Lord Hamilton - RGU Inaugural Lecture - "Arbitration in Scotland : Its Nature and Its Future"
11 March 2014
The following talk was delivered by Lord Hamilton at the Robert Gordon University Inaugural Lecture on Tuesday 11th March 2014.
"Arbitration in Scotland : Its Nature and Its Future"
It is an honour and a pleasure to deliver this lecture to celebrate the inauguration of the Law School at Robert Gordon University.
My subject this evening is arbitration, a dispute-resolution process of real importance to Aberdeen as a major centre of the oil and gas industry. I should like to set my remarks in the context of my own career and, in particular, its connection with arbitration and with other processes of dispute resolution. A few words of personal history may, therefore, be in point.
I was called to the Scottish Bar in November 1968, when I was admitted as a Member of the Faculty of Advocates. I practised as an advocate (becoming a QC in 1982) until 1995, when I was appointed a judge of the Court of Session, Scotland’s supreme civil court. I sat initially in the Outer House, the first instance court, where much of the business I was concerned with was commercial actions; I was later promoted to the Inner House (the appellate division) and finally in 2005 to the office of Lord President, the head of the Court. I held that position until my retirement in June 2012.
During my judicial career I saw all sorts of cases but not much in the way of arbitration. Earlier, however, while in practice at the Bar, I had the opportunity from time to time to appear as counsel in arbitrations and, principally when I was a QC, to sit as an arbiter (as arbitrators in Scotland were then called). Since my retirement as a judge my interest in arbitration has revived.
The audience for this lecture is dual in character: those who sit physically before me as I deliver it and those who, as remote learners, will see and listen to it on film. The prior state of knowledge of those distinct audiences may well be different-so, if what I have to say may in some measure to some of my listeners seem trite and to others unduly technical, I apologise in advance; I shall do my best to accommodate both perspectives.
What, then, is arbitration? As my immediate audience at least will know, it is very difficult to find a modern, comprehensive and authoritative definition of the term. In Scotland the law of arbitration was recently reformed and given statutory force by the Arbitration (Scotland) Act 2010 but that statute does not provide a definition of arbitration as such, only telling us that the term includes domestic, inter-UK and international arbitration. Nor does the (English) Arbitration Act 1996 provide any more enlightenment. Internationally, the United Nations has been active in promoting harmonisation among states of arbitration law, including promulgating the UNCITRAL Model Law of International Commercial Arbitration (adopted by the United Nations Commission on International Trade Law on 21 June 1985 and recommended to all states by the General Assembly on 11 December 1985). In the Travaux Preparatoires there was much discussion of “commercial” and of “international” but none of the term “arbitration”. In the Model Law as promulgated “arbitration” is merely defined as “any arbitration whether or not administered by a permanent arbitral institution” (Article 2 (a)); Article 1(3) identifies when an arbitration is “international”.
So far as I am aware, no court in the United Kingdom has, in modern times, offered a comprehensive definition of “arbitration”-though, as we shall see, there may be some judicial pronouncements which are of assistance. As to textbooks, Professor Fraser Davidson in the recent (2nd) edition of his Scottish work entitled “Arbitration” has tentatively offered the following definition at para 2.01:
“….a process whereby two or more parties agree to submit a legal dispute to one or more third parties, whose role it is to pronounce judicially on that dispute in the shape of a binding award”.
This is broadly consistent with how the 18th century Scottish jurist John Erskine of Carnock defined a “submission”- that is the technical instrument by which a dispute is referred to arbitration; he defined it thus:
“…. a contract, entered into by two or more parties, who have debateable rights or claims against one another, by which they refer their differences to the final determination of an arbiter or arbiters, and oblige themselves to acquiesce in their decision” (Institute IV.3.29).
It is also consistent with the Policy Memorandum against which the 2010 Act was formulated.
In the second edition (1989) of Mustill and Boyd on Commercial Arbitration (a leading English textbook) it is noted at p. 39 that English law does not provide a comprehensive answer to the question “What is arbitration?”. In the 2001 Companion Volume to that edition it is noted (at p. 119) that the (English) Act does not attempt an answer to that question and states that, in the absence of guidance, the question must in the end be answered intuitively.
So, where does that leave us? It is implicit in the Model Law that arbitration, in the context of international commercial arbitration, is a consensual process. It defines “Arbitration agreement” as “ an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not” (Article 7(1)). The agreement has to be in writing (Article 7(2)). The Model Law was amended by a General Assembly resolution of 4 December 2006. The definition (in so far as it goes) of arbitration is not altered. Article 7, however, now gives two optional forms of arbitration agreement: one of them (Option II) follows the 1985 form; the other (Option I) takes account, among other things, of modern communication by electronic means.
In national contexts arbitration is again ordinarily heavily dependent on the contractual terms agreed between the parties. Lord Hope of Craighead said in Lafarge Redland Ltd v Shephard Hill Ltd  1 WLR 1621 (a construction dispute) at p. 1623 that arbitration “depends on the law of contract”. But this will not always be so: arbitration may be a mode of dispute resolution imposed on parties by statute (see, for example, section 13 of the Agricultural Holdings (Scotland) Act 1991 (as originally enacted)-the arbiter has now been superseded by the Scottish Land Court. Also, in some contexts the term “arbitration” may be applied to a purely advisory process-for example, “industrial arbitration” or “pay arbitration”. Neither of these exceptional usages is within the scope of this lecture.
If an authoritative modern definition of “arbitration” cannot readily be found, what judicial indications might suggest that a particular process is an arbitration rather than some other form of dispute resolution? In Arenson v Arenson  AC 405 the House of Lords had to decide whether an auditor carrying out a valuation exercise was immune from suit for negligence in that exercise. The case was an English litigation, in which unusually three Scottish judges were included in the panel of Law Lords. One of these was Lord Wheatley, who was at that time the Lord Justice Clerk (Scotland’s second senior judge) but who, as a peer, was entitled to sit in the House of Lords Appellate Committee. Lord Wheatley at p.428 suggested that there were four tests which might be applied to identify whether a decision-taker enjoyed immunity from suit. These were:-
“ (a) there is a dispute or a difference between the parties which has been formulated in some way or another; (b) the dispute or difference has been remitted by the parties to the person to resolve in such a manner that he is called on to exercise a judicial function; (c) where appropriate, the parties must have been provided with an opportunity to present evidence and/or submissions in support of their respective claims in the dispute; and (d) the parties have agreed to accept his decision.”
These tests were not designed as a definition of arbitration but, as an arbitrator is the only decision-maker other than a judge to enjoy, broadly, this immunity (see now, for Scotland, rule 73 of the Scottish Arbitration Rules), they may be of some assistance in identifying when a decision-maker is an arbitrator (or in the position of an arbitrator)-though it should be noted that not all the judges in that case agreed that arbitrators as a class should be immune from suit. Lord Kilbrandon in particular had serious reservations on that matter.
In AGE Ltd v Kwik Save Stores Ltd 2001 SC 144 Lord Hardie (sitting in the Outer House of the Court of Session) followed and applied Lord Wheatley’s tests. Lord Hardie’s reasoning was subsequently approved by the First Division of the Inner House in Holland House Property Investments Ltd v Crabbe and Edmont 2008 SC 619. The same approach was adopted by an Extra Division in Macdonald Estates plc v National Car Parks Ltd 2010 SC 250. So, the position, at least in Scotland, appears to be reasonably well settled.
With reference to Lord Wheatley’s test (a), this has explicit support in the speech of Lord Simon of Glaisdale in Arenson where at p. 424 he says:
“….in my view the essential prerequisite for him to claim immunity as an arbitrator is that, by the time the matter is submitted to him for decision, there should be a formulated dispute between at least two parties which his decision is required to resolve.”
As to Lord Wheatley’s test (c) (submissions/evidence), Lord Simon (at p.424) seems not to have regarded the reception of rival contentions or of evidence as an essential element, though Lord Salmon (at p. 439) said it had been rightly decided “ that a valuer enjoys the immunity of a judge or arbitrator only if what he does assumes the character of a judicial enquiry, for example, by the parties submitting their dispute to the valuer for adjudication and the valuer listening to or reading the contentions made by or on behalf of the parties and to any evidence which they may put before him…..”.
In Holland House at para  the court, in distinguishing the case of the surveyor before it, said:-
“….in the present case the parties were not inviting the surveyor , at the time the matter was referred to him, to adjudicate as between their rival contentions and to decide which side he preferred, having regard solely to the material which parties chose to put before him, which characteristics define the nature of adversarial judicial and arbitral procedures in our system. Rather, they were inviting him, using his expertise and experience, to fix the consideration which was appropriate, at the relevant time, under their agreement, the lease.”
As to Lord Wheatley’s test (d)(agreement of parties to accept the decision), Lord Salmon (at p.439) described the person enjoying the relative immunity as “publishing a decision which is final and binding save for any appeal which the law allows”.
Reverting to Lord Wheatley’s test (b)(that the person for whom immunity is claimed must be called on to exercise a judicial function), this does not mean that the procedural arrangements must be the same as in a court-in many cases they may not- but it does mean that the person to whom parties have remitted the dispute must act in a way a judge is expected to act, including deciding the case in accordance with the legal rights and obligations of the parties. In that respect his position can be contrasted with some other forms of dispute resolution (such as mediation), where the end in view may not be the determination of rights and obligations but the achieving of an outcome which is mutually acceptable to the parties and has their interests rather than their rights and obligations in mind. Likewise, processes such as an architect’s certification as to whether building work is complete or defective is not a judicial function and would not attract the immunity accorded to an arbitrator’s decision (Sutcliffe v Thackrah  AC 727, per Lord Reid at pp.737-8, an English case).
Why, then, should an arbitrator enjoy, in general, immunity from suit for negligence? Again, the question does not appear to have been answered directly. Acknowledgement of the immunity of arbitrators from suit (provided that they act bona fide) goes back at least in Scots law to certain observations by Lord Curriehill in McMillan v Free Church (1862) 24 D 1282 at p. 1295, where, holding that certain officers and members of the Church were not open to suit, he said:-
“…..parties upon whom judicial functions are lawfully conferred and who, in the bona fide exercise of these functions over parties subject to their authority, fall into error in judgment, are not liable in damages to these parties in consequence of such errors….Infallibility of judgment is attainable by no man, however laboriously and conscientiously he may exert his powers to do what is right; and, if notwithstanding a judge’s best and bona fide endeavours to do so, he should be liable in damages for errors into which he might fall, such offices would be shunned by those best qualified for performing their functions.”
He goes on to cite the immunity of judges as an illustration and continues:-
“[The law] also extends such immunity to private persons, upon whom parties, by voluntary agreement, confer authority to adjudicate in certain matters among themselves; it being the policy of our law to encourage and support the settlement of disputes by such private arrangements. This is exemplified by the support which is afforded to arbitrations.”
This long-standing rule based on public policy-applicable to judges and arbitrators alike- has also been recognised as part of the law of England (Sutcliffe v Thackrah, per Lord Reid at p.735) ; arbitrators are perceived as essentially fulfilling a judicial function. The fact that it has for so long been so recognised may not wholly answer Lord Kilbrandon’s point in Arenson that it is difficult to explain why an arbitrator should be immune from suit for negligence, while an expert valuer is not. It remains, however, simply a matter of public policy that, in common law jurisdictions, this immunity is conferred on but restricted to the judge and the arbitrator. A different rule may apply elsewhere. In some civilian jurisdictions it is unconstitutional or contrary to statute for an arbitrator to have such immunity-at least to the extent he enjoys it in common law jurisdictions.
I have referred so far to arbitrator in the singular but arbitrations may be constituted with an arbitral panel comprised of several (usually three) arbitrators. This is commonly the case in international commercial arbitrations, where sometimes each of two parties selects an arbitrator with the third (in due course the chairman) being selected by the original two acting together.
From what, then, is arbitration to be distinguished? The most obvious comparator is the civil jurisdiction of the national courts. There are some parallels between the two: as we have seen, arbitrators, like judges, have to conduct proceedings before them judicially (e.g. in good faith and having regard to the evidence, if any, and arguments submitted to them) and they both, in common law jurisdictions, as the law stands, enjoy immunity from suit for negligence. But arbitrations (with a few statutory exceptions) are consensual processes-that is, they come into existence because the parties in dispute have agreed upon that mode of resolving their differences; the courts, by contrast, are the apparatus which has been set up by the state for the resolution of disputes; any person who can found jurisdiction may bring proceedings at his own initiative. Ordinarily, the parties to an arbitration will have at least some say in the choice of the arbitrator or arbitrators; by contrast, the parties (again with some exceptions) will not be able to choose their judge.
On the other hand, arbitration is to be contrasted with other modes of consensual adjudication. In older Scottish practice the submission earlier mentioned was contrasted with the reference, under which a third party was invited to give his professional determination on a question which had arisen- often on the price or value of the subject matter of a contract (Calder v Mackay (1860) 22D 741, per Lord Justice Clerk Inglis at p.743). The powers of such valuators or referees were more restricted than those of arbiters. A more modern example of such a class of determinator is the architect under a building contract who certifies that work has or has not been done or issues some other type of certificate. Rent review clauses in commercial leases commonly provide for the reviewed rent, if not agreed, to be assessed by an independent surveyor. The Holland House case earlier referred to arose out of such a provision. Parties to a contract may provide for some other matter, if not agreed between them, to be determined by an independent expert. In the Macdonald Estates case the matter was whether a planning permission obtained was “satisfactory” as provided for in the contract. Statutory provision has been made in the United Kingdom (under the Housing Grants, Construction and Regeneration Act 1996) for expeditious adjudication of whether or not monies are due under a construction contract. The determination of the adjudicator is binding and enforceable but only provisionally since the same issue may subsequently be reopened in litigation or in arbitration proceedings. The aim of the statutory provisions is to aid “cash-flow” in the construction industry.
The foregoing processes all involve a determination (whether provisional or otherwise) by a third party of a point or issue which has arisen. Other forms of alternative dispute resolution are designed to encourage parties themselves to resolve any dispute between them. They can, of course, do so simply by negotiation but resolution may be facilitated by the involvement of a third party. This type of process has been publicly encouraged. The European Mediation Directive (Directive 2008/52)-which formally applies only to disputes across E.U. frontiers-encourages states to promote mediation of disputes. In the domestic context mediation has also had Government encouragement by the establishment of the Scottish Mediation Network. That process is, however, well removed from arbitration.
If there is a range of dispute resolution processes to choose from, in what circumstances might arbitration be the choice of parties? In this connection I consider only commercial situations, with some additional comments about international commercial arbitration. It is in the nature of commercial dealings that, while they often may run smoothly, they have the potential for disputes to arise. It may be prudent for parties in their contractual arrangements to make provision for how any such dispute is to be resolved. The candidate of choice may often be arbitration. The most obvious advantage is the very fact that it is a choice: parties are at one about the form of process rather than being exposed, for example, to litigation in a forum which may be to the disadvantage of one or other or both of them. The choice will also include the selection of a mutually acceptable arbitrator or arbitrators or of a mutually acceptable mode of identifying such an arbitrator or arbitrators-through for example an established arbitral institution. Because arbitration is, in many respects close in nature to proceedings in a court of law, parties can expect that their dispute will be addressed and resolved in a judicial manner-an absence of bias, attention given to evidence and/or submissions placed before the arbitrator by the parties and determination of the dispute, according to the arbitrator’s honest and best judgement, in accordance with the parties’ legal rights and obligations. Arbitration is, with some possible exceptions discussed below, also a private process-so, the confidential nature of trade secrets, or even that the parties are in dispute, can be respected. That confidentiality, if it is important, cannot ordinarily be assured in a court of law, which is essentially a public forum. On the other hand, there may be an element of choice for commercial parties who are considering litigation. In some jurisdictions specialist judges are allocated to deal with commercial disputes; those judges will commonly have been commercial law practitioners at some stage in their careers and as such, and later as commercial judges, have built up experience and expertise in that field. The Court of Session (Scotland’s supreme civil court) has a dedicated group of commercial judges who have built up a good reputation. The Commercial Court in London has a similar reputation. Litigation has the obvious advantage that decrees of the court are enforceable by mechanisms (known in Scotland as diligence)which are readily to hand and effective in their own jurisdictions. Decrees pronounced in E.U. countries should also be readily enforceable in other E.U. states. The position may be less satisfactory in other states. Arbitrators cannot enforce their own awards but there are procedures which allow national courts to lend their assistance to the enforcement of arbitral awards. For example, section 12 of the Arbitration (Scotland) Act 2010 makes provision for such enforcement. The section applies regardless of whether the arbitration concerned was seated in Scotland (section 12(6)). The Act also expressly recognises and, subject to section 20, makes enforceable in Scotland awards to which the New York Convention applies (section 19). That Convention (the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958)) is an instrument to which most countries, including the United Kingdom, are signatories. It provides for the recognition and enforcement in signatory states of arbitral awards made in other such states; it is of major significance in the enforcement of awards in international commercial arbitration. In some situations an arbitral award may be more readily enforceable in a foreign country than a court judgment from abroad.
Arbitration may also offer procedural flexibility, being capable of meeting the particular needs of the parties; in court procedures generally applicable rules of court will ordinarily apply. Also in arbitration the parties will be able to choose for themselves, if appropriate, an established set of procedural rules. Arbitration is not subject to rules about rights of audience such as ordinarily apply in national courts. Commercial parties are likely to be sensitive to the cost of proceedings. In arbitration the parties will be responsible not only for the costs of their representation but also for the fees and charges of the arbitrator (or arbitrators), of any necessary support services (such as for a clerk and for any charges for hearings accommodation) and of any arbitral institution through whose offices the arbitration has been established. These costs may be substantial-particularly in international commercial arbitrations-though there is reason to believe that these will be significantly lower in Scotland than in some other jurisdictions, such as England and Wales. Commercial parties are also likely to be sensitive to how expeditiously their dispute can be resolved. Arbitrations have not always been expeditious. Much may depend on the personal authority of the arbitrator or arbitrators to progress matters.
Because parties to an arbitration have agreed that the arbitrator’s award will be binding upon them, that award will be final unless the relevant national law allows for a challenge to it. In Scotland the position at common law was that the award of an arbitrator (then called in Scotland an arbiter) was final on matters both of fact and of law (Caledonian Railway Co v Turcan (1898) 25 R (HL) 7, per Lord Watson at p.17); only misconduct or excess of jurisdiction could open the award to review by a court of law. However, section 3 of the Administration of Justice (Scotland) Act 1972 provided that, during the course of an arbitration, an arbiter might, and in some circumstances must, state a case for the opinion of the Court of Session on a question of law arising in the arbitration. This provision was less than satisfactory in practice. Some arbiters, in my experience, were reluctant to be pro-active and decisive, particularly in procedural matters, out of an apprehension that their decisions would be challenged in court under this procedure. On that matter Lord President Hope had this to say in ERDC Construction Ltd v HM Love & Co (No.2) 1997 SLT 175 at p.178:-
“I consider that it would be an abuse of s.3 of the 1972 Act for questions of mere procedure to be brought before the court for its opinion on the pretext that they raise questions of law. The delay and expense of a stated case is an obstacle to progress in the arbitration. Excessive use of this procedure is liable to bring the whole process of arbitration in Scotland into disrepute”.
Section 3 was swept away by the Arbitration (Scotland) Act 2010, under which a court may intervene only in more limited circumstances.
Section 1 of that Act (side-noted “Founding Principles”) provides:-
“The founding principles of this Act are-
(a) that the object of arbitration is to resolve disputes fairly, impartially and without unnecessary delay or expense,
(b) that parties should be free to agree how to resolve disputes subject only to such safeguards as are necessary in the public interest,
(c) that the court should not intervene in an arbitration except as provided in this Act.
Anyone construing this Act must have regard to the founding principles when doing so.”
That section broadly reflects section 1 of the (English) Arbitration Act 1996, a statute which in effect set out an arbitration code. It has been said that the features of that statute “add up to a fundamental re-balancing of the relationship between the parties and the arbitral tribunal, in terms not only of rules but also of psychology” (Mustill and Boyd-Commercial Arbitration-2001 Companion Volume to the Second Edition at p.52).
Section 13 of the Scottish Act (as read with the Scottish Arbitration Rules) imposes strict limits on the circumstances in which a court can intervene in an arbitration. Broadly, an award may be challengeable in court on the grounds of want of jurisdiction, serious irregularity and legal error. The power to challenge on the ground of legal error is further restricted by it being available only by agreement of parties or with the leave of the court. The incidents of such a challenge were considered by Lord Glennie in Arbitration Application No. 3 of 2011 2012 SLT 150. By contrast, where proceedings are instituted in court, there is almost always a prospect of a dissatisfied party being able, without the need for leave, to appeal to a higher court on a wider range of grounds, including alleged errors of fact.
So what, then, is the future for arbitration? In Scotland, domestically, I believe that the 2010 Act (including the Scottish Arbitration Rules set out in the Schedule) present a new and exciting framework against which arbitration can make significant advances as a satisfactory mode of dispute resolution. Instead of a somewhat uncertain common law background supplemented by occasional statutory provisions the Act establishes a comprehensive and principled code against which arbitration can be conducted. As in many other jurisdictions, the Act does not incorporate the Model Law but uses its principles to identify its own rules. The founding principle that the court should not intervene in an arbitration except as provided for in the Act should give arbitrators confidence to proceed pro-actively, particularly in procedural matters, and thus expedite the proceedings. It will be important, however, that arbitrators recognise and adhere to the founding principle that one of the objects of arbitration is to resolve disputes without unnecessary delay. In GI Venues Ltd, Petitioners  CSOH 202 Lord Malcolm had occasion to pass adverse comment on a delay of ten months between the conclusion of a debate on jurisdiction and the issue of the arbitrator’s decision. However, while experience of the working of the 2010 Act is at present limited, I believe that it provides a basis for a new and prosperous age for domestic arbitration in Scotland.
I turn now to international commercial arbitration. “International” in this context refers to the situation where the parties to the arbitration are seated in different states; “commercial” connotes that the arbitration arises out of a business relationship. International trade continues to expand and with that expansion the number of international commercial agreements multiplies. With every such agreement there is a potential for dispute and for the need for any such dispute to be resolved satisfactorily. Where parties are in dispute, the forum of first resort might be thought to be the aggrieved party’s national court. But that forum may not be available; the other party may not be subject to its jurisdiction. So, if a court remedy is to be pursued, the aggrieved party will have to have resort to the other party’s national court-a judicial system with which he may be unfamiliar, where a foreign language may be in use and where it may be necessary to engage foreign lawyers unfamiliar with the business needs and interests of the client. There may even be a risk of judicial partiality; in Fiona Trust Corp v Privalov  4 All ER 951, Lord Hoffman said at para:-
“Particularly in the case of international contracts, [parties] want a quick and efficient adjudication and do not want to take the risks of delay and, in too many cases, partiality, in proceedings before a national jurisdiction.”
In that case the House of Lords also laid down a principle that was new-at least for English law-in the interpretation of arbitration agreements and clauses. It held that, in general, the scope of an arbitrator’s powers was not restricted to issues which arose under the principal agreement but extended to issues such as whether that principal agreement had been validly entered into. So, questions such as whether that agreement had been procured by bribery were within the scope of the arbitrator’s jurisdiction and were not reserved for determination by a court of law. In Scotland, that position is now reflected in rule 19 of the 2010 Rules.
Even if the other party is subject to the aggrieved party’s state system, then, unless both states are members of the E.U., a judgment of that state may not be recognised and enforceable in the other state.
For parties trading with each other internationally, arbitration as a forum for the resolution of disputes presents a number of advantages. First, there is party autonomy: parties can themselves choose the forum or place of arbitration and the procedural rules under which any dispute will fall to be resolved. Many commercial contracts of an international character currently provide for arbitration under the rules of an established arbitral institution such as the ICC (the International Chamber of Commerce) with its headquarters in Paris and the LCIA (the London Court of International Arbitration) with its headquarters in the British capital. Both of these institutions are of longstanding. The former was created in 1919, the latter had its initial establishment in 1892. More recent are the CEAC (the Chinese European Arbitration Centre) with its headquarters in Hamburg (designed principally for the China/Europe trade) and the Scottish Arbitration Centre set up in Edinburgh against the background of the 2010 Act; these were established respectively in 2008 and 2011.There are others. The Scottish Arbitration Centre has, since its establishment, set up an association with the Centre for Energy, Petroleum and Mineral Law and Policy at the University of Dundee. This joint venture, known as “ICEA” (the International Centre for Energy Arbitration) will promote arbitration in energy disputes under the 2010 Act and Scotland as a place to arbitrate such disputes. It has the support of the Scottish Government.
Secondly, parties will be able to select or agree on the mode of selection of the arbitrator or arbitrators to determine any dispute, often using these international institutions. Thirdly, the arbitral award will be binding on the parties and will, ordinarily at least, be enforceable internationally under the New York Convention earlier referred to, which the vast majority of states have ratified. Fourthly, the arbitral proceedings will, in most cases and in most respects, be confidential, thus obviating the exposure in a court of law to public gaze of what may be sensitive commercial material- though it should be noted that there has been some jurisprudence in Australia and in the U.S.A. which suggests that this may not always be so. I have in mind, in particular, the Australian case of Esso Australia Resources Ltd v The Honourable Sidney James Plowman and others (1995) 183 C.L.R. 10 and the American case of United States v Panhandle Eastern Corp et al (D.Del.1988) 118 F.R.D. 346. The subject matter for which confidentiality was in these cases denied was of public or national interest. As to confidentiality under the 2010 Act, see rule 26.
There can, on the other hand, be disadvantages in arbitration in international commercial situations. Costs may be higher than in litigation- as with domestic arbitrations, it will be necessary to meet the fees and expenses of the arbitrator or arbitrators as well as the costs of representation. If the seat of the arbitration is in some neutral country, the costs of travel and accommodation will require to be met. It may also be necessary to have resort to local courts for assistance- such as to secure the attendance of witnesses or the production of documents. There will not, in general, be power to convene third parties to the process- a facility ordinarily available in a court of law and which may be important in resolving a dispute satisfactorily; on the other hand, it may be possible by agreement to consolidate arbitrations.
Of significance is the extent to which the English language has come to dominate international arbitral proceedings. For example, although the ICC is a French institution, 75% of the awards approved by it in 2008 were drafted in English. These cases arose from120 different countries and independent territories across the globe. This dominance is reflected in the use of English as the language of the Willem C. Vis International Commercial Arbitration Moot held annually in Vienna (with a parallel Vis East in Hong Kong). These moots are for the deployment of forensic skills in an international commercial arbitral atmosphere by senior university students intending to embark on legal careers in international business. As one who has acted as a member of the Final Panel in that competition , I can vouch for the English language and forensic skills of the participants. It is also a gathering place for many distinguished international arbitrators.
What then of the future of international commercial arbitration? There is no reason to doubt that, largely for the reasons explained above, arbitration will remain a favoured mode of dispute resolution for many international commercial disputes. While the English, French, American and Swedish international arbitral institutions remain at present dominant in the field, there is reason to believe that other jurisdictions, including Scotland, will in early course establish themselves as fora for international commercial arbitrations. Scotland has the advantage that the English language-the lingua franca of international commercial arbitration-is spoken here; it also has the distinct advantage that the costs of arbitration, including the costs of representation before the tribunal, are likely, without any loss of quality, to be significantly lower than in other jurisdictions such as England. With clear and reasonably accessible provisions contained in the 2010 Act (itself influenced by the Model Law) foreign parties will find in it rules which are not unfamiliar and are easily workable. The Scottish Arbitration Centre is making significant headway towards establishing itself as an international arbitral institution. Many contracts are now being written with arbitration clauses referring to the Centre. A number of senior lawyers, including myself, are making themselves available to act as arbitrators in international cases. I am confident that before long we can expect international commercial arbitration seated in Scotland to take off.
So, for those with ambitions in business, whether domestic or international, a familiarity with arbitration is of the first importance. Robert Gordon University in inaugurating a Law School with arbitration as one of its disciplines is providing a service which, I believe, will be of real value. It has been my pleasure to participate in this inauguration.
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