Arbitration
36.Disputes about the application of the code can be referred to arbitration which, it is intended, will usually be carried out by the adjudicator directly. The intention of this is to ensure that the code is being complied with, by both tenants and pub-owning businesses, and that where it is not working, and either side feel it is not being complied with, then constructive action can be taken, via arbitration, to resolve a dispute.
Section 14: Adjudicator’s duty to arbitrate or appoint arbitrator
37.This section requires the adjudicator to act as arbitrator, or appoint another person to do so, if there is a dispute between a tied-pub tenant and a pub-owning company about whether the business has complied with a non-excluded term of the code and if the dispute is submitted for arbitration either under section 15 (see below) or in accordance with an agreement between the tenant and pub-owning company.
38.In most circumstances, the adjudicator is expected to arbitrate such disputes. However, the adjudicator is also able to appoint another person to do so if, for example, the adjudicator does not have enough time to act as the arbitrator (due to caseload volume), or because the adjudicator considers that a conflict of interest may exist (for example, where the adjudicator has previously advised on or investigated an issue which is relevant to the dispute).
39.Subsection (2) confirms that arbitration proceedings must be conducted in accordance with the rules of the Chartered Institute of Arbitrators or any other dispute resolution body nominated by the arbitrator. This will ensure that arbitrations are conducted in line with recognised sectoral rules and guidelines.
40.Subsection (3) gives the Scottish Ministers power to make regulations to exclude a term, or terms, of the code from being subject to arbitration by the adjudicator. Under section 24, any such regulations are subject to the affirmative procedure in the Scottish Parliament, which means that they must be laid in draft for approval by the Parliament.
Section 15: Submission of dispute to adjudicator
41.This section provides a statutory right of arbitration for Scottish Pubs Code disputes for tied pub tenants and pub-owning business. Such arbitrations will be “statutory arbitrations” as set out in section 16 of the Arbitration (Scotland) Act 2010. (Section 16 of the 2010 Act sets out certain rules that apply to statutory arbitrations, although the section had not been brought into force at the time of Royal Assent of this Act.) Section 17 of the 2010 Act, which is in force, allows Scottish Ministers to make further provision about the handling of statutory arbitrations.
42.A dispute may be referred to arbitration only if the tenant has first notified the pub-owning business that they consider there has been a failure to comply with the code. The notification must be given within 6 months, beginning on the day the alleged failure occurred (or the last day of a continuing failure, or the day when the tenant became aware, or could reasonably have become aware, of the alleged failure). There is then a window, beginning 21 days after the business is notified of the alleged failure and ending 4 months later, within which either party (tenant or pub-owning business) may refer the dispute, to arbitration. The 21-day period is to allow the parties a reasonable time to try to resolve the dispute without the need for arbitration. The six-month and four-month limits ensure that any alleged failures to comply with the code are addressed reasonably promptly. The four and six months periods are always measured in calendar months, so if either begins on the 29th, 30th, or 31st of a month, and there is no corresponding date four or six months later, then the period ends on the last day of that later month (e.g. a four month period would end on 28th February if the period began on 31st October).
Section 16: Liability for arbitrator’s reasonable fees and expenses
43.Under this section, a pub-owning business that is party to an arbitration is normally liable to pay the arbitrator’s fees and expenses if the adjudicator, or someone appointed by the adjudicator, is the arbitrator. However, under subsection (2), this does not apply if the referral was made by a tied pub tenant and the arbitrator considers the referral to be vexatious (intended to frustrate or delay without any chance of success). A pub-owning business may also ask the adjudicator to relieve it of a liability for any fees and expenses, or to transfer a portion (as the adjudicator sees fit) of a liability to a tied-pub tenant who was a party to the arbitration.
Section 17: Further fees and expenses payable to the adjudicator
44.Subsections (1) and (2) provide that the Scottish Ministers must make regulations to require tied pub tenants to pay a fee to the adjudicator in situations where the adjudicator, or a person appointed by the adjudicator, is the arbitrator (under section 15) because of a referral or request made by the tenant. Subsection (3) states that such regulations may set out the amount of the fee to be paid, and situations where the fee would be refunded, or need not be paid at all.
45.Subsections (4) and (5) allow the Scottish Ministers to make regulations to require tied pub tenants to pay towards the expenses of the adjudicator in any other situations where the adjudicator, or a person appointed by the adjudicator, is the arbitrator. Subsection (6) states that such regulations may set out the circumstances in which payment towards expenses may be required; limit the amount payable (by amount or methodology); and/or specify circumstances where a tenant may be liable for expenses beyond any limit that is set.
Section 18: Information about arbitration
46.This section enables the adjudicator to obtain information on an arbitration carried out by a person appointed by the adjudicator, either from that person or from the parties to the arbitration. The purpose of this to help the adjudicator carry out their functions, such as preparing annual reports and providing advice and guidance on the code. Subsection (2) states that the adjudicator may enforce this requirement through civil proceedings.
Section 19: Reports on avoidance
47.This section requires the adjudicator to report any cases of pub-owning businesses trying to avoid the code to the Scottish Ministers. Subsection (2) defines “avoidance activity” as acts or omissions (or both) which are unfair and intended to avoid the code to the detriment of tenants. A similar provision was added to the 2015 Act, by the Enterprise Act 2016, in response to allegations of pub-owning businesses trying to find ways around the England and Wales code.
