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A Bill to improve arbitration law has been passed by Parliament.

The Arbitration (Scotland) Bill will provide a statutory framework for arbitration to encourage greater use of arbitration domestically and, in time, attract more international arbitration to Scotland.

Arbitration is a procedure outwith the civil courts where parties agree to submit a dispute between them to a third party, who often has special expertise or knowledge, and who will produce a final and binding determination of the dispute.

The Bill puts the majority of Scots law on arbitration into a single Bill and means that anyone in Scotland, or seeking to do business in Scotland, will have easy access to the principles and rules governing the law of arbitration in Scotland

Enterprise Minister Jim Mather said:

"The Bill gives Scotland a modern arbitration regime which captures the best of modern international practice. It reforms and codifies the existing out of date, obscure and incomplete law and will enable people to resolve their disputes more quickly and more effectively than going to court, setting the scene for a renaissance of Scottish arbitration.

"There is increasing demand around the world for high quality arbitration services to resolve cross-border commercial disputes, and the Bill will help to make Scotland an easy place to do business. In order to make Scotland an attractive choice for dispute resolution and bring international business here, we must demonstrate that our domestic arbitration system is efficient and cost effective. The aim of the Bill is to give us a modern, impartial and efficient arbitration regime which will have that effect."

Some of the law on arbitration in Scotland dates back over 300 years.

Arbitration is a procedure where parties agree to submit a dispute between them to a third party, who often has special expertise or knowledge, who will act as a private tribunal to produce a final and binding determination of the dispute.

By agreeing to go to arbitration, parties voluntarily deny themselves recourse to the courts or to another method of alternative dispute resolution. The agreement to go to arbitration is often contained in a contract concluded between the parties possibly years before they come into dispute.

Final and binding

• Arbitrator's decision or 'award' is final and binding and may be enforced like a court decree.
• Within countries which have ratified the New York Convention on recognition and enforcement of foreign arbitral awards, agreements to arbitrate and awards made in other countries will be recognised without further review of the issues. Thus arbitration offers major advantages to those engaged in international or cross-border trade.
• The binding nature of the outcome may be an attraction over other forms of alternative dispute resolution such as mediation.

Private and confidential

• Arbitration is a private means of dispute resolution. The Bill provides a default rule on confidentiality (i.e. the arbitration will be confidential unless the parties agree otherwise). This is a major advantage to commercial parties who may not wish sensitive commercial information debated openly in the courts.

Expertise of arbitrator

• The parties can choose their arbitrator, which is not possible in the courts, and they will usually choose someone who has expertise or knowledge in the area of the dispute. If a technical expert is appointed as arbitrator, this may reduce the need to lead technical evidence so that arbitration may be quick, cost effective and efficient.

Flexible

• The arbitration process can provide flexible procedures (as it is privately funded and initiated) and because it is within the parties' control, the location, timing and other arrangements can be planned to suit their particular needs.

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