Commercial Court in Scotland Increases Emphasis on ADR

The Court of Session has issued new requirements for commercial actions, taking effect from 27 March 2017. The requirements highlight a change in emphasis for alternative dispute resolution, including specific provisions requiring parties to consider ADR at an early stage, advise the court on the steps taken to achieve settlement and in most cases to attend a joint meeting.

New Scottish Commercial Court Guidance

The new requirements are set out in the Court of Session’s Practice Note No.1 of 2017 re Commercial Actions (which replaces Practice Note No. 6 of 2004). Practice Notes are documents issued by The Lord President in respect of the Court of Session. They inform practitioners of a practice the court is minded to take, or expects practitioners to take. The new Practice Note revises the court’s approach to commercial actions and a number of procedural matters. Of particular interest are the changes relative to settlement and alternative dispute resolution (which includes mediation, without prejudice discussions, etc):

• As part of their pre-action communication, parties should now “consider carefully and discuss whether some or all of their disputes may be amenable to some form of alternative dispute resolution” (paragraph 11). The previous Practice Note had the considerably more diluted wording that parties “may wish to consider” the same;
• In the lead up to the second hearing in a commercial action, known as the Procedural Hearing, parties should now “consider and discuss whether resorting to alternative dispute resolution might be appropriate in respect of some or all of the issues” (paragraph 20c);
• Further, the court will want to hear about what the parties have done. At the Procedural Hearing they will be “expected to be able to advise the court 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”. The Court itself will also “ascertain from parties whether there are any further steps that could be taken by court to assist in the resolution of the dispute” (paragraph 20a);
• The existing power of commercial judges to make such orders as they think fit now specifically includes the 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 “such an order will not be made as a matter of course, but it is likely that a joint meeting will be ordered in most cases” (paragraph 35);
• There is now a reminder that the existing case management powers of commercial judges mean that any failure of a party to comply with a court order may result in sanctions, including a costs finding against it (paragraph 39).

Implications

The introduction of these new requirements, which strongly encourage parties to go to ADR, reflects the increasing desire of the courts in Scotland to encourage greater efficiencies in the resolution of disputes. ADR is something that the courts have been considering for a number of years but this new Practice Note is the clearest signal to date from the Scottish judiciary that ADR is to be encouraged. This is by no means as developed as the encouragement to mediate in the English courts (where an “unreasonable refusal” could result in cost sanctions). Nevertheless, failure to comply with court rules or court orders may be reflected in an adverse finding of costs/expenses. Forms of ADR and in particular mediation, have been readily available in Scotland for a number of years and are already often considered by parties in Scottish commercial actions, however, there is now clear encouragement from the Court of Session to do so.

References:
Court of Session Practice No. 1 of 2017 – Commercial Actions