Reform of Scottish Arbitration Law

Arbitration (Scotland) Act 2010The aim of the Act was to “set the scene for a renaissance of Scottish arbitration” and to provide a “modern, impartial and efficient arbitration regime”. It codifies existing Scots legislation and Case Law on arbitration.The New York Convention on Recognition and Enforcement of Arbitration Awards 1958 requires contracting states to give effect to private agreements to go to arbitration and to recognise and enforce arbitration made in other contracting states. There are 142 contracting state, including the UK. The Arbitration Act 1975 gave effect to this in Scotland.The Law Reform (Miscellaneous Provisions) (Scotland) Act 1990 adopted the UNCITRAL Model Law on International Commercial Arbitration in Scots Law but its provisions were not applied to domestic arbitration. The model law assisted states in reforming and modernising their law or arbitral procedures so as to take into account the needs of international commercial arbitration. This model was repealed in Scotland by the 2010 Act.This Act has similar objectives to the Arbitration Act 1996 in England, Wales and Northern Ireland. Sections 89-91 of the 1996 Act dealt with consumer arbitration agreements and these also apply to Scotland and will continue to do so as Consumer Law is not a devolved matter. Those provisions protect those that might inadvertently agree to unfair, low-value consumer arbitration clauses.The 2010 Act replaces the dual arbitration system that existed in Scotland with a single codified set of rules that now apply to domestic, cross-border and international arbitration proceedings. Though it abolished the UNCITRAL Model Law in Scotland, the Act is based on those model law principles. It aims to encourage trades, professions and industries to establish their own low cost arbitration schemes like that provided by ABTA.The Act sets out the following founding principles:• The object of arbitration is to resolve disputes fairly, impartially and without unnecessary delay or expense;• Parties should be free to agree how to resolve disputes subject only to safeguards that are necessary in the public interest;• Courts should not intervene in arbitration except as provided for by the Act.The Scottish Arbitration Rules are set out in a Schedule to the Act. They are divided into mandatory rules that must be followed and cannot be altered even by consent of the parties and non-mandatory rules that can. There is a presumption of confidentiality in relation to the matters in dispute, the arbitral proceedings and the arbitral award unless the parties agree otherwise. Breach of this provision entitles the other party to seek an interdict and/or damages.It is for the arbitrators to determine whether or not they have jurisdiction to determine the case; though a party may object if they act beyond their powers or where they do not have jurisdiction. The Act enshrines the “separability doctrine” i.e. an arbitration agreement is not affected by the alleged invalidity of the commercial contract. The agreement to arbitrate is distinct and separate from the contract or agreement of which it forms part.The “stated case” procedure provided by Section 3 of the Administration of Justice (Scotland) Act 1972 was abolished. This had made it too easy for a party to invoke spurious points of law for referral to the Court of Session, thereby considerably delaying the proceedings and substantially increasing the costs. The 2010 Act provides a more limited procedure whereby a party can challenge errors in law made by the arbitrator.The only valid grounds for challenging a decree arbitral are:• the arbitrator(s) did not have jurisdiction to make the award;• “serious irregularity” that has caused or will cause substantial injustice to the appellant;• The arbitrators erred on a point of Scots Law.Where an appeal is made to the court the identity of the parties must not, generally, be disclosed outside of the court. An arbitral award may be enforced in the sheriff court or the Court of Session.The Scottish Government intend to establish a self-financing Dispute Resolution Centre in Scotland to attract international arbitration business.

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