What could Scottish independence mean for arbitration?

What could Scottish independence mean for arbitration?

How might arbitration in Scotland be affected by the forthcoming Scottish referendum? Brandon Malone, head of the contentious construction and arbitration team at McClure Naismith, says a Yes vote could have a profound and positive effect.

How could your practice area be affected by an independent Scotland?

Independence has the potential to have a profound effect on arbitration in Scotland. At the moment, Scotland is a separate jurisdiction for the purposes of arbitration. Scotland has its own arbitration act—the Arbitration (Scotland) Act 2010—and its own courts to deal with procedural and enforcement issues. Arbitration is already devolved to the Scottish Parliament. There is no appeal to the UK Supreme Court in London in respect of any matter arising out of an arbitration. Accordingly, in terms of arbitration law and in procedural terms, Scotland is already an independent jurisdiction and its system is entirely self-contained. On one view, independence would have little effect.

However, there are a number of ways in which independence could have a positive impact on arbitration in Scotland. In the first place, Scotland’s status as a neutral alternative to London is not currently well understood or even well known. Independence would put that beyond doubt.

Secondly, with independence, there would be an increase in international trade agreements for Scottish businesses dealt with in Scotland, which would in turn generate more international arbitration.

Scotland currently has no separate international legal personality and is not a party to treaties in its own right. As a consequence, there is very little investment treaty work in Scotland. That would change with independence. Scotland would also become entitled to appoint its own International Centre for Settlement of Investment Disputes (ICSID) and Permanent Court of Arbitration arbitrators.

If Scotland were independent, it would have its own International Chamber of Commerce (ICC) national committee, and would be recognised by the ICC, the London Court of International Arbitration and other bodies as a separate jurisdiction from the rest of the UK (rUK). At the moment, despite Scotland’s separate legal status for arbitration purposes, Scottish arbitrators are classed as UK arbitrators. Therefore, where an English arbitrator cannot be selected because of neutrality issues, Scottish arbitrators are also excluded. Independence would remedy that anomaly.

For these various reasons, independence could provide a significant boost for arbitration in Scotland.

What cross-border issues currently arise in your practice area?

As part of the UK, the New York Convention applies in Scotland, and foreign awards are enforceable. There is no regulator of arbitration per se. Scotland is an open jurisdiction, and there are no restrictions on arbitrators and counsel from other jurisdictions dealing with arbitrations seated in Scotland.

Where the intervention of the court is required, it is necessary to use lawyers with rights of audience before the Scottish courts—solicitors and advocates, who are regulated by the Law Society of Scotland and the Faculty of Advocates respectively.

What makes Scotland attractive as a seat and place of arbitration?

Scotland is a stable, arbitration-friendly, jurisdiction, where English is the official language. Its arbitration act is modelled on the English Act of 1996—the Arbitration Act 1996—and will therefore be familiar to arbitration practitioners. However, there are a number of distinguishing features which make it particularly attractive as a seat of arbitration.

In the first place, there are the detailed confidentiality provisions within the Scottish Act (the Arbitration (Scotland) Act 2010). In contrast to most jurisdictions, where confidentiality is implied, in Scotland, it is provided for in the Act. This provides that a breach of confidentiality is actionable. Should there be a need for any incidental procedure in the court, the court maintains the parties’ anonymity by redacting the rolls of court, conducting hearings in private and redacting and restricting publication of court decisions.

Scotland has a strictly controlled appeal procedure and there is no route of appeal to the UK Supreme Court.

Discovery procedure is restricted on the basis of relevance, and there is no general disclosure of documents as in some common law jurisdictions.

For these reasons, arbitration in Scotland is considerably less expensive than arbitration in other major arbitration centres. In addition, Scotland has a particular concentration of expertise in energy technology and law and is a highly suitable legal venue for energy dispute resolution.

What are your key concerns as the referendum draws near?

I have no particular concerns in the arbitration context. Whatever the arguments may be in the wider debate, it is difficult to see how independence might adversely affect the arbitration industry. Should there be a Yes vote, there will be a period of some 18 months to adjust to independence and put the necessary international framework in place.

Do you think there are any issues that haven’t received enough attention or consideration?

There has not been a great deal of thought given to the mechanics of implementing the necessary framework for an international arbitration regime, such as signing up to the New York Convention, dealing with ICSID etc. However, these issues are not going to be seen as being high up the list of priorities until the outcome of the referendum is known.

An area where I do think there should be more focus is the issue of how the UK’s assets and liabilities are to be divided in the event of the Yes vote. There has been a fair bit of debate, but most of it amounts to assertion and posturing. The outcome cannot be known in advance, and there won’t be any pre-negotiation. However, serious thought ought to be given to the structure of negotiations, and how matters are to be resolved if an impasse is reached. There will be a significant need for dispute resolution strategies and techniques.

What would a Yes vote mean in practice for lawyers in your field?

A Yes vote would internationalise the Scottish profession. Investment treaties would be required in Scotland for the first time and it would result in a general increase in international arbitration for Scottish lawyers. This is something that we are aiming for regardless of the outcome of the referendum, but there’s no doubt that a Yes vote would boost the level of international arbitration.

What would a No vote mean in practice for clients in your field?

If there is a No vote then, from a client’s point of view, nothing changes. Scotland will remain a separate jurisdiction for arbitration purposes, but will still be part of the UK. We’ll continue to push Scotland as a seat of arbitration within the UK.

Any other thoughts?

Whatever the outcome of the referendum, the independence debate has raised Scotland’s profile on the world stage, and has increased recognition of Scotland as a separate legal jurisdiction. It’s up to Scottish arbitration professionals to capitalise on this increased profile and ensure the growth of the industry in Scotland.

Interviewed by Nicola Laver.

The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.

See more opinions on the Future of the Union and how this affects different practice areas here.

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