THE ADVANTAGES north of the Border are clear, writes Stuart Murdoch
A recent article in the legal press suggested the losing party in a large banking dispute could be exposed to legal and court costs of up to £10m in England. That was in the context of claims worth £50m, but still, even as a proportion, that is a lot of money and a lot of risk.
Typically, the highest value and most complex claims are not dealt with in Scotland – primarily due to the London-centric nature of corporate and institutional banking in the UK. Yet Scotland potentially offers a far cheaper, high-quality alternative.
Barclays, Deutsche and RBS have all been embroiled in LIBOR-related litigation. Disclosure of documents is the first battleground. There are potentially tens of millions of “relevant” papers for each bank. The risk of eventually bearing the cost of a marathon disclosure project is potentially prohibitive for claimants, whilst the banks have sensitivities due to complicated international regulatory arrangements.
The solution: in Scotland, swapping documents is not a given. A judge will only order parties to hand over documents clearly crucial to the dispute. This feature is shared with many continental European countries where, unlike England and the US, disputes are resolved without the time, cost and effort of exchanging truckloads of barely pertinent paperwork.
Along with document disclosure, the most expensive part of any dispute is usually the trial (or proof in Scotland). The cost is not just legal spend, it is management time, business disruption and PR risk, for both sides.
The first UK SME interest rate hedging case (Grant Estates v RBS) was decided in Scotland without the need for a trial. The case was determined at a uniquely Scottish legal hearing called a debate. It was found the bank’s terms and product literature were suitably clear to defeat a mis-selling claim.
This result was a victory for both RBS and the customer. RBS won the case, but Grant Estates avoided the additional cost consequences of losing at an expensive proof and the company was then free to pursue the complaint via the FCA’s skilled person review, which was likely to be the more fruitful forum.
The benefits of these traits of Scottish court process can be financial, reputational and psychological. Scottish professional rates are also significantly less on average than in London – yet many advantages of the English system are baked in. Commercial judges with business banking experience are on hand. Scotland now has arbitration rules modelled on the English system and a vibrant mediation industry.
Appeals from the senior Scottish and English courts are both sent to the UK Supreme Court, which houses two Scottish judges. Therefore, ultimate consistency and quality is ensured between both countries. The Financial Ombudsman Service and the Financial Conduct Authority both have UK-wide remits and are equally accessible for Scottish disputes.
A final thought: if you do end up in a hard-fought trial at the Court of Session in Parliament Square, at least you can enjoy lunch in the grand surroundings of the High Street, St Giles, the Castle - or Deacon Brodie’s Tavern.
• Stuart Murdoch is a Senior Associate with www.burnesspaull.com