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SCHEDULE 1 SCOTTISH ARBITRATION RULES
PART 1 COMMENCEMENT AND CONSTITUTION OF TRIBUNAL ETC.
Rule 1 - Commencement of arbitration
54. In the normal course of events, and possibly after a number of years trading, one party may have a grievance which leads them to wish to invoke the arbitration agreement. It is necessary to provide for how that party should begin the arbitral proceedings. Alternatively, the parties may simply agree to the submission of a new dispute to arbitration. An arbitration, will therefore commence on service of notice by one of the parties.
55. The significance of this date may be by virtue of the arbitration agreement or the Bill default provisions, for example the parties or an arbitrator may set time limits from such a date, and the rules on prescription and limitation will apply from this date.
Rule 2 - Appointment of tribunal
56. Arbitration agreements only take effect when a dispute arises. They rarely state a specific individual to act as arbitrator in the event of a dispute, though they often stipulate a nominating or appointing body. Once the parties are in dispute, it is essential that a system is in place to facilitate the swift appointment of a single arbitrator or an arbitral tribunal composed of several members to allow the arbitration to proceed quickly and efficiently.
57. If the parties have included provision in the arbitration agreement about the appointment of an arbitrator or arbitrators then those provisions will apply. If, however, no provision has been made in the arbitration agreement for the appointment of an arbitrator, if there are gaps in the provisions on appointment, or if the parties fail to carry out those provisions, then the Bill aims to provide default rules to allow for the swift and effective appointment of an arbitrator to take the arbitration forward expeditiously. An arbitrator's appointment takes effect immediately on the appointment being made (or at such time as may be agreed between the parties).
Rule 3 - Eligibility to act as tribunal member
58. Given that an arbitrator may be chosen from fields as diverse as farming, construction, forestry, oil engineering or international law, it would not be appropriate for the Bill to be prescriptive about who should be eligible to become an arbitrator. It is the person's expertise which is important. An arbitrator must, however, legally be capable of acting as an arbitrator; otherwise any award made by him may be liable to nullification.
59. Rule 3 makes mandatory provision that an arbitrator must be a natural person of any nationality, aged 16 or over, not an incapable adult within the meaning of section 1(6) of the Adults with Incapacity (Scotland) Act 2000. Either party can also object on the grounds that an arbitrator is an undischarged bankrupt subject to insolvency restrictions as defined.
60. These provisions also apply to oversmen (see rule 23).
Rule 4 - Number of tribunal members
61. If the arbitration agreement is silent on the number of arbitrators to be appointed, the Bill provides a default rule that the arbitration is conducted by a single arbitrator.
Rule 5 - Method of appointment
62. Sections 2 and 3 of the Arbitration (Scotland) Act 1894 provide for the appointment of arbitrators by the court in certain circumstances. This is mainly where one party fails to do something to appoint a single arbitrator or where one party fails to appoint one of two arbitrators. These provisions have no effect, however, if both parties fail to act or if there is a necessity to appoint more than one arbitrator. There are, therefore, no comprehensive default provisions which means the commencement of an arbitration process is likely to be delayed until an arbitrator can be appointed by agreement or by application to the court. Moreover, the court may be unable to appoint if the arbitration clause is at present too general or uncertain. There is also provision in Article 11 of the UNCITRAL Model Law for the appointment of arbitrators in international commercial arbitration where the place of arbitration is Scotland.
63. The Bill changes the default procedure for the appointment of arbitrators to allow the arbitration process to begin as soon as possible after a dispute arises. The parties may still agree among themselves as to who the arbitrator should be, and on the procedure for appointment, but the Bill provides a fallback system. In the absence of such an agreement, or to the extent that there is no agreement, then the Bill's default provisions ensure that an arbitral tribunal is appointed to take forward arbitration of the dispute. The method of appointment applies from the outset, but the 28 day time-limits for parties complying begin on a request being made.
Rule 6 - Failure of appointment procedure
64. Where a party to an arbitration agreement refuses to do something which that agreement or any other agreement requires them to do to bring about the appointment of an arbitrator, or if they fail to do something within the 28 day period required by rule 5, the Bill provides a default rule that either party may refer the appointment of the arbitrator to the arbitral appointments referee who will direct the parties to appoint such eligible individuals as the arbitral appointments referee considers appropriate. See the discussion above on section 18 for who is to act as referee.
65. The rule stipulates that the referee must have regard to the dispute and the attributes of the individuals when making the decision. It should be noted that qualifications need not necessarily be a requisite to be appointed as an arbitrator. A person may have a lifetime's experience in a particular field, but no formal qualifications.
Consultation Question
Q9: When the parties have failed to appoint an arbitrator, either party may refer the matter to the arbitral appointments referee. The arbitral referee will nominate and direct the parties to appoint such eligible individuals as arbitrators. Do you agree?
Rule 7 - Tribunal members' duty to disclose circumstances relating to impartiality
66. A tribunal member (or oversman) must be impartial. The Bill provides a default rule that a tribunal member (and any oversman) must disclose to the parties any circumstances likely to give rise to justifiable doubt as to the member's impartiality. If they fail to do so, the court can take that into account as regards their expenses in removing them (rule 68).
Rule 8 - Tribunal member's tenure
67. Rule 8 provides for the circumstances in which the appointment of an arbitrator comes to an end before the natural end of the arbitration. This rule is mandatory.
Rule 9 - Removal of tribunal member
68. Rule 9 is a default rule for the parties to agree to remove an arbitrator, instigated by one of the parties.
Rule 10 - Resignation of tribunal member
69. At present, an arbitrator, having accepted office, must proceed to deal with the submission faithfully and honestly and cannot renounce office capriciously or without cause. It is accepted that once an arbitrator accepts appointment, he or she should not be permitted to lightly cast off this responsibility. If an arbitrator wishes to resign and the parties concur, there is no difficulty, but at common law an arbitrator who accepts office has no inherent right to withdraw, retire or resign, except where there is good cause, the validity of which the court may be asked to judge. It is not clear what the legal sanction is for this: it may have been considered contempt of court, but the only sanction now may be contractual.
70. Rule 10 is a default rule, in the absence of agreement between the parties, to restrict and rationalise the circumstances in which an arbitrator is permitted to resign. The court may authorise the resignation on the basis of what is reasonable. Rule 10(3) and (4) allow the court to either grant the arbitrator relief from liability incurred as an arbitrator and to make an order about fees and expenses, or to impose liability or make an order about expenses where an arbitrator is in breach of this rule.
Rule 11 - Challenge to appointment of tribunal member
71. Rule 11 is a default rule, in the absence of agreement between the parties, to allow a party to object to the appointment of an arbitrator or oversman. The grounds are lack of (or doubts about) impartiality and lack of qualifications agreed by the parties. This is not automatic - it is simply grounds for objection.
Rule 12 - Removal of tribunal members by Outer House
72. The Bill makes mandatory provision for removal of an arbitrator or oversman by the court, as opposed to by the parties and any other arbitrators or oversmen on application by any party. The court can also judge that the arbitrator is incapable of acting (which includes the eligibility requirement on capability in rule 3 so that someone may be capable under the Adults with Incapacity (Scotland) Act 2000, but may still be incapable as acting as an arbitrator).
Rule 13 - Dismissal of tribunal by Outer House
73. The power for the court to dismiss the entire tribunal is a mandatory provision. The tribunal may not be conducting proceedings efficiently or in accordance with the parties' wishes or agreed procedure, for example. This is however subject to the caveat that substantial injustice has been or will be caused to the aggrieved party.
Rule 14 - Removal and dismissal by court: supplementary
74. Mandatory provision is made to further limit the ability of the court to remove an arbitrator or oversman or dismiss a tribunal. Any other available recourse must have been exhausted. The court is able to make such order as it thinks fit with respect to entitlement, if any, to fees or expenses, or the repayment of any fees or expenses already paid. There is no appeal against a court's decision under rule 12 or 13.
75. The arbitration is to continue while the challenge is heard. This avoids the possibility that (notwithstanding there might be good grounds for attempting to remove an arbitrator) the rule may be used as a means of delaying or frustrating the arbitration. These provisions are universal to all types of court proceedings on removal/dismissal.
Rule 15 - Reconstitution of tribunal
76. Rule 15 is a default rule for the reconstitution of the tribunal when an arbitrator's tenure ends. This can be done either by the same procedure as for the original tribunal or under this default rule. The reconstituted tribunal decides the extent to which things done previously as part of the arbitration stand, subject to the parties' agreement otherwise, and their right to object or appeal on any ground they previously had available.
Rule 16 - Tribunal members nominated in arbitration agreements
77. The Bill provides for a default rule, in the absence of agreement between the parties, that any provision in an arbitration agreement which nominates a particular individual as a tribunal member has no effect when their tenure comes to an end as a result of rules 8 to 15.
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