Hansard

I begin by declaring that I used to be a practising solicitor. I am retained on the roll of solicitors by the Law Society of Scotland and I have been involved in a number of arbitrations, although I do not stand to benefit personally from the bill. Despite the many good points in the bill and the enthusiasm of the minister, I have no intention of returning to arbitration, in either the near or the distant future.

I thank the clerks to the Economy, Energy and Tourism Committee, who did an excellent job in pulling together the stage 1 report under difficult time constraints.

The Scottish Conservatives fully support the principles of the bill. There is much to be said for codifying arbitration law. Arbitration has been with us in Scotland for many hundreds of years. Some people suggest that it predates our court system. Despite the court system then coming into use, arbitration remained popular. Over a period of several hundred years, case law developed in a fairly piecemeal fashion, with a couple of statutes along the way. The benefit of the bill before us is that it pulls the law together, codifying it in one statute. It modernises and tidies up the law in various areas, and it produces a more dynamic offering. If arbitration is to be successful, a more dynamic offering is definitely required.

If the bill is truly to meet its goals, arbitration must become faster and cheaper, and those two factors are directly related. Arbitration was popular in the past as it was fast, cheap and confidential, and because parties were able to remit their dispute to a man of skill. Over the past couple of decades, arbitration has become very slow. As a consequence, it is now sometimes more expensive than going to court. In going to court, people do not have to pay directly for the services of the judge; they do have to pay directly for the services of an arbitrator, however.

Parts of the bill will make the process faster. I like rule 23 of the Scottish arbitration rules set out in schedule 1. It puts a positive obligation on the arbitrator; it imposes a duty to

"conduct the arbitration … without unnecessary delay, and … without incurring unnecessary expense."

That sets out how the arbitrator should go about their business.

The ending of the stated case procedure, which was brought into force in 1972, should unblock many arbitrations in the future. The stated case procedure allows parties to go to the Court of Session on a point of law before the arbitration can proceed. It is a great idea in principle but, over the decades, many spurious applications have been made to the courts, thereby delaying arbitrations by months and, in some cases, years.

Those two measures, together with the fact that a bill is actually proceeding, might help to produce a culture change in arbitration in Scotland, which could itself speed the process up.

Despite all those things, I ask the minister and his team to do absolutely everything in their power between now and stage 3 to find anything else that they can to speed up arbitration. The bill, and arbitration in Scotland, will stand or fall on whether we can make the process faster and cheaper. If we can, arbitration could have a pretty bright future in Scotland, both domestically and in terms of bringing in international arbitration. If the bill does not do that, I will be seriously worried about the future of arbitration.

We have heard about the economic aspects. There is no doubt in my mind that the bill will bring economic benefit. It can save court time, and I think that there will be an increase in the uptake of arbitrations. At the moment, there are only 50 commercial arbitrations a year in Scotland, and about 250 consumer-related arbitrations. As well as the economic benefit, I am sure that there will be an increase in the number of international arbitrations that come here. The important point, which every member has touched on in the debate so far, is how big the economic bonus will be. I take the minister's point—he said that it is important not to overstate the case—but I think that it was overstated in the financial memorandum. There is obviously a big difference between £3 billion, which arbitration was originally believed to be worth to the City of London, and the figure of £250 million, which is probably what it is actually worth to the City. The 10 per cent figure is a nice easy way to calculate what arbitration might be worth to Scotland, but 10 per cent of the value of arbitrations conducted in London will not simply gravitate to Scotland. That will take a great deal of effort, time and, no doubt, investment, because London is a well-established international centre of arbitration. I am sure that we will get some arbitrations just by passing the bill, but a great deal of effort will be required if we are serious about getting anywhere near 10 per cent.

The minister mentioned the two additional meetings that need to be held. There were two blind spots in the Government's consultation process. Not enough work was done with consumers, especially on low-cost arbitrations, which function fairly well in practice at the moment. I am concerned about the impact of foisting 25 mandatory rules on such arbitrations. I am not sure that that issue was taken fully into account, because the bill looks as if it was drafted with commercial arbitrations in mind. I welcome the minister's commitment to pursue the matter and look forward to seeing the results of the meeting to which he referred.

There will also be a meeting with legal experts to examine the drafting and some unintended consequences of the proposals. For example, the bill will give the arbitrator a power akin to interdict. Breaching an interdict that is issued by a court of law is a criminal offence, but we do not know whether breaching an interdict-type measure handed down by an arbitrator will be an offence.

We see what the Government is trying to do in the confidentiality provisions. However, if after the arbitration there is a question of law to be determined by a court and the court breaches the confidentiality rule, either intentionally or unintentionally, what will the consequences be? What action can be taken against a judge if confidentiality is breached? Has the matter been thought through?

Various other rules have been mentioned. Rules 45 and 46 concern the power to award damages and the power to award interest from the due date. There is a disparity in bargaining power—especially in the world of construction, which is the source of many arbitrations—between the employer or person funding the project and the contractor, and between the contractor and the subcontractors. When projects go out to tender, it is easy for the stronger party to say to people that they have no chance of getting the job unless they agree to a default rule being scrubbed out completely. The Government recognises that unfair bargaining power in rule 50. Why does the same argument not apply to rules 45 and 46?

The issue of commencement is important. Clearly, the bill will not apply to arbitrations that are already under way. Will it apply to contracts that have been signed but for which no arbitration has begun? Under the bill as it stands, it appears that those contracts would be affected, which would be a retrospective application of the law. The general principle in Scots law is that retrospective application is undesirable. Where we apply the law retrospectively, we must have strong reasons for doing so. When the parties signed up to their contracts, they agreed an arbitration clause and a set of rules, but the bill would impose at least 25 mandatory rules on them.

We support the general principles of the bill, but there is work to be done. So far the Government has shown itself to be willing to move and to do that work. I look forward to considering the bill at stage 2.