Many practitioners south of the border may have little knowledge or experience of litigation in Scotland and what the Scottish courts can offer, especially in connection with IT-related disputes. While Scotland is famous for many things, it is fair to say that it may not be well known for being a forum for dealing with IP and IT disputes. However these are regularly dealt with by the Scottish courts and, in particular circumstances, the Scottish courts may be the most appropriate forum and can offer distinct advantages to parties. Rather than focusing on any particular IT issues or specific differences between the laws of Scotland and England/Wales, the article explains where the Scottish courts fit in to the UK, relative to IT disputes, and highlights some key differences in procedures and remedies as between the Scottish and English systems. The aim is to make readers aware of the Scottish Court option so that it can be considered when appropriate when advising clients.
Differences between Scotland and the Rest of the UK
The Law
The substantive UK law governing most potential IT disputes is, by and large, the same north and south of the border. One key difference is that, although on a broad brush basis largely similar in effect, there is a distinct Scots law of contract. Clearly, IT disputes often centre around a contractual dispute and so where Scots law applies it will require to be considered. Such disputes may relate to whether deliverables/milestones have been achieved, whether there are grounds to terminate a project and/or seek compensation and indeed whether there is any firm contract in place and if so what are its terms.
Generally, the law applying to the interpretation of IT contracts is very similar in Scotland to the law in England. We will focus on differences in procedure in relation to availability of remedies, rather than on specific legal differences relevant to IT contracts.
Binding Authorities
Although English decisions on IT disputes are persuasive and will be considered by the Scottish courts, the Scottish courts are not obliged to follow them.
Scottish Court System and Forum Issues
The Scottish civil court system is independent from the courts of England, Wales and Northern Ireland, and so the court rules, procedures and judges in Scotland are different. Often in IT disputes the contract will contain governing law and jurisdiction provisions. If English law governs and there is agreed exclusive or non-exclusive jurisdiction for the English courts then generally the dispute will be dealt with in England. However, if the contract provides that Scots law governs and gives jurisdiction to the Scottish courts, or the contract is silent about such topics but the dispute is more closely connected to Scotland, it may be necessary or at least more appropriate to raise any court proceedings in Scotland.
Remedies
The remedies available from the Scottish courts are almost identical to the remedies available in England and Wales. Permanent and interim injunctions (known as interdicts in Scotland), delivery up, damages and accounts of profits are all available in Scotland. Specific performance/implement is also available, although it is rarely a possible remedy in IT disputes where parties may no longer be feasibly able to work together. In particular, an interim interdict is a very useful remedy which can lead to swift resolution of some IT disputes and it is fair to say it is generally more readily available in Scotland than an interim injunction is in England. For example, where a party is threatening to terminate a large IT contract due to alleged breach, an interim interdict preventing termination on grounds that it is wrongful may be a useful weapon to create a negotiation opportunity.
The Scottish Courts
The primary court in Scotland which deals with the overwhelming majority of Scottish IP and IT cases is the Court of Session in Edinburgh. The Court of Session is the Scottish equivalent of the High Court in London. Its jurisdiction covers all of Scotland and, in particular circumstances, the whole of the UK. Subject to any conflicting contractual provision, the Court of Session has jurisdiction to deal with IT disputes if: (1) the defender’s (Scottish term for defendant) registered office is in Scotland; (2) the defender has a place of business in Scotland; or (3) the event/service giving rise to the dispute, or damage suffered, occurred in Scotland or is threatened to occur in Scotland.
The Court of Session is both a first instance court (the Outer House) and an appeal court (the Inner House). The Inner House comprises of a bench of three of Scotland’s most senior judges. Appeals from the Inner House are heard before the Supreme Court in London (considering the appeal from a Scots law perspective). Appeals to the Supreme Court are rare, particularly in IT disputes.
Sheriff courts in Scotland are broadly similar to county courts in England and Wales, with each sheriff court’s jurisdiction covering a particular geographical area of Scotland. Lower value IT disputes are often dealt with by the sheriff courts. However, in the majority of cases where IT disputes are technically complex and/or involve high value claims, the Court of Session is the court of choice. Therefore, this article focuses on disputes dealt with by the Court of Session
Types of Action
IP Action
In the Court of Session, there are semi-specialist designated IP judges who deal with intellectual property actions. Currently, there are four designated IP judges. There are also specific Intellectual Property Court Rules providing for efficient case management. Therefore, when there is an intellectual property issue wrapped up within an IT-related dispute, such as a dispute concerning a software patent, it is possible to commence an action under the IP rules.
Commercial Action
When there are no real or substantive intellectual property issues in play and especially when (as is very often the case in large IT project disputes), there are commercially valuable and urgent issues at stake, parties often elect to raise a Commercial Action. Such actions are often the best way to deal with IT disputes quickly and cost-efficiently. The rules create a flexible and strictly case managed forum within which to deal with the dispute. There are two designated Commercial Judges and they have built up experience in dealing with high value and often complex commercial disputes, including those involving IT issues. The judge in a Commercial Action acts very much more as a case manager, with a hands-on and pro-active role from very early in proceedings. The judge is free to depart from the standard timescales and procedures in the Court of Session to facilitate a commercially-focused dispute resolution process. This can be vital in IT disputes where parties often require solutions which do not impact negatively on ongoing business or relationships and there is a common aim to avoid delay and uncertainty given the commercial issues at stake.
In Scotland, there is no CPR equivalent providing that parties should aim to resolve matters directly via correspondence before resorting to the courts. Whilst this often happens as a matter of course in IT disputes, given standard contractual dispute escalation terms, it is not mandatory. However, pre-litigation correspondence is something which the Commercial Action rules generally encourage and require. The utilisation of pre-litigation correspondence can also have an important bearing on how the court deals with the dispute and such correspondence will certainly play a part in the court’s consideration of the next steps/orders to make in a Commercial Action. The court hearings in a Commercial Action are generally round-the-table informal discussions. This format and the early focusing of key issues can achieve swift resolution, often via out-of-court negotiations.
Key Considerations when Considering Scotland as an Alternative Venue
In considering whether Scotland may provide an attractive alternative forum for dealing with IT disputes, it is worth highlighting some key points.
No Automatic Disclosure
In the days of e-discovery, where a huge amount of data is stored electronically, it should be highlighted that there is no automatic disclosure in Scotland, whether before commencing an action or during the action itself. Pre-action disclosure, broadly akin to the English search and seize order, is available, and is known as a Section 1 Order. However, such actions are relatively rare.
Usually, parties must instead apply to the court in the context of an ongoing action to request recovery of specific categories of evidence/materials which they must justify to the court as being relevant. Generally, the parties and the court work together to determine the exact scope of the recovery and there is usually voluntary compliance with any order granted. On the rare occasions where a party does not cooperate voluntarily, if it is believed to be withholding documents/data it can be ordered to appear at a hearing for questioning.
The use of specific as opposed to automatic disclosure can lead to significant cost and time savings in Scotland. A Commercial Judge is often prepared to order disclosure at a relatively early stage of proceedings, but the scope of this is far narrower than the wider obligation to produce all relevant materials which usually applies in England. The English system can involve high costs and potentially an enormous search of electronic data and this is particularly the case in IT disputes.
Interim Interdicts
The remedy of interim interdict is a particularly powerful, cost-efficient and potentially useful remedy to resolve disputes in Scotland. The Scottish courts are prepared to grant interim interdicts without notice in appropriate cases. Although there is generally an obligation on parties involved in IT disputes to be reasonable and work together, in appropriate circumstances, an interim interdict can be a highly effective weapon to nip disputes in the bud. The practical effect of such an interim interdict order is that it stops the defender from doing what is allegedly causing or is about to cause harm to the pursuer (the Scottish term for the claimant) or prevents an event giving rise to the dispute – with immediate effect without prior notice. The order remains in place until a full trial is conducted. Such an order could encourage a swift negotiated settlement.
The test for interim interdict is broadly the same in Scotland as it is for interim injunction in England. An applicant must show they have an arguable case and this is not usually a high hurdle to meet. If that test is satisfied, the court will then have to decide whether to grant the interim interdict order based on its opinion of the balance of convenience. Essentially, this involves the court considering which party will be more prejudiced by its decision to grant or refuse the order. If the balance of convenience is equal and the court believes that the case is very likely to succeed at the end of the day, that can tip the balance in favour of granting of the interim interdict as the strength of the merits can be considered in assessing the balance of convenience.
Generally interim interdicts may be more applicable to, for example, intellectual property infringement disputes, but they can be used to ensure compliance with key terms of IT contracts by preventing ongoing breaches of an agreement. Interim interdict decisions are not reported (unless appealed which is rare) and they tend to lead to settlement.
The use and effectiveness of interim interdicts partly explains why there are few reported IT decisions in Scotland. The relatively small (compared to England) number does not mean that there are a minimal number of IT disputes being dealt with and resolved in Scotland, both within and outside the Scottish court system. Many such disputes settle out of court before any trial takes place.
Costs and Time
From a client’s perspective, the costs involved in litigation in Scotland are generally less than in England. Scottish advocates (barristers) and QCs’ fees tend to be lower than in England. However, recovery of costs from the other party in Scotland can be at a lower level in Scotland than in England & Wales. In Scotland, recovery is typically around 50-60%, but it can be as high as 70-80% if a cost uplift award is granted.
Less Publicity and the Element of Surprise
Litigation in Scotland generally attracts less publicity and is less on the radar of the press and trade journals. In addition, Scotland is unlikely to be at the forefront of parties’ minds so it can also be a surprise to raise proceedings in Scotland and possibly take a party outside its comfort zone.
ADR and Mediation
The Scottish courts can offer a good forum to deal with IT disputes. However, in the authors’ experience, IT disputes often lend themselves to resolution by means of negotiation between parties and, where appropriate, formal mediation. Usually, parties in a large IT project dispute have to try and continue to work together whether on a particular project in dispute or on an ongoing basis in the future. Any ongoing litigation or dispute is clearly not conducive to this. Therefore, steps are usually taken to resolve any dispute as quickly and efficiently as possible. Informal resolution negotiations are not always successful, and often mediation will be required; indeed, quite often it will be mandatory under the terms of a contract.
Mediation can offer a very flexible and confidential way in which to try and resolve matters, and can allow parties to reach very creative ‘win-win’ solutions which the courts cannot offer. IT disputes will often include key infrastructure that is vital to business and can involve highly valuable and confidential information processes or technology. Mediation can offer a valuable confidential alternative to court which protects such information and can allow the parties to keep the existence of the dispute secret. Mediation can save significant time and costs in comparison to a court dispute and can still involve the use of experts when dealing with complex or novel technology.
Conclusion
The Scottish court system can, in many circumstances, be a valuable alternative forum to deal with an IT dispute. It should be on the list of jurisdictions to consider in appropriate cases. Indeed, in many cases, hopping over the border and considering resolving IT disputes in Scotland could open up real advantages and options for clients.
Robert Buchan, partner, and Shaun Gibson, solicitor, both specialise in intellectual property and technology law at Maclay, Murray & Spens LLP (Edinburgh): www.mms.co.uk.
