Scotland Launches International Centre for Energy Arbitration

On 2 October 2013, the First Minister of Scotland, Alex Salmond, launched the International Centre for Energy Arbitration (ICEA). The ICEA is a joint venture between the Scottish Arbitration Centre and the Centre for Energy, Petroleum and Mineral Law and Policy at the University of Dundee (CEPMLP) which aims to attract energy sector dispute resolution to Scotland.

This is an interesting initiative in an industry sector which has always enjoyed particular prominence in arbitration. Whilst the activities of the ICEA will have particular relevance to those energy companies operating in the North Sea, the ICEA also aims to attract work from the broader international energy dispute resolution arena. The ICEA is a centre for arbitration, not an arbitral institution, but amongst its first activities will be to consult the industry with a view to preparing arbitral rules tailored to energy sector disputes.

Looking further ahead, it may be that the Scottish Arbitration Centre acts as the appointing authority and the administering institution for any arbitrations conducted under these new rules.

Following this consultation, it will be interesting to see whether the ICEA aims to introduce distinguishing procedural features to the new rules on the basis that they are particularly appropriate for energy disputes.

In the broader context, the launch of the ICEA signals another move towards the further specialisation of arbitration along sectoral and regional lines. In 2012, the Panel of Recognised International Market Experts in Finance (P.R.I.M.E. Finance) launched a specialist arbitration forum targeting complex financial disputes. On the regional front, institutional growth has largely been concentrated in the Asia-Pacific region this year, with the launch of HKIAC's first overseas office in Seoul and SIAC's further expansion into Mumbai.

The appointment of arbitrators with specialist energy expertise is often sought by parties in the industry, and it may be that in due course the ICEA offers a panel of expert arbitrators (akin to P.R.I.M.E. Finance's offering). The American Arbitration Association already maintains a panel of energy specialists on its AAA National Energy Panel, drawing experts from the technical, financial and legal disciplines of the industry.

Any future ICEA arbitrations would likely be governed by the Arbitration (Scotland) Act 2010, which applies to all domestic and international arbitrations seated in Scotland. Whilst Scotland is a separate legal jurisdiction from England and Wales, the relevant UK treaties (in particular, the New York Convention) apply equally to an arbitration seated in Scotland. In contrast to England where confidentiality is implied into an arbitration agreement, the Scottish Act includes confidentiality as an express default obligation, unless the parties agree otherwise (formerly it was unclear whether confidentiality was an implied term of Scots law). Further, the Scottish Act limits appeals to the Outer House (a single judge), and from the Outer House judge to the Inner House (appeal court). There is no appeal to the UK Supreme Court.

For further information, please contact Craig Tevendale, Partner or Rahima Patel, Associate or your usual Herbert Smith Freehills contact.