One of the many impacts of the coronavirus pandemic on businesses in Scotland of all shapes and sizes has been on the way they have able to resolve disputes. For some weeks now, a potential spike in litigation has been making headlines as commercial contracts have been stressed while businesses face uncertain futures.

Why is a spike in litigation likely?  Well, it is broadly accepted that the Covid-19 crisis will lead to an unprecedented number of contractual defaults. Some of these will be dealt with expressly by the contract stating in force majeure clauses that a pandemic is a frustration event, but disputes as to the interpretation of these clauses will be frequent.

Where these clauses don’t exist, the common law of frustration may be applicable, but this law is not particularly well developed, as the most significant historic frustration events occurred at the outbreak of war.   That's a very different place to where we are now so  means that “usual ways” of handling these defaults may well not be the most efficient – and efficiency in managing disputes will be essential to enabling businesses to focus on business. 

We may therefore start to see a more commercially minded approach come into play. One of the newly appointed Supreme Court justices, Lord Leggatt, recently commented that one necessary innovation may be to include obligations of good faith in all commercial contracts to place more of an emphasis on co-operation between the parties to achieve the contractual goals. It may also be that forms of conciliation such as mediation will become mandatory to give parties breathing space before any court action is raised.

For any commercial dispute the lockdown brought various difficulties in proceeding with court actions in Scotland and so a business’s typical means to resolving and moving on from these disputes has largely stagnated.

Some of these difficulties are legal while others are practical. One practical difficulty has been the speed at which the Scottish court system has been able to deal with routine cases remotely, despite increasing use of conference calls across the courts. While the SCTS has been working hard to improve the courts' ability to process cases and hold hearings by video conference or conference call, that is unfortunately still not possible for lots of sheriff court cases.

This has put Alternative Dispute Resolution (ADR) into the spotlight. Can ADR offer a solution where the court system can't?

Adjudication, which is unique to the construction sector, can carry on largely as normal. Remote arbitrations facilitated by the parties can replicate the court system to a certain extent by providing a mechanism whereby parties can continue to seek binding legal decisions on their disputes. Where parties are looking to resolve matters amicably, mediation remains a viable option with mediators offering remote mediation as a means of resolving disputes.

The availability of ADR is, however, a different thing from its use. While ADR is being used as an alternative to court action, its use does not seem to be particularly widespread. That may be partly due to parties being willing to give each other more breathing space than they normally would because of the circumstances.

However, it may also be that where commercial matters are concerned, the court system remains the forum of choice for resolving disputes and parties are simply waiting until they fully open for business again. Enabling businesses to efficiently resolve disputes will be crucial to supporting the Scottish economy, and the next few months as the lockdown continues to ease will be telling.