A Guide To Dispute Resolution in Scotland

Background

In the current economic climate, litigation is becoming more and more of an issue for businesses. Not only are claims (some of them spurious) rising in some sectors, the cost of litigation seems to continue to increase unabated. The reader may of course think that that is actually good for litigation specialists like BBM. However, given that we are effectively in a results driven business, it is actually in everyone’s interests that disputes be resolved as quickly and efficiently as possible. This guide seeks to give some brief detail on various options that may be open to businesses in resolving their disputes. The BBM website contains a separate guide to debt recovery matters, where there is no real or substantial dispute over amounts due from one party to another. This guide concentrates on cases where there is some real legal or factual dispute between the parties.

It is probably worth saying that one of the reasons that disputes arise is because of uncertainty. Often uncertainty arises because of the interpretation of a document or of events. It sounds very simple, but the best advice that can possibly be given on dispute resolution, is simply to avoid having disputes in the first place! That all sounds simplistic, but sometimes dispute avoidance can be an art in itself. Advice should be taken to ensure that contractual documentation, record keeping of transactions and events, and recording of timings, are all in place to demonstrate what the position is about something or another.

Unfortunately, the law is about interpretation. That means that there can never really be one hundred per cent certainty in relation to documentation. A lawyer can give an opinion that something has a very minimal risk of being interpreted in a different way, but there is always the potential for another lawyer to attempt an innovative or clever argument. This is because, to a large extent, the law depends on applying previous case precedents to different up to date factual scenarios. The best dispute resolution advisors are those who can take the precedents and give a realistic opinion about how a court is likely to apply them. That is what a business should be looking for in litigation advisors: the ability to give a realistic view as far as possible about how a set of events are likely to be interpreted.

There are other litigation risks. One wild card element in any litigation is simply that the evidence may not come out in court or arbitration, in the way that it was anticipated. This is not necessarily (although it can be sometimes) because witnesses are not credible, or they are lying. Often, the position people think was the case turns out to be slightly different when objectively analysed.

Clearly, whether the risks are large or small will affect what dispute resolution option is best for a business in a particular case. There is no panacea. That is why good relationships are required with litigation advisors, so that a business is pointed in the right direction.

The main options tend to be as follows: –

1. Negotiation

If there is a continuing commercial relationship between the parties, or even a personal relationship, the last thing that is helpful is a public battle in a court room. Often, it will be desirable to get to a stage where the parties can continue to work together. Obviously, each business will have different commercial priorities. However, if both parties are sensible and it is reasonable to compromise, then matters can often be helpfully resolved by negotiation. This will often involve the legal advisor, but sometimes not directly in the negotiation. In many cases it will simply be a case of the legal advisors giving a view about the merits or otherwise of a particular claim so that the commercial risks of proceeding can be weighed up against a compromise settlement. As well as maintaining relationships, negotiation can have the added benefit of saving on costs. We are now at the stage in Scottish litigation where nearly any defended case, which runs to a conclusion, will cost at least a five figure sum. In fact, in the Court of Session many more substantial claims can cost a six figure sum, and that is (in both cases) without thinking about the cost of appeals or of the risk of picking up any of the other side’s expenses. Even if successful, the winning party is unlikely to recover all of their costs (the usual rule of thumb is they may recover up to two thirds of their cost) and there is always the risk that the losing party enters insolvency or does not have the assets to meet the claim. These are all factors that the legal advisors have to weigh up when assessing whether to advise that an offer should be accepted.

2. Mediation

Another option that can produce excellent results in the right case, is for the parties to agree to go to mediation. It costs more than an informal negotiation, but effectively involves an expert mediator mediating and facilitating discussion between the parties. In our experience this normally works best where both parties are genuinely committed to trying to achieve a resolution, and both have a good understanding of the strengths and weaknesses of their case. Sometimes, if mediation is arranged too early, parties are entrenched in their position because they genuinely do not understand their case’s strengths and weaknesses. Having said that, mediation can be a useful tool for simply getting a rational and objective analysis of what the other side are saying in a dispute, which is something that can be dangerously lost in the fog of war, particularly if the other side are taking the dispute particularly personally. Mediation will often not work where there is a genuine legal issue to be resolved by a court, but it is never an option that should be rejected out of hand. It also has the advantage of keeping the dispute private.

3. Arbitration

For a number of years in Scotland arbitration was seen as the poor cousin to mediation. However, matters have changed with the advent of new Scottish Arbitration Rules in recent years. The advantage of arbitration over litigation is the privacy factor, and the fact that arbiters are often subject specialists. Arbitrations did previously have a reputation for being extremely lengthy and costly, and often favoured only in the largest construction disputes. However, the new rules do attempt to streamline matters. There are also now only limited appeal rights to the Court of Session from arbitration. In the right case, where both parties are willing to co operate and to be sensible on the choice of arbiter, arbitration can be an extremely sensible option, which again ought to provide privacy to the parties as they resolve their disputes. It is beyond the scope of this briefing, but it should also be noted that in construction disputes the statutory form of dispute resolution, known as “adjudication” is often utilised instead of arbitration. This often proceeds on the basis of written submissions to an adjudicator who will usually only have a limited time (say 28 days in most cases) to come to a decision. The difficulty with adjudication in many cases is actually enforcing the award of the adjudicator because appeals to the court are common place. It should be noted that many commercial contracts have the parties agreeing to go to arbitration before they actually litigate.

4. Litigation

Litigation has an extremely bad reputation. Delays, costs and uncertainty, as well as the public nature of the battle are all draw backs that are well known. However, sometimes litigation is the desirable option and it should not be over looked. For example, sometimes a business will require some statement or decision on the law to be made in order that future scenarios do not develop in the same way as current ones. In such a case litigation is the obvious way to go about matters. Secondly, in larger disputes in Scotland, the Commercial Court of the Court of Session has developed an extremely streamlined process with one judge case managing disputes from a preliminary hearing right up until a hearing on evidence (which often takes place within nine months of the case starting, which in court terms is actually extremely fast!). The reader should note that there is what is called a pre action protocol before a commercial case can be raised which involves setting out the position clearly to the other side and showing them any expert evidence before proceedings are actually raised (unless there is some particular urgency).

On the issue of urgency, the other time where litigation will be the preferred option is if there is some need, as part of the dispute, to try to get some protective immediate order against the other party (either to freeze assets or to stop them from committing some act or another).

Advice

BBM solicitors are a specialist litigation firm with a reputation for dealing with complex disputes. The team operates from offices in Edinburgh and in the Highlands and Islands, serving Scottish companies as well as solicitors and their clients from other jurisdictions. We are delighted to have an initial discussion about dispute on a no obligation basis.

Our contact details are as follows:

This guide is current 8 March 2013 and is our understanding of the position described at that date. It does not constitute legal advice. Legal advice ought to be taken before relying on its terms (particularly to ensure the law has not changed).