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JGM, Solicitor
Category: Law
Satisfied Customers: 9973
Experience:  30 years as a practising solicitor.
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In a common law arbitration in Scotland between two limited

Customer Question

In a common law arbitration in Scotland between two limited companies, C1 v C2, C1 claimed £5m in relation to a repudiated contract for underpayments and damages from C2. The Arbiter, appointed by Joint (C1 & C2) Deed of Appointment, recently issued a Part Award by which, in bad faith, he dismissed C1’s claim as irrelevant – he allowed no proof and I have counsels Opinion that there is nothing irrelevant about the claim. C1 is insolvent but was subject to a CVA where the directors (and owners) were given exclusive rights to fight and control the Arbitration. The directors of C1 funded the Arbitration, and legal representation. The directors cannot raise any further money to instruct law agents to raise an action against the Arbiter for damages corresponding to some £300k of fees paid to him and law agents in relation to the Arbitration.
On the basis that his Part Award was issued in bad faith, is it first competent to raise an action for damages either at common law or under the auspices of serious irregularities as provided in the new Arbitration (Scotland) Act 2010 where Rule 73 provides:
(1) Neither the tribunal nor any arbitrator is liable for anything done or omitted in the performance, or purported performance, of the tribunal's functions.
(2) This rule does not apply—
(a) if the act or omission is shown to have been in bad faith, or
(b) to any liability arising from an arbitrator's resignation (but see rule 16(1)(c)).
(3) This rule applies to any clerk, agent, employee or other person assisting the tribunal to perform its functions as it applies to the tribunal.
Given that it is competent, on the basis that I will not be allowed to raise summons on behalf of C1 (lay representation of legal entities is not allowed in Scotland) can I sue in my own name as assignee given that C1 will assign the rights of a claim against the Arbiter for damages.
Alternatively, on the basis of the CVA do the directors qualify as an alleged party to the Arbitration proceedings akin to Section 14(2) of the Arbitration (Scotland) Act 2010 which provides:
Persons who take no part in arbitral proceedings
(1) A person alleged to be a party to an arbitration but who takes no part in the arbitration may, by court proceedings, question…
(2) Such a person has the same right as a party who participates in the arbitration to appeal against any award made in the arbitration under rule 67 or 68 (jurisdictional and serious irregularity appeals) and rule 71(2) does not apply to such an appeal..
Many thanks
Gabe Politakis
Submitted: 1 year ago.
Category: Law
Expert:  JGM replied 1 year ago.
Thank you for your question.
The root of all of this is your allegation that the arbiter acted in bad faith.
Could you explain your situation a little more in that connection?
Customer: replied 1 year ago.


I have made several attempts to reply to no avail. This is the first time a 'reply window' appeared. Although the undernoted is my reply, with all due respect, my the legal questions assume that there is bad faith. Anyway the undernoted is my reply.

To put it simply, £3m of the £5m Claim relates to underpayments. The corresponding valuation was simply based on measurement from contract drawings and application of Bill rates to that measurement.

In 2007, following a 5 day legal debate, the Arbiter issued a Final Draft Opinion (FDO) dismissing the whole £5m Claim as irrelevant. To do so, with intent, he invented non-existent methodology issues relating to the valuation where he then said these methodologies were flawed and as such he declared the craves irrelevant. This was repeated throughout his dismissals of the various Craves. The Arbiter recently converted his FDO to a Part Award which he issued on 11 December 2014.

Thanks again


Expert:  JGM replied 1 year ago.
The 2010 Act doesn't apply to arbitrations commencing before the Act came into force.
You will have to use the remedies that were available before then.
Note the following:
A final award has the effect of rendering the arbitrator functus officio, and thus unable to amend the award or to revise any point made in that award.
It is common practice for the arbitrator to provide a draft of his award to the parties for examination and comment before the award is issued, so that any omissions, misconceptions or ambiguities can be identified and, subject to the limits of the arbitrator's overall jurisdiction, dealt with before the award is issued. This may also prompt a party to request an arbitrator to state a case (ie, raise a legal point for determination) to the Court of Session, since a stated case cannot be referred after the award is issued.
The parties can expressly provide in the arbitration agreement that the arbitrator is bound to submit his award for the preliminary consideration of the parties. In the absence of such a stipulation the arbitration is under no duty to do so.
The arbitration award is not open to review or appeal.
A party may apply to the court to have the award set aside at common law or under the 25th Act of the Articles of Regulation 1695.
At common law the grounds relate to breach of the submission to the arbitrator. They include instances where the arbitrator has failed to address the issues raised in the submission or where the arbitrator has exceeded the jurisdiction conferred by the submission. They also include situations in which a party has materially misled the arbitrator or the arbitrator has acted improperly and this has affected the award.
Under the Articles of Regulation of 1695 an arbitral award may be challenged on the basis of the arbitrator's impropriety; that is, on the grounds of corruption, bribery or falsehood.
If the award exceeds the terms of the arbitrator's reference the court can set aside an award in part and preserve such parts of the award that are within the arbitrator's jurisdiction.
Your remedy is to take the issue to the Court of Session. The company would require representation by a lawyer. If you proceed by way of assignation and do this yourself, you'll have to be quite clear that you understand the practices and procedures of the Court of Session. The judges will give you no help with this and will not be slow to throw the case out if it's not properly presented.
Customer: replied 1 year ago.

ThanksCustomer that's very good. The Company is insolvent though and I don't have the funds to instruct law agents so I have to do it though an assignation.

I have put together the summons, which could convert to a writ if I was to take it to the Edinburgh Sheriff Court. Is there any way you could look at the summons and advise me on their competency?

Expert:  JGM replied 1 year ago.
Yes I can look at it for you. You can send it to***@******.*** and ask the moderator to send it toCustomer It will normally arrive with me within a few hours, possibly longer at the weekend.
JGM, Solicitor
Category: Law
Satisfied Customers: 9973
Experience: 30 years as a practising solicitor.
JGM and 3 other Law Specialists are ready to help you
Expert:  JGM replied 1 year ago.
I've received the papers, thank you. There's nothing wrong with the drafting of the Summons other than you've made reference to the 2010 Act which as I said earlier doesn't apply.
The assignation would have to be signed by the liquidator. I'm not sure that you couldn't raise a damages action in your own names anyway, as affected shareholders.
I've read (briefly) some of the court judgments. Paragraph 27 of the Supreme Court judgment would suggest that the arbitration proceedings have reached the end of the line. That being the case I'm not sure that the court would entertain an action for damages against the arbiter. There may be time bar issues in addition to which your averments of bad faith aren't specific enough or relevant. You might want to refer to the advocate that gave you the earlier Opinion and ask for a specific opinion in relation to your proposed action and have the Summons revised by him or her.
Good luck with whatever you decide to do.

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