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Exploring the litigation landscape in Scotland

Euan McSherry, DWF's Head of Litigation in Scotland, introduces the possibly unfamiliar territory of raising court proceedings, raising arbitrations or going to mediation in Scotland.

A version of this article first appeared in the civil litigation section of The Law Society in April 2017.

Clients expect their lawyers to be experts in the service they need. It is equally trite to that any commercial transaction may involve multiple legal jurisdictions. If that service is litigation advice, it is critical that solicitors have expertise in recognising when a jurisdiction other than their own may apply to any particular dispute. On occasion, one may seek to seize jurisdiction early in a dispute to obtain a perceived tactical advantage for your client. However, if parties enter into discussions regarding their dispute, it may not be until that moment when one or both parties explore enlisting the services of third party as a means of seeking a resolution that jurisdiction returns to centre stage. The paths open to the parties may have been agreed some time previously, and can be found in contractual dispute resolution provisions. Other times, the parties may be free to take unilateral action through the raising of court proceedings. Alternatively, they may elect to go to arbitration, to appoint an expert to determine their dispute or to go to mediation. Under the law of Scotland, they could agree to make a joint approach to the Court of Session for a determination via the stated case procedure.

This article is relevant to those who find themselves recognising that Scotland could be, or is, the locus for the resolution of their dispute. This article introduces readers to three possibly unfamiliar scenarios when such recognition occurs: (i) raising court proceedings, in particular, the changing face of litigation expenses, (ii) raising arbitrations or (iii) going to mediation in Scotland, where mediation is not mandatory.

Raising court proceedings in Scotland

Where a party has grounds to raise proceedings in Scotland, he may be faced with a number of options. By way of example let us consider the raising of a commercial claim for payment. If the remedy sought is payment of a sum noting £5,000, then proceedings must be raised in the Sheriff Court which has jurisdiction (there are currently 39 Sheriff Courts in Scotland) and will be governed by the Simple Procedure Rules which came into force in November 2016.

If the remedy sought is payment of a sum in excess of £5,000, then proceedings can be raised in the Sheriff Court which has jurisdiction and either be governed by the Ordinary Procedure Rules or, should the pursuer (plaintiff) find himself with grounds to raise a commercial claim in any of the Sheriff Courts of Edinburgh, Glasgow, Aberdeen, Dundee, Forfar or Perth, he may ask for the action to proceed as a commercial action which will be governed by the Commercial Action rules, a sub-set of the Ordinary Procedure Rules. Each court has its own practice notes for Commercial Actions.

If the remedy sought is payment of a sum of £100,000 or more then the pursuer can raise the action in the local Sheriff Court or in the Court of Session, which can hear any dispute in Scotland. Our pursuer could raise an ordinary action before the Court of Session in terms of its Rules of the Court, or by way of a commercial action governed by the Commercial Action Rules, a sub-set of the Rules of the Court. A new Practice Note for Commercial Actions came into force on 27 March 2017, replacing the 2004 note ("the 2017 Commercial Court Practice Note"), which supplements the Commercial Action Rules. Most clients with a commercial claim raise an action in the local Sheriff Court, if it has a commercial court offering, or the Court of Session as this provides a quicker, more creative, effectual and cost-effective means of resolving their disputes. A party can look to have their dispute transferred to a higher court for complicated cases which fall below the money limits set out above.

The court fee for raising any non-personal injury civil action for any sum in the Sheriff Court is fixed at £120; the court fee for raising an action for any sum in the Court of Session is fixed at £210 - which is significantly less than the comparable costs for raising actions before the courts of England & Wales. There are no mandatory pre-action steps which carry a sanction in judicial expenses, however where there is an action brought to court which is to be governed by, it is expected that parties will have engaged in substantive correspondence prior to bringing their action to court.

Judicial expenses are calculated by the rules of the particular court in which an action has been determined. The first stage is to obtain an award of expenses in favour of your client to be paid by other side. Once achieved, an additional fee may be sought. Thereafter, a law accountant is generally instructed to prepare an Account of Expenses. Absent agreement between the parties, the Account is lodged for a taxation hearing before the Auditor of Court. Only once the Auditor of Court has taxed the account, and any appeal being resolved, does a party have an enforceable debt. The judicial expenses procedure is under review and changes are expected imminently. It is anticipated that some of the cost procedures familiar to readers will be imported from the rules governing actions before the courts of England & Wales.

Arbitrating in Scotland

For those familiar with the 1996 Act, the arbitration landscape may in fact not look too alien in Scotland.

The law of arbitration in Scotland was significantly reformed by the Arbitration (Scotland) Act 2010 ("the 2010 Act"). Where the parties are bound or agree to arbitrate in Scotland then the 2010 Act is modelled on the Arbitration Act 1996 ("the 1996 Act") which applies in England and Wales. The founding principles underpin all questions of arbitration in Scotland. These are (i) the object of arbitration is to resolve disputes fairly, impartially and without unnecessary delay or expense; (ii) the parties should be free to agree how to resolve disputes, subject only to such safeguards as are necessary in the public interest; and (iii) the court should not intervene except as provided by the Act.

In general, the 2010 Act applies to all arbitration agreements whether made before, on or after its coming to force in June 2010. Schedule 1 to the 2010 Act includes a set of Scottish Arbitration Rules governing the conduct and procedure for every arbitration seated in Scotland ("the SARs"). The SARs are split into mandatory rules, which cannot be modified or disapplied by the parties, and default rules, which apply unless the parties agree to modify or disapply those rules. Where the parties agree that a different set of rules are to apply to the arbitration, the default rules shall be modified to the extent that they are inconsistent. If the arbitration agreement is silent on the rules to apply to the arbitration, the mandatory and the default rules will apply, thus providing a comprehensive set of rules governing all procedural aspects of the arbitration.

The 2010 Act provides that arbitration is seated in Scotland where the parties agree that to be the case; or where the arbitrator determines, or where the court determines, that Scotland is the seat. Parties are free to choose the substantive law to be applied to the dispute, so that disputes under international contracts may be arbitrated in Scotland; if the parties fail to agree the law to be applied, the law of Scotland applies. Unless the parties agree otherwise, the arbitrator's award may be registered for execution in the Books of Council and Session. This means that the award is treated as having equivalent effect to a court decree for payment, allowing a party to enforce an award without the need for further court procedure.

The impact of the 2010 Act has overall been a positive one, with a significant increase in the number of arbitrations taking place in Scotland where the parties had the option of raising the arbitration in another jurisdiction. This is likely in part due to Scotland's geographical location and language, the knowledge and experience of Scottish arbitrators and practitioners (of course, I would say that), and, perhaps most significantly, Scotland's comparatively low cost base compared to other jurisdictions.

Mediating in Scotland

With the exception of certain family cases, there are no mandatory mediation rules applicable to Scottish court actions. It is reasonably safe to say that mandatory mediation is unlikely to be adopted by the Scottish courts any time soon. The position in relation to the use of mediation in Scotland was considered in the context of The Report of the Scottish Civil Courts Review 2009 led by Lord Gill (as he then was). The report devoted an entire chapter to mediation and alternative dispute resolution, which included commentary on the EU Mediation Directive and the practice before the courts of England & Wales.

Lord Gill concluded that mandatory mediation was not appropriate, but he did recommend that Sheriff Courts and the Court of Session should give more information about mediation and ADR. However, in the 2017 Commercial Court Practice Rules, there is a much greater emphasis on parties to consider the possibility of alternative dispute resolution, which could be taken as a positive indication that commercial judges are being encouraged to promote mediation.

Of course, mediation is a process which is voluntary, private, informal, collaborative and confidential. When parties choose to have their dispute mediated, they get to set the ground rules, including what the governing law will be and where any meetings will occur. Having advocated at mediations in both Scotland and England, the only significant difference I have encountered is size of the mediator's fee. In England, a mediator's fee tends to be double that of a mediator of similar standing in Scotland, and in London the fee has been three to four times greater than her equivalent in Scotland.

In conclusion, litigators will find some of the above familiar to their own jurisdictions but, perhaps, much that is different. As those responsible for the procedure of Scots law continue to be very active in reforming its institutions and rules, I strongly suspect that there will be many changes to come which will have a significant impact on court proceedings, arbitrations and mediations in Scotland over the next few years.

If any issues arising out of this article are of interest, please contact Euan McSherry, DWF’s Head of Litigation in Scotland at euan.mcsherry@dwf.law or at 0131 474 2309.

A version of this article first appeared in the civil litigation section of The Law Society in April 2017.

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

Euan McSherry

Partner - Head of Real Estate Litigation (Scotland)

I provide litigation advice to clients in the retail, food and banking sectors. I am the first Scottish lawyer to be listed on the Register of RICS Accredited Mediators.