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LITIGATION IN SCOTLAND UPDATE
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INTRODUCTION LAST YEAR WAS A BUSY YEAR FOR LITIGATION IN SCOTLAND with a number of important legal developments and judicial decisions. We have included our top 5 commercial cases over the past 12 months as well as looking at the benefits that Scotland’s commercial courts can offer to businesses. The Scottish courts were in the media spotlight for much of the past year with key constitutional law challenges being heard by the Court of Session in relation to the prorogation of parliament. In the area of personal injury, changes to the valuation of cases in England and Wales now leaves Scottish claims being of a higher value than the equivalent claims South of the Border. In 2020, we will also see some significant changes with cost shifting.
With 2020 being the Scottish Year of Mediation we look at some significant developments that are taking place in this area. In addition, with the Congress of International Council for Commercial Arbitration taking place in Edinburgh in February 2021, we look at the benefits of arbitrating in Scotland. If you would like more information on any of the topics covered below please do not hesitate to contact us. Innes Clark is a Partner and heads up our Litigation Division which is one of the largest and most experienced litigation teams in Scotland.
The Scottish courts were in the media spotlight for much of the past year
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TOP 5 COMMERCIAL CASES Richard McMeeken looks at his pick of the commercial cases in Scotland over the past 12 months. AS LORD REED OF ALLERMUIR IS INSTALLED AS THE FIRST SCOTTISH PRESIDENT OF THE SUPREME COURT, we look at five of the most important Scottish decisions over the past 12 months. In these decisions we see the influence of the pragmatism of English law particularly in Carnbroe where the Supreme Court changes the law on gratuitous alienations to align more closely with that on transfers at an undervalue in England and in Commodity Solution Services where the Sheriff Appeal Court applies the pragmatic approach of the new President in Robinson, much to the chagrin of at least one member of the court. As
Lord Kerr remarked, however, of Lord Reed’s installation, the influence of the two Scottish Supreme Court justices on the development of the law of England & Wales has been invaluable and it will be interesting to see whether Lord Reed’s tenure as President leads to the law in both jurisdictions converging more closely. Click here to read our top 5 cases.
Richard McMeeken is a Partner and Solicitor Advocate specialising in commercial litigation.
The influence of the two Scottish Supreme Court justices on the development of the law of England & Wales has been invaluable
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ARBITRATING IN SCOTLAND Sandra Cassels looks at the benefits of arbitrating in Scotland.
Why arbitrate in Scotland - The Scottish Arbitration Centre The Scottish Arbitration Centre promotes both arbitration as an effective alternative to litigation, and also Scotland as a place to conduct international arbitration. Did you know that it is possible to specify Scotland as the seat of arbitration in any domestic or international arbitration clause? The Scottish Arbitration Centre is in the heart of the City of Edinburgh and offers a modern, affordable venue for arbitration and other dispute hearings.
The vast knowledge and experience of Scottish arbitrators and practitioners cannot be underestimated. The Arbitration (Scotland) Act 2010 The Arbitration (Scotland) Act 2010 encapsulates modern arbitration law and practice for domestic and international arbitration in Scotland. Although the 2010 Act contains close similarities to the Arbitration Act 1996 applicable in England and Wales, its innovations (such as statute based confidentiality) means that it has a familiar feel which international practitioners appreciate.
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Seat of the arbitration and governing law The 2010 Act provides that an arbitration is seated in Scotland where the parties or the tribunal designate Scotland as the seat or, failing that, where the court determines that Scotland is the seat (section 3(1)). 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 (section 3(2)). Where parties fail to agree the law applicable to the arbitration agreement, it shall be governed by Scots law (section 6). Comparisons with the English Arbitration Act 1996 The 2010 Act shares a number of common features with the English Arbitration Act 1996. Both jurisdictions share the fundamental principles of fairness, party autonomy and limited court intervention, which are reflected throughout provisions of the 2010 Act and the Arbitration Rules. Concepts such as separability of arbitration agreements, consolidation of arbitral proceedings and the correction of errors by the introduction of a slip rule reflect similar provisions in England, as well as in other jurisdictions. The procedures for challenging the jurisdiction of the tribunal and the process for challenging awards also broadly follow the position in England.
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The 2010 Act also contains a number of provisions improving on or filling in perceived blanks in the English model. In particular: • There is an express and detailed confidentiality provision as a default rule, rather than relying on the common law, as in England. • The 2010 Act covers oral agreements to arbitrate, which, again, are governed by the common law in England. • The 2010 Act also resolves the difficulty in England as to which law applies to the arbitration agreement by providing that, where Scotland is the seat of the arbitration, Scots law will apply unless otherwise stated.
In conclusion, one of the key aims of the Act is to promote Scotland as a centre for international arbitration - the Act and the creation of the Scottish Arbitration Centre have done much to achieve this. Sandra Cassels is a contentious construction Partner. She is a fellow of the Institute of Arbitrators (FCIArb) and former chairperson of the Scottish Branch of the Chartered Institute of Arbitrators and a member of the Scottish Arbitration Centre’s Arbitral Appointments Committee.
Finally, sections 32 and 33 of the 2010 Act provide that the Scottish Ministers may, by order, make any supplementary or incidental provision which they consider appropriate in order to give full effect to the 2010 Act. This allows the Scottish Ministers to react quickly to rectify any minor problems or loopholes in the primary legislation. What are the Benefits of Arbitrating in Scotland? The principal advantages of arbitration under the 2010 Act are confidentiality (which has a statutory basis in Scotland), restricted grounds of appeal or challenge, flexibility in procedure, and the ability to choose the decision maker. In choosing Scotland as a centre of international arbitration, parties can also benefit from Scotland’s neutrality in many international disputes, its geographical location and its language. The vast knowledge and experience of Scottish arbitrators and practitioners cannot be underestimated. Finally, the comparative low cost compared to other jurisdictions should not be overlooked. One of the aims of the 2010 Act, which has been achieved, was to revive arbitration as a cost effective and efficient method for resolving disputes in Scotland.
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One of the key aims of the Act is to promote Scotland as a centre for international arbitration
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A YEAR OF CHANGE FOR MEDIATION IN SCOTLAND? With 2020 being the Scottish Year of Mediation, David Hossack looks at some significant developments which are likely to bring mediation to the fore in Scotland. FROM READING THE LEGAL DIRECTORIES, a reasonable assumption to make is that mediation does not happen in Scotland. At the last count, only two mediators based in Scotland (one from Morton Fraser) are listed. The reality is that there are many excellent mediators in Scotland. Perhaps the reason that mediation does not have the same profile here is that it is not embedded in the Civil Justice System to the same extent. There are, however, areas where mediation is very much part of the landscape. In simple procedure cases the Sheriff can direct that cases should be mediated, in family law there is the ability to refer cases to mediation, and Judicial Mediation has been an option in Employment Tribunals for many years now. It is likely though that 2020 will herald significant changes in the use of mediation in Scotland. Recently we hosted the launch of Scottish Mediation’s “Mediation Charter” of which we were one of the first signatories. Scottish Mediation is a charity whose objects are to raise the profile of mediation in Scotland, act as a professional body for mediators,
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There are many excellent mediators in Scotland and, from experience, they are every bit as good as those who feature in the legal directories.__ maintain the Scottish Mediation Register and to provide access to quality assured mediation services. In December 2019, the Scottish Government’s response to the independent review of mediation in Scotland was issued. Ash Denham, Minister for Community Safety commented on momentum building towards mediation reform, referring to proposals for review by Scottish Mediation, the Scottish Government’s Justice Committee report “I Won’t See You In Court”, a review into legal aid provision in Scotland “Rethinking Legal Aid” and consultation for proposals for a Private Member’s Bill on aspects of mediation by Margaret Mitchell MSP.
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The next steps entail a Scottish Dispute Resolution Delivery Group meeting to develop a package of reform. It will issue a public consultation to seek the views of the general public, key stakeholders and other interested parties on the proposals for increasing the consistency and use of mediation within the civil justice system in Scotland.
It is considered that this represents a major step in recognising the value of mediation in the resolution of disputes. Scottish Mediation seeks to advance awareness of mediation by leading and co-ordinating a Scottish Year of Mediation in 2020. It seems that it is not a question of whether mediation will be integrated into the Civil Justice system but rather what form that might take.
The Delivery Group is to look at a wide range of issues including how an Early Dispute Resolution Office might work, considering the wider Dispute Resolution infrastructure, looking at training and standards and considering the possible financial model for mediation in Scotland. Consideration will be also given as to whether legislation is required and to what extent amendments can be made to the current system of dispute resolution, as well as considering implementation arrangements. It is proposed that a wider public consultation will follow.
Our commitment to the Mediation Charter reflects the fact that we have have been at the vanguard of the use of mediation in Scotland. Signing this is indicative of our abilities to use mediation to resolve disputes and of our commitment to equip our lawyers with the knowledge and skills to do so. To learn more about the current developments you can listen to our mediation podcast series - Stuck in the Middle. David Hossack is a Partner in the litigation and dispute resolution team. He is accredited as a commercial mediator by the Law Society of Scotland.
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CONSTITUTIONAL LAW & THE SCOTTISH COURTS Lynda Towers looks at the high profile constitutional law cases that were heard by the Scottish courts last year. HUDDLES OF REPORTERS ARE A FAMILIAR SIGHT at court buildings across Scotland with criminal cases usually attracting the most publicity. But no one could have predicted that it would be a constitutional law case before the Scottish Courts which would attract reporters from near and far. In 2018, we saw the first of a series of constitutional cases being brought before the Scottish Courts. A group of cross-party parliamentarians challenged whether or not it was possible to unilaterally revoke Article 50. In record time, the case proceeded through the Scottish courts, UK Supreme Court and European Court of Justice. This case illustrated that the Scottish courts were willing to consider constitutional issues, and may take a different approach to other courts. It paved the way for the cases of 2019.
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Move on to summer of 2019 when Parliament was formally prorogued by the Queen on the advice of the Privy Council. The prorogation, or suspension, was due to last for 5 weeks. Opposition politicians and political activists argued that the prorogation was an unconstitutional attempt to avoid Parliamentary scrutiny of the Government’s Brexit plans. Much commentary on the court cases which followed has focused on the political implications of this prorogation for Brexit. Of course, the potential implications of the opinion delivered by the courts goes far beyond Brexit. The basis on which prorogation of Parliament could be held by the courts to be unlawful is a matter of great importance to constitutional law and the functioning of democracy in our country.
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Prorogation was challenged in the High Court in England and Wales by the anti-Brexit campaigner Gina Miller, and in Northern Island by victims’ rights activist Raymond McCord, who argued that it breached the Good Friday Agreement. In Scotland, the challenge was led by Joanna Cherry MP. Along with other cross-party politicians, she raised a judicial review in the Court of Session in Edinburgh. Lord Doherty held that the matter was not justiciable. It was a policy and political argument, not one for the courts. That decision was appealed to the Inner House of the Court of Session, where a court of three judges found that it was justiciable. Having determined that, the court then needed to consider whether or not it was lawful. The unanimous judgement of the Inner House held that prorogation was unlawful as “its purpose was to stymie parliamentary scrutiny of the executive, which was a central pillar of the good governance principle enshrined in the constitution”.
They did not go as far as the Scottish Court had done in considering the Prime Minister’s motive. The case was then appealed to the UK Supreme Court (‘UKSC’), where it was heard at the same time as the appeal in the Gina Miller case. The UKSC considered two conflicting opinions: the Court of Session’s which favoured the petitioners and the High Court’s which favoured the UK Government. The 11 judge bench of the UKSC delivered their judgement on this complex matter in record time and it was unanimous. They held that the prorogation was unlawful. It interfered with constitutional principles. The Government cannot exercise its powers to frustrate parliamentary sovereignty or accountability without proper justification, and there was not proper justification in this case.
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They did not go as far as the Scottish Court had done in considering the Prime Minister’s motive. The UKSC decision was not based on an examination of whether prorogation had been motivated by the improper purpose of stymieing Parliament. Shortly after this case, the Scottish Courts were to see a flurry of further activity when another action was raised by Joanna Cherry MP against the UK Government. Google was overloaded with a legal search term - “nobile officium”: the power of the Court of Session in Scotland to provide a legal remedy where statute or the common law are silent. It is unique among British courts, and is a power used to prevent injustice. Cherry and others petitioned the court to use its nobile officium power to sign a letter to EU leaders asking for an extension to the Brexit deadline if the Prime Minister refused to do so. Parliament had passed legislation requiring the government to request the extension. The Prime Minister had made comments to the press which suggested he may not do so. The Court found that the Prime Minister had said he would abide by the law, but rather than issuing a final determination they left the case live so that parties could return to court in the event that the Prime Minister refused to sign the letter requesting the Brexit deadline extension. Is this constitutional law trend here to stay? It may well be. There has already been a wellpublicised suggestion that the SNP may bring a legal challenge against the UK Government’s refusal to allow a second independence referendum. There may also be a review of the constitutional relationship between the Judiciary and the Executive. So, the Court of Session may not have seen the last of such cases for a while yet, and constitutional law may continue to be a much discussed topic. Lynda Towers is Director of Public Law in the litigation and dispute resolution team.
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BENEFITTING BUSINESS IN SCOTLAND’S COMMERCIAL COURTS Richard McMeeken highlights the benefits of the commercial courts in Scotland. SPECIALIST COURTS IN SCOTLAND ARE NOTHING NEW. In 1994 Lord Penrose established a commercial court in order to respond to the demands of the business community for a quick and straightforward way of resolving disputes and also to make Scotland a more attractive place to litigate compared with other jurisdictions, particularly England and Wales. Other forms of dispute resolution were also beginning to gain in popularity such as arbitration and mediation and the judiciary was keen to ensure that the court remained the forum of choice for commercial actions. On its 25th birthday the commercial court is thriving and it is worth remembering the significant benefits that it brings to businesses needing to litigate in Scotland. 1) The cost of raising commercial proceedings in Scotland is lower than in England & Wales While there is no real difference in procedure nor the quality of decision north or south of the border, there is a significant difference in cost. The court dues incurred in getting a summons to court are only £313 whereas equivalent lodging dues in England are typically £10,000. So any corporate lawyers on the fence as to whether to put an English or Scottish jurisdiction clause into a contract should give careful consideration before subjecting their client to the additional cost of English jurisdiction. 2) Commercial court decisions can be more predictable than decisions in arbitration The legal community is undoubtedly split into two groups on this but it is hard to commend arbitration to clients as compared
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£10,000 While there is no real difference in procedure nor the quality of decision north or south of the border, there is a significant difference in cost.. to the commercial court (accepting that in certain specialist areas where technical input is important, the position may be different). Arbitration tends to be no less expensive nor time consuming and the quality of decision making at arbitration can be variable, whereas because commercial decisions are based on precedent, they are often more predictable. So while the confidential nature of arbitration can be attractive to parties, the commercial court is typically a better choice for litigants wanting a clear, more predictable outcome.
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3) It is more specialised than other courts This benefit cannot be underestimated. Having a dispute managed and decided upon by a commercially experienced judge is of huge benefit and can be sharply contrasted to the position in the ordinary court where actions regularly call before judges without any commercial experience. The consistency of having a single judge deal with the whole case and that judge having practical experience with the kind of dispute in question is invaluable and the specialist nature of the court has since been followed in other areas of practice such as family, personal injury and intellectual property. 4) Decision-making is comparatively faster Ordinary actions seem to last forever. It can be months before the parties’ written case reaches anything like its final form and even longer before the case first gets considered by a judge. A trial is usually years down the line, particularly if it’s a long trial that needs a lot of court time. By contrast, things happen comparatively quickly in the commercial court. The case will be considered by a judge almost as soon as defences are lodged and there is a limited period before a final hearing is fixed. In between, the case is carefully managed by the judge to ensure that neither party is allowed to delay matters unnecessarily. So the case is resolved as quickly as it can be within the court system, enabling businesses to move on from the dispute as quickly as possible.
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5) The commercial courts have more flexible procedures Procedure in commercial case can be tailored to the needs of the parties and the circumstances of the particular case. Innovations in relation to the use of experts and the way in which they give evidence, witness statements taking the place of evidence in chief and procedural steps being abbreviated or missed out entirely in more straightforward cases all assist in reaching the right result in the best way possible for parties. It is not, of course, all plain sailing. Innovation is not always a good thing and the production of electronic bundles of documents (which should be a straightforward process) has recently caused a lot of additional time and cost being added to commercial actions. Undoubtedly, moving more documents online and using IT to its full potential is a good thing but, as a solicitor, you are often left with the impression that the court system is about 20 years behind the profession and it needs to catch up quickly. Whether that means investment in a new IT system or just a better procedure for those using the current one is for others to say. However, in general terms the commercial court remains a key attribute of the Scottish court system and the best place for business to resolve disputes. Richard McMeeken is a Partner and Solicitor Advocate specialising in commercial litigation.
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PERSONAL INJURY UPDATE Jenny Dickson considers changes which are afoot for personal injury cases in Scotland. AS THE SPRING OF 2020 APPROACHES, our personal injury team reviews the key changes which took place in 2019 and what we should look out for in 2020. The Personal Injury Discount Rate in Scotland In 2019, the Government Actuary recommended a new discount rate for personal injury claims in Scotland. The recommendation is that the discount rate remains at -0.75%. The rate is used to calculate the amount due to a pursuer for “future pecuniary losses”. Future pecuniary losses are financial losses the pursuer will incur as a result of the injuries they have suffered, for example the cost of additional care needs or lost earnings. The rate is applied to lump sum payments for future pecuniary losses. Pursuers who receive their damages in a lump sum would normally invest that money and expect to earn interest. This rate ensures that interest is taken into account in the valuation of damages and the effects of inflation, taxation and expenses. The discount rate is crucial in ensuring those who have sustained personal injuries are fairly compensated for their losses. In simple terms, the lower the percentage, the higher the damages a pursuer will receive. Therefore, the lower the rate is, the greater financial pressure there is on public services that have large personal injury liabilities, such as the NHS. The Government Actuary is now responsible for fixing the discount rate. It was previously set by the Scottish Ministers and was usually in line with the rate which is applicable to claims raised in England and Wales. The previous rate was - 0.75%, so the Government Actuary’s recommendation makes no change to the value of cases in Scotland. This is in contrast to the change for England and Wales which was made on
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5 August 2019. That saw the discount rate increase from - 0.75% to - 0.25%, which resulted in a fall in the level of damages in high value claims. Accordingly, there is now a difference in the value of payments for future pecuniary loss north and south of the border. Qualified One Way Cost Shifting The Civil Litigation (Expenses and Group Proceedings) (Scotland) Act 2018 is expected to be given practical effect in 2020 by the introduction of court rules which will implement its terms.
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The discount rate is crucial in ensuring those who have sustained personal injuries are fairly compensated for their losses. The Act aims to increase access to justice. It introduces Qualified One Way Costs Shifting (QOCS). This means that a claimant will not be liable for a defender’s costs in personal injury actions. The introduction of QOCS contrasts with the usual position in civil litigation that an unsuccessful party will bear the costs of a successful party. Previously, a risk-adverse pursuer may have refrained from engaging in litigation due to the risk of being found liable to pay the defender’s expenses where the defender was successful. In theory, potential pursuers will now be more incentivised to litigate, thereby facilitating access to justice. There are exceptions to QOCS where a pursuer:• has acted fraudulently; • behaves in a manner which is manifestly unreasonable; or • conducts the litigation in a way which amounts to an abuse of process. The extent to which these exceptions will be applied by the courts is unknown. However, it is likely that they will be applied cautiously given that a liberal application would undermine the purpose of the change.
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There is still some work to be done to clarify exactly how QOCS will work in practice in Scotland. For example, it is recognised that there is a risk that QOCS will apply pressure on defenders to settle weak claims as they may be liable for costs even if they successfully defend a case. This presents a potential imbalance and it may become appropriate to introduce further exceptions depending on the status and circumstance of the defender, for example, in a situation where the defender is an uninsured individual. The main provisions of the Act have not yet been implemented and the practical implications of the Act are yet to be seen. We’ll be watching both these developments closely in 2020, to see if there are changes to the volume of cases raised in Scotland, given both the higher awards of damages when compared to England and the future removal of the risks of claimants bearing the costs of unsuccessful cases. Jenny Dickson is a Partner and Solicitor Advocate in the litigation and dispute resolution team.
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OUR LITIGATION TEAM WE HAVE ONE OF THE LARGEST AND MOST EXPERIENCED LITIGATION TEAMS in Scotland with a team of over 80, including 60 lawyers. In recent years, we have achieved success for our clients in some of the highest profile cases before the Courts and Tribunals.
Our team is also regularly involved in various forms of alternative dispute resolution, including mediation, arbitration and adjudication. Our broad experience gives us the insight our clients need to ensure the successful resolution of any dispute.
Clarity is at the heart of everything we do and we provide clients with high quality, strategic and commercially sensible advice. Our client base includes leading national businesses, the public sector and high-net worth private individuals and entrepreneurs. We operate cross-sector dealing with a variety of commercial disputes, including: general commercial litigation, real estate litigation, professional negligence, personal injury, employment disputes and inquiry work.
We recognise that funding a litigation can be a challenge and we offer a variety of options for our clients in appropriate cases including hourly rates, fixed fees and success fee agreements. We also work with litigation funders in certain cases to provide cover for our clients’ costs and insurance cover for adverse costs, providing clients with the clarity and certainty they need before embarking on litigation.
Our litigation team tailors its approach to cases depending on the nature of the dispute and has vast experience dealing with actions at all levels of the Scottish court system.
For more information on our litigation and dispute resolution services click here.
Clarity is at the heart of everything we do and we provide clients with high quality, strategic and commercially sensible advice.
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OUR SCOTS COUNSEL SERVICES WE ARE A SCOTTISH BASED LEGAL PRACTICE WITH OFFICES IN EDINBURGH AND GLASGOW, and a long and distinguished history at the heart of the legal community in Scotland. We regularly work with English, Irish and international law firms on high value and complex cross-border transactions and disputes. Law firms acting as lead counsel for key clients in cross-border transactions or litigation matters have a number of commercial issues to consider when choosing firms to partner with in other jurisdictions. Here at Morton Fraser, we understand that it is vital that you and your business can engage with a law firm in Scotland on behalf of your clients which understands the challenges you face, the pressures you are under and the commercial factors which need to be considered in terms of your own business interests. Our Scots Counsel services are focused on providing solutions for you and your clients in the following areas: • Litigation & Disputes • Banking & Finance • Corporate
We frequently act alongside law firms based in the City of London and other major financial and commercial centres. Our legal specialists include a number of lawyers who have practised in the City of London for wellregarded City and international law firms. We therefore have an inherent understanding of the challenges faced by lead counsel on cross-border international transactions under demanding time pressures. When partnering with lead counsel law firms, our primary focus is to work seamlessly with you to ensure a collaborative approach throughout so that together we deliver results on time, on budget and in a manner that reflects the commercial requirements of your client. We are therefore the natural choice for you and your clients, regardless of the size or complexity of the relevant transaction or dispute, or the technical difficulty of the Scots law advice required. For further information please contact Ross Caldwell at ross.caldwell@morton-fraser.com.
• Insolvency & Restructuring • Private Client • Real Estate
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