What counts as a commercial dispute

The Court of Session takes a deliberately broad view. Its own description of a commercial action is any transaction or dispute of a commercial or business nature, and it gives as examples banking and insurance transactions, contracts for the sale or supply of goods or services, commercial leases, building contracts, partnership agreements, professional negligence, and business property. Company and insolvency petitions are dealt with by the same judges.

That list is worth reading twice, because it is wider than most people expect. A fallout between partners, a claim against an accountant, an argument about a dilapidations schedule and an unpaid subcontractor are all, in the court’s own terms, commercial disputes.

Three things that are different in Scotland

The first is the clock. Many obligations arising from contract, and obligations to make reparation, are subject to the five-year negative prescription under section 6 of the Prescription and Limitation (Scotland) Act 1973. If the applicable period expires without a relevant claim or relevant acknowledgment, the obligation is extinguished rather than merely becoming procedurally unenforceable. The starting point and any interruption or postponement depend on the particular obligation and facts, so the five-year rule should not be treated as five years automatically running from the date a dispute first appears.

The second is where the case goes. Section 39 of the Courts Reform (Scotland) Act 2014 gives the sheriff court exclusive competence where the total value of the orders sought, excluding interest and expenses, does not exceed £100,000. Below that figure a commercial action cannot be raised in the Court of Session at all.

The third is what the court will order. Scots law does not treat damages as having priority over performance. Specific implement, an order requiring a party to do what it undertook to do, is not confined to cases where damages would be inadequate, which is the English test. Where the object is to stop something rather than compel it, interdict and interim interdict do the corresponding work.

How a commercial action actually runs

In the Court of Session a commercial action is allocated to one of the commercial judges, who manages it from the preliminary hearing through to decision rather than passing it around. The procedure is deliberately flexible, and at the preliminary stages informal, with no court dress worn. The commercial judges press for early disclosure of the relevant documents, and will ordinarily order the parties to meet and narrow the dispute before it goes further. Where a point turns on the construction of a contract, it can sometimes be decided without hearing evidence at all.

Commercial procedure is also available in designated sheriff courts under Chapter 40 of the Ordinary Cause Rules. Below the £100,000 privative limit a claim which falls within section 39 of the Courts Reform (Scotland) Act 2014 must be raised in the sheriff court. Above that level, value no longer decides the forum by itself: questions of jurisdiction, the orders sought, contractual provisions and the circumstances of the case can all matter when deciding whether proceedings belong in the sheriff court or the Court of Session.

What it costs, and who pays

Commercial litigation is commonly charged by reference to the time spent, although fee arrangements vary between firms and cases. The general rule on judicial expenses is that the successful party is ordinarily entitled to recover expenses from the unsuccessful party, but the court retains a discretion to make a different or modified award where the circumstances justify it. An award of judicial expenses is not the same thing as reimbursement of every pound actually spent with a solicitor.

That makes proportionality worth considering early. A dispute worth £30,000 which is fought through a proof can consume a significant part of the value at stake. That is one reason commercial procedure focuses on identifying the real issues early, and why settlement can be commercially rational even where a party considers its legal position strong.

Which page you actually need

Commercial disputes divide fairly cleanly. The right route depends on what is actually being argued about:

• Interpretation or breach: If the argument is about what a contract means, whether it was breached, or whether performance was defective, the detail is on our page about contract disputes in Scotland.
• Unpaid invoices: If the other side accepts the debt and simply has not paid, the procedure, diligence and tactics are set out under recovering money you are owed.
• Bad advice: If a professional adviser, such as a solicitor, surveyor or accountant, has caused loss, that is professional negligence. Note that the prescriptive period there runs on its own facts.
• Property: If the dispute is with a landlord or a tenant of business premises, start with commercial leases in Scotland.
• Founders and formation: If you are still setting the business up and deciding between a company and a partnership, see business structures in Scotland.
• Partnership breakdowns: If the business is established and the partners have fallen out, the rules on joint and several liability, dissolution and the judicial factor are under partnership disputes in Scotland.

What to do now

1. Establish when any prescriptive period began to run. It is the only decision here that cannot be revisited.
2. Gather the contract, the correspondence in which its terms were discussed, and the records of what was actually delivered, before anyone tidies an inbox.
3. Work out early what a commercial outcome would look like. The parties who do best in commercial litigation are usually the ones who decided in advance what they would settle for.