New Arbitration Act for Scotland

The Arbitration (Scotland) Act 2010

This long-fought-for Act received Royal Assent on 5 January 2010 and is expected to come into force in March 2010. The introduction of the new Act is good news in that it brings together in one user-friendly document the law and rules applicable to any arbitration taking place in Scotland.  This will be of enormous help to practitioners and end-users alike.

In short, the Act:

• applies to international as well as domestic arbitrations "seated" in Scotland;
• applies, to all such arbitrations, the Scottish Arbitration Rules (based on the already existing Scottish Arbitration Code and now contained in a Schedule to the Act – "SAR").  Some of the Rules are expressed to be "Mandatory", others can be revised or excluded by the parties to the arbitration ("Default" Rules);
• applies to any arbitration agreement, whether or not the agreement is in writing;
• is drafted such as to be consistent with the UNCITRAL Model Law and the UNCITRAL Arbitration Rules and accordingly repeals the 1990 legislation which enacted the Model Law in Scotland; and
• restricts interference by the Scottish Courts essentially to issues of jurisdiction, serious irregularity and legal error.  No appeal lies to the Supreme Court in any instance.

Main Implications to You

Quite apart from making the law of arbitration in Scotland much more accessible, the SAR direct the parties negotiating the terms of their arbitration agreement to those issues on which a choice is to be made. Prior, therefore, to finalising your arbitration agreement, you should consider all "Default" rules in the SAR and their applicability and the extent to which they should be amended or excluded.  Examples include:

• should the Court be allowed any role in the determination of the tribunal's jurisdiction?
• should the decision of a three-man tribunal be unanimous or by a majority?
• what powers should the tribunal have if a party unnecessarily delays in submitting its case?
• should the tribunal have power to consolidate the arbitration with another arbitration or to hold concurrent hearings?
• should the court be empowered to determine any point of Scots law arising in the proceedings (ie on a "case stated")?
• should the court have power to make provisional awards?
• should the tribunal first submit its report in draft to the parties and consider further submissions on it?
• should the tribunal have power to order a claimant party to provide security for the recoverable arbitration expense of the other party?
• should a party be able to appeal against the tribunal's award on the grounds that the tribunal erred on a point of Scots law?

We can help you in your consideration of such issues.

Background to the Act

Over 10 years ago I wrote an article, under the heading "Scotland – a Brave New World?" which read, in part, as follows:

"… the [UNCITRAL] Model Law as incorporated into Scots Law applies only to international commercial arbitrations taking place in Scotland.  For all domestic arbitrations, the law has still to be found scattered amongst case law and various statutes.  In March 1996, the Scottish Advisory Committee submitted its report "Legislation for Domestic Arbitration in Scotland" to the Lord Advocate.  Next to the Report was a draft Bill the purpose of which was to consolidate earlier statutory provisions in respect of arbitration in Scotland and to introduce new provisions clarifying the law in those areas where there was thought to be uncertainty.  Unfortunately, the Bill has never been afforded time in the legislative timetable and Scotland therefore remains without any statutory framework for domestic arbitration."

It was against that background that the Scottish Council for International Arbitration, the Chartered Institute of Arbitrators (Scottish Branch) and the Scottish Building Contract Committee decided that if government would not find the time to enact the law of arbitration in Scotland, they would put their collective heads together and produce a "code" which would provide, to those parties agreeing to its application to their disputes, the next best thing.

The Scottish Arbitration Code was launched on 14 October 1999, and has, in its various revisions, "filled the gap" ever since.  However, the efforts continued in the meantime to persuade the Scottish Parliament to devote time to the drafting and promulgation of new legislation to cover both international and domestic arbitration, and it is those efforts that have now culminated in the enactment of the new  Act. 

David Scott
Partner
Tel +44 (0)131 777 7023
Email david.scott@mcgrigors.com