You will recall that we have asked this question before in this very bulletin in November 2009 distinguishing between an expert and an arbiter. Why, might you ask, would a case concerning a financial ombudsman be of interest to a solicitor dealing with contentious construction matters? Put simply, few and far cases concerning arbitration make it to the courts. The reason being of course that arbitration is a private process and an alternative to litigation.

On 19 November 2010, Lord Woolman issued a decision offering guidance on what constitutes an arbitration and what an arbiter is (David Clark v Argyle Consulting Limited 19 November 2010, [2010] CSOH 154). This case concerned timebar and whether there had been an interruption of the statutory five year period by the referral of a complaint to a financial ombudsman.

It was submitted, on behalf of the pursuer, that an ombudsman scheme bore the essential elements of an arbitration. The ombudsman is independent, has a duty to hear representations and evidence, makes a decision on the merits and can make an order for compensation. However, unlike an arbiter, the ombudsman is not obliged to determine a complaint in accordance with the common law and cannot therefore be required to state a case. The second distinction is that the decision of an ombudsman can be accepted or rejected whereas an arbiter’s decision is binding.

Concurring with the authority that an adjudicator is not an arbiter (Diamond v PJW Enterprises Ltd 2004 SC 430) and that an expert is not an arbiter (MacDonald Estates plc v NCP Ltd 2010 SC 250) the court determined that an ombudsman is not an arbiter. There was therefore no relevant claim, the prescriptive period was not interrupted and the action was dismissed.