OIL AND GAS ARBITRATION IN SCOTLAND IN THE 21ST CENTURY - CHARTERED INSTITUTE OF ARBITRATORS .pptx by hcj

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									 OIL AND GAS ARBITRATION IN
SCOTLAND IN THE 21ST CENTURY

  CHARTERED INSTITUTE OF
      ARBITRATORS
       SCOTTISH BRANCH
        Northern Chapter
   Arbitration
Why? In Scotland?

   Brandon J Malone
        Chairman
Scottish Arbitration Centre
                     Why?
• Why arbitration?
  – Rather than litigation?
• Why arbitrate in Scotland?
  – Rather than London, Paris or New York?
               Why arbitrate?
•   Confidentiality
•   Commerciality
•   International enforceability
•   Limited rights of appeal
•   Control of costs
               Confidentiality
• Arbitration is a private   • Litigation is a public
  process                      process
• In Scotland, under the     • Court reports are
  Arbitration (Scotland)       published online and
  Act 2010, arbitration        in legal journals
  is confidential
• A breach of
  confidentiality is
  actionable
              Commerciality
• Arbitrators can be       • Judges, whilst expert
  selected on the basis      in the law, are unlikely
  of industry experience     to have day to day
• An industry arbitrator     experience of the
  comes to the process       issues
  with an understanding    • The function of a
  of the wider               judge is to decide
  commercial context         between the cases
                             presented
     International Enforceability
• Arbitration                  • Litigation
   – New York Convention          – Few countries have a
     1958                           comprehensive
   – Every significant              system of reciprocal
     commercial country in          enforcement treaties
     the world is a party to      – Some sovereign states
     the Convention                 will claim immunity
   – Sovereign states can           from litigation
     submit to arbitration
      Limited Rights of Appeal
• Arbitration under the     • Litigation
  2010 Act                     – An unsuccessful party
  – Parties can agree to         can appeal as of right
    limit appeals                to the Court of Session,
  – Appeals in respect of        and with the consent
    points of law can be         of two Counsel to the
    excluded                     UK Supreme Court
  – Where an appeal is
    competent the Court
    must consent
  – No appeal to London
                Control of Costs
• Arbitration                  • Litigation
   – Parties can agree to         – Expenses follow
     cap recovery of costs          success
   – Parties can agree to         – There is no cap on
     exclude recovery of            recoverable expense
     legal costs
   – The lack of a right of
     appeal will necessarily
     restrict cost
              A Scenario
• A Service Company sues your client for
  £14m in the Commercial Court
• The subject matter of the dispute is highly
  commercially sensitive
• The contract contains no arbitration clause
  and the Service Company won’t agree to
  arbitrate – so the litigation proceeds
• What if there had been a properly drafted
  arbitration clause?
   Bad Publicity v No Publicity
• Court                         • Arbitration
  – Public Process                 – Private Process
     • Case appears on the            • No public
       rolls of Court                   announcement of the
     • Press alerted                    existence of the case
     • Hearings are open to           • Duty of confidentiality
       the public                     • Breach of confidentiality
     • Decisions of the court           is actionable
       are published online               – Can be interdicted
                                          – Damages if it causes
                                            loss
                     Success
• Court                        • Arbitration
  – The Court rejects the         – If this had been an
    Service Company’s               arbitration the
    claim against your              arbitrator could have
    clients                         awarded expenses on
  – Awards costs on the             an indemnity basis if
    judicial scale in favour        those expenses were
    of your client –                considered reasonable
    typically 40 to 70% of          – 100% recovery
    actual costs
                  Success?
• Court                     • Arbitration
  – The Service Company        – If Rule 69 of the
    appeals to the Inner         Scottish Arbitration
    House of the Court of        Rules is excluded, no
    Session                      appeal on an error of
                                 law is allowed
                               – Even if Rule 69 is left
                                 in place, and appeal
                                 on an error of law is
                                 only allowed if parties
                                 agree or if the Court
                                 consents
                     Appeal
• Court                     • Arbitration
  – Delay of 12 to 18          – If appeals are excluded,
    months to get an             the matter is at an end
    appeal hearing in the      – If not excluded and the
    Inner House                  Court permits an
                                 appeal (which it will be
                                 slow to do), the appeal
                                 goes to the Outer
                                 House – a single judge
             Further Appeal?
• Court                       • Arbitration
  – The Inner House              – If appeals were
    rejects the Service            excluded by contract:
    Company’s appeal               no further procedure
    and upholds the              – if not excluded, and an
    decision of the judge          appeal to the Outer
  – The Service Company            House was allowed
    can still appeal to the        and refused, there is a
    UK Supreme Court               right of appeal to the
    (formerly the House of         Inner House with leave
    Lords)                       – No appeal to the UK
                                   Supreme Court
                   Final Victory?
• Court                            • Arbitration
  – Decision of the UK                – If appeals have been
    Supreme Court is final, but         excluded in the arbitration
    …                                   clause the arbitration would
  – The process will have               have concluded at stage
    taken two to four years at          one, at a fraction of the cost,
    enormous expense in the             with no adverse publicity
    full glare of the public eye      – Even with the limited right
                                        of appeal allowed by the act,
                                        the process would have
                                        been quicker and cheaper
             A duty to advise
• Solicitors in Scotland now have a duty to
  consider arbitration as a serious alternative to
  litigation
• A failure to advise of the potential advantages of
  arbitration at the contract stage, and at the stage
  that a dispute arises is at best a failure to give
  full advice, and at worst a failure to comply with
  professional standards which may give rise to a
  claim for negligence
      Why Arbitrate in Scotland?
•   Location
•   2010 Act / the Scottish Arbitration Rules
•   Supportive Courts
•   Specialist lawyers
•   Choice of arbitrators
•   Expense
                    Location
• Scotland has                • The Rest of the World
  – Top notch venues for        – The weather
    arbitration
  – Good transport links to
    Europe and the world
  – English spoken
  – Golf
  – Scenery
  – Etc
                   The Law
• Scotland                  • The Rest of the World
  – Hybrid Common/Civil       – Mixed – some
    law                         common law (ex:
  – Modern and innovative       England, America)
    Arbitration Act             some civil law (ex:
  – Modern and flexible         France, Italy)
    arbitration rules         – Arbitration Acts vary
  – Combines the best           from jurisdiction to
    aspects of the              jurisdiction
    UNCITRAL rules and
    the 1996 Act with
    innovative provisions
             Supportive Courts
• Scotland                   • The Rest of the World
  – The Arbitration Judges     – Varies wildly from
    are the current              jurisdiction to
    Commercial Court             jurisdiction
    judges: Lord Glennie,      – Some courts are very
    Lord Hodge, Lord             supportive (eg
    Menzies                      England and Wales)
  – Reputation for             – Others less so
    commerciality and
    pragmatism
           Specialist Lawyers
• Scotland                   • The Rest of the World
  – Scotland is home to        – Many international
    many firms with a UK         firms specialise in
    wide and international       arbitration
    reach
  – The “Common sense”
    of Scottish lawyers
          Choice of Arbitrators
• Scotland                     • The Rest of the World
  – Parties are free to          – Parties are free to
    choose any                     choose any
    international arbitrator       international arbitrator
                   Expense
• Scotland                   • London, Paris, New
  – Costs are estimated to     York
    be 40% of the overall      – Costs are high
    cost of arbitrating in
    one of the other main
    centres
                 Conclusions
• Why arbitrate?
  – Arbitration offers a confidential and commercial
    solution for disputing parties
  – Arbitration compares favourably with litigation in terms
    of overall timescale and expense
• Why arbitrate in Scotland?
  – With the Arbitration (Scotland) Act 2010, Scotland has
    one of the best systems of arbitration in the world
  – The expertise and common sense of Scots lawyers
    and judges combined with the cost advantages of
    arbitrating here make it the obvious choice for
    international business
    Brandon J Malone
   LLB LLM MCIArb WS
    Solicitor Advocate
             Chairman,
     Scottish Arbitration Centre
brandon@scottisharbitrationcentre.org
  www.scottisharbitrationcentre.org

								
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