In the 1980s, studies by the United Nations secretary general indicated the need for a uniform legal framework to address problems in the field of international arbitration arising from the diversity of states' domestic laws. This resulted, in June 1985, in the adoption of the UN's Model Law on International Commercial Arbitration.
In England, as is now well known, the option of adopting the model law was rejected by the Departmental Advisory Committee on Arbitration Law in favour of a "restatement" of English arbitration law in the Arbitration Act 1996.
But a version of the model law was written into Scots law by the Law Reform (Miscellaneous Provisions Scotland) Act 1990. This governs international commercial arbitration taking place in Scotland. Thus, an arbitration in Scotland, regardless of which rules apply, will be subject to the model law if it qualifies as an international commercial arbitration.
The model law's definition of an international arbitration is likely to include more arbitrations than might have been thought likely.
In short, an arbitration is likely to be international if the disputing parties have their places of business in different states; if neither of the parties has its place of business in Scotland; or if the parties have their places of business in a location other than where a substantial part of the obligations of the contract is to be performed, or other than with which the subject matter of the dispute is most closely connected.
- The UN’s model law applies in Scotland but not England
- It can make disputes cheaper and shorter
- Parties are free to contract in to the model law
Thus, for example, arbitrations in Scotland between a Scottish and English company, or between two English companies or between two Scottish companies in relation to a project carried out in England, will all likely be subject to the model law.
A hallmark of the model law is that no court is to intervene in the arbitral process except where provided for in the model law itself (article 5).
In particular, there is no recourse in the model law against an award if a party believes the arbiter has made an error of law. Recourse against an award is restricted to setting the award aside, on grounds similar to those for resisting enforcement of foreign awards under the 1958 New York Convention, and these do not include error of law.
This differs from the position of a "real" domestic arbitration in Scotland, in which there is, effectively, a right of appeal on a point of law under what is known as the "stated case" procedure.
The stated case procedure has been criticised for its potential to prolong proceedings, to be used as a delaying tactic, and consequently to increase costs. The equivalent procedure in England was abolished in 1979.
David Scott is a partner in McGrigor Donald's Edinburgh office.