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Scotland Wants To Become “The Switzerland Of Dispute Resolution”

Not only does Scotland vie to become a global, efficient ADR center attracting domestic and international businesses, but it also wants to improve the overall competitiveness of its legal system.

It all begins with a long and hard look at the Scottish legal system in the form of a short, no-nonsense report known as the “BELF Report”, authored by the Business Experts and Law Form (BELF), and commissioned by the Government of Scotland’s First Minister & Custodian of the Great Seal of Scotland, Alex Salmond, MSP MP, through Cabinet Secretary for Justice, Kenny MacAskill MSP.

This November 2008 report feels and reads almost like a harangue, a “yes we can”, as it calls upon the Scots to marshal their resources, to stand together, to learn from their illustrious history, and to dare to look forward to the future with a renewed sentiment of pride. The report is indeed a worthwhile read.

The economic strategy of the Government of Scotland as published in November 2007 places great importance on an “effective and modern legal and criminal justice system, underpinning a safer and stronger Scotland, to provide an essential sound basis for conducting business and securing growth.”

In the report’s foreword, the authors reveal a tendency in the past –and still lingering—to view and consider the needs of the justice system as separate from the needs of the business community, suggesting that walking down the same road separately has caused many businesses to choose England over Scotland as their preferred venue to resolve disputes.

What was the Justice Secretary’s purpose in commissioning this report? To see what could be done to enable and encourage businesses, so far as appropriate, to choose Scotland as the seat of their business and legal activities, to look to Scottish lawyers for their advice, and to look to the Scottish courts as their dispute resolution forum of choice.

The report does not go into detailed proposals for reform focusing, instead, on the larger picture, on “opportunities and areas of focus that will allow Government and the legal profession to work together to ensure that Scotland’s legal profession continues to thrive and, even more importantly, to ensure that the legal system can help business, and therefore Scotland as a whole, to flourish.”

Of the report’s five main areas of focus, we will highlight three:

  • Scotland as a Center for Dispute Resolution;
  • Alternative Dispute Resolution;
  • Selling Scotland’s legal system and profession.

Members of the BELF do not believe that Scotland is competing effectively with England in attracting or even encouraging businesses to use the Scottish courts and legal system. The report points to several reasons and factors to explain why Scotland is less competitive than England.

Harmonization. While there is an increasing drive to harmonize Scottish and English law, and while EU Directives compel member states to harmonize legislation at home and throughout member states, the fact that businesses can choose one legal system over another still favors English over Scottish law.

Size. It is important. England is a larger jurisdiction than Scotland. As a result, the legal system, and its attorneys, are perceived has having broader experience in specific areas of commercial law.

Global recognition. English law has been adopted and adapted in many countries, a legacy of the British Empire that gives English law a unique level of recognition worldwide.

Geographic barriers. The report points out that parties are reluctant to “go north” out of inconvenience.

Delays. Actual delays or not, the report points to the fact that business believe that Scottish courts are slower than courts in other jurisdictions.

Specialization. Despite increasing efforts to promote specialization through Commercial Courts judges and sheriffs, it appears that a number of commercial disputes are still heard by judges or sheriffs with little sector-specific expertise.

Case management . “Move the case forward”. When consulted, excellence in case management is viewed by businesses as a key factor contributing to the prestige of any given jurisdiction.

Language. As pointed out in the report, “The procedural terms used by the Scottish courts are distinctive and historic, but arguably alienate those unfamiliar with Scots law.” The authors of the report encourage authorities to take advantage of the fact that Scotland is an English language jurisdiction, and to discard archaic procedural terminology

Costs. It appears that cost recovery in Scotland is lower than in England, thus posing a serious disincentive to litigating in Scotland.

Mediation. There is mediation in Scotland, but it is not comparable, nor as developed as is the case in England, and receives but token ad hoc support, at best, from the courts.

Arbitration. Scotland lags behind England. According to the report, arbitration in Scotland appears to be limited to construction Arbitration. To be sure, many commercial contracts in Scotland contain arbitration clauses, but do not to take place in Scotland.

In this section of the report, the authors coin the term “the Switzerland of dispute resolution”, in terms of striving to make the legal system run like clockwork. The authors dare to wonder out loud if there is a good reason for the Scottish legal system to be all that different from that of England. Let us, however, keep in mind that the goal is to make Scotland an attractive legal venue for the Scots and the English, and for the world in general, as far as international ADR is concerned. It boils down to a question of choice of jurisdiction. To be an attractive choice, the report suggests a bold, fearless approach daring government to find ways to attract the world to Scotland while remaining Scottish at heart. Just, why not?

The report lists a few recommendations to achieve the desired outcome that tackle each of the problems as identified above, (i) recommending a greater effort toward specialization by expanding the Commercial Court “model” at lower jurisdictional levels; (ii) a strategy to present Scotland as a center delivering judicial and ADR excellence; (iii) reviewing rules regulating cost recovery; (iv) using plain English procedural terminology to present a more “user-friendly” face to domestic and international parties, etc.

Section 3 of the report examines alternative dispute resolution. As the reader knows, Scotland just closed a public commentary period on a new bill regulating arbitration. Modeled after UNCITRAL’s model law of 1985, the soon-to-be new Act looks to “reform and consolidate the currently outdated and incomplete Scots law on arbitration.”

The report points in the same direction that the consultation paper points to in terms of identifying the underlying difficulties for Scotland to become an attractive arbitration venue without profound reform, namely, that existing arbitration law in Scotland is largely an uncodified mesh of common law that makes it very difficult for parties to be clear in questions as important as procedure, arbitrator power, and the exact extent of court intervention to aid or to hinder arbitration itself, although courts are generally perceived to be supportive of arbitration. In short, the Scots themselves know that arbitration as it exists today does not reflect current, modern arbitration practice.

The authors of the report agreed that much can be learned from England as a nationally, and internationally recognized arbitration venue.

Regarding mediation, the report states that it is “a key dispute resolution option for businesses”, and that it should be made to be a integral part of any modern civil justice system.

As with arbitration, mediation is widely available in Scotland, but it has not become a routine option, an alternative worth exploring before engaging in full blown litigation. The authors of the report don’t mince words: “In this respect Scotland is not on an equal footing with other jurisdictions, including England and the United States. Reasons for this may include residual suspicion or skepticism amongst lawyers, general lack of awareness amongst businesses and inconsistency of endorsement (formal or informal) from the judiciary.”

Any foreign observer would conclude that the state of ADR in general in Scotland is both undeveloped and precarious, as if it existed without actually existing. The task is formidable: to start almost from scratch, to build an ADR culture by demolishing and building, not just touching up. The task at hand is beyond cosmetics.

The panel’s recommendations do not deviate from recommendations that any country would make when formulating ADR policy to build an ADR culture and practice from the ground up, to wit: (i) court acknowledgement of the role that mediation can play by incorporating mediation as an option in court dockets; (ii) a policy of cooperation of government with stakeholders (businesses, attorneys, and ADR professionals), to create a viable dispute resolution center in Scotland; (iii) a public show of support on the part of government towards mediation to foster its wider use, encouraging highly specialized professionals to practice as neutrals; (iv) devise neutral certification criteria.

Lastly, the BELF report examines how best to sell Scotland’s legal system and profession. Before listing actual recommendations, the authors conclude that efforts in this direction should be focused, first, on businesses already operating in Scotland to encourage them to hire legal work in Scotland and, secondly, on businesses that may be considering establishing themselves in Scotland.

The report suggests that part of the reason why Scotland’s legal system and profession has not reached its full potential is due to a lack of adequate marketing from larger law organizations, compounded by “go-it-alone” marketing strategies of individual law firms.

There is nothing wrong with law firms marketing their own professional services, but the report suggests that an effective strategy to market Scotland’s legal system and professionals, should include partnering with other specialized professions such as accountancy, banking, financial services, etc. The underlying core premise? All kinds of professionals are needed to harness Scotland’s potential as a sophisticated professional services provider. Thus, a strategy of partnering to build a professional and competitive services infrastructure.

The authors of the BELF report call upon the legal profession to pave this new road and lead the way by working alongside Government, key agencies and professional organizations. To begin to achieve a competitive services infrastructure, the authors recommend that this goal be talked about, by developing a proactive communications strategy by all stakeholders with Government that promotes the panoply of Scottish professional services as a sort of quality seal, a proud “made by Scottish professionals” seal.

Scotland appears set to compete, but competition yields results only over time at best, no matter what endeavor one chooses to initiate. The road ahead is not so much hard, as it is long and winding. Scotland would be ill-served if Scots fixed a destination on a compass, as any “final destination” is and should be unattainable, for it always lies in that ever receding horizon we call the future. Be that as it may, the BELF report is, as it should be, all about the endless path to a shared future.


José Antonio García Álvaro

José Antonio García Álvaro is the Director of ADR Resource (ARyME), a private institution established in 1996, dedicated solely to providing specialized information on international ADR, and to promoting a better understanding and use of alternative dispute resolution mechanisms to resolve civil and business disputes. From 1987 to 1995, José… MORE >

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