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Arbitration (Scotland) Act in force today

7 June 2010

The Arbitration (Scotland) Act 2010, which received Royal Assent on 5 January, comes into force for voluntary arbitration today, 7 June.

The Act modernises and codifies the Scots law of arbitration, and will apply (with a few exceptions) where there is an existing agreement to go to arbitration.

Transitional arrangements are set out in s 36 of the Act and SSI 2010/195. They include:

  • the new regime will not apply to any arbitration (or court proceedings about arbitration) begun before 7 June;
  • the Act will otherwise apply to existing arbitration agreements made before 7 June, unless the parties agree otherwise;
  • where existing agreements contract out of s 3 of the Administration of Justice (Scotland) Act 1972 (stated case on point of law), that is deemed to exclude the ability to raise points of law in court under the new regime;
  • the Act is not yet commenced for statutory arbitration pursuant to enactments which provide for a dispute to be submitted to arbitration (see s 16).

The bodies which can be used under the new Act to appoint arbitrators on failure of any appointment procedure agreed by the parties have been designated in SSI 2010/196. The Rules of the Court of Session have also been updated by SSI 2010/205.

Ministers hope that the reform of the law will encourage the use of arbitration domestically and attract international arbitration business to Scotland. Fergus Ewing MSP, the Minister for Community Safety, will give the keynote address at a conference at Edinburgh University on 23 June (Journal, May, 40 at 41) which will mark the Act coming into force. The conference will cover both domestic and international arbitration and will be addressed by speakers from home and abroad.

Flexibility?

Linday Patterson, head of construction and engineering at law firm Dundas & Wilson said that as the new law gave much greater powers to arbitrators, businesses should consider the implications if they had entered contracts subject to arbitration clauses. “As [the new laws] apply retrospectively, businesses should review the arbitration clauses already in place within contracts to make sure they will be easy to administer should the need arise.”

She added: ”We might now see an increase in the number of companies who include arbitration in their contracts as a means to resolve disputes which might otherwise have ended up in court.”

However Charles Brien, senior associate at Tods Murray, predicted that "the long admired flexibility of the arbitration process" was likely to be lost as the Act introduced a "rule book" to follow, and as a consequence mediation might now become more attractive as an alternative process.

He commented: “Arbitration provided a framework in which both parties could choose the rules, but this changes with the new Act. The Act brings in a ‘one solution fits all’ approach in an attempt to speed up the process, but the unintended consequence may be that it becomes a catalyst for a new approach to dispute resolution."

Pointing out that mediation succeeded where parties wanted to maintain business relationships going forward, he added: “Because it retains the essential consensual nature that used to be fundamental to arbitration, and parties have the discretion to resolve disputes in their own way, mediation suddenly becomes far more attractive and cost effective.”

Opportunity

The Law Society of Scotland welcomed the commencement of the Act. Michael Clancy, Director of Law Reform at the Society, said: “We now have a modern and comprehensive statutory framework which reflects the best principles of arbitration while also giving parties a great deal of flexibility.

“The Act will make it easier to use arbitration as a means of resolving disputes. It also provides Scottish solicitors with an opportunity to attract new business under the new regime. Scotland, with its excellent legal services, reasonable costs and effective legislation, now has the potential to grow as a centre for international arbitration.

“I would encourage solicitors to advise clients about arbitration as a possible means of dispute resolution, and to consider the use of arbitration clauses when drafting commercial contracts.“
 

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