Scotland finds its place in the arbitration world | Natasha Doris | CDR Article

Two years after the ICCA conference in Edinburgh, Scotland defines what kind of player it aims to be on the international arbitration stage.

Scotland has spent the last couple of years working to make its mark on the international arbitration community. The Scottish Arbitration Centre (SAC) has been marketed extensively by its team to draw international business to the hub in Edinburgh. However, the Scottish capital has a heady pool of arbitration centres to compete with as it finds its place in the disputes environment.

LAUNCH

Arbitration in Scotland had historically been a convoluted, disjointed mess. Brodies international arbitration partner Ken MacDonald tells CDR that the previous slate of arbitration law was “a bit archaic”.  

However, domestic arbitration was overhauled and polished with the Scottish Arbitration Act 2010, which was published after extensive consultation. The explanatory notes in the 2010 Act confirm MacDonald’s perspective, describing the older arbitration law as “often not clear or readily accessible, nor does it reflect modern practice on arbitration”.  

Burness Paull dispute resolution partner Alan McMillan tells CDR that historically arbitration clauses were often added to commercial contracts for disputes, however latterly “no one, particularly claimants, wanted to use them […] parties would rather  go to court and put a big red pen through the arbitration clause [because] it was just too expensive and fraught given the legal complexity of the arbitration labyrinth in Scotland, which even included a statute from the sixteenth century.” He continues that since the introduction of the modernising 2010 Act, “there’s been a significant increase in the numbers [of arbitrations] in Scotland.””, as parties found the avenue less problematic once it had been streamlined by the legislation.

The SAC stepped up its activities after the 2022 International Council for Commercial Arbitration (ICCA) Congress in Edinburgh. However, it has been a slow burn to get to this stage. The SAC was initially set up in 2011 as a promotional entity, with administrative services added to its offering in September 2022.

SAC CEO Andrew MacKenzie tells CDR: “Our focus in the first decade or so was on promoting Scottish arbitration and Scotland as a seat and venue for arbitration, effectively raising awareness that Scotland is a separate country for arbitration.” He adds: “Winning our bid to host the ICCA Congress in Edinburgh was a huge boost to our efforts and bringing 1,400 practitioners to Scotland in September 2022 for the event allowed us to showcase Edinburgh and the Centre.”

The Centre rolled out its inaugural Edinburgh International Arbitration Festival (ArbFest) in 2023, drawing in over 100 members of the legal community to the Scottish capital in a bid to bring attention to the city as a serious arbitration base, and followed by a second edition last week. MacDonald comments that the introduction of an annual event is “really trying to continue the interest in international arbitration in Scotland”.

MacKenzie confirms the SAC’s ambitions to market Scottish arbitration internationally: “We have been promoting our new rules and services, which often involves attending and speaking at conferences and events in Scotland and around the world. We are doing our best to ensure that Scotland has a voice at key international arbitration and law conferences.”

The centre’s efforts are a step towards attracting business in a market flush with burgeoning arbitration hubs. McMillan says: “The plan is to make Scotland a centre for international arbitration.” He adds: “Lots of countries have tried to make it work with varying degrees of success, [and] time will tell.”

MODERATE AMBITION

The SAC has no intention of competing with the arbitration giants of London, Singapore or New York anytime soon, however it is courting work from a variety of smaller jurisdictions and aiming to redirect a portion of the disputes that typically wind up in the London Court of International Arbitration (LCIA).

MacKenzie explains: “We hope to administer both domestic and international cases. We especially hope that our neighbours in smaller jurisdictions, such as the Republic of Ireland, the Nordic and Baltic regions, will consider us for disputes where a neutral administrator outwith their region is required. Where parties are looking for a UK administrator but cannot use LCIA, we hope that we will be chosen.”

MacDonald emphasises the appeal to the Nordic countries, adding: “Geographically, we are quite close to these countries, and we have common interests in fishing, oil and gas extraction and offshore wind.”

SAC expects to receive the bulk of its business “from property, oil and gas, and renewable energy matters, as well as partnership disputes. There is also some arbitration arising from statutory provisions”, MacKenzie says.  “We also expect to see smaller value cases coming our way, given that we are much more cost effective than most administrative bodies in Europe.”

MacDonald reiterates that the SAC is unlikely to join the big leagues anytime soon: “There’s huge competition globally for international arbitration work, and Scotland will be an emerging centre along with many, many others. The established centres will obviously retain most of the work, [including] London, Paris, and Singapore and Hong Kong in the East as obvious centres.” He adds: “But I think more geographies will be trying to win business and fight to get international arbitration work.”

Scotland is also aiming to trade  on confidentiality. A topic of debate at ArbFest 2024 was the advantages of transparency against confidentiality, where keynote speaker and Herbert Smith Freehills London international arbitration head Craig Tevendale pointed out the appeal of arbitration as a private form of dispute resolution for parties.  

However, despite the fact that the SAC rules enshrine confidentiality in its opt-out regime in rule 26 of the Scottish Arbitration Rules in Schedule 1 of the Scottish Arbitration Act, MacDonald states that there are advantages to a higher level of transparency as well: “One view is we should perhaps want to be more transparent in Scotland because as a new centre, you want to be able to demonstrate the competence and that you are doing good work. A system that is really confidential [means] nobody really knows when you’re doing a good job.” He considers the other side of the divide and adds: “Having a private means of dispute resolution is one of the attractive things about arbitration. That’s why you choose it rather than litigation. So it’s really where on the spectrum you draw the line between confidentiality and transparency.”