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New requirements have come into effect which will have application for many of the major commercial disputes litigated here in Scotland. These requirements aim to nudge parties away from the Court and towards Alternative Dispute Resolution (“ADR”) or settlement. Below is set out a summary of the changes and what their effect may be for those parties engaged in a commercial dispute.

Background

The Outer House of the Court of Session is generally the destination for the major commercial litigations based in Scotland. Under the Rules of the Court of Session, there is a particular specialist procedure governing “Commercial Actions”. This ‘Commercial Procedure’ is intended to streamline the process, allow greater case management by an appointed ‘commercial’ judge, and allow the parties to get to the key issues in dispute in a hopefully more commercially-pragmatic way than with ordinary procedure. The Commercial Procedure is widely used for all manner of commercial disputes.

Effective from 27th March 2017, the Court has issued a new Practice Note (No.1 of 2017) which sets out how parties are to conduct themselves under the Commercial Procedure. The new Practice Note replaces the prior Practice Note (No.6 of 2004).

New Provisions

The key changes are as follows:

• In addition to substantially setting out their respective cases pre-litigation, it is now required that “both parties should consider carefully and discuss whether all or some of the dispute may be ameniable to some form of alternative dispute resolution”.  This represents a significantly stronger requirement than the previous Practice Note which only stated that parties “may wish to consider” ADR;

• Prior to the first hearing in the litigation, the parties are required to “consider and discuss whether resorting to alternative dispute resolution might be appropriate in respect of some or all of the issues”;

• At the procedural (second) hearing before the commercial Judge, it will now be required that the parties be able to advise the Judge “on the steps that have been taken to date to achieve an extra-judicial settlement and on the likelihood of such a settlement being achieved”;

• At the procedural hearing, the parties will be asked to “express a view on the stage at which any joint meeting between parties ought to be ordered to take place” and the commercial Judge now has an express power to order parties “to hold a joint meeting with a view to exploring whether the dispute is capable of extra-judicial settlement or, alternatively, whether the issues requiring judicial determination can be restricted”. The Practice Note states that “it is likely that a joint meeting will be ordered in most cases”.

In summary, there is now more emphasis on parties being able to show the Court that there has been genuine consideration of ADR and attempts have been made to settle the matter out of Court.

Comment

While the technical practicalities of litigating under the Commercial Procedure are primarily a matter for solicitors and Counsel, the effect of this for commercial clients is real.

The obvious consequence is that parties will be expected by the Court to have made genuine efforts to settle the dispute (and be able to explain those efforts). The consequence of having failed to do so is more likely than previously to result in an adverse finding in respect of expenses i.e. a party may not be awarded expenses if the Court perceives that a party’s unwillingness to genuinely engage in settlement discussions or to consider ADR has caused further litigation.

The Court’s apparent willingness to nudge parties towards ADR could represent delay to a party who has come to Court seeking a particular remedy, whether that be payment of a sum of money or some other order. Much depends on the circumstances and the parties. However, it is not inconceivable that a defending party could utilise the Court’s push to ADR to obfuscate and to delay.

These efforts are part of a broader policy of reducing the resource burden on the judiciary (i.e. and therefore the taxpayer) and shifting some of that burden on to the parties actually engaged in the litigation. While of course reducing the workload of the judiciary has merit in terms of giving value to the public, it should not be ignored that the parties who actually come to court (usually extremely reluctantly) are faced with increasing pressure to try and conduct much of the litigation process before going to Court by way of correspondence and potentially to engage in ADR processes all at their own cost. The rights and wrongs of that can obviously be argued but the net effect is that a party considering coming to Court is now subject to an increased burden than they were before.

On the upside, parties involved in a commercial dispute and facing the prospect of a commercial litigation at the Court of Session may take some comfort from the fact that the Court is pushing settlement and ADR more firmly and therefore perhaps this may have the positive effect of avoiding unnecessary cost and risk by forcing parties to the negotiating table.

Conclusion

The Court’s approach to ADR, extra-judicial settlement discussions and requirements pre-litigation places a greater burden on a party coming to Court hoping to achieve a particular remedy. The new requirements also serve to further complicate matters for the commercial litigant hoping to navigate their way through the process to a successful commercial outcome.

Robert McDiarmid, Senior Associate

Chambers UK 2018

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