Scotland on the arbitration stage

As a commercial litigation solicitor, arbitration is, as it should be, one of the tools at my disposal for resolution of my clients’ disputes. The ICCA Congress to be hosted here in Scotland is just over a month away, as I write this, and that causes me to consider the role of arbitration in the Scottish litigator’s arsenal over the course of my career.

Arbitration featured relatively rarely in my early practice. The procedures were governed by out of date rules, and, amongst other criticisms, the ability in most arbitrations to go off to court for challenges often made it a long and inconvenient process that compared unfavourably with court action. 

I do not regularly practise in the contentious construction field, where arbitration was still relatively popular (at least until the Housing Grants, Construction and Regeneration Act 1996 popularised adjudication in many such disputes). So, in the early 2000s, arbitration was, so far as I was aware, a relatively underused option for litigation solicitors, especially compared with England & Wales where the Arbitration Act 1996 had introduced modern improvements.

A renaissance

However, those in the arbitration community were working to create bespoke Scottish legislation which it was hoped would allow a resurgence in the use of arbitration in Scotland – and the Arbitration (Scotland) Act 2010 has, I would argue, done that, or at least laid the groundwork for its use as a much more common tool for litigators.

The creation of the Scottish Arbitration Centre in 2011 was a welcome development, with its purpose to promote Scottish arbitration and Scotland as a place to conduct international arbitration. The Centre and the team there have worked hard to promote the use of arbitration, leading conferences and training days attracting attendees from all over, and were of course behind the successful bid to hold the 2020 (until COVID intervened) ICCA Congress in Edinburgh, now rescheduled for 18-21 September 2022.

Personally, I have seen arbitration as a much greater part of my practice since the 2010 Act’s introduction. The more limited ability to bring court challenges, the flexibility of the Scottish Arbitration Rules, and the clear confidentiality requirements all encourage its use, in my view. I would argue that, during the pandemic, the ability to progress arbitration while courts were closed or restricted was an undoubted advantage, and experience suggests our profession (and those practising arbitration from other professions) used the Act and associated rules for that purpose.

At any given time, I have perhaps three or four arbitrations in which I am involved, some as participant, others as arbitrator; and anecdotal evidence would suggest that there are quite a few ongoing at any one time, not only in contentious construction but in the wider commercial litigation field. An article in another journal in recent weeks stated that there were only 22 applications for “third party arbitration” since the start of 2022, but that focused on commercial rent disputes, and to applications to one arbitral appointment referee, so does not, in my view, necessarily reflect the wider picture.

Why arbitration?

Why would my clients choose to arbitrate rather than litigate?

The flexibility of procedure and potential for an early determination are, I believe, big attractions. The obligations on both arbitrator and parties to progress the arbitration without undue expense and delay allow the arbitrator to manage the procedure to help achieve that. One case in which I have been involved has been able to progress at a good speed throughout the pandemic, using Teams and other technology, even at the outset when most courts were simply not operating. Other clients, living in a rural community where the dispute is likely to attract interest (prurient or otherwise), have had the comfort of the express provisions of the Scottish Arbitration Rules on confidentiality, and have been able to deal with a difficult dispute away from the public eye. There are many advantages, depending on each case, to using arbitration. 

It is also important to remember that the prospect of an “appeal” through a court challenge is relatively limited – so giving certainty more quickly and avoiding a double procedure of arbitration and court with all the delay and expense that involves. Though, necessarily, both jurisdiction and serious irregularity challenges are possible as mandatory options in the rules, a legal error challenge can be prevented by agreement that the discretionary rule is disapplied. My own experience is that parties are not often varying the rules as was envisaged, selecting those discretionary rules that are to be disapplied, and I hope that the possible tailoring of the rules becomes more common so that any arbitration can be managed to meet parties’ needs.

Our courts have proved remarkably supportive of arbitration and the principles set out by the Act and rules. We have four arbitration judges and the www.scotcourts.gov.uk website lists arbitration applications. A browse demonstrates that these are relatively infrequent, and few are successful. An Arbitration Court Users Group was set up in 2017 to “provide a forum for consultation, discussion and feedback between judges, legal professionals and others involved in arbitration matters in Scottish courts”. All of this contributes, in my view, to a jurisdiction where arbitration is becoming more popular, as it should be.

What can be improved?

For many years, arbitration was not a qualification sought out very often by litigators, but that has, in my view, changed. Anecdotal evidence suggested that finding an arbitrator outwith the construction community or those dealing with rent reviews was not always easy in the past, but there has been welcome interest from practitioners in obtaining an arbitration qualification. There has been a welcome development in the provision of postgraduate qualifications in arbitration and other forms of dispute resolution, including from Scottish institutions. There are now various options open to those new to arbitration. 

We have also seen the return of very senior judges to limited practice as arbitrators, which I believe increases not only the pool of highly qualified arbitrators, but also the visibility of arbitration as an option for dispute resolution. Our professional bodies have continued to work positively to ensure those appointed are appropriately qualified and experienced, and the body of experience across all forms of dispute has surely broadened. This is all good news for those who favour arbitration.

One of the founding principles of the 2010 Act is stated to be that the object of arbitration is to resolve disputes fairly, impartially and without unnecessary delay or expense. Arbitration, in the early stages of my career, was generally perceived to be expensive and slow. Have those aspects of the process improved enough?

A larger cadre of well qualified arbitrators should help with speed – if there are sufficient possible arbitrators available, arbitration ought to be able to proceed as quickly as is realistic. There should be much less reason for delay, given the limited range of challenges and the courts’ support for limited intervention in the process.

There remains, however, in my view, a question over the potential for costs to become unmanageable. Yes, the Act and rules contain provisions about costs challenges, but there is, I believe, the potential for the arbitrator to run up fairly considerable costs without the knowledge or control of the parties. An arbitrator should certainly consult parties, so far as possible, before instructing third parties or incurring significant extraneous costs, but the arbitrator’s costs themselves are often calculated on an hourly basis. Even if that base hourly rate looks reasonable, significant costs can be incurred in for example preparing a judgment (as anyone who has ever written a judgment will tell you), which may not always compare favourably with the costs charged by the court for a hearing. Though those costs have increased substantially in recent years, we do not (at least yet) pay for the judge’s time in preparing the judgment.

We may need to consider other ways of managing costs to meet the objective set out in those founding principles. It is fundamentally an issue for parties to manage during the appointment process, but perhaps, over 10 years from their coming into force, we could consider whether anything can be done within the Act and rules themselves.

And whither ICCA?

So what can be hoped for from the hosting of the ICCA Congress?

ICCA will attract a significant number of commercial arbitrators to Scotland. That should, I hope, raise the profile of arbitration and the very positive environment here in Scotland for conducting arbitration. The Congress is being supported by all those involved in commercial arbitration, both domestically and internationally, and the team organising the event have attracted high profile and well respected speakers including the Lord President and Lord Hodge, and those from the wider arbitration community. 

It is up to all of us involved in dispute resolution in Scotland to ensure that ICCA’s potential legacy for arbitration in our own jurisdiction is all it can be. We have a modern, fit for purpose Act and associated rules. As I note above, recent years have seen a marked increase in those acting as arbitrators qualified under CIArb rules, or with qualifications from our world leading universities. That is a welcome development, allowing Scotland to build a cadre of arbitrators trained under the 2010 Act and with perhaps a range of experience in arbitration subject matter covering the spectrum of disputes in Scotland. We have a variety of arbitral appointment referees, some of which operate with panels of appropriately qualified arbitrators, and others (including the Scottish Arbitration Centre) which have discretion to choose a suitable arbitrator for any particular dispute from leading domestic and international arbitrators. 

Either way, Scotland is now an excellent, and in my view world leading, location to conduct arbitration and I very much hope that support for ICCA and other initiatives by our profession, our courts, and our Government, brings continued growth in arbitration as a method of dispute resolution suitable for the modern age.  

“There are so many opportunities to hear formally and informally of others’ experiences and aspirations in the dispute resolution field. That’s got to be worth it for anyone’s practice.”

The words are those of solicitor advocate and international arbitrator Lindy Patterson QC, who we interviewed ahead of the original dates for the Edinburgh ICCA Congress: Journal, March 2020, 16. Check it out again for her own career story, her experience of arbitration in Scotland and internationally, and what to expect from ICCA, now taking place from 18-21 September 2022.

All the up to date information is at icca2020.scot